CEOs in Canada earn 155X average worker

Canada’s 100 best paid CEOs

Canadians may still be feeling the pain from a worldwide economic meltdown caused by reckless financial speculation but Canada’s business elite has preserved its privileged position.This report examines the earnings of the 100 best paid public company CEOs in Canada in 2009 — the worst year of the recession for this country — and concludes it was a very good year to be a CEO.

At the rate they earned in 2009, by about 2:30 on January 3 the average of the 100 best-paid public company CEOs in Canada already pocketed what it would take a Canadian working full-time, all year to earn.The distance between minimum wage workers and Canada’s CEOs is even bigger. Canada’s best paid 100 CEOs earn a year’s worth of minimum wage work by 3:15 p.m. on New Years Day.

The total average compensation for Canada’s best paid 100 CEOs was $6,643,895 in 2009 — a stark contrast from the total average Canadian income of $42,988 and the total average minimum wage worker’s income of $19,877. Even in the worst of recession, Canada’s best paid 100 CEOs earned, on average, 155 times more than Canadians earning an average income.

Growing gap project

Chart 1 shows the earnings of the 100 highest paid CEOs in Canada in 2009 compared with the pay of average Canadians.

And there’s more to come. Canada’s best paid 100 CEOs are sitting on previously-granted stock options that were already worth $1.3 billion at the time their companies reported to shareholders in 2009. That’s about $2 in deferred pay for every dollar reported as earnings that year.

For Canadians who aren’t in the CEO club, the news gets even worse: When the best paid 100 CEOs finally decide to exercise their stock options, Canadians will subsidize that bonus in lost taxes. Stock options are taxed as if they were capital gains, rather than as ordinary income. As a result, nearly one third of CEOs’ 2009 reported income — and the entire amount of their capital gains windfall — is taxed at half the rate paid on wage and salary income.

That tax subsidy is worth an average of $467,000 on their 2009 income. That subsidy alone is roughly 10 times the pay of the average Canadian worker. And they can look forward to even more support from Canadians in the future, when they cash in that $1.3 billion stock option stockpile. At their 2009 value, this windfall will be supported by a tax subsidy of $360 million — an average of $3.6 million per top-100 CEO.

time is money, for canada’s ceos

It is important to note that the stratospheric performance of CEO salaries — and their resilience — is a relatively recent phenomenon. In 1995, the average pay of Canada’s highest paid 50 CEOs was $2.66 million, 85 times the pay of the average worker. In 2009, the average pay of the highest paid 50 CEOs had skyrocketed to 219 times the pay of the average worker .It’s a similar story for Canada’s best paid 100 CEOs, who pocketed 104 times more than the average worker in 1998 but now pocket 155 times more.

Between 1998 and 2008, the best paid 100 CEOs’ average compensation outpaced inflation by 53%. In stark contrast, Canadian earning the average income gained 4% to inflation over that period.This extraordinary explosion in CEO pay is one of the factors underlying the dramatic growth in income inequality in Canada highlighted in a December 2010 report from the Canadian Centre for Policy Alternatives by Senior Economist Armine Yalnizyan.1

That report found that fully one-third of all income gains in Canada between 1987 and 2007 went to the richest 1% of Canadians — enough of a shift towards greater inequality to reverse a 30-year trend towards greater equality that had begun in the wake of the Great Depression of the 1930s. Notably, it also found that, unlike other periods in which income inequality grew, the shift towards greater inequality in the past 20 years has been driven by inequality in incomes that are reported as wage and salary income.
 
Read the whole report here: http://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2011/01/Recession%20Proof.pdf