Company men: CEO pay in 2023
Posted on January 9, 2025 in Equality Delivery System
Source: PolicyAlternatives.ca — Authors: David Macdonald
PolicyAlternatives.ca – news-research
January 2, 2025. David Macdonald
Summary
Following two blistering years of all-time high compensation, Canada’s 100 highest-paid CEOs pocketed $13.2 million, on average, in 2023—the third biggest haul since we’ve been tracking CEO pay. On average, these 100 CEOs were paid 210 times more than the average worker’s wage in 2023—from its high of over 240 times more pay in the previous two years. This ratio is the fourth highest since we’ve been tracking CEO pay.
It’s hard to conceive of income gaps that large. By the first working day of the year, January 2 at 10:54 a.m., these 100 CEOs already made, on average, $62,661. It took the average Canadian worker all year long to earn that amount.
CEOs have always made more than the average worker, but the gap is growing. In 1998, the ratio was 104 times. It was closer to 150 times in 2009 and now is comfortably over 210 times, even though it was down in 2023.
This report notes several trends and busts key myths about CEO pay and their worth:
Company men: The top 100 CEO list remains an old boys club of almost entirely men—with only three women on this list. Remarkably, there are more CEOs named Scott or Micheal than women on this list. But there’s more. The mythology is that CEOs are parachuted into the top job like plucking gods from heaven. Without pay packages that are in the stratosphere, companies wouldn’t be able to obtain and retain these god-like figures to ensure success for their companies—or so the myth goes. The truth of the matter is much more mundane: 76 percent of the highest-paid CEOs have been promoted from within the company and worked with the company for 21 years, on average. In other words, these aren’t gods plucked from heaven requiring heavenly pay packages, they’re internal hires who have spent over half their careers at a single company. In other words, they are company men.
Justifying extreme pay: The value of these CEOs isn’t a god-like quality that allows them, and only them, to run a large company. Their value is in having spent their career in that company, knowing it, its businesses and its industry, inside and out. As a result, they aren’t interchangeable with other CEOs. Therefore, the competition between companies to hire CEOs is itself a myth. Extreme competition is used to justify extreme pay. But if companies are hiring internally because they need internal expertise, they aren’t competing against other companies for a rarified group of perfect substitutes.
Juicy bonuses: The major reason why CEO pay is growing so much more rapidly than worker pay isn’t their salary, pension or benefits—it’s their juicy bonuses. Average variable compensation is, on average, $10.7 million per CEO. This isn’t the average workers’ holiday bonus. In theory, bonuses are supposed to be tied to how well the company is doing. That’s a myth. In practice, CEO bonuses just keep rising, regardless of performance.
Diminishing reliance on salaries and pensions: These recognizable two pay areas only make up 12 per cent of the average CEOs’ pay package. The average salary is nothing to sneeze at: it stood at $1.3 million in 2023 for the 100 highest-paid CEOs. The salary line has remained remarkably constant over time, at roughly one million dollars, particularly after adjusting for inflation.
Policy wins: The CCPA has been tracking CEO pay since 2007, pushing for fairer taxes as one tool in the kit to reduce the extreme pay gap between CEOs and the average worker. That pay gap is still stratospherically high, but there are two policy wins:
- Capping the stock option deduction: On July 1, 2021, the federal government capped the stock option deduction at $200,000 a year. Previously, when CEOs were paid in stock options, they were taxed as if this was a profit on a long-held stock, not just working income, which it clearly is. Almost certainly because the federal government capped this tax loophole, the proportion that CEOs make from stock options compared to their overall pay has been cut in half since 2021.
- Treating stock profits slightly more like working income: The 2024 federal budget increased the inclusion of capital gains to 66 per cent. For comparison, the inclusion rate on salaries and wages is 100 per cent. Of particular importance for CEOs is that this applