For decades now, I’ve been following the steady increases in Chief Executive Officer (CEO) compensation among Canadian corporations. Once again, the Canadian Centre for Policy Alternatives (CCPA) is reporting that compensation for Canada’s 100 highest-paid CEOs broke every compensation record on the books in 2022. That means that these CEOs now make 246 times more than average workers made in the same year. According to CCPA, this is up from their previous high of 243 times the average worker wage in 2021.
To put this issue in greater perspective, the same year Canadians were hard hit by the emergence of the worldwide recession in 2008, the CCPA authored a report that indicated that CEO compensation represented 174 times more than the average Canadian wage. While the average compensation for the top CEOs outpaced inflation by 70 percent between 1998 and 2008, people earning the average income lost six per cent to inflation over the same period.
Furthermore, the CCPA report entitled Canada’s new gilded age notes that CEOs benefit from inflation because extreme CEO pay is linked to soaring corporate profits. It’s driven by bonuses, not salaries, and those bonuses are tied to company performance, like revenue and profits. In 2021 and 2022 as inflation soared, so did corporate profit margins. As a direct result, CEO bonus pay also hit all-time highs as companies profited from higher prices.
Now, there are those that will say that CEOs should be rightfully awarded for the corporations’ higher profits. However, in numerous cases, even where a corporation did not perform up to expectations, contractual arrangements still allow for CEOs to receive their bonuses. What is most unfair is that their workers’ wages have not kept up with inflation. The report notes that in 2022, the average worker in Canada got an average pay raise of $1,800, or three percent. However, prices went up by 6.8 per cent in 2022, meaning workers took a real pay cut of almost four percent compared to 2021. On top of which, the average worker has to deal with inflationary prices for such essentials as food, heating and accommodation and recent higher interest rates affecting everything, including mortgages.
What’s worst is that when corporations are in the market to replace CEOs, they are forced to offer greater compensation at current rates in order to attract who they believe are the most qualified candidates. This creates a continuing cycle in industries whereby the compensation for each new CEO starts at even a higher level than would have been the case in the past.
The CCPA rightly calls upon governments to address the rampant income inequality between the rich and the rest of us through taxation measures that both disincentivize extreme CEO compensation and help to redistribute CEOs’ extreme income to Canadians on the lower end of the income spectrum. How much greater does the spread have to be between what Canadian CEOs now make and the average workers make before the federal government finally acts? The above mentioned report suggests the creation of new top income tax brackets, the removal of corporate tax deductibility of pay packages over a million dollars, the introduction of a wealth tax and an increase in the capital gains inclusion rate. Under the current circumstances, such measures would certainly appear reasonable and just!
Surely, the Canadian government is in a position to introduce certain tax measures to deal with this issue now. There is little justification not to address the fact that 100 CEOs, who are overwhelmingly male, got paid a whopping average of $14.9 million in 2022. This is double what they pocketed in 2008 (an average of $7.3 million), even when taking into consideration yearly inflation rates.
FROLITICKS 