Your pay is indecent, gentlemen bosses

It’s hard to say what’s most shocking about the study on Canadian corporate executive compensation released this week by the Canadian Center for Policy Alternatives.

Is it the fact that the 100 highest paid CEOs of companies listed on the Toronto Stock Exchange have enjoyed a staggering 31% increase in compensation between 2020 and 2021?

Or that they now earn 243 times the salary of the average Canadian, an indecent gap that is constantly widening and breaking a new record?

Or that the prize list counts 97 men… and barely 3 women?

What is clear, in any case, is that these gentlemen benefit from inadmissible largesse.

Yes, running a big business comes with heavy responsibilities. No, the candidates who can occupy these positions are not running the streets. It is normal that these people are well paid.

Except that for decades, we have been witnessing an escalation that takes us away from logic and legitimacy each year to sink deeper into indecency.

In 1998, the median salary of the bosses of large companies listed on the TSX reached 62 times the average salary of workers in the private sector. By 2010, the gap had more than doubled to 140 times.

Since ? It’s getting worse.

Despite undeniable gains in terms of transparency, the mandatory disclosure of executive compensation, introduced in 1993 in Canada, has had perverse effects. Boards of directors are all keen to offer more than the market average to their leaders, observes expert Michel Magnan.

These councils therefore establish comparisons which push them to raise the remuneration of the bosses. This raises the average… encouraging everyone to add more. The vicious circle has been running at full speed for decades.

Like others, Michel Magnan denounces the fact that the justifications underlying the compensation granted to senior executives are based on “myths”.

Among them: the belief that a company’s performance is directly related to the performance of the big boss. Talk to the oil companies who have been doing gold business since the war in Ukraine.

Another myth is that CEOs will forage elsewhere if the pay is higher. François Dauphin, CEO of the Institute for the Governance of Private and Public Organizations (IGOPP), underlines that in reality, the internal knowledge of the company is an asset which considerably slows down the mobility of managers.

What to do in the face of these abuses? The answer is complex.

Many companies hold votes on their compensation policy with their shareholders (what English speakers call “say on pay”). The federal government passed a bill to make the practice mandatory, but it was never enforced. In any case, these votes are purely advisory and serve above all as a moral guarantee for excesses.

In its study, the Canadian Center for Policy Alternatives proposes to combat excessive remuneration through new tax measures. It would, however, have impacts that would affect many more than a handful of multi-millionaire leaders. These discussions need to take place, but on a much broader basis.

Ultimately, it is the boards of directors that must play their role and ensure that compensation policies are fair and based on adequate indicators. It is on them that we must put pressure.

Big investors like the Caisse de depot, for example, should use their clout to bring bosses’ pay down to earth.

As for the low presence of women, this is a subject in itself… to which we will return in another editorial.

Business inequities undermine the sense of justice and fuel cynicism. They have been denounced for years. It’s time to reverse the trend.