money cash bag CROPPED

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

Graham Hicks