Fri. Feb 23rd, 2024

CEOs better off after inflation, report finds

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The Canadian Center for Policy Alternatives has tracked the compensation of the 100 highest-paid CEOs in Canada since 2008. (Archive image)< /p>

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If the most recent inflationary wave pushed hundreds of thousands of workers on strike, it benefited the highest paid Canadian CEOs , reveals a new study from the Canadian Center for Policy Alternatives (CCPA).

The average worker in the country took home $60,600 in 2022, according to CCPA data, or 246 times less than the 100 highest-paid CEOs, who took home $14.9 million on average.

These business leaders saw their compensation increase by $623,000 (4.4%) compared to the previous year. It also doubled from 2008, the year the CCAC began compiling this data.

It's another record year.

A quote from David Macdonald, CCPA senior economist and author of the report.

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Canadian Center for Policy Alternatives (CCPA) economist David Macdonald. (File image)

Inflation, which reached a 40-year high in 2022, has driven up the value of sales and profits businesses, says David Macdonald.

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CEOs, whose remuneration is largely composed of performance incentives which rely on the profitability of the firm, thus saw their bonuses explode during this period, maintains Mr. Macdonald.

Lana Payne, the national president of Unifor — Canada's largest private sector union — calls the growing gap infuriating.

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In 2022, Lana Payne became the first woman to serve as president of the Unifor union.

We saw workers rising up against this. This is why we have more labor conflicts in Canada and this is why there are more conflicts at the bargaining tables. Because the workers said enough was enough, she insists.

However, not all business leaders pocket this much money. Some ensure that income gaps within their organization do not exceed a certain threshold.

This is the case of Hosni Zaouali, the CEO of ConnectED labs, a Toronto-based technology firm. He maintains that the highest salary in the company is never more than 10 times higher than the lowest salary.

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Hosni Zaouali is also president of the non-profit organization lucrative This is Community Help.

We can increase the highest salary, but in this case, we absolutely must increase the lowest salary and thus we ensure a certain fairness in our company, he explains.

Mr. Zaouali nevertheless believes that the remuneration of managers of large firms can be justified, taking into account their performance and return obligations for shareholders.

The success of a company often rests on the decisions of its president, believes Hosni Zaouali.

The business manager must be able to play with […] all aspects of the business, management, finance, operations, to ensure that the performance of the business is optimal and that its thousands of employees continue to be employed.

A quote from Hosni Zaouali, CEO of ConnectED Labs

Globalization has also made the work of CEOs more complex, notes Vincent Geloso, assistant professor of economics at George Mason University in Virginia.

He There are more and more companies that are international. […] A large Canadian company in the 1960s was much less likely to be in competition with Indian companies or Chinese companies, he illustrates.

Boards would therefore seek to hire business leaders with a wide range of skills from a limited pool of candidates.

Few people would want to constantly live out of suitcases and get five to six hours of sleep. These are people who have very unique preferences, notes Mr. Geloso.

Boards of directors, which can be demanding, also do not hesitate to show the door to a CEO who does not meet expectations.

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In a report published in 2020, Vincent Geloso indicated that between 38 and 55% of CEO changes were linked to disappointing performance. (Archive image)

In a report published in 2020 by the Fraser Institute, the economist reported that among the 100 highest paid Canadian CEOs in 2007, 42 were off the list the following year. Ten years later, only 15 remained.

Mr. Geloso also believes that the income gap between CEOs and workers measured by the CCPA is the result of methodological shortcuts.

He judges in particular that the remuneration of the 100 highest paid CEOs is not representative of the income of the average business leader and criticizes the fact that workers' social benefits, such as their insurance for example, are not taken into account in the CCPA calculations.

Ms. Payne, of the Unifor union, believes that governments can reduce the country's income gap by reducing barriers to unionization, by raising the minimum wage and requiring companies to offer stable working hours to their employees.

The CCPA report, for its part, proposes a series of measures aimed at reducing the after-tax income of the highest paid business leaders.

Mr. Macdonald suggests in particular adding a tax bracket with a higher rate, imposing a tax on wealth and increasing the tax on capital gains.

Professor Geloso believes that it would be more justified to question the remuneration awarded to CEOs who are hired because of their connections in the political world, in order to receive subsidies or public contracts in particular, rather than for their managerial skills.

He sees it as a reward for privileges, while the remuneration of other business leaders would only follow a logic of 'supply and demand.

With information from Philippe de Montigny

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