ARE CEOs PAID TOO MUCH?

It’s 10.33 am on the first working day of 2008. If you are an average Canadian worker do you know how much your boss has already made this year compared to what you make?

Here are the numbers. The average remuneration of the 100 highest-paid Canadian chief executives working for a publicly traded company was $8,528,000 compared to the average salary of $39,000 for the average Canadian worker.

In other words, it will take a little more than nine hours for the average boss in a large Canadian firm to make what an average Canadian earns all year. Canada’s top CEOs now make 218 times as much as the average Canadian full-time worker, compared with only 104 times as much in 1998.

One element that has driven up executive salaries is that the market for chief executive officers has become an international market and the salary levels in the U.S. tend to slip over into Canada.

Does this blatant salary differential make any difference? If Canada doesn’t pay those salaries, who would run our companies? Moreover, successfully run companies generate millions of jobs, don’t they? and further millions for the shareholders. And how long would we be competitive if the government started to tax away CEOs salaries? (By the way, it would seem these salaries are paid whether the company makes money or not.)

Some, however, do not agree that CEOs are worth their weight in gold. A former union official says most CEOs are the corporate equivalent of rent-a-cops who come in for a short time and to argue that the wealth of these large corporations is created by one individual is ridiculous.

What do you think?

Is the differential between a CEO’s pay and a worker’s pay out of whack?

If so, what could be done about it?

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9 Comments »

  1. 1
    John Says:

    I don’t really understand enough about high finance to know, but it sure seems out of whack to me…..obscene, in fact. Not so much for the amount as to the fact that it gets paid to the CEO whether they do their job or not. Try that in the real world.

    If the rationale for that kind of money is that they create wealth and employment for others, then when that doesn’t happen they shouldn’t get paid. Their salary or at least a large chunk of it should be performance-based (moreso than it is now).

    Nowadays, it seems the opposite happens. If the company tanks, then it’s the workers and the shareholders who are left out in the cold, while the CEO dances merrily on with a truckload of cash.

  2. 2
    Paul Costopoulos Says:

    I agree with John. But remember they get away with it because the shareholders are happy when they get hefty returns regardless of consequences to others. When you hear of a sacked CEO it is usually because the shareholders are unhappy with him or he was caught one time to many with his hands in the till.
    When unemployment figures go up, so does the stock exange. In La Presse today an economist argues that it is normal for wealth creators to hord that wealth for a time before sharing it. But how long is that holding time? How far reaching is the sharing, if it happens at all?
    When oil prices shut upward a former friend of ours was very happy because her petroleum shares were providing here with a bundle. When asked about the repercussions on the ordinary peoples she answered so long as she made money what happened to others was of no concern to her. In whatever economic regime it seems the “wealth creators” get the money and keep it as long as they can.

  3. 3
    Alex Thomas Says:

    CEO’s are treated as commodities. Their perceived value is entirely subjective. The $8 million dollar / year man is supposed to be worth about $32 million / year in new revenue to the company, otherwise, he or she is seriously overpaid. Shareholders don’t care, as long as the man at the top keeps sending them their dividend cheques.
    At that level, at that salary amount, the CEO should undergo even more extreme scrutiny than any other worker. His/her influence is much greater. His/her decisions has more far-reaching ramifications.
    The Peter Principle states that one is eventually promoted to the level of one’s own incompetence. I would say that any CEO should be paid upon performance only. A simply base salary, plus a percentage of whatever additional revenue can be demonstrably attributed to his or her decisions, strategies and tactics. There are salespeople who live on commission alone — either they sell, or they starve. Imagine how good you would have to be to earn that $8 mil. Now, imagine all CEO’s that good. Whoa.
    My name is Alex Thomas. I imagine things as they might be and say, “Yeah. Right.”

  4. 4
    Tony Kondaks Says:

    If shareholders of a company don’t complain how much their employee, the CEO, makes, why it that OUR concern? It’s their money.

  5. 5
    Chimera Says:

    Tony, this is a much more complicated question than that. While the shareholders can do whatever they like with their money, it’s their money (and their desire to have more without working for it) that supports the infrastucture of publicly-held companies. And if the companies fail, thousands of people with families to support can be thrown out of work and out of income. But the shareholders rarely suffer. Bad CEOs (I liken them to hit-and-run drivers) have been known to disappear to parts unknown with the loot, and they are completely untouchable. What they leave behind is chaos.

    I have never liked the idea of the stock market, period. A publicly-traded company has a split personality and divided loyalties. It pits the shareholders (people with money wanting more of it) against the employees (people who need the money for which they are working), using the consumers (the ones who actually vote with their money) as markers.

    In theory, a three-legged stool is always in balance and never wobbles. In reality, if one of those “legs” is ‘way out of proportion to the other two, the whole thing collapses. A CEO is like a shot of growth hormone for the shareholder leg. Y’all do the math.

  6. 6
    Paul Costopoulos Says:

    Besides what Chimera has said, we, the consumers, have to pay bloated prices to keep the profits high enough to pay those guys. Then, they turn around and ask salary concessions to the workers to keep the company competitive against foreign firms. Then they shut down and relocate, keeping their money, and making even more for the shareholders while whole villages and families are destroyed here. But that is not their problem nor the shareholders’s. It is for us taxpayers to fork over for help programs to relaunch those villages and closed factories. Whose money is it again Tony?

  7. 7
    Tony Kondaks Says:

    Chimera: you talk of divided loyalties and competing interests between stockholders, employees, and consumers. I highly recommend director Norman Jewison’s movie “Other People’s Money” starring Danny DeVito as Larry the Liquidator. Despite the fact that it is directed by a self-described socialist, it honestly and fairly gives both sides of the issue of shareholder versus employee interests (and it does it as a wonderful romantic-comedy, to boot).

    Paul: I really don’t know what “bloated prices” you are talking about. The most successful retailer in history is Wal-Mart which is almost single-handedly responsible for keeping inflation at the incredibly low level its been for the past two decades by offering UN-bloated prices. Inflation, until the recent surge in oil prices, have been under control for 20 years.

    As for “whole villages and familes destroyed”, I have no idea what you are talking about…in a free-market economy, such as ours, inefficient companies go out of business if they can’t compete and, yes, sometimes that means that one-business towns suffer. Would you prefer inefficient businesses continue producing over-priced lower-quality goods for which consumers have no need? There is a good reason why the buggy-whip manufacturers and the candlestick makers are no longer the major industries they once were.

  8. 8
    Paul Costopoulos Says:

    OK Tony, this is hopeless, you will not convince me and I will not convince you. Let’s leave it at that.
    As far as Walmart is concerned I do not set foot in any of their outlets. They are sharks and maybe they keep inflation down but the only present I got that was bought there never worked quite well.

  9. 9

    The rise of taxes since the 1930s that has eroded our potential wealth relatively speaking should be of greater concern to us.

    There is no doubt there are certain CEO’s that lack accountability or are incompetent. It’s an imperfect system. However, the good ones deserve a higher salary. If the market is willing to pay it so be it. I’d rather that than superficially constraining it.


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