It’s three minutes to 11 in the a.m., the first working day of the new year. You are about to purchase your second cup of coffee. There you are, standing in line, counting nickels. Perhaps you are contemplating the runaway costs of the seasonal festivities just past. Perhaps you’re trying to remember whether any payroll deductions are front-end-loaded at the beginning of the year and whether the employee costs of any benefits have been bumped higher for 2018. How skinny will that first paycheque be?
Let’s add this: as of 10:57 a.m., the average CEO who has made it into the ranks of the top 100 chief executives in the land will have earned what the average Canadian worker will make in the entire year.
Yes, this is another record. For the past 11 years, the Canadian Centre for Policy Alternatives has been monitoring the growing gap between average worker pay and that of the country’s wealthiest CEOs.
The numbers: average worker pay rose by 0.5 per cent in 2016. That’s a $228 increase, taking the annual income to $49,738. Canada’s top 100 CEOs were luckier: an average 8-per-cent pay hike pushed their average pay to $10.4 million, the first time the centre’s data-crunching has taken the total above the $10-million mark.
David Macdonald, senior economist at the CCPA, takes the numbers to a more granular level. “The minimum wage for the top CEOs is now $2,489 an hour,” Macdonald says. “Which, incidentally, is about a month’s work at minimum wage.”
In 2015, a CEO had to pull in $3.7 million to crack the ranks of the top 100. In 2016, the minimum threshold was $5.2 million. “So there was really a big increase in the minimum wage to get on the top 100 list,” Macdonald says. “Yet, at the same time, the CEOs who are seeing huge increases in the minimum wage for themselves are often – and the organizations that represent them are often – the first ones out of the gate to say increases in minimum wage shouldn’t happen for regular workers.”
The causes that lie behind the growing disconnect are easy enough to pinpoint. CEOs have been incentivized increasingly over the past three decades through means other than straight pay. There’s the conventional bonus. The odious fashion of backdated stock options. Regular old stock options.And so on. As Macdonald points out, any time there’s an attempt to clamp down on one of these measures, the income will probably pop up in another area.
Sometimes, as we know, nothing happens. The evidence here is the undelivered promise by the Liberal government to close the stock option deduction. Cautious companies, weighing the possibility that the government would at last be good on its word, rejigged their rewards.
The implications for corporate performance should not be ignored. The voices championing investment for the long term remain few; rewards tied to short-term performance remain plentiful. Take mergers and acquisitions: “The Canadian corporate world is on a mergers and acquisitions boom in the neighbourhood of $100 to $200 billion,” Macdonald points out. “The stock price goes up, everyone gets paid in the C suite and the companies are saddled with debt … It’s galling from an income and inequality perspective. It’s also bad for the Canadian economy. It’s bad for workers because they’re often the ones who get stuck in the middle when a merger goes wrong and (companies) need to cut costs. Canadian workers are the ones going to be laid off for that. We’re paying CEOs to do this.”
And this: “A company can go bankrupt and still somehow CEOs will get their bonuses, despite the fact that the company has gone into insolvency.”
The CCPA is light on the “big-picture approach” that needs to be taken to address the problem, and says little to nothing about institutional investor power or whether fixing the gender imbalance at the top could have some effect. It does seem to be the case that increased transparency in pay disclosure has resulted in CEOs being “benchmarked” against the ever-increasing rewards of their peers, with the obvious effect that pay continues to be pushed skyward.
Macdonald is bleak in his overall assessment.
In his heart of hearts does he expect next year’s results to be anything other than another record-setting year for the executives on top? “I don’t, unfortunately. I don’t.”
Now get that coffee and get back to work.
Jennifer Wells is a national affairs columnist.