The estimate of CEO pay was drawn up in a recent report by Gallagher McDowall Associates, which is based in Toronto. In Canada, the top CEOs make 159 times what the average worker does, according to a human resources consulting firm. But that hardly approaches the ratio you see at the top of a public company in the U.S. The consultancy has tracked executive compensation for the past six years, dating back to 2010.
In this year’s report, released Friday, they looked at executive compensation among the members of the TSX 60, which is a list of the 60 most valuable publicly traded companies in Canada. The group also delved into compensation practices at the next 60 largest firms, for a total pool of 120 Canadian companies.
The report looked at compensation for 58 CEOs in the S&P/TSX 60 Index, and those of another 60 at the top of the next biggest companies on the Toronto Stock Exchange. It included compensation such as base salaries, annual bonuses and share and option-based award grand values, using figures for 2015. It also looked at pension values, among other things. Among the top tier, the numbers suggest that executive compensation actually declined in 2015 from the previous year’s level. The first group of CEOs made an average of $7.89 million last year, 159 times more than the Canadian average industrial wage of $49,510.
According to the report, the average CEO of one of Canada’s biggest 60 companies paid $3.47 million in taxes last year, roughly 44 percent of their income. That compares with the average industrial worker, who the report says paid $8,067 in income taxes, or 16 percent of their pay packet. But the pay ratios pale in comparison to what top executives take home down south. The calculation does not factor in any tax avoidance strategies that may have been used, and instead is culled from a model that calculates what a person would pay in taxable income on investment gains were their stock-based compensation to be booked as regular income.
All in all, Levasseur says, executive compensation at large Canadian companies still pales in comparison to what happens in U.S. ones, where the CEO-to-worker compensation ratio currently sits at more than 300 to one.
“There’s this assumption that when you’re a very high earner you don’t pay any tax,” Levasseur says. “These people earn a lot of money but by the same token they do pay a substantial amount of tax.”
“It’s really hard to determine what’s reasonable,” he says. “I don’t know if Jose Bautista’s or Sidney Crosby’s compensation is reasonable, but they operate in an open market, they are getting out of the system as much as they can.”
“It’s incumbent on boards to ensure they are comfortable with compensation,” he added.”But they have to be paying these people based on performance.”
Canadian public companies face no such requirement. Paying a CEO more money doesn’t necessarily translate to higher returns for shareholders. More important than how much a CEO is paid or how much they are paid compared to their workers is whether or not the company is getting value for that money.