UGSM - Monarch Business School Doctoral Research Proposal899e8a6a646e5f542a49-e097890226727195ca481b8ca7afe84d.r45.… · 08-06-2011 · relationship and resulting dynamic between

UGSM - Monarch Business School

Doctoral Research Proposal

CEO CASH COMPENSATION, FIRM PERFORMANCE AND FIRM SIZE: AN EMPIRICAL STUDY ON TSX/S&P INDEX COMPANIES OF CANADA

Program: Doctor of Philosophy in Business Research Proposal Submission Date: June 8, 2011 Candidate: Yusuf Mohammed Nulla, B.Comm., M.B.A., M.Sc. Research Supervisor: Dr. Ali Mabrouk, Ph.D. Dissertation Supervisor: Dr. Jeffrey Henderson, Ph.D.

CEO Cash Compensation, Firm Performance, And Firm Size: An Empirical Study On TSX/S&P Index Companies Of Canada

Yusuf Mohammed Nulla, M.Sc., MBA

Doctor of Philosophy in Business Research/Ph.D. Dissertation Proposal UGSM-Monarch Business School Switzerland

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TABLE OF CONTENTS 1.0 INTRODUCTION……………..……………………………………….. 3 2.0 RESEARCH QUESTIONS…………………………………………… 4 3.0 RESEARCH RELEVANCE AND CONTRIBUTION TO ORIGINAL KNOWLEDGE………………………………………….. 5 1. Background……………………………………………………. 5 2. Research Relevance & Original Contribution……………… 6 3. Future Research Directions…………………………………. 9 4.0 LITERATURE REVIEW……………………………………………... 9

1. CEO Cash Compensation and Agency Theory…………… 10 2. CEO Cash Compensation and Firm Size…………………. 11 3. CEO Cash Compensation and Firm Performance……….. 12

5.0 QUANTITATIVE RESEARCH METHODOLOGY……………….. 13 6.0 THE RESEARCH BUDGET……………………………………….. 19 7.0 THE RESEARCH TIMELINE…………………………………........ 20 8.0 THE APPROVAL…………………………………………………….. 21 PARTIAL BIBLIOGRAPHY…………………………………………….. 22 APPENDIX A…………………………………………………………….. 25 APPENDIX B…………………………………………………………….. 26




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1.0 INTRODUCTION

Recently in Canada, institutional shareholders, investors groups, and the public have

raised concern over huge remuneration packages offered to CEOs, and in particular,

board of directors declaring huge cash bonuses to CEOs despite corporate

performance below expectations. This is especially true in the environment of the recent

past where heavy conditional bail-outs of public companies by the Canadian federal and

provincial governments to overcome the global credit crisis have been seen. As such,

this ever growing concern brings to foreground the need to further study the primary

relationship and resulting dynamic between CEO cash compensation, firm performance,

and firm size in Canada. In particular, the combination between, CEO cash

compensation and firm performance; CEO cash compensation and firm size; and CEO

cash compensation and CEO power, will be studied. In addition, the important concept

of agency theory will be explored in order to further define the operating environment

related to CEO cash compensation.

Within the study, a sample size of four hundred publicly traded Canadian companies in

TSX/S&P index will be examined. The basic research methodologies of empirical,

survey, and inferential statistics will be adopted under the positivist research paradigm.

The research hypothesis will be to determine the relationship between CEO cash

compensation, firm size, firm performance, agency theory, firm innovation, and CEO

power among TSX/S&P venture companies in Canada. The majority of past studies,

mainly conducted in both the United States and the United Kingdom, found a strong




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relationship between CEO cash compensation and firm size; and to the weaker extent

that of CEO cash compensation and firm performance. The results of this research will

be used to identify common characteristics among the sample and to obtain robust

conclusions on defined research hypotheses within the Canadian context.

2.0 RESEARCH QUESTIONS

The purpose of this research is to investigate in clear terms whether CEO cash

compensation is influenced by firm performance and firm size in Canada. Applying both

salary and bonus as a cash compensation measurements; total assets, total sales, and

number of employees as measurements of firm size; return on equity and return on

assets as measurements of firm performance; and CEO shares ownership,

Chairman/CEO duality role, and CEO tenure as measurements of CEO power.

The following research questions are developed

Research Question 1:

Is there a relationship between CEO cash compensation and firm size in

TSX/S&P companies? Does this relationship differ across industries?


Is there a relationship between CEO cash compensation and firm performance

in TSX/S&P companies? Does this relationship differ across industries?




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Is there a relationship between CEO cash compensation and CEO power

(ownership of firm shares, CEO/Chairman duality role, and CEO tenure) in

TSX/S&P companies?

