Hot! Make the rich pay? Not in Canada

HillTimes.com – impolitic/politics
17 August 2012.   Susan Riley

While Finance Minister Jim Flaherty urges austerity at home, and wags a disapproving finger at struggling Greece, Canada remains remarkably generous towards its well-paid senior executives, public and private.

They may make costly mistakes with taxpayers’ money, squander the life savings of their investors, but they still walk away with huge bonuses.

In Ontario, Chris Mazza, the CEO of the province’s troubled air ambulance service, ORNGE, earned a $1.4-million annual compensation package—on top of a $500,000 housing loan, and other perks—before being ousted in February. There are serious, unanswered questions about Mazza’s behaviour and concern for patients who suffered because the air ambulance service was so badly equipped.

Another senior Ontario administrator, eHealth executive Greg Reed, made headlines recently for refusing an $81,250 annual bonus for the second year.

But Reed only declined his bonus after criticism from opposition politicians in Queen’s Park. And his base salary is $329,000. Computerizing hospital records in Ontario is important business and Reed has been cited for “outstanding leadership,” but should that job pay more than the prime minister’s ($315,462)?

Leaving aside instances of fraud, or incompetence, there is an underlying problem with executive compensation in Canada: salaries, bonuses, and severance packages are increasingly unrelated to performance, to economic reality, to the pressures faced by ordinary Canadians.

While we deal with wage freezes or layoffs in the public sector, along with reduced employment insurance protection and delayed retirement, many senior executives are making more money than ever.

It emerged last week, for instance, that more than half of $80-million earmarked by the Alberta government in 2009 to reorganize the province’s health services went to executive compensation. Some $21-million was used to cover a deficit in the bonus retirement package for health executives; another $22.5-million went directly to executive severance pay.

Meanwhile, nearly 98 per cent of eligible managers in the Ontario Public Service got bonuses last year despite the province’s $15-billion deficit, and a pay freeze, at a total cost of $35-million.

In British Columbia, the annual list of top government earners is headed by Powerex Corp. manager Thomas Bechard who was paid a staggering $976,504 in 2011 (only $360,000 in actual salary) to market B.C.’s energy products.

Outrage over salaries for some top executives at B.C. Ferries prompted the beleaguered Christy Clark government last month to impose a freeze on compensation for executives at crown corporations and to promise phasing out bonuses, eliminating perks, and red-circling senior executive salaries.

All useful measures, if they happen, but they touch only part of the problem. For every bureaucrat drawing a bloated salary, there is a private sector CEO making millions—often regardless of the fortunes of his company.

In April, the Quebec engineering firm SNC-Lavalin paid its former boss, Pierre Duhaime, $5-million when he departed after having approved $56-million in mysterious payments. The chair of SNC’s board, Gwyn Morgan, once pegged by Prime Minister Stephen Harper to oversee public appointments, acknowledged only that Duhaime “made some errors”.

At the same time, Morgan complained in his Globe and Mail column of “entitlement addiction.” He wasn’t talking about his senior colleagues in the private sector, however, but about protesting Montreal students and Greek rioters reacting to cutbacks.

In his revealing new book, Thieves of Bay Street, investigative journalist Bruce Livesey looks at the clubby relationship among wealthy players in Canadian business and politics and the resulting “see no evil” ethic.

Livesey argues that, at minimum, we need a national securities regulator and he credits the Harper government with at least trying. (The idea was dropped after resistance from provinces.)

But more fundamentally Canada needs a return to rectitude in the private sector and recognition that public service can offer compensation more important than money.

These ideas wouldn’t have found favour when Finance Minister Jim Flaherty held his annual private retreat in Wakefield, Que. last week with business executives and assorted policy wonks.

At last year’s gathering, according to the Globe, Flaherty was bombarded with demands to cut public service wages—not in the senior ranks, of course, but among clerks and administrators.

We can only guess at the agenda this year—but more realistic levels of executive pay are probably not included.

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1 Comment

  1. I just don’t get it why rich people didn’t pay. The executives of both public and private sectors should be an example. In my opinion, most of their subordinates look up to them as an inspiration. I wonder if the opposition didn’t criticize Mr. Reed, will he still decline the said bonus?

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