Before noon yesterday, Canada’s highest-paid chief executive officers earned more than the average working person’s income for all of 2017.
That’s the conclusion of the Canadian Centre for Policy Alternatives, an Ottawa-based think-tank that has tracked CEO compensation in this country for a decade.
It says this year’s elite group of CEOs will earn the average, full-time Canadian wage by 11:47 a.m. on Jan. 3, which is the second working day of 2017. Last year, it would have taken about half an hour longer – until 12:18 p.m. on the second working day of 2016.
Hugh Mackenzie, a Toronto-based independent economist who wrote the report, says the clock analogy is a powerful way to illustrate a widening gap between what top executives get paid and what average Canadian workers earn.
“There’s […] been an explosion in the compensation of senior executives in Canada and the United States. And that serves as a very potent symbol, I think, of the growth of income inequality,” Mackenzie said in an interview.
This year’s report, based on information released by Canadian publicly traded companies in 2016, estimates the average compensation of the top 100 chief executives was $9.5 million in 2015, 193 times the average annual industrial wage.
That’s up from $8.96 million in 2014, 184 times the average annual industrial wage that year.
Mackenzie says the problem lies with the way CEOs earn this money, often with stock grants and stock options that can lead executives to make decisions that reward them in the short term rather than the company or public at large.
He suggests Ottawa should level the playing field by ending a tax break for proceeds from stock options
“The proceeds of stock options in Canada are taxed at half the rate of ordinary income,” Mackenzie says. “The [Trudeau] government actually promised to get rid of that but then backed down in the face of opposition from the business community.”
He adds, “One of the things that I’m going to be watching with some interest is what the government does in its next budget with respect to that campaign commitment.”
Mackenzie says the trend to higher CEO compensation has been pretty consistent over the years, regardless of the broader economic downturns or shareholder attempts to get more say on executive pay. But he admits there always seems to be at least one or two individual CEOs each year who are far ahead of the others, possibly distorting the overall averages in the top 100.
Most of the year-over-year increase in the report was due to just one person: Michael Pearson, formerly CEO of Valeant Pharmaceuticals, who vaulted to number one with $182.9 million of compensation in 2015 from number 15 at just under $11.35 million in 2014.
Pearson’s rise was due mostly to $179.4 million of share compensation in 2015 – a year when Laval, Que.-based Valeant was at times Canada’s most valuable company with a stock above $300 per share for a two-month stretch in the summer.
Since then, Valeant has lost more than 90 per cent of its market value following a series of problems, including U.S. investigations into price hikes for some of its drugs. These problems emerged before Pearson departed in early 2016.
This article was originally published on Benefits Canada‘s companion site, Advisor.ca