It’s a topic Canadians are immensely uncomfortable talking about. And it’s a topic that can be argued equally well from either side.
On the one hand, I am aghast at the amount of money upper-end lawyers, accountants, and management consultants are making as service providers, even in a humble town like Edmonton.
They don’t save lives, they don’t put their own lives on the line. They don’t start companies. They don’t create wealth.
Lawyers and accountants have made the rules of law and accounting so complex that they are the only ones who can understand said rules. Therefore they can command enormous compensation - $400 to $900 an hour for the top dogs – to interpret those rules on behalf of clients.
Institutional executive compensation - the salaries, perks and benefits paid to the heads of universities, major government-funded agencies, crown corporations and regulators - especially stick in my craw. The latest University of B.C. president didn’t work out. He has “resigned” after one year. Yet he still gets another year’s worth of pay, another $450,000.
The growing spread between the pay of the average working professional and the top executives in the same organization (be it private, public or institutional) is worrisome. Yes, the CEO stays awake at night worrying about the fortunes of the ship he/she sails. But is that added responsibility really worth 5x to 10x more than the $80,000 to $100,000 the middle rank professionals are being paid?
It’s not about the actual disclosed “salary” – the $250,000 to $400,000 a CEO makes. It’s about the performance bonuses, the stock options, the golden handshakes, special pensions and tax-avoidance structures that push “real” compensation into the $1 million-plus range. But the total package is so convoluted that only an accountant gets it.
ON THE OTHER HAND, it’s a free market!
Executive compensation, no matter what, is ultimately based on supply and demand. A top executive with a proven record comes into a broken company and turns it around, increasing revenues by $10 million or more. Isn’t that worth $1 million in performance bonuses?
Somebody agreed to pay the lawyer. “We had to argue on a regulatory ruling that, had it gone against us, would have cost millions,” says a former CEO. “We paid our lawyer $1,000 an hour. Was it worth it? Yes!”
If the outside accountant offers tax strategies that save the company millions, what’s that worth compared to the paltry $100,000 in fees?
The higher they fly, the further they can fall. The moment a big company begins to falter, the board can turf the highly paid CEO.
Economic downturns – especially for any top executive in Alberta’s energy industry – knock the mickey out of those performance bonuses and stock options. Still, it’s hard to be sympathetic when the top dudes will only make $1.5 million in 2015 instead of $3.5 million.
As for entrepreneurs … no argument: If a person takes the huge risk of starting a company and makes a go of it – creating employment, paying taxes – they deserve every penny they make!
Every compensation package in Canada is a two-way street, from the $10.20 an hour current minimum-wage earner in Alberta to the $87.9 million Onex Corporation paid CEO Gerry Schwartz in 2014. Somebody makes a pay offer. Somebody accepts the offer.
It may be walking on springtime ice, to argue that individuals in our society are being over-paid. It is all about supply and demand, about two signatures to every employment contract.
But something is not right here. The spread between top management/service provider compensation and what their mid-level professional employees are being paid is just too great. And it continues to grow.
What they made: Top executive compensation in well-known Canadian companies, 2013-14
(Source: Canadian Centre for Policy Alternatives)
Gerald Schwartz, Onex, $87,917,026
Nadir Mohamed, Rogers Communications, $26,769,973
Michael Wilson, Agrium, $23,818,740
Donald Walker, Magna International, $19,557,600
JR Shaw (Exec Chair), Shaw Communications, $17,380,532
Robert Dépatie (partial year), Quebecor, $14,821,147
Gordon Nixon, RBC, $14,038,877
Doug Suttles, Encana, $13,774,095
Steven Williams, Suncor, $13,001,730
Scott Saxberg, Crescent Point Energy, $12,785,274
Donald Guloien, Manulife Financial, $12,763,549
Bradley Shaw (CEO), Shaw Communications, $12,426,854
Richard Waugh (partial year), ScotiaBank, $11,205,612
R. Jeffrey Orr, Power Financial, $11,181,444
George Cope, BCE, $10,963,448
Edmund Clark, TD Bank, $10,436,884
Darren Entwistle, TELUS,$10,127,702
Gerald McCaughey, CIBC, $10,016,000
Harold Kvisle,Talisman Energy Inc. $9,543,519
William Downe, BMO, $9,492,425
Steve Laut, CNRL, $9,248,828
Average pay in Alberta (Alberta Government, Alberta Wage and Salary Survey, 2013)
Bartenders, $11.37 an hour, $17,164 a year
Janitors, $18.45, $33,370
Hotel managers, $24.24, $52,000
Corrections officers, $31.40, $63,285
Nurses, $42.60 (average 28.8 hours a week), $63,933
Social workers, $40.24, $67,175
Ambulance attendants, $30.35, $68,436
Teachers (elementary), $42.98, $74,649
Mechanics, $36.08, $77,076
Heavy equipment operators, $31.92, $77,543
Architects, $38.79, $77,693
Crane operators, $35.90, $80,626
Bricklayers, $40.37, $84,525
Carpenters, $35.69, $85,263
Computer Engineers, $44.86, $88,975
Drillers, oil and gas, $34.94, $90,511
Police officers, $44.39, $91,391
Civil engineers, $46.11, $92,054
Pharmacists, $49.49, $92,677
University professors, $56.92, $122,805
Doctors, family, $114.58, $194,494