A Complete Perspective

Readers of this blog may have seen a recent article in the Toronto Star about some Tarion executive salaries and operational costs between 2008 and 2013.

While the article was generally accurate, the Toronto Star certainly excluded information we provided that provides important context for readers in terms of how Tarion carries out its mandate of consumer protection.

As a result, some readers of the article may be left with the impression that Tarion is secretive and pays excessively high salaries to its executives. That is simply not true.

First, Tarion regularly undertakes a salary compensation review that is grounded in best practices from both the public and private sector.

A committee of the Board of Directors is charged with the responsibility of setting and monitoring salaries. This committee retains Korn Ferry Hay Group, a world-recognized expert in executive compensation, to provide professional advice and guidance on Tarion’s executive compensation levels.

Hay Group – with no management oversight – independently assesses the job evaluations of our executive positions, including their roles and responsibilities, and then compares them to other similar organizations across Ontario and Canada in the public and private sector.

Executive compensation, including bonuses, are assessed on five different criteria, (often called a balanced scorecard approach). The five criteria are: Tarion’s financial performance, risk management, leadership, strategy and stakeholder relations.

As recent as May 2016, a review of both the CEO and COO compensation packages found that they were in line with what other national public and private sector organizations pay.

A couple of other points in the article are worth addressing.

The story notes that Tarion has previously refused to provide the Star with details of senior management salaries. What the article fails to make clear is that Tarion is not a public sector organization and that it therefore has no obligation to provide this information. In fact, it has an obligation to its employees to not share this information – just as the Star does with its own employees.

Tarion was created by the Ontario government in 1976 as a private, not-for-profit company. It is funded through new home enrolment fees and builder registration fees. It is not supported by public tax dollars. So, like any other private company, Tarion is not subject to public sector salary disclosure.

More important is understanding that these investments comprise part of Tarion’s Guarantee Fund – for which it has a legal obligation and duty to manage on behalf of Ontario new home buyers and new home owners.

Home insurance concept. Man holding hands above miniature home

The article also states that the information was found in “newly uncovered documents,” the implication being that Tarion was trying to hide something. In fact, these are old public documents. From 2008 – 2013, Tarion was required to file this information – containing the salaries of a select few senior managers – to the U.S. Internal Revenue Service to gain a tax exemption for its investment returns in the U.S.

More important is understanding that these investments comprise part of Tarion’s Guarantee Fund – for which it has a legal obligation and duty to manage on behalf of Ontario new home buyers and new home owners. More than once, other new home warranty programs in Canada or internationally have collapsed because there were insufficient funds to meet bona fide warranty claims.

Tarion takes its responsibility to manage and grow the Guarantee Fund very seriously. For example, Tarion has diligently managed this Fund and grown it from $83.8 million in 2008 to $216 million in 2013. This provides Ontario consumers with the confidence that Tarion can respond appropriately to significant warranty claim events;

Ontario consumers can also have confidence in their new home warranty program for other reasons:

  • We are a leader in new home warranty coverage in Canada. In fact, Ontario consumers enjoy warranty protections that simply do not exist in other provinces;
  • We are effective. Since 2008, Tarion has paid out more than $44 million to new home owners for warranty claims in instances where builders could not or did not meet their obligations;
  • We work hard to deliver meaningful warranty protection at an affordable cost. For two decades Tarion has kept new home enrollment fees – which are paid for by builders but often passed on to homeowners – stable while still increasing protection limits and coverage. The compound annual growth rate for enrolment fees over the last 20 years is only 1.4%.
  • Our good work has been independently recognized: this year, Tarion won two bronze Stevie® Awards for customer service, and in 2013, Tarion was awarded an Excellence in Governance Award from the Canadian Society of Corporate Secretaries. The Society has shortlisted Tarion this year for a governance award under the category of Best Engagement by a governance team.

Salary compensation for any organization can be complex and controversial. That is certainly true at Tarion, which is itself a very complex organization. Rest assured however, that Tarion has implemented, and follows best governance practices when it comes to regularly reviewing its compensation packages.

Many staff at Tarion could earn significantly more at other private, for-profit organizations but they choose to work here because their work can make a significant difference in the lives of Ontario consumers. We are very proud of the work that the more than 230 employees at Tarion do each and every day on behalf of Ontario new home owners.