A Journal of People report
Canada’s top-paid 100 CEOs make an average of $9.5 million a year, finds a study by the Canadian Centre for Policy Alternatives (CCPA).
The CCPA said:
The country’s 100 highest paid CEOs will have earned $48,636 by lunchtime on their first working day of the year – about what the average Canadian earns in a year.
The amount of money that the top-paid Canadian CEOs make works out to 193 times the average Canadian’s wage of $49,510.
“These extraordinarily high levels of compensation push people toward making decisions that will deliver a short-term benefit in a time period in which they’re able to take advantage of it, rather than making decisions that are in the long-term benefit of the corporation,” said economist Hugh Mackenzie, author of the study report.
“There’s a fair bit of turnover among senior executives.”
The study said:
Pay for top executives, always high, has risen in recent years. Canada’s highest-paid executives saw their compensation almost double in real terms between 1998 and 2015.
It’s likely to keep growing, since there’s no real reason for it not to, says Mackenzie. Shareholder activists have tried but largely failed to trim compensation.
“There are an awful lot of people whose names are Bob and Bill in that list,” says Mackenzie. “Boards of directors have a certain composition. They tend to hire people who are like themselves.”
However, not all CEOs do that well. Mid-pack bosses have to work about 11.3 hours to earn what the average Canadians makes in a year.
Canada’s top-paid CEO was Valeant Pharmaceuticals’ Michael Pearson, at $182 million. Nearly that entire amount was in shares. Pearson lost some of the value of that when Valeant stock plunged in 2016. Pearson left his position in the spring of 2016 after a medical crisis.
Canada’s CEOs’ compensation climbs during crisis
Canada’s top-paid CEOs saw their compensation climb at double the rate of the average Canadian between the depths of the recession and 2013, the study found.
The country’s 100 highest remunerated chief executive officers pulled down an average of $9.2 million in 2013, about 25 per cent more than the $7.35 million they amassed in 2008, said the CCPA.
By comparison, the average Canadian income in 2013 was $47,358, about 12 per cent more than the 2008 level.
“It’s a sort of a highly visible manifestation of growing income inequality in Canada,” said Mackenzie, who studied the numbers of the CEOs of 240 publicly listed Canadian corporations on the Toronto Stock Exchange.
“I just don’t think it’s sustainable. I think that sooner or later public concern about income inequality is going to start to matter politically and something will have to happen.”
The last time compensation for the top 100 corporate chiefs reached such a height was 2007 — the year before the recession — when it peaked at an average of $10 million, said the report Glory Days: CEO Pay in Canada Soaring to Pre-Recession Highs.
The CEO calculations include salaries as well as earnings from bonuses, share grants and stock options.
By that measure, Gerald Schwartz of the private equity company Onex Corp. earned the most of any of the CEOs, pulling in $87.9 million for 2013. The sum included $61.4 million in options and a $25.2-million bonus.
Next up was Nadir Mohamed of Rogers Communication Inc., who made $26.8 million, followed by Michael Wilson of the fertilizer producer Agrium Inc. at $23.8 million. Both men retired from their respective companies in 2013 and received large one-time payments related to their departures.
Mackenzie acknowledged that particularly large sums, like the one awarded to Schwartz, push the average upwards, but he noted that even the compensation of the 100th-ranked CEO on the list was about 30 per cent higher in 2013 compared with 2008.
In 2013, Thomas Simons of Canadian Energy Services & Technology Corp., who took home just over $4.1 million in compensation, earned the least on the Top 100 list.
Looking back even further, the study found:
The average 1998 compensation for the Top 100 CEO earners was 105 times more than the average Canadian’s income. In 2013, the top CEOs raked in about 195 times more than the average Canadian’s pay.
The report found:
The compensation divide was wider for women: the average CEO in the Top 100 made 237 times the income of the average woman in 2013.
Mackenzie said the government could limit how much of a CEO’s salary a company can deduct from its taxes.
The review also offers other suggestions including: the introduction of a more steeply graduated tax system and putting an end to the treatment of stock options as a capital gain, so they’re no longer taxed at half the rate of ordinary income.
The report suggests the average Canadian CEO earned $8.96 million in 2014.
While the average Canadian makes do on around $935 a week – or a little better than $23 an hour — the average CEO takes in $172,307.69 weekly. That’s about $4,307.69 per hour (assuming a 40-hour work week).
At that rate, it takes the average wage earner 4.6 weeks to earn what the average CEO earns in an hour.
Most Canadians have to make their average annual industrial wage of $48,636 cover expenses like food, housing, clothing and transportation. The average CEO could use their $8.96 million annual stipend to: (1) Buy 480 of the best seats in the house to every Toronto Blue Jays game for the 2016 season. Or they could afford 7,900 of the cheapest seats for all 81 homes games in 2016. (2) Buy 1,478 season tickets for the Montreal Canadiens – assuming they can first persuade the more than 800 people currently on the waiting list to give up their places. (3) Take 34 of their best friends on a space flight with Virgin Galactic. (4) Buy a Couple of homes in Kardashian country. (5) Help offset Ottawa’s annual cost of resettling 1,120 Syrian refugees.
The facts found reveal a single fact: Inequality.