3.0 RESEARCH RELEVANCE AND CONTRIBUTION TO ORIGINAL KNOWLEDGE

1. BACKGROUND

A common measure of CEO pay is cash compensation and is the sum of basic salary

and cash bonus (McKnight and Tomkins, 2004; McKnight and Tomkins, 1999; and

Henderson and Frederickson, 1996). CEO cash compensation is a straight forward

measure and does not include any long-term incentives elements of the CEO

compensation. The majority of past studies conducted in the United States only

measured CEO cash compensation (Girma et al. 2007; Gregg et al. 2005; Johnston,

2002; and Benito and Conyon, 1999). A reason for excluding the long-term incentive

components is often due to the challenges encountered in collecting data, and the

complexity of valuing executive share options or long-term incentive plans. Past

research studies that report on cash compensation versus total compensation (including

stock options, long-term incentives and pensions) found contrasting results for each

measure of pay. Thus, this study will focus on short-term CEO compensation with firm

performance and firm size in order to safeguard against the same issues as stated

above.




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2. RESEARCH RELEVANCE & ORIGINAL CONTRIBUTION

The significance of this research study is to understand the primary variables affecting

CEO cash compensation such as firm size, firm performance, CEO power, and

CEO/Chairman duality role within the Canadian context. Specifically, this study will try to

understand the relationship of its sub-variables which help to derive the overall

conclusion among the macro variables relationship. Sub-variables for CEO cash

compensation are salary and bonus; sub-variables for firm performance are return on

assets, and return on equity; sub-variables for firm size are total sales, total equity, and

number of employees; and sub-variables for CEO power are ownership of firm shares,

CEO/Chairman duality role, and CEO tenure.

Historically, there exists little literature on Canadian CEO cash compensation. Most of

the past studies conducted were primarily focused between the period of 1980 – 2000.

The primary reason of the existence of little literature in Canadian CEO cash

compensation is due to natural absorption and acceptance of United States scholarly

researched results in Canada on the basis of geographical proximity, the identical

economic and corporate cultures, and the mixed group of ownership between

shareholders of Canada and United States. Accordingly, decision makers in Canada

used the US scholarly research findings as a proxy in their corporate decision making.

According to Gomez-Mejia and Barkema (1998), among the known authorities in

executive compensation, past and ongoing present studies have focused extensively on

executive compensation and firm performance within United States.




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CEO cash compensation, component of executive compensation, as stated above,

hasn’t yet been researched in Canada at least during the past decade either on large

population basis nor at the level of stock market index company populations. The

majority of the research that was carried-out was primarily done using secondary data.

Sampling selection methods and statistical modelling were different in each respective

study. Also, these studies focused on industry segment basis such as: banking or

manufacturing. More importantly, these studies were mostly conducted at the non-

refereed level. The data gathered for these studies were from third parties such as

associations and magazines. The period of study covered for most of the studies were

from one to three years, at most. In addition, it is revealed from past studies that there

was a positive correlation existing between CEO cash compensation, firm performance

and firm size, yet the extent of the relationship between these variables remains

opaque. Therefore, these previously incomplete or limited studies encouraged the

conducting of a more comprehensive research on Canadian CEO cash compensation

systems. Furthermore, the contemplated research study is considered extensive as

data is to be gathered from 400 companies to derive at robust research conclusions.

Moreover, the period of study from 2005 to 2010 is quite unique as it includes the period

of global recession and unprecedented interference in market operation by the

Canadian government mostly to large public companies such as within the automotive

industry.




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The selection of TSX/S&P index is considered critical as it is the largest stock exchange

in Canada whereby all the leading companies of the major Canadian economic sectors

participate in its stock listings. Secondly, since the primary research questions of

interest deal with examining the relationship between CEO cash compensation, firm

size, and firm performance, data collected from TSX/S&P firms generally include this

information in the form of reports and disclosure fillings as a mandatory exercise of

public companies for investor reporting.

The sample selection of 400 companies, as stated above, aims to provide rich data and

accordingly, research results will represent not only TSX/S&P index population but also

by extension the Canadian market population. Secondly, this study will cover the data

before and after periods of global economic crisis, which is quite interesting to see if

there is to be found any crisis effect on CEO compensation. It is highly expected that

this contemporary research data will reflect and accommodate the Canadian political

and economic changes that have occurred since 2005.

In addition, this research will pursue structured qualitative and quantitative

questionnaires which are the means to validate the objectivity of the annual reports and

public fillings. Also, it will focus on two prominent theories derived from the CEO

compensation literature, namely; 1. The relationship between agency theory and CEO

cash compensation; and 2. The relationship between CEO cash bonus, firm

performance, and firm size.




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This research seeks to contribute the Canadian perspectives to the body of small but

important literature. This study will also be beneficial to the executive compensation

industry and various corporations as it will assist the Canadian public, and in particular

media and investors, in understanding the system of CEO cash compensation. In

addition, this research being historical and statistical throughout, has undeviating

implications for researchers, executive compensation consultants, investors, and by-

enlarge Canadian citizens.

3. FUTURE RESEARCH DIRECTIONS

For future researchers, this study will provide interesting knowledge on the Canadian

aspects of the relationship between CEO cash compensation, firm performance and

firm size. It is also hoped that this study will appeal to researchers in advancing the

understanding of the field by concentrating future studies on the relationship between

CEO non-cash compensation variables, such as: stock options and long-term benefits,

and firm performance and firm size. In addition, it is hoped that this study will also

encourage future researchers in conducting a full study on all components of executive

compensation and firm performance in Canada at a refereed level.

