POLITICS

Navdeep Bains: Bombardier Taking 'Action' On Massive Raises 'Speaks Volumes'

04/05/2017 10:48 EDT | Updated 04/05/2017 11:37 EDT

OTTAWA — Federal and Quebec politicians were pressed Tuesday on whether government can — or should — allow Bombardier executives to grant themselves generous raises while taxpayers are helping keep the company afloat.

Planned pay hikes for six executives were announced last week, with most of the money set to start flowing in 2019, but that's now been delayed a year amid a sustained public outcry that included a protest at the company's Montreal office.

The company's move has seemed action enough for both the federal and Quebec governments, who together have given the company more than $1 billion in funding since 2015 to help develop new aircraft.

navdeep bains

Innovation Minister Navdeep Bains said what the government might have to say about Bombardier's executives' generous raises doesn't matter. (Photo: The Canadian Press)

The point of the $372.5-million federal loan for Bombardier's CSeries and Global 7000 aircraft programs was the jobs and research that will flow, said federal Innovation Minister Navdeep Bains.

What the government might have to say on executive salaries doesn't matter, he said.

"It's not a matter about what I say," he said. "I think it's their actions, and the fact that they took this action and recognized there was issues with that, and they're now trying to correct it and change it, speaks volumes."

What politicians say could be dangerous, Quebec Premier Philippe Couillard argued as his government blocked opposition motions calling for the government to take further steps to corral Bombardier's pay raise plans.


"If the government gives a signal to the world that when you come to Quebec with a company, the government will put its big paws in your business and run your company for you, we won't go far in Quebec."

That doesn't mean there's never a case to be made for governments to act to manage CEO salaries, said Sean Speer, a fellow at the Macdonald-Laurier Institute.

"People aren't standing up in the House to condemn the compensation of Bell's CEO or Rogers' CEO or RBC's CEO," Speer said.

"The reason Bombardier is in the news, of course, is because they've drawn on public resources and I think criticism is fair."

Company reported pension surplus in 2015

Speer worked for former Conservative finance minister Jim Flaherty when that government was faced with a decision in 2013 on whether or not to grant Air Canada more time to deal with deficits in its pension plan.

The risk of the airline being grounded was urgent, but Flaherty attached conditions, including a freeze on executive compensation at the rate of inflation, a prohibition on special bonuses and limits on executive incentive plans.

In 2015, the company reported a pension surplus.

"There were a number of factors at play, but I think it's fair to say the conditions around executive pay changed the incentives for members of the executive team to fix the problem rather than keep kicking the ball down the road," Speer said.

"The reason Bombardier is in the news... is because they've drawn on public resources and I think criticism is fair."

To ensure executive compensation is not a problem for taxpayers, there should have been no taxpayer money going into Bombardier in the first place, said longtime Quebec Conservative MP — and leadership candidate — Maxime Bernier.

Bernier has made no secret of his disdain for government support to corporations, but to the extent the salaries of the CEOs are a problem, it's only because the Bombardier ones are being supported by taxpayers, he said.

"If CEOs want to have big salaries, the capital markets will decide," he said. "I don't want to interfere."

Others say the government must engage. Frustration over high CEO paycheques is what fuels populist discontent, Bernier's leadership rival Michael Chong noted Monday.

The Liberals have taken note of the issue too. Some of the money the executives receive isn't cash but stock options, and they pay less tax on those, making it a more lucrative salary approach if the company is performing well.


The Liberals had promised to close the loophole, one they themselves noted was primarily a benefit for just 8,000 very high-income Canadians in 2014.

They haven't done it, in part because of concerns raised by budding start-ups who often use stock options to lure young talent.

They represent the minority who benefit, and any change to the tax rate could be capped, said David Macdonald of the Canadian Centre of Policy Alternatives.

"Just because you close a loophole doesn't mean you can't pay people with stock options," he said.

"It just means they don't get 50 per cent off compared to the janitor sweeping their floors."

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