Short Term Incentive Plan (STIP) Non-Unionized Employees (Canada) and US Salaried Employees Issuing Department: Human Resources

Canadian Pacific offers a Short Term Incentive

Plan (the "Plan"), to recognize the contribution that each

regular, non-unionized and US salaried employee makes to the Railway’s achievement of its business objectives.

 

 

The Management Resources and Compensation Committee of the Board of Directors of Canadian Pacific Railway (the "Committee") has complete authority to interpret and define individual and group eligibility and to establish rules and regulations required to properly administer the Plan. The Board may also suspend, amend or terminate this Plan at any time.

On an annual basis, managers are responsible for guiding their employees in the objective setting process. Managers must conduct regular progress reviews throughout the year, evaluate performance against objectives at year end and report results to Human Resources.

Employees are responsible for setting and striving to achieve their annual performance objectives and for soliciting performance feedback from their managers.

Human Resources is responsible for interpreting this policy, guiding its administration and supporting employees and managers applying the policy.

 

 

 

Regular employees who participate in the Company’s non-unionized compensation program are eligible to participate in the Plan provided they join the Plan prior to October 1^st in their first year of participation.

Employees must complete three (3) months (65 working days) of cumulative active service in the Plan year in order to be eligible for a STIP payout.

 

 

Employees transferred or seconded to employers

participating in a joint venture with CP may be designated

as participants in the Plan by the Company.

 

 

Unionized employees who temporarily assume a non-

unionized position will be eligible for STIP, provided the temporary assignment commences prior to October 1^st of the Plan year and has a minimum continuous duration of three (3) months (65 working days) in the Plan year.

 

 

The objectives of the Plan are:

•    to tie a part of the employee’s compensation directly to CP's results;

•    to reward the achievement of individual and team objectives that support CP's achievement of its annual business plans and long-term strategy; and

•    to maintain the competitiveness of CP's compensation program.

 

 

Participation in the Plan ends when the employee reverts

to a unionized position at the Company’s request, retires or terminates their employment with CP.

Employees who revert to a unionized position at their own initiative prior to payout will not be eligible for a STIP award.

 

 

For each Plan Year the Committee establishes the

various classes of participants, the weighting of each

performance measure assigned to each class and the Target Award Levels.  Employee level determines their Target Award Levels. Target Award Levels are expressed as a percentage of annual salary and are the basis for calculating STIP awards.

 

 

Individual STIP awards are based on two components, individual and corporate. STIP award payouts are based on an employee’s group and weighting category at year end.

 The following table outlines the weighting for corporate and individual performance for the various management levels in the organization:

     LEVEL CORPORATE    INDIVIDUAL

     Level A to F    75%                         25%

     Level 1               60%                         40%

     Level 2 to 6     50%                         50%

 

 

The individual component of STIP awards is tied directly to the individual’s PMP objectives established under the Performance Management Program (PMP). A PMP rating (from Unsatisfactory to Outstanding) will be assigned to each of the individual’s PMP objectives.

The performance ratings are determined on the basis of three dimensions:

1.    achievement of objectives against the standards and measures established for each objective;

2. context of performance throughout the year; and

3. peer clustering of employees into a distribution profile established by the Company.

The context of performance dimension considers the “how” of the achievement and adds a necessary judgmental component to the assessment process. The demonstration of company values must be considered.

Taking the three dimensions into account, through the calibration process, an overall PMP rating and an overall STIP attainment level, based on the scales below, are determined for the employee’s individual performance component.

Outstanding        170% - 200%

Exceeds        125% - 165%

Achieved          90% - 110%

Partially Achieved      50% - 85%

Unsatisfactory              0%

Annually, the Committee establishes the performance criteria, the weighting assigned to each performance criterion and corporate performance target levels for the STIP Program.

Each corporate performance criterion will have three levels of performance and payout.

a)    Exceptional Level - 200% of Target Award Level assigned to the corporate component where the actual CP performance meets or exceeds the exceptional level established by the Committee;

b)    Target Level - 100% of Target Award Level assigned to the corporate component where the actual CP performance meets the target level established by the Committee;

c)    Threshold Level - 50% of Target Award Level assigned to the corporate component when the actual CP performance level for the Plan Year is at the threshold level established by the Committee; and

Where the actual CP performance falls between the threshold and exceptional levels, the payout level will be prorated.

