CEO wages: it’s not a political issue

Dan
Dan Leger
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Hunter Harrison, the chief executive officer of Canadian Pacific Railway, earned $49.1 million in 2012, making him the highest paid executive in the country. Canadian Press photo

Among the top 10 not surprising headlines so far in 2014 is the revelation the other day that Canadian CEOs will make, in half a day, more than an average worker will earn all year. Apparently it took the average chief executive officer until 1:11 p.m. on Jan. 2 to surpass the annual wage of the average Canadian toiler.

Does that seem surprising? Hardly. It’s not exactly a secret that the first class passengers are drinking even better champagne while those in steerage get by on discount beer.

The study by the left-leaning Canadian Centre for Policy Alternatives examined the pay packets of chief executives of the top publicly traded companies and determined they made as much before lunch on their first day back at work as Joe or Jane Average will make between now and Dec. 31.

As a public policy analysis, the review: All in a Day’s Work? CEO Pay in Canada, is almost worthless. It doesn’t deal with the workplace at all, beyond that single dimension of some people getting paid more than others.

But there are profound issues of inequality in the Canadian economy. The annual CCPA review and comparison only deals with one of them. Its purpose is entirely political: to raise awareness of the widening gap between those who have lots and those who have less.

Trouble is, even that political goal isn’t of much value because people have already made up their minds and there’s no consensus about what to do, if anything.

Is it really government’s job to right every economic wrong? Many Canadians don’t think so and among that group are most members of the Conservative Party.

Perhaps it’s your view that the state should reduce inequalities and break down class barriers. You’ll likely think “there ought to be a law” on these fat-cat executives gobbling up the cash while many workers barely make ends meet.

People who think the country is too much of a free market will already believe that workers are underpaid and executives overpaid. Those who believe in the miracle of the free market will reply that CEOs earn only what the market will bear and not a penny more.

It doesn’t have anything to do with public policy because no government nor any party is proposing laws or regulations to reduce CEO wages in corporations that have every legal right to decide what to do with their profits.

After all, these aren’t government agencies. They are private corporations, owned by shareholders. They might operate in regulated industries, but the companies themselves really only have to report to shareholders, not to the government and not to the public.

If the company is making money for its owners, they generally don’t prevent executives from giving themselves pretty good compensation, which are then approved by boards of directors. It’s all very orderly. Cozy too.

Still, no credible political voices in any of the major parties are calling for the slightest change in that arrangement.

Companies are free to make private deals with their employees, from the shop floor to the executive suite. The companies are required to disclose those arrangements for purposes of market transparency, not because the public has any particular right to know.

But reports like All in a Day’s Work? make for snazzy headlines. And to be fair, the review does illustrate how the gap between top wages in the corner office and those of “average Canadian workers” has only grown over the years.

The report suggests that in real terms, wages for “average workers” rose by a paltry six per cent from 1998 to 2012. During that time, CEO wages increased 73 per cent. That brings the total average CEO haul to $7.96 million, 171 times the national workers’ average of $46,634.

So, be outraged if that’s your inclination. But be outraged about the right problems, which aren’t addressed in the CCPA review and don’t pretend to be.

The real issue isn’t whether CEOs make too much money. The issue is how they run their firms.

Do these companies provide legitimate products and services? Do they stay within law and protect consumers? Do they treat employees fairly? Do they respect the environment and conduct their businesses ethically?

If the answer to all these questions is yes, perhaps the CEOs are worth the big bucks. If not, it’s time shareholders took out the chainsaws.

    

Dan Leger is a Halifax-based writer and commentator.

Organizations: Canadian CEOs, Canadian Centre

Geographic location: Canada

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  • Stewart Smith
    January 06, 2014 - 13:47

    What I object to is people who make money simply by taking it from others. Speculators in property and the stock markets don't earn money as such, they just take it from less fortunate individuals. If a stock trader makes a profit, some poor pensioner is going to get less pension next year. Unless an investor is genuinely lending money to a company in order for them to grow, these types of trades should be illegal.

    • Angus
      January 07, 2014 - 10:02

      Stew This is not a socialist state nor the Left's paradise. No one is forcing individuals to invest in anything - although greed does play a part in both sides of the equation. The Left and the media can blather on all they want. Their b'tching doesn't amount to a fart in a windstorm. Without the entrepreneurs and execs making big bucks, we wouldn't have anyone making any bucks! and BTW no one owes any worker a good paying job - that's their obligation to get educated and find one, no matter where or how. Google the parable of the little red hen. That's what happens when the state starts meddling with the free enterprise system.