Tag Archives: executive compensation

Poor little rich boys


Your typical, overpaid CEO in Canada contemplating his options

Your typical, overpaid CEO in Canada contemplating his options

They are absurdly wealthy. They are getting even more absurdly wealthy. And, because too many of them are no good at what they do, we hate them for their free rides through life.

I speak, of course, of the lordly tenth of the one per cent: The beautiful people; the ones whose marriages, when they fall apart, don’t drive them into bankruptcy; the ones whose private islands remain virginal even as their returns on their investments in oil and gas ensure that organ-replacement technology keeps them alive and kicking much longer than Methuselah could have possibly imagined, (though, to be fair, he was a supplicant of an imperfect Almighty; had he worked for Donald Trump, he night well be alive today).

Still, kids, meet the new gods, coming as cardboard cut-outs to a mini-mart they probably own near you. Even their financial backers are beginning to despise the look of them.

According to a recent piece by Janet McFarland in the Globe and Mail’s Report on Business section, “In bygone years, it might have slid by with little protest. But not in Canada’s new say-on-pay era. Barrick Gold Corp. reported in March that it raised chairman John Thornton’s pay last year by 36 per cent to $12.6-million (U.S.) and exempted him from the defined performance targets it uses for other executives’ pay, all while Barrick lost $3 billion and saw its share price shed one-third of its value in 2014.

And the denouement, thanks to Ms. McFarland’s assiduous reporting, is thusly known: “It was an incendiary combination and shareholders responded with an overwhelming ‘no’ in the company’s say-on-pay vote on executive compensation, which garnered just 27-per-cent support at Barrick’s annual meeting in May.”

Ouch, John! Tell us, how does that make you feel? Can you get by on a mere $5 million a year for effectively running the company you oversee into the fine and splendid ground the diamonds on the soles of your shoes have ruined forever? Dear John, do tell.

Of course, the obscene disconnection between company performance and executive pay is not new. Back in 2010, following the Great Nervous Breakdown That Made Mere Peasants Shudder To Think About Retirement, Harvard Magazine’s Jay Lorsch and Rakesh Khurana had this to say on the subject:

“Concerns about the compensations of chief executive officers and other top executives of American public companies have reached fever pitch since the financial crisis and the economic meltdown of 2009. Some observers blame the recent recession in part on the flawed compensation arrangements for the top management of major financial institutions. For almost 20 years, a growing chorus of voices have been criticizing the way top managers are paid. The criticisms focus particularly on CEOs, not only because they are the highest paid, but also because their compensation sets the pattern for executives beneath them. Like previous criticisms, the current complaints focus on two issues: executives are paid too much, and current incentive-pay schemes are flawed because the connection between executive pay and company performance is mixed at best – and at worst has led to a series of dysfunctional behaviors.”

No kidding, Sherlocks. Still, please refrain from deploying phrases like “dysfunctional behaviours”. It hurts my eyes.

Beyond that, it’s wrong.

These boys who wrecked the world own all the toys. They simply got out of the sandbox when the getting was good. That’s not “dysfunctional”, per se; selfish, yes; evil, indisputably.

No, the new normal in this world of work and fair pay may be absurd, but it is completely explicable and lamentably predictable.


That’s one for you and 171 for me


The wretchedly poor are far more likely than the stupendously wealthy to publicly disclose their incomes. After all, the former needn’t ever worry about being kidnapped for a ransom of mac and cheese.

So, we must turn to the Canadian Center for Policy Alternatives (CCPA) to learn that the rich are, indeed, getting richer faster than everybody else in the country.

According to a folio entitled All in a Day’s Work? released last week, the annual compensation packages of Canada’s 100 highest-paid CEOs included, on average, a base salary of $1 million, cash bonuses amounting to $1.73 million, corporate shares and stock options worth $3.93 million, and miscellaneous perks and pensions valued at $1.29 million for a grand total of $7.95 million, giver or take a grand or two.

If anyone is counting, that amounts to 171 times more than the average Canadian wage, which tops up at about $47,000 a year. And, it gets worse (unless, of course, you’re rich, in which case it’s getting better all the time).

“The average wage in Canada increased by 6 per cent between 1998 and 2012 while the average compensation of Canada’s highest-paid CEOs increased by 73 per cent during that same time period (inflation-adjusted),” author Hugh Mackenzie writes. “Reality was harsher for Canada’s minimum-wage workers: If they were lucky enough to have a full-time, 40-hour a week job, minimum-wage workers earned, on average, $20,989 in 2012.”

In fact, another source, the AFL-CIO, says the wage cap in industrialized countries – including Canada – is wider and accelerating faster than even these numbers indicate. In the United States a top CEO, earning an average of $12.2 million annually makes 354 times what a wage-earning stiff pockets in a year. In Canada, the ratio is 205:1. In Germany, it’s 147:1. In England, it’s a downright egalitarian 84:1. “In the past few decades, CEO pay has skyrocketed while the average worker’s pay has stagnated despite increases in productivity,” the union’s website observes.

Of course, the purpose of these timely revelations is not a little political. Neither the CCPA nor the AFL-CIO are especially fond of corporate fat cats. To be sure, the CCPA can’t resist thundering its disapproval: “Five ears after a global recession knocked the wind out of Canada’s labour market, throwing tens of thousands of workers onto the unemployment line and sidelining a generation of young workers, the compensation of Canada’s CEO elite continues to sail along.”

But if such criticisms are expected from the usual assortment of fellow travelers outside the gates and beyond the moat, less predictable is the chorus against excessive compensation rising within the castle keep, itself.

Here’s what McGill University professor of management Henry Mintzberg had to say in a piece he penned for the Wall Street Journal in 2009:

“These days, it seems, there is no shortage of recommendations for fixing the way bonuses are paid to executives at big public companies. Well, I have my own recommendation: Scrap the whole thing. Don’t pay any bonuses. Nothing.”

As Dr. Mintzberg concludes, “Too many large corporations today are starved for leadership – true leadership, meaning engaged leadership embedded in concerned management. And the global economy desperately needs renewed enterprise, embedded in the belief that companies are communities. Getting rid of executive bonuses, and the gambling games that accompany them, is the place to start.”

The larger point is that, ever since much of the world’s financial sector collapsed under the weight of an adept minority’s avarice, fairness and equity (or least some semblance of these scarce resources) have become centerpieces of economic development and job creation among the abused and disaffected majority.

That’s why obscenely high pay packets for CEOs, such as Canadian Pacific’s E. Hunter Harrison who earns a staggering $49.1 million a year, affects public opinion (and perhaps even public policy) more directly today than ever before.

Will it be enough to imbue the system with a little sanity? “Despite the scrutiny and pressure,” Mr. Hugh Mackenzie writes, “the pay of CEOs in Canada and elsewhere has proven to be remarkably resilient.”

All of which suggests a reason other than fear of kidnapping why Canada’s stupendously wealthy are loath to discuss their loot in public: Lest they die of embarrassment.

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