4.0 LITERATURE REVIEW

This section reviews the relationship between CEO cash compensation with agency

theory, firm performance, and firm size. CEO cash compensation is identified as the




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dependent variable and will be studied with the control variable of firm size and the

independent variable of firm performance.

1. CEO CASH COMPENSATION AND AGENCY THEORY

CEO cash compensation is influenced by agency theory in the form of governance

structure whereby a weaker governance structure leads to relatively greater CEO cash

compensation. That is, it is believed that a CEO will act in his best interest by adopting a

maximum power approach through the use of qualitative influence, such as: controlling

the board and operational expertise and, to a lesser extent, through the use of

qualitative criteria of firm performance, such as: total sales and return on equity.

Finkelstein & Boyd (1989) argue that the balance of power between the Board and the

CEO is a major determinant of CEO compensation. Core, Holthausen, and Larcker

(1999) found that firms with weaker governance structures have greater agency

problems; that CEOs at firms with greater agency problems receive greater

compensation; and that firms with greater agency problems perform worse. Bebchuk

and Fried (2005) also argued that executive compensation is consistent with executives

who control their own boards and who maximize their own compensation subject to an

outrage constraint. Similarly, Weisbash (2007) stated that the contracts that are

negotiated between the CEO and the board are not likely to be those that maximize

shareholder profits subject to the usual constraints in principal-agent problems. Rather,

the contracts are likely to reflect optimal rent-grabbing by the CEO. Gomej-Mejia and

Tosi (1989) strongly believe that, in management-controlled firms, the top executives




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are more likely influential in both decision management and decision control, while

principals or their representatives are not particularly strong in any of the stages.

2. CEO CASH COMPENSATION AND FIRM SIZE

This topic will review additional relationship variables in the form of firm size with CEO

cash compensation. Gomez-Mejia and Barkema (1998) defined the relationship as

following: A positive relationship between CEO compensation and firm performance

would be consistent with agency theory, the dominant paradigm in this stream of

research. CEOs cash incentives have a strong relationship with the firm size as CEOs

in larger companies make higher income than CEOs in the smaller companies. Shafer

(1998) showed that the pay sensitivity (measured as the dollar change in CEO wealth

per dollar change in firm value) falls with the square root of firm size. That is, CEO

incentives are 10 times higher for a $10 billion firm than for a $100 million firm. Jensen

& Murphy (1990); and Kerr & Bettis (1987) found that different data sets, measurements

of variables, application of statistical techniques and model specification have often

found weak or even statistically insignificant relationships between pay and

performance. In a factor analysis conducted by Tosi, Werner, Katz, and Gomez-Mejia

(1998) they found that less than 5 percent of CEO pay is explained by performance

factors. In addition, these highly respected authorities in executive compensation stated

bluntly that after their six decades of research that the failure to identify a robust

relationship between executive compensation and firm performance has led scholars

into blind alleys (Gomez-Mejia and Barkema, 1998). Dyl (1998) added that there is a

downside hedge in the pay of CEOs in management-controlled firms, given that it is




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more strongly related to size, not performance. Williams (1985) believes that executives

themselves set their pay through using outside consultants to legitimize their pay

package. Therefore, transparency is minimized within the decision making system.

3. CEO CASH COMPENSATION AND FIRM PERFORMANCE

This topic will review firm performance with CEO cash compensation. CEO cash

compensation is believed to be weakly related to firm performance, according to a

majority of studies conducted in United States and the UK. It is believed that CEO

power and weaker governance plays an important role in the weak relationship between

CEO cash compensation and firm performance. Henderson and Fredrickson (1996) and

Sanders and Carpenter (1998) stated from their research findings that while CEO total

pay may be unrelated to performance, it is related to the organizational complexity that

they manage. On the other hand, Mehran (1995) reported that CEO pay structure was

positively related to same-year performance. Likewise, other similar studies conducted

by Murphy (1985); Jensen and Murphy (1990); and Joskow and Rose (1994) also

supports this nature of the relationship claim.

According to Tosi, Werner, Katz, and Gomez-Mejia (2000) through Meta-Analysis

conducted on pay studies overall it was found that the ratio of change in CEO pay and

change in financial performance is 0.203, accounting for about 4% of the variance. The

estimated true correlation between CEO pay and Return on Equity is .212. And the

estimated true correlation between CEO pay and Return on Assets is 0.117. Thus,

these other financial measures account for less than 2% of the variance in CEO pay




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levels. These results are supported by Jensen and Murphy’s (1990) findings that

incentive adjustments as an exploratory construct for CEO pay is weakly supported at

best. This weak relationship is explained by Borman & Motowidlo (1993); and Rosen

(1990), who state that the archival performance data focuses only on a small portion of

CEO’s job performance requirements and therefore it is difficult to form an overall

conclusion.

Another aspect of this relationship is the firm performance. Whether it should be

measured based on accounting performance or stock value since it is argued that stock

value better reflects shareholder wealth. Jensen and Murphy (1990); and Hubbard and

Palia (1995) favoured performance to be measured with stockholder value to reflect

CEO wealth.