Where the actual CP performance falls below the threshold

level, no awards will be paid under the corporate component.

 

 

For each Plan Year, the Committee establishes a minimum level of corporate performance, below the threshold level, called the corporate hurdle. If the Company’s performance falls below this hurdle, no awards will be paid under the individual or corporate components.

 

 

If individual performance levels are unsatisfactory, no award will be paid to the individual under the corporate or individual components.

In addition, the CEO has the discretion to not pay an award for the corporate component in any individual instance.

 

 

The Committee has the discretion to adjust the amount of awards so that payment of awards under the Plan does not result in a net loss for CP. No awards will be paid if CP has a net loss for the Plan Year.

Awards are calculated by performing the following

calculation:

Target Award Level multiplied by the weighting for the individual component, multiplied by the annual salary in effect at the end of the Plan Year, multiplied by the STIP attainment level

added to 

the Target Award Level, multiplied by the weighting for the corporate component, multiplied by the annual salary in effect at the end of the Plan Year, multiplied by the weighting of the performance measure, multiplied by the payout level. This calculation is repeated for each of the Company’s performance measures.

For sample STIP calculations, see Appendix 1.

Awards to be paid out in any Plan Year, will be paid

as soon as possible after CP financial results are determined, the Committee has approved a payout, and the participants’ performance has been assessed under PMP.

 

 

 

 

 

Leaves of absence (LOA) are those periods when an

employee is not actively at work i.e. short or long term

disability, personal, maternity, parental, educational leaves.

Participants who take a leave of absence greater than 30

consecutive days (22 working days) during the year will have

their award prorated based on the length of time in active

service during the year.

Potential STIP Awards will be held for participants who take a personal (non-medical or educational) leave of absence. Eligibility for STIP will be determined at the end of the LOA. If the participant decides not to return it will be considered a voluntary resignation and the participant will not be eligible for a STIP Award. The payment of any STIP Award will only occur when the participant returns from the LOA.

 

 

 

 

Participants whose employment is terminated by the

Company without cause on or after April 1st of the Plan Year will continue to participate in the Plan until their last day actively at work. If all program conditions are met, (i.e. Company performance and individual performance warrants a payout), they will receive a prorated award based on the length of time they participated in the plan during the year.

 

 

Employees that retire on or after April 1 of the plan year without a severance payment are eligible for a prorated STIP award provided:

•    they are at least 55 years of age with a minimum of 10 years of service from their last hire date

•    have provided the required 3 month notice of retirement as outlined in Retirement Policy 8101

 

 

Employees who are terminated for cause during the

year will not receive an award for the year in which

their employment ended. They will also not be eligible to receive any award not yet paid at the time of their termination for cause.

 

 

Employees who resign prior to the STIP payout date will not be eligible for an award for the previous or current plan year.

 

 

When a participant dies on or after April 1st of the Plan Year, if all program conditions are met, a prorated award based on the length of their membership in the Plan during the year will be paid to the participant's estate.

 

 

 

The STIP cycle begins with the establishment of PMP

Objectives. In discussion with their manager and/or team leader, participants are responsible for the development of their PMP objectives and assigning weightings.

 

 

PMP objectives are weighted according to their relative importance. The total value of all PMP objectives must equal 100%.

 

 

By the end of January, annually, managers should have STIP attainment levels reported to Human Resources for the previous Plan Year.

 

 

 

 

For additional information, please contact your HR Field Representative or Employee Services by e-mail at ***@***, or toll free at ###-###-####.

 

 

Peter Edwards

Vice President

Human Resources and Labour Relations

 

 

Policy 2210 - Employment Categories

Policy 3001 - Compensation Program

Policy 5611 - Performance Management Program

Policy 8503 - Compensation & Benefits for Unionized Employees who Temporarily Assume Non-Unionized Positions

Policy 8101 - Retirement Policy

Policy 3410 – Annual Salary Program

 

(U.S. only disclaimer: This policy statement represents the current policy and practice of CP regarding the Short Term Incentive Plan for non-unionized employees and may be changed from time to time by CP without notice. Nothing in this policy is intended to create any contract, agreement or other obligation by CP with any of its employees.)