Current Trends in Executive Compensation in Cannabis: Trulieve Cannabis Corp.

I reside in the US, in the State of Washington where cannabis is legal. Vertical integration is prohibited, but it’s a start. We, of course, are neighbors with Canada where the legal status of cannabis is quite different and there is a lot of complexity about where companies are headquartered, the subsidiaries they have and where they operate, and more.

As a long time consultant and student of executive compensation in both the US and Canada, it’s interesting to me to see how these two compensation cultures are interacting in the complex cannabis sector.

Cannabis is not an industry, it’s a sector.  See the blog “’What are companies like us doing’ – Revisiting compensation peer groups” published by the NCIA.

As companies are releasing their filings for 2020 shareholder meetings this Spring, executive compensation is the hot topic as it is every Spring.

My firm, Cannabis Compensation ConsultantsTM monitors a large number of cannabis companies, not just in the Spring but all year long. This is because in addition to being compensation consultants, our firm has extensive investment holdings in cannabis. 

Many are comparing the executive compensation programs in cannabis companies to those of tech and biotech companies, especially in the early years of those industries. That oversimplifies and is inaccurate. Because there are extreme examples that are nothing like tech or biotech.  Like Trulieve Cannabis Corp. – or so it might appear.

(Disclosure: I am a personal investor in Trulieve and as regulations allow will transfer those holdings to our parent corporation, Compensation Venture Group, SPC.)

In 2019, here is how the top 5 executives – CEO, CFO, General Counsel, Chief Production Officer, and Chief Information Officer – at Trulieve were paid:

  • Base salary ranging from $291k to $147k (rounded)
  • Annual incentive (bonuses) from $150k (52% of base salary) to $30k (19% of base salary
  • Stock options: none
  • Stock grants: none
  • Other long-term incentive plans (e.g., cash): none
  • Pension: none
  • All other: $3 ,901 to $41 (yes, forty-one dollars).

I was very surprised! A young entrepreneurial company in a budding (ha!) industry not granting equity compensation to top executives? They are not like tech or biotech companies at all!

The Company said this about that:

The long-term component of compensation for executive officers, including the Named Executive Officers, will be based on stock options. This component of compensation is intended to reinforce management’s commitment to long term improvements in the Corporation’s performance. 

The Board believes that incentive compensation in the form of stock option grants which vest over time is beneficial and necessary to attract and retain both senior executives and managerial talent at other levels. Furthermore, the Board believes stock option grants are an effective long-term incentive vehicle because they are directly tied to share price over a longer period, up to 10 years, and motivate executives to deliver sustained long term performance and increase shareholder value, and have a time horizon that aligns with long-term corporate goals.

And then…

No compensation securities were granted or issued to the Named Executive Officers of the Corporation during the most recently completed financial year. As at December 31, 2019, no option-based awards were outstanding. 

The data, from the Summary Compensation Table is what the media will report, possibly concluding that Ms. Kim Rivers, CEO of Trulieve, is “underpaid” and that must be because she is female. That is how the media is playing right now. You will read media stories about how much a CEO:

  • Was “paid”
  •  “Took home”
  • “Pocketed”
  • “Raked in”
  • “Made”

Compensation experts like me, however, read the Summary Compensation Table and know this is the furthest from the truth that compensation disclosures can be. Not because a company is trying to mislead investors, but because the disclosure rules are just dumb, and companies have to follow those. But rules are just rules.

Here is what happened, not by December 31, 2019 (the last day for which the compensation period is reported for a company with a calendar fiscal year) but in the meantime. As in the first business day after:

On January 2, 2020, the Board granted option awards under the Corporation’s Stock Option Plan to each of the NEO’s as follows: 

  • Ms. Rivers – 160,944 options
  • Mr. Srinivasan – 122,624 options
  • Mr. Powers – 73,575 options
  • Mr. Landrum – 73,575 options
  • Mr. Pernell – 73,575 options. 

These options have an exercise price of US$11.52 and expire on January 3, 2025. 

Trulieve also granted stock options to members of the Board of Directors…on January 2, 2020.

What does a cannabis compensation consultant and compensation expert like me think of that? 

  • Granting options the day after the disclosure cutoff obviously delays disclosure of the grants until next year. For grants to have occurred on January 2, they were likely approved prior to that day, says my experience with Compensation Committees.
  • The option grant to Ms. Rivers has an accounting “value” (that’s topic for another blog) of roughly $1 million. That’s a lot more than her reported “pay” of $443,750 in 2019.
  • This a very short term for stock options, 5 years. That’s pretty short for a “long-term incentive.”
  • No vesting schedule for the stock option is disclosed. Major faux pas in executive compensation disclosures.
  • Trulieve has 3 classes of stock and does not disclose on which of these options are being granted. Subordinate Voting Shares? Multiple Voting Shares? Super Voting Shares?

What does a cannabis investor and shareholder in Trulieve like me think of that?

  • Trulieve should not be playing games with executive compensation disclosures.
  • Trulieve should be clear about the details of stock-based compensation grants to executives – class of shares, vesting periods, and more.
  • Trulieve does not disclose the use of an independent compensation consultant to assist the Compensation Committee.  The Company should either disclose that or,
  • Self-interest alert: Hire a compensation consultant to help them make compensation decisions that are in the interests of all stakeholders: investors, employees, the community…

I’m going to hold on to my Trulieve shares but if there weren’t COVID restrictions and warnings right now, would have been on a flight to Tallahassee, Florida for the shareholder meeting on June 2.  Maybe it’s going to be virtual? The “Investors” page of their website has no information on that. 

Whittlesey Headshot

Fred Whittlesey

  • Founder and Principal Consultant – Compensation Venture Group, SPC
  • Compensation Committee Adviser
  • Compensation Expert Witness
  • A Certified B Corporation

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