Canadian cannabis firm Canopy Growth has given its CEO position a generous salary bump this year, according to recent filings with the U.S. Securities and Exchange Commission, even as the company laid off a large chunk of its workforce and struggled to contain losses.
The filings show that an employment offer was made to current CEO David Klein on Dec. 6 with a base salary in U.S. dollars of $975,000, which amounted to approximately 1.3 million Canadian dollars at the time.
Mark Zekulin, who filled in as CEO on an interim basis after Bruce Linton was shown the door last year, earned an annual salary less than half of Klein’s.
Linton’s last disclosed salary as co-CEO was CA$318,000 annually.
But base salary is a fraction of overall compensation for the executives.
Under Klein’s employment offer, the CEO is eligible to receive millions more in stock options, an annual short-term performance bonus equal to 125% of base salary and an annual long-term award of 300% of base salary.
Klein’s contract also makes him eligible for an annual CA$125,000 allowance, and Canopy agreed to contribute CA$40,000 per year to the CEO’s retirement plan.
Soon after Klein took the reins of Canopy on Jan. 15, the Smiths Falls, Ontario-based company announced a restructuring plan that ultimately led to 600 job losses.
That came despite interim CEO Zekulin saying in November that “there are not going to be job losses” as the company struggled to contain deficits.
Canopy reported a net loss of CA$1.3 billion in its fourth fiscal quarter and adjusted EBITDA loss of CA$102 million.
Canopy did not answer queries from Marijuana Business Daily.
Beau Whitney, founder and chief economist at Portland, Oregon-based Whitney Economics, said the salary boost sends a poor message to the market and comes at a time other cannabis CEOs are taking pay cuts because of their own layoffs.
“Until the CEO can deliver value, it’s going to be tough to justify these high wages,” he told MJBizDaily in a phone interview.
“On the other side of the coin, they’re compensating a guy to come in and make some really tough decisions.
“They’re overextended, they have way too much capacity, there is not as much international demand to fill that capacity, so they have to reduce it in order to rightsize the business relative to the industry.”
Whitney believes the layoffs were justified.
“It wasn’t a well-run operation. Maybe they got too far out over their skis relative to the market that was really there,” he said.
Klein wasn’t the only Canopy executive to see a generous pay increase this year.
The company also increased the base salary for its chief financial officer and president on a retroactive basis.
Under his disclosed March 31, 2020 employment agreement, CFO Mike Lee was offered a salary worth nearly CA$600,000 as well as other bonuses and incentives.
That’s about 30% higher than the disclosed salary of Canopy’s previous CFO.
The salary increase was retroactive to July 1, 2019 – the start of Canopy’s fiscal year – and payable in a lump sum.
Rade Kovacevic, Canopy’s president, saw his salary nearly double to CA$600,000.
Kovacevic’s salary was also retroactive to July 1, 2019, “and payable in one lump sum on the next possible payroll,” according to the SEC filing.
Canopy’s shares trade on the New York Stock Exchange under the ticker symbol CGC and on the Toronto Stock Exchange as WEED.
Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at mattl@mjbizdaily.com.
