A report released by the Canadian Centre for Policy Alternatives shows CEO compensation in Canada has set a new record. By 11.47 AM on January 3, 2017 when most people were starting their work year, Canada’s highest-paid CEOs earned more than the average working person’s income for all of 2017.
Last year, it would have taken about half an hour longer —until 12:18 p.m. on the second working day of 2016.
Hugh Mackenzie, a Toronto-based economist who wrote the report, says the clock analogy is a powerful way to illustrate a widening gap between what top executives get paid and what average Canadian workers earn.
The report states that Canada’s 100 highest paid CEOs total compensation in 2015 hit a new high at $9.5 million, on average. The report shows Canada’s 100 highest paid CEOs on the Toronto Stock Exchange index now make 193 times more than someone earning an average wage.
When adjusted for inflation, the average income of the top 100 CEO’s has grown by 99% since 1998, compared to 9% for the average Canadian.
Forty-seven of the top 100 CEOs had a defined benefit pension plan, with an average pension payable at age 65 of just under $1.1 million.
The report’s findings about the highest paid 100 CEOs in Canada show that:
- They earn the average wage ($49,510) by 11:47 a.m. on January 3;
- The average Canadian worker will have to work full-time all year to earn that amount;
- The average earnings of Canada’s corporate top 100 increased by 178% between 1998 and 2015;
- The glass ceiling still exists in this elite club: only two women made it in the top 100 rankings in 2015.
The increases in CEO compensation have nothing to do with how well corporations are doing. “We should keep in mind that this income boom continued through a deep recession from which Canada has yet to fully emerge,” said Mackenzie.
Data from the OECD suggests that Canada, along with the US and Britain, rank among the countries with the most extreme gap between CEO’s and the average worker.
Mackenzie says the problem lies with the way CEOs earn this money — often with stock grants and stock options that can lead executives to make decisions that reward them in the short term rather than the company or public at large.
He suggests the government should level the playing field by ending a tax break for proceeds from stock options.
The report recommends taking compensation decisions out of the hands of the board of directors and making share holders votes on pay mandatory rather than advisory. It further suggests changing the accountability of compensation advisors so that they are accountable to shareholders rather than to the board, like auditors.
The Canadian government should look at a law enacted by Portland, Oregon, which imposed 10% to 25% tax hikes on firms whose CEOs make more than 100 times their average employee.
Harinder Mahil is a human rights activist and is a board member of the Dr. Hari Sharma Foundation.