The above literature review suggests that the relationship between CEO cash

compensation, agency theory, firm size and firm performance are relevant and remain

indecisive and as such this proposed topic needs to be further researched in greater

detail using primary data to understand the extent of relationship among its variables.

5.0 QUANTITATIVE RESEARCH METHODOLOGY

Adopting within the overall framework of quantitative research methodology, this study

will use historical-based, survey-based, and inferential statistics-based methodologies.

Historical-based research methodology is important for this study as a first step, as this




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research demands the studying of past corporate records and accordingly attest to the

nature of the relationship between CEO cash compensation, firm performance, and firm

size. “Historical-based research is very typical for a positivistic investigation of executive

compensation data. Using precise collection of data from annual reports is an obvious

approach applied by the researchers who had investigated chief executive pay in the

past” (McKnight and Tomkins, 2004, and Buck et al. 2003). A survey-based

methodology is essential to form, derive, and complete the research in any study and to

further uncover closely held beliefs and assumptions concerning CEO compensation.

As such, structured qualitative and quantitative questionnaires would be designed for

sampling. Inferential statistics-based methodology, which is very instrumental to this

quantitative research, will be used to transform historical and survey data into statistical

results to derive conclusions on research theory.

The pay-size-performance variables will be used for hypothesis testing and will be

applied in statistical tests as a highly structured quantitative and control variable,

holistically adopting the primary approach of positivist research methodology.

For the longitudinal study, historical data will be collected of firms from financial years

ending on or after Jan. 1, 2005 until the study ending period of Dec. 31, 2010. From the

collections of financial records of companies for the survey, combinations of twenty five

to one hundred qualitative and quantitative questionnaires will be created to assess and

confirm the published financial records. Also, through survey questionnaires, research




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and operational hypotheses will be addressed to form conclusions. The extent of cross

sectional study questionnaires will be based on the findings from longitudinal study.

Application of inferential statistics-based methodology will be applied and will be based

on parametric testing (z-score, ANOVA, T-test, & F-test); non-parametric testing (Chi-

squared tests, Man-Whitney U tests, Spearman rank correlation coefficient); and other

econometrics replication from past studies and/or development of new statistical

models. Inferential statistics-based methodology will achieve generalizability of results

under the positivist emphasis approach. The above methodologies and methods were

adopted in comparison of CEO compensation and firm performance through the use of

descriptive statistics and correlation format in the studies conducted by Gomez-Mejia

and Balkin (1987); Finkelstein and Boyd (1998); and Gomez-Mejia, Tosi, & Hinkin

(2000). Also descriptive statistics was used on Corporate Governance and firm

performance study by Gupta, Kennedy, and Weaver (2009).

A triangulation research strategy will be adopted for longitudinal and cross sectional

studies under this positivist research study. A content analysis will also be applied to

translate quantitative data to qualitative conclusion.

The statistical software package SPSS will be used to process quantitative and

qualitative research data. Data analysis will be performed through determining the

response rate, checking the range and validity of the data, producing summary tables,

illustration of graphs and charts, and drawing summary statistics. An Ordinary Least




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Squares (OLS) multiple regression model will be used to test the significance of

company performance and CEO power (the independent variables) on CEO cash

compensation (the dependent variable). The positivistic nature of the research is

characterised by the research objective to identify whether there is an evidence to

support a causal relationship between company performance and chief executive pay.

The period of sample size taken as stated earlier will be from 2005 to 2010. The overall

sample size of 2400 observations (6 years X 400 firms) will be used for statistical testing

which will provide strong power for statistical testing. Those firms which have been

listed for at least three years with the TSX/S&P index during the study period will be

included in the sampling population. This approach is taken to obtain good mature and

consistent data from each firm. To avoid potential losses of data during the period of

study, firms will be sampled from the year 2010 backwards. Such a sampling technique

will assist the total number of firms that may fall-out of the study due to events such as

firm separation, and mergers and acquisitions.

The sample will encompass TSX/S&P defined sectors of Mining; Energy and Services,

Clean Technology; Life Sciences; Technology; and Diversified industries (Consumer &

Industrial Products; and Services, Financial Services, Real Estate; Communications &

Media; Utilities & Pipelines; Forest Products and Energy Services).

Research paradigm selected for this study will be the application of positivism

reductionist approach. The quantitative methodology approach will be applied, as




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mentioned above. Primary historical data would be obtained through individual

corporate websites, and the SEDAR database. Also, other data collection sources will

be sought, such as: the Canadian Financial Markets Research Centre, Dun &

Bradstreet Canada, Moody’s Canada, and Moody’s and Business Week surveys.

A longitudinal study of 18 public companies listed in TSX/S&P will be conducted from

the categories of small, medium, and large size companies based on sales. The

longitudinal study period will be for five months. These companies are categorized into

“Small”, “Medium”, and “Large”. Small size companies will have annual sales up to $500

million. Medium size company will have annual sales of over $500 million to the limit of

$2 billion. Large size company will have an annual sales of over $2 billion. These

companies will be selected randomly based on the diversity of the sector and the range

of sales as defined above. A mail survey method will be adopted and structured

qualitative and quantitative questionnaires sample method will be used. The data

collected from these methodological studies will then be analyzed as stated above

through the use of SPSS statistical software and accordingly, forming conclusions

through linking the assumptions as outlined in research questions. Longitudinal design

is seldom used in social science research; however, it is typical within financial

investigations that adopt a positivist research philosophy (Bell and Bryman, 2003).

