An economist says the recent decision by Air Canada executives to voluntarily give back their bonuses is an incredibly rare case of an about-face on compensation from a company.
David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, says it’s unusual for public outcry to be successful in nudging C-Suite employees to return their bonuses. “In most cases, it’s a day or two of bad press and the world goes on and [chief executive officer] pay packages continue to increase. It’s only in very extreme cases like this where CEOs and other C-Suite members are shamed into giving their money back.”
The airline announced Sunday its president and CEO, as well as its executive vice-presidents, had volunteered to return their 2020 bonuses and share appreciation units after “public disappointment” grew over its compensation program. In the statement, it said former president and CEO Calin Rovinescu, who retired in February, will be donating the value of his 2020 bonus to the Air Canada Foundation.
Both Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland expressed their displeasure with the company’s bonus program last week after the airline disclosed millions in bonuses to people it called “instrumental” to the airline’s survival during the coronavirus pandemic. The federal government paid $500 million for a six per cent stake in Air Canada and also agreed to a $5.9-billion loan package for the airline in April. “Canadian companies receiving money from the government have a duty to behave responsibly when it comes to regular Canadians who are now their shareholders as well as their customers,” says Freeland.
Over the course of 2020, some of the airlines’ executives took pay cuts to their base salaries, including a $490,000 salary reduction for Rovinescu and a $245,000 reduction for chief financial officer Michael Rousseau, according to the company’s most recent proxy circular.
“It just goes to show that it’s almost impossible for executives not to receive their bonuses even if those bonuses would’ve been wiped out in the normal course of operations due to COVID-19,” says Macdonald. “The formulas are just changed after the fact so that everyone gets their bonuses in any event,” he notes, referring to the calculations used to decide the amount of the bonus. In Rovinescu’s case, he was awarded more than $720,000 as a “pandemic mitigation bonus” in 2020, while Rousseau was given $420,000.
Aside from the specific case of Air Canada, Macdonald says bonus payouts are a part of a larger culture that favours executives even in the face of difficult financial times, like those experienced by the airline during the pandemic. However, he doesn’t think this is a part of a larger trend and instead is an exception that proves the rule.
“If you’re on the right side of some shift you had nothing to do with you get extraordinary bonuses, if you were on the wrong side of the shift, you just change the formulas after the fact and you still get extraordinary bonuses,” he says.