In Canada, the rich keep getting richer
New CCPA report shows the gap between executive and worker compensation is increasing.
The average member of Canada’s 100 top-paid business executives will earn the average worker’s entire annual wage by 9:43 a.m. on Jan. 3, according to a new report from the Canadian Centre for Policy Alternatives entitled “Breakfast of Champions.”
While your average Canadian worker makes $58,800 annually, the average top-earning CEO made a record high $14.1 million in 2021 — 243 times the average worker’s income — pointing to a growing gap between the haves and the have-nots, the report found.
Prior to 2021, the highest average top-paid CEO compensation was $11.8 million in 2018. In 2020, it was $10.9 million, with the 2021 figure representing a 31.2% increase over the past year.
By contrast, the average worker’s income increased just 3% between 2020 and 2021. Year-over-year inflation, however, sat at 4.8% at the end of 2021.
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The top paid CEO, Philip Fayer of Montreal-based payments solution company Nuvei, made a whopping $147 million last year.
In a Global News story about the report, journalist Sean Boynton notes the role inflation plays in increasing CEO pay, which coincided with an increasing reliance on bonuses, rather than salaries:
With companies hitting record profits in 2021 as a result of rising prices — a trend that only increased last year — executives earned more performance-based bonuses that drove up their compensation.
Those bonuses could be either paid in cash, shares or, increasingly, stock options.
In 2021, those bonuses made up 83 per cent of all compensation for the highest-paid CEOs, up from 70 per cent in 2008. Base salaries, meanwhile, have remained relatively stable during those years, according to the report.
The report’s author, economist David Macdonald, told Global that “for CEOs, inflation is the gift that keeps on giving.”
Macdonald told CBC News that he sees no problem with CEOs making more than the average worker. "The issue here is how rapidly the gap is growing,” he said.
In the report, Macdonald makes the following recommendations for closing the compensation gap between executives and employees through taxation:
A small wealth tax of a few percentage points a year.
Implementing higher marginal tax brackets.
Tax capital gains the same as income.
Limit corporate deductibility for compensation more than $1 million.
To present an alternate point of view, the CBC spoke to Ian Lee, an associate professor of management at Carleton University's Sprott School of Business in Ottawa, who said by raising taxes on executives, “you risk causing brain drain.”
"The job is unbelievably demanding to be a successful CEO.... They are paying these people, these executives of these very large, complex corporations to deliver certain results," he said. "And the moment you don't deliver, you're out the door."
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