Following a longitudinal study, cross sectional study will then be carried out based on

longitudinal results towards 400 randomly selected firms representing different sectors

of the Canadian economy and this study will be for four months in duration. A




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triangulation method will be adopted to refine the survey questionnaires for cross-

sectional study from the results obtained from the longitudinal study. In all studies, the

questionnaires will be sent to the Chief Compensation Officer (CCO) or equivalent in

ranking. The CCO is selected for this survey due to their expertise in compensation

matters and its importance in determining pay-performance policies and also with

regards to being an important member of the compensation committee board (Cook,

1981). The CCO or equivalent in ranking will be contacted by telephone and/or e-mail to

form a written agreement before the survey is send out. Strict anonymity and

confidentiality will be assured in the form written signed statement.

The typical questionnaire survey will be from the designed scale in the form of selecting

best statement among the choices given; Likert scale will be used for some components

of the questionnaire survey by requesting to tick-box the selection which is applicable to

the firm case; and other scales such as recording of qualitative and quantitative

answers details would also be adopted. The processing of data will be through SPSS

software, as mentioned. One-digit numeric code will be assigned for each applicable

choice given in each categorical question of the survey. This will ensure efficient and

error-free processing of data that can be transformed into a statistical reporting format

for interpretation of the results. Validity checks will also be performed to test unassigned

coding acceptance by the SPSS software and vis-à-vis minimizing time and effort in

finding data errors.




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6.0 THE RESEARCH BUDGET

The researcher will fund the costs privately thus no scholarships or grants will be

requested in carrying out the present research. The total cost of the research is

estimated to be approximately $38,000 CDN dollars. No extra supervisory costs or other

cost are being requested from UGSM- Monarch Business School. The present research

is fully funded and may commence immediately.

The Research Budget

Category Description Cost (CDN $)

Tuition Supervision & Administration $29,200 Travelling Meetings/Seminars/Company visits $2,000

Printing Photocopies/computer printings $2,000

Stationary Miscellaneous $300 Mailing Sample questionnaires $4,000 Telephone Local and long distance calls $500

Total $38,000




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7.0 THE RESEARCH TIMELINE Below the overview of the estimated time frame for the completion of the proposed

doctoral research is presented along with the identified milestones.

Research Timeline

Activity

Months

Initialization & Research Proposal Review 1 Research Proposal Submission 1-2 Literature Review 3-8 Submission of the Literature Review 9 Development of the Research Methodology 10-11 Longitudinal Study 12-16 Cross-Sectional Studies 17-20 Writing-up(Results, Literature Reappraisal, and Conclusions)

21-26

Viva Voice 26




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8.0 RESEARCH PROPOSAL APPROVAL The contemplated research proposed herein has been approved by the University and

the student may commence the research immediately. The student is not to deviate

from the proposed research unless expressly confirmed by both the Supervisor and the

University in written form.

______________________________ Approved By The University On 10-June-2011 in Zug-Switzerland By: Dr. Jeffrey Henderson, Ph.D.




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PARTIAL BIBLIOGRAPHY

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2. Balkin, David B., Gomez-Mejia, Luis R., and Markham, Gideon D. (2000)‘CEO Pay in High-Technology Firms Related to Innovation?’, The Academy of Management Journal, vol. 43, No. 6, pp. 1118-1129.

3. Bebchuk, Lucian A. and Fried, Jesse M. (2003) ‘Executive Compensation as an Agency Problem’, Journal of Economic Perspective, Vol. 17, No. 3, pp. 71-92.

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6. Bell, E. and Bryman, A. (2003) Business research methods. New York, Oxford University Press.

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20. Girma, S., Thompson, S. and Wright, P. W. (2007) ‘Corporate governance reforms and executive compensation determination: evidence from the UK’, The Manchester School, Vol. 75:1, pp. 65-81.

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23. Gomez-Mejia, Luis R. and Tosi, Henry L. (1989) ‘The Decoupling of CEO Pay and Performance: An Agency Theory Perspective’, Administrative Science Quarterly, 34, pp. 169-189.

24. Gomez-Mejia, Luis R. and Tosi, Henry L. (1994) ‘CEO Compensation Monitoring and Firm Performance’, The Academy of Management Journal, Vol. 37, No. 4 (Aug. 1994), pp. 1002-1016.

