The richest of the rich have gained more ground in Canada, and are now making 189 times the average Canadian wage, according to a new report.
OTTAWA: The richest of the rich have gained more ground in Canada, and are now making 189 times the average Canadian wage, according to a new report.
The 100 highest paid chief executives whose companies are listed on the S&P/TSX composite index made an average of $8.38 million in 2010, according to figures pulled from circulars by the Canadian Centre for Policy Alternatives, a left-leaning think-tank.
That’s 189 times higher than the $44,366 an average Canadian made working full time in 2010, the report says. And it’s a 27% raise from the $6.6 million average compensation for the top 100 CEOs in 2009, the report says.
Regular Canadians, on the other hand, have seen their wages stagnate over the past few years. In 2010, after adjusting for inflation, average wages actually fell.
“The gap between Canada’s CEO elite 100 and the rest of us is growing at a fast and steady pace, with no signs of letting up,’’ says economist Hugh Mackenzie, who authored the report.
“The extraordinarily high pay of chief executive officers is more than a curiosity. It actually is a reflection of a troubling redistribution of society’s resources in Canada and the United States, and in most of Western Europe,’’ he said in an interview.
He points out that in 1998, the top 100 CEOs were paid 105 times the average wage. Since then, the ratio has generally climbed up.
In 2008, it was 174, dropping back to 155 during the recession in 2009. The high-water mark was 2007, when it peaked over 190.
It means that by noon on Jan. 3, the average top executive will have already made as much money as the average Canadian worker makes in a year.
The driving forces behind the inequality gap are complex, and lie in the structure of executive compensation packages, Mackenzie says.
Consultants giving advice to corporate boards on how much to pay their CEOs only compare to other CEOs, perpetually driving up the average in the race to be above-average, he explains.
The corporate board members all run in the same circles.
And many companies use stock options for a large part of their executives’ bonuses, a practice that not only drives up pay packages but also ties compensation to share price rather than company performance, Mackenzie notes.
“The process of paying CEOs is really quite incestuous.’’
Solutions are equally complex. Debate in the US has raged over this subject since the subprime fiasco of 2008, and the consensus seems to be that regulating the structure of compensation packages won’t really work, Mackenzie says.
Instead, taxation is a better way to go, allowing corporate boards to compensate as they please, but putting governments in a position to claw back excesses and redistribute them as they see fit.
While Mackenzie does not expect Prime Minister Stephen Harper to hike taxes on the rich tomorrow, he does see some kind of policy response eventually.
“I actually see this kind of growing income inequality as inherently unstable. I think there will be a response,’’ he said.
“The people at the very top of the income scale – and CEOs are at the top of the top –have really launched themselves into a kind of economic interplanetary travel. If the rest of us are on Earth, they’re off somewhere else in a different world. I think that’s unstable.’’
The top earner on the list is definitely in a galaxy of his own. Frank Stronach, the honorary chairman of auto-parts manufacturer Magna International Inc. took home almost $62 million in 2010.
Excluding Stronach from the Top 100 calculation would bring the average pay package down by about $62,000, Mackenzie said.
Number two on the list – Donald Walker, also of Magna – made $16.7 million in 2010.
The top banker was Richard Waugh of Bank of Nova Scotia, pocketing $13.8 million in pay, bonuses, options and perks.
But Mackenzie points out that the compensation information companies include in their circulars don’t catch the pay packages of investment bankers, whether or not they work for publicly traded companies.
Click here to download Canada’s CEO Elite 100.
Click here to download OECD: Canada’s income gap is at a record high.
© 2012 The Canadian Press