THE BLOG

It's Time to Limit Ridiculous CEO Salaries

05/29/2013 05:32 EDT | Updated 07/29/2013 05:12 EDT
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Man looking at sand from hourglass turning into coins

"Ain't capitalism wonderful", said the CEO to the worker. "There's really no end to what they'll pay you."

Last year the CEO of Canadian Pacific, Hunter Harrison, received $49.2 million in compensation. For their parts, the CEOs of Thompson Reuters and Talisman Energy were poor second cousins to Harrison bringing in only $18.8 and $18.6 million respectively.

According to a Globe and Mail Report on Business list of the top 100 Paid CEOs, median Canadian CEO compensation topped $5.6 million last year. This is about 150 times what an average Canadian worker makes and 12,000 times the pay of a Bangladeshi garment worker.

The difference between regular employees' pay and CEO compensation has grown rapidly in recent years. According to the Canadian Centre for Policy Alternatives, in 1995 the top-paid CEOs received 85 times the earnings of average Canadians, a ratio that reached 235 times in 2011.

This gap between what CEOs and common workers are paid is a stark symbol of growing inequality, which is an increasing concern of Canadians. In a recent Pew Research Centre poll 76 per cent of Canadians said they thought income inequality had increased over the past five years. Some 45 per cent of respondents believe inequality is a "very big problem" and 22 per cent said reducing inequality should be the government's top priority.

Tackling CEO-common worker wage differentials is a good place to start. There is absolutely no efficiency argument for these growing wage differentials.

Voters and politicians elsewhere are increasingly looking to regulate executive pay. In March, 68 per cent of Swiss voters supported a referendum question requiring companies give shareholders a binding annual vote on executives' pay while the French government recently adopted a plan to limit executive salaries at publicly owned companies to a maximum of 20 times that of the lowest-paid employees.

Canada should follow suit. Are any Canadian politicians willing to legislate a maximum 20 time pay differential between the best and worst paid workers in a company?

It will be difficult but I'm sure the various CEOs will learn to get by on a million bucks a year.

Canada's Highest-Paid CEOs