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APPENDIX A

Table of Compensation Terminology & Measurement

Term

Measurement

Basic Pay Annual Salary/Base Pay Cash Bonus Annual Performance Cash Bonus/Other Cash Bonus

CEO Power CEO Shares Ownership; Chairman/CEO Duality Role; and CEO Tenure

Firm Performance

Return on Total Assets; Return on Total Equity; Stockholder's return; and Tobin's Q valuation method

Firm Size Total Sales; Total Assets; and Number of Employees;




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APPENDIX B

S&P/TSX COMPOSITE INDEX SAMPLING POPULATION COMPANIES Large Cap Companies( greater than $2 billion in Revenues)

(listed company information is obtained from tsx.com, investor500.com, and canadianbusiness.com websites)

1 Ace Aviation Holdings Inc. 36 Colossus Minerals Inc. 2 Advantage Oil & Gas Ltd. 37 Consolidated Thompson Iron Mines Limited 3 Agnico-Eagle Mines Ltd. 38 Cott Corporation 4 Agrium Inc. 39 Daylight Energy Ltd. 5 Air Canada 40 Detour Gold Corporation 6 Alamos Gold Inc. 41 Dorel Industries Inc. 7 Alimentation Couche Tard Inc. 42 Dundeewealth Inc. 8 Altagas Ltd. 43 E-L Financial Corp. Ltd. 9 Atco Ltd. 44 Empire Company Ltd.

10 Aurizon Mines Ltd. 45 Enbridge Inc. 11 Bank of Nova Scotia 46 Encana Corp. 12 Bankers Petroleum Ltd. 47 Equinox Minerals Limited 13 Barrick Gold Corporation 48 European Goldfields Limited

14 BCE Inc. 49 Extendicare Real Estate Investment Fund Trust

15 Bell Aliant Regional Communications LP 50 Fairfax Financial Holdings Inc. 16 Bombardier Inc. 51 Finning International Inc. 17 Brookfield Properties Corporation 52 First Quantum Minerals Ltd. 18 Cameco Corporation 53 Fortis Inc. 19 Canadian Imperial Branch of Commerce 54 Franco-Nevada Corporation 20 Canadian National Railway Company 55 Fronteer Gold Inc. 21 Canadian Oil Sands Trust Units 56 GAZ Metro LP 22 Canadian Pacific Railway Ltd. 57 George Western Ltd.

23 Canadian Real Estate Investment Trust Units 58 Gerdua Ameristeel Corp.

24 Canadian Tire Corporation Ltd. 59 Gildan Activewear Inc. 25 Canadian Utilities Ltd. 60 GMP Capital Inc. 26 Canadians Oil Sands Trust 61 Goldcorp Inc. 27 Canfor Corp. 62 Golden Star Resources Ltd. 28 CanWest Global Corporation 63 Great Basin Gold Inc. 29 Cascades Inc. 64 Great-West Lifeco Inc. 30 CCL Industries Inc. 65 Groupe Aeroplan Inc.




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31 Celestical Inc. 66 Husky Energy 32 Cenovus Energy Inc. 67 Husky Energy Inc. 33 CGI Group Inc. 68 Hydro-Quebec 34 CI Financial Corp. 69 IBM Canada Ltd. 35 Cinram International Income Fund 70 IGM Financial Inc.



71 Imperial Oil Ltd. 106 Peyto Energy Trust Units

72 Industrial Alliance Insurance & Financial Services Inc. 107 Pfizer Canada Inc.

73 ING Canada Inc. 108 Power Corporaton of Canada 74 Inmet Mining Corporation 109 Pratt & Whitney Canada Corp.

75 Insurance and Financial Services Inc. 110 Progress Energy Resources Corporation

76 Intact Financial Corporation 111 Provident Energy Trust Units 77 Inter Pipeline Fund Units 112 Quebecor Inc. 78 Ivanhoe Energy Inc. 113 Questerre Energy Corporation 79 Jaguar Mining Inc. 114 Research In Motion Ltd. 80 Kingsway Financial Services Inc. 115 Rogers Communications Inc. 81 Labrador Iron Ore Royalty Corp. 116 Rona Inc. 82 Lake Shore Gold Corp. 117 Royal Bank of Canada 83 Lesi-Bfc Ltd. 118 Rubicon Minerals Corporation 84 Linarmar Corp. 119 Russel Metals Inc. 85 Loblaw Ltd. 120 Saputo Inc. 86 Magna International Inc. 121 Savanna Energy Services Corporation 87 Major Drilling Group International Inc. 122 Sears Canada Inc. 88 Manitiba Telecom Services Inc. 123 Semafo Inc. 89 Manulife Financial Corporation 124 Shaw Communications Inc. 90 Martinrea International Inc. 125 Shawcor Ltd. 91 MDS Inc. 126 Sherritt International Corporation 92 Methanex Corporation 127 Shoppers Drug Mart Corporation 93 Metro Inc. 128 Silver Standard Resources Inc. 94 Minefinders Corporation Ltd. 129 Silver Wheaton Corp. 95 Mullen Group Ltd. 130 Silvercorp Metals Inc. 96 National Bank of Canada 131 Sino-Forest Corporation 97 Nevsun Resources Ltd. 132 SNC-Lavalin Group Inc. 98 New Gold Inc. 133 Sun Life Financial Inc. 99 Nexen Inc. 134 Suncor Energy Inc.

