Did you get a raise last year? If you’re an executive at one of Canada’s largest companies, chances are you’ve enjoyed a big pay raise.
The CEOs of the 100 largest Canadian companies listed on the Toronto Stock Exchange took home a combined payout of $1.16 billion in 2021, a 32 percent increase from $877 million a year earlier. , according to a report. analysis by the balloon and mail and the consulting firm Global Governance Advisors. The median CEO salary package, which includes a base salary, annual bonus and stock awards, rose to $9.13 million in 2021, up 23 percent from 2020. By comparison, CEOs saw a 1.4 percent wage increase from 2019 to 2020 when Covid first hit.
Philip Fayer, CEO of payment processing company Nuvei, topped the list with a multi-stock payment package valued at just over $140 million. The second biggest winner was Patrick Dovigi, CEO of waste management company GFL Environmental, with $43.4 million.
Why do CEOs bank?
The reason for the compensation increases was largely due to a strong stock market and corporate earnings, recovering from the worst days of the pandemic, says David Macdonald, a senior economist at the research institute. Canadian Center for Policy Alternativesor CCPA. Of the companies listed in the report, the average share price increase was 30% in the last fiscal year, which was reflected in CEO bank accounts: the average share award was $4, 77 million for executives, almost 9% more than in 2020. .
The analysis found that the main driver of high CEO pay packages was annual cash bonuses. (Research by the CCPA found that in 2019, just 12 percent of the top 100 CEOs’ pay came in the form of salary, while 82 percent was in the form of a bonus.) at $1.95 million, up almost 38 percent from 2020. The data also found that the typical CEO received a bonus equal to 170 percent of his salary.
Macdonald explains that bonuses are determined based on factors such as an executive’s performance, the performance of their company market price and earnings A company’s compensation committee, made up of members of the board of directors and potentially executives from other industries, approves the amount of the payment.
But ramy elitzur, an accounting professor at the Rotman School of Management, questions how executives are compensated. He says that if he looks at metrics that measure company performance, say share prices, it’s important to ask whether CEOs are largely responsible for such financial gains. “Are CEOs paid well just because the whole stock market went up, or are they paid well for something they’ve actually done?” he says. And when it comes to evaluating a CEO’s individual performance, he’s skeptical of companies using metrics like leadership or strategic vision. “It is not measurable and you can modify it however you want.”
The growing pay gap between workers and CEOs
The data highlights the disparity between top earners and their staff: The typical CEO earned a base salary of $1.11 million last year, nearly 20 times what the average salaried Canadian worker earned during the same period, according to September 2021 data. The wages of most workers have not kept pace with inflation, which as of May stands at 7.7 percent. Executives, on the other hand, are seeing their salaries outpace the rate of inflation. Elitzur sees this as a big problem. “I don’t think any employee is being compensated for inflation,” he says. “Income inequality is a very dangerous thing.”
The wage gap can have a ripple effect. Elitzur says that employees, especially those who lost their jobs in the early days of the pandemic, will be less inclined to return to work for companies where executives made sure to keep high-paying roles while laying off workers. “It will come back to go after the corporations,” he says. “People may think, ‘I’m not paid that well, and when things go wrong, I’m the first to suffer. So why do I want to work with you?’” Facing labor shortages, some companies are raising wages to attract top talent. including executive directors. But with fears of a recession looming, massive pay packages raise concerns about whether such increases are even sustainable.
While many Canadian CEOs took pay cuts during the pandemic, a 2021 CCPA report found that CEOs of some companies, such as George Weston Ltd. and Laurentian Bank, benefited from making adjustments to bonuses, including altering the weighting of categories in performance reviews. Often, according to the report, bonuses offset pay cuts. “The pandemic demonstrated that the formulas that determine bonuses are easily changed after the fact to preserve CEO pay, even if the company does poorly,” Macdonald says.
This shows, according to Macdonald, that even if a recession hits, it doesn’t necessarily mean that a CEO’s pay package changes significantly. “Wage increases may not be as big in a recession, but large decreases are quite unlikely.” Elitzur believes the pay gap between executives and workers will only widen. “I’m less concerned about the jump in CEO pay that has already happened,” says Elitzur. “I am worried about the future as I don’t think the executive compensation committees are doing their job.”