Regulation of indecent compensation of senior executives

Regulation of indecent compensation of senior executives

The compensation for certain top executives in Canada are so exorbitant that they are becoming immoral. This new public awareness – or even this revolt – is all the more legitimate since paying such wages does not always go hand in hand with the company’s profits and hirings.

Some figures to make your head spin
Let’s take the 100 highest-paid executives in Canada. Did you know that these executives received, on average, total compensation (salary, option, bonus and retirement) of $9.57 million in 2015, an increase of 30% since 2008, while the average Canadian earns less than $50,000. The ratio between these two groups was therefore 193 in 2015 and 175 in 2008. A disturbing, even alarming development when one discovers what it is in the United States: 354, no less! This year, by 11:47am on Tuesday, January 3, these same 100 executives had already earned the average annual compensation of Canadians.

What do you think of these enormous sums paid to top level executives whose results are often disappointing? Close to $210 million in severance packages to come for Marissa Mayer, Yahoo; the announced 50% increase of Bombardier’s top executives, despite the elimination of 14,000 jobs around the world and the bailout of the accounts by the provincial and federal governments.


From ineffective safeguards to awareness

What are the human resources and compensation committees doing, appointed by the board of directors, to limit the excessive appetite of top executives? In addition to their role as guarantor in the appointment of leaders, talent management and succession planning, they have their say regarding compensation. However it’s not easy to be objective with respect of their peers, as demonstrated by the declaration of Mr. Monty, president of the Human Resources and Compensation Committee at Bombardier, who said that “the compensation practices were sound” and that “the company’s ability to earn in a highly competitive market depends on its ability to attract and retain a team of top executives of world-class calibre.” After such statements, revolt rumbled – demonstrations by citizens made the the company bend on certain points. This new awareness is also found among a number of economic players: Claude Béland (Mouvement Desjardins) recommends a radical reduction of the ratio (between 30 and 40) and Yvan Allaire (Executive Chairman of the Board of the Institution on Governance of Private and Public Organizations) wants payment of bonuses to be conditional on new hires.

This debate on compensation of top executives in Canada is treading water. Why do some outside our borders succeed (ratio of 35 in the Israeli financial sector, a surtax for companies whose ratio is higher than 100 in Oregon) or display a willingness to move the lines (on May 4, 2017, a bill was announced on regulating the compensation of top leaders at universities), while others are slow to make decisions that would restore peace of mind to many Canadian businesses.

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