100 Onex Corp. 135 Superior Plus Corporation




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101 Parkland Income Fund 136 Talisman Energy Inc. 102 Perpetual Energy Inc. 137 Teck Cominco Ltd. 103 Petrobakken Energy Ltd. 138 Teck Resources Limited 104 Petrobank energy and Resources Ltd. 139 TELUS Corporation 105 Petro-Canada 140 TELUS Corporation



141 Tembec Inc. 142 The Jean Coutu Group PJC inc. 143 Thomson Reuters Corporation 144 Tim Hortons Inc. 145 Toromont Industries Ltd. 146 Toronto Dominion Bank 147 Trans Canada Corporation 148 Transalta Corporation 149 Transat A T Inc. 150 Transcontinental Inc. 151 Transforce Inc. 152 Trican Well Service Ltd. 153 Trinidad Drilling Ltd. 154 Vale Inco Limited

155 Valeant Pharmaceuticals International Inc.

156 Ventana Gold Corp. 157 Viterra Inc. 158 West Fraser Timber Company Ltd. 159 Western Ltd. Geroge 160 Westjet Airlines Ltd.




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S&P/TSX COMPOSITE INDEX SAMPLING POPULATION COMPANIES Medium Cap Companies(from over $500 million to $2 billion in Revenues)


1 Aastra Technologies Limited 36 Dundee Corporation 2 Aecon Group Inc. 37 Emera Inc. 3 AGF Management Ltd. 38 Enerflex Systems Income Fund 4 Agnico-Eagles Mines Inc. 39 Energy Savings Income Fund 5 Algoma Central Corporation 40 Enerplus Resources Fund 6 American Energy Partners Inc. 41 Ensign Energy Services Inc. 7 ARC Energy Trust 42 EPCOR Power LP 8 Astra Media Inc. 43 Ericsson Canada Inc. 9 AstraZeneca Canada Inc. 44 Estate Investment Trust

10 ATS Automation Toolinf Systems Inc. 45 Eveready Income Fund 11 Automation Tooling Systems Inc. 46 FirstService Corporation 12 Baytex Energy Trust 47 Flint Energy Services Ltd. 13 BFI Canada Income Fund 48 Fording Canadian Coal Trust 14 Bird Construction Income Fund 49 Forest Products Inc. 15 BMTC Group Inc. 50 Fort Chicago Energy Partners LP 16 Bonavista Energy Trust 51 Forzani Group Ltd./The Extendicare 17 Brisck Group Income Fund/The Cathedral 52 Garda World Security Corporation 18 CAE Inc. 53 GlaxoSmithKline Canada 19 Calfrac Well Services Inc. 54 GLV Inc. 20 Canaccord Capital Inc. 55 Groupe Aeroplan Inc. 21 Canada Bread Company Ltd. 56 H&R Real Estate Investment 22 Canam Group Inc. 57 Harry Winston Diamond Corporation 23 Canwel Holdings Inc. 58 Honeywell Canada 24 Centerra Gold Inc. 59 HudBay Minerals Inc. 25 CHC Helicopter Corporation 60 Iamgold Corporation 26 Chemtrade Logistics Income Fund 61 IESI-BFC Ltd. 27 Churchill Corporation 62 Indigo Books & Music Inc. 28 Cogeco Cable Inc. 63 Intertape Polyerman Group Inc. 29 Cogeco Inc. 64 Janssen-Ortho Inc. 30 Colabo Group Inc. 65 Jazz Air Income Fund 31 Connors Brothers Income Fund 66 Just Energy Income Fund




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32 Constellation Software Inc. 67 Keyera Facilities Income Fund 33 Corus Entertainment Inc. 68 Kinross Gold Corporation 34 Crescent Point Energy Trust 69 Laurentian Bank of Canada 35 Diversified Income Trust 70 Leon's Furniture Ltd.

S&P/TSX COMPOSITE INDEX SAMPLING POPULATION COMPANIES Medium Cap Companies(from over $500 million to $2 billion in Revenues)


71 Linamar Corporation 106 Sino-Forest Corporation 72 Logistic Income Fund 107 SMART Technologies Inc. 73 Lundin Mining Corporation 108 Softchoice Corporation 74 MacDonald, Dettwiler and Associates Ltd. 109 Stantec Inc. 75 MDC Partners Inc. 110 SunOpta Inc. 76 MDS Inc. 111 Tembec Inc. 77 Merck 112 Tesco Corporation 78 Methanex Corp. 113 The Churchill Corp. 79 MI Development Inc. 114 The Forzani Group Ltd. 80 Mitel Networks Corporation 115 Thompson Creek Metals Company Inc. 81 Mullen Group Ltd. 116 Toromont Industries Ltd. 82 New Alta Income Fund 117 Torstar Corporation 83 New Flyer Industries Inc. 118 Transforce Inc. 84 Norbord Inc. 119 Trican Well Service Ltd. 85 North American Energy Partners Inc. 120 Uni-Select Inc. 86 North West Company Fund 121 Vector Aerospcace Corp. 87 Northbridge Financial Corporation 122 Vermilion Energy Trust MacDonald 88 Open Text Corporation 123 Wajax Income Fund 89 Patheon Inc. 124 Western Coal Corp. 90 Pembina Pipeline Income Fund 125 Western Forest Products Inc. 91 Petrobank Energy Resources Ltd. 126 Winpak Ltd. 92 Pharmascience Inc. 127 Xeros Canada 93 Precision Drilling Trust 128 Yamana Gold Inc. 94 Provident Energy Trust 129 Yamana Gold Inc. 95 Quadra Mining Ltd. 130 Yellow Pages 96 Real Estate Investment Trust 97 Reitmans Canada Ltd. 98 Rio Tinto Iron & Titanium Inc. 99 RioCan Real Estate Investment Trust




