Executive Pay in Canada
Nice to be at the Top!
Robert K. Stephen
The Canadian Centre for Policy Alternatives issued a paper written by David Macdonald in January 2018 entitled “Climbing Up and Kicking Down: Executive Pay in Canada”. This report is an annual report that has been done over the past 11 years. It focused on the top 100 paid CEOs listed on the S&P/TSX composite for 2016.
The report records the growing gap between the pay of average workers in Canada and that of the richest CEOs. These CEOs are busting the bank it would seem and in the 2016 calendar year made an average of $10.4 million which is 209 times greater the average income for the average worker being $49,738 This is the first time the ratio of CEO pay to average pay has surpassed 200:1. In 2009 the gap was 155:1. To coin a trite phrase the rich are getting richer and the poor are getting poorer. It really begs the question dear reader of what Trudeau has done about this to protect his cherished “middle class”. It would seem he has left the working poor and the working class out of his cozy equation?
It also begs the question why all the fuss about the rise of the minimum wage in Ontario to $15. Where is the fuss about executive compensation? I rather doubt the CEO has to worry about paid breaks being removed and being compelled to pay for his or her health benefits. To put the paper into perspective by 10:57 a.m. on January 2 of this year Canada’s average top-100 CEO will already have made what the average worker makes in an entire year!
The pay increase for the average worker in 2016 was .5% while the top 100 CEOs saw a pay increase of 8%.
The paper states the majority of Canada’s largest publicly traded companies paid out 4 times as much money to shareholders than it would have cost to fully fund their worker pension plans.
The paper also points out the tax loopholes for these CEO’s remaining open will prevent the Canadian government from reducing inequality in Canada. The minimum hourly wage for the richest 100 CEOs in 2016 was $2,489.62. In 2018 it will take the minimum wage worker in 2018 one month to earn the 2016 CEO hourly minimum wage!
In 2016 the top CEOs pay was 3% in enriched pension benefits, 11% in base salary, 33% share-based value, 26% bonus, 15% in option-based compensation and 12% as “all other compensation” which is often “golden parachute” packages paid to retiring CEO’s. Six CEOs alone made $80.1 million from these “golden parachutes”.
Of the top of the 100, 2016 paid CEOs only three are women.
The perpetuation of high CEO salaries is justified by employee benefit plan and management consultants and by use of a peer benchmark. Attempts by governments in the United Kingdom, the United States and Canada to control executive compensation have failed because they have focused on taxation of certain components of compensation. The paper states that when the UK moved towards limits on bonuses the same dollars were just shifted back to base pay. It also continues by saying when the federal government in Canada considered fairer taxation of stock options, compensation through options declined and direct stock grants increased.
The report concludes. “ Ultimately, a more co-ordinated strategy across several tax measures is likely necessary. This could involve closing the stock option deduction, increasing the capital gains inclusion rate and creating a new top marginal bracket. Without a big picture approach to reining in CEO compensation, company accountants are bound to find ways around limiting regulatory actions so that they can continue gaining tax preference for company executives.”
The paper can be found here https://www.policyalternatives.ca/publications/reports/climbing-and-kicking-down