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100 Royal Utilities Income Fund 101 Samuel Manu-Tech Inc. 102 Sanofi-Aventis Group 103 Sherritt International Corporation 105 Sierra Wireles Inc.

S&P/TSX COMPOSITE INDEX SAMPLING POPULATION COMPANIES Small Cap Companies(up to $500 million in Revenues)


1 Agrico-Eagle Mines Ltd. 36 Denison Mines Corporation 2 Akita Drilling Ltd. 37 DragonWave Inc. 3 Angiotech Pharmaceuticals Inc. 38 Duvernay Oil Corporation 4 Atlantic Power Corporation 39 Eastern Platinum Ltd. 5 Atomic Energy of Canada Limted 40 Eldorado Gold Corporation 6 Atrium Innovations 41 Enablence Technologies 7 Aurizon Mines Ltd. 42 Energy Resources Ltd. 8 Azure Dynamics Corporation 43 Equitable Group Inc. 9 Ballard Power Systems Inc. 44 Evertz Technologies

10 BioMS Medical Corporation 45 Fairborne Energy Ltd. 11 Bioniche Life Sciences Inc. 46 FNX Mining Company Inc. 12 Birchcliff Energy Ltd. 47 Frontera Copper Corporation 13 Boralex Inc. 48 Galleon Energy Inc. 14 BPO Properties Ltd. 49 Gammon Gold Inc. 15 Breaker Energy Ltd. 50 Genesis Land Development Corporation 16 Breakwater Resources Ltd. 51 Gennum Corporation 17 Bridgewater Systems Corporations 52 Glacier Ventures International Corporation 18 Cagene Corporation 53 Guardian Capital Group Ltd. 19 Canadian Apartment Properties 54 Hanfeng Evergreen 20 Canadian Western Bank 55 Heroux-Devtek Inc. 21 Cangene Corporation 56 High River Gold Mines Ltd. 22 Capstone Mining Corporation 57 Highpine Oil & Gas Ltd. 23 Cardiome Pharma corp. 58 Home Capital Group Inc. 24 Celtic Exploration Ltd. 59 Horizon North Logistics Inc. 25 Centerra Gold Inc. 60 Imperial Metals Corporation 26 Clairvest Group Inc. 61 Kereco Energy Ltd. 27 CML Healthcare Income Fund 62 Labopharm Inc. 28 COM DEV International Ltd. 63 Lassonde Industries Inc.




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29 Compton Petroleum Corporation 64 Lifestyle Communities Inc. 30 Connacher Oil and Gas Ltd. 65 Linamar Corporation 31 Constellation Software Inc./Canada Foremost 66 Major Drilling Group International 32 Corby Distilleries Ltd. 67 March Networks Corporation 33 Corel Corp. 68 Marsulex Inc. 34 Crew Energy Inc. 69 Maxim Power Corporation 35 DALSA Corporation 70 Medical Facilities Corporation

S&P/TSX COMPOSITE INDEX SAMPLING POPULATION COMPANIES Small Cap Companies(up to $500 million in Revenues)


71 MEGA Brands Inc. 106 Ventures International Corporation 72 Melcor Developments Ltd. 107 Vero Energy Inc. 73 Mgao Corporation 108 Wesport Innovations Inc. 74 Miranda Technologies 109 Western Canadian Coal Corporation 75 NAL Oil & Gas Trust 110 World Point Terminals Inc. 76 Niko Resources Ltd. 77 North American Energy Partners Inc. 78 North American Palladium Ltd. 79 Northgate Minerals Corporation 80 Optical Engineering Inc. 81 PAN American Silver Corp. 82 Pason Systems Inc. 83 Petrolifera Petroleum Ltd. 84 Petrominerales Ltd. 85 Pey to Energy Trust 86 ProEx Energy Ltd. 87 QLT Inc. 88 Quest Capital Corporation 89 Red Back Mining Inc. 90 Richelleu Hardware Ltd. 91 Sandvine Corporation 92 Silver Wheaton Corporation 93 Stella-Jones Inc. 94 Storm Exploration Inc. 95 SXC Health Solutions Corporation 96 Tekmira Pharmaceuticals Corporation




Page 33

97 Tembec Inc. 98 Tesco Corporation 99 Theratechnologies Inc.

100 Timminco Ltd. 101 Transglobe Energy Corporation 102 TriStar Oil & Gas Ltd. 103 TVA Group Inc. 104 Universal Energy Group Ltd. 105 Uranium One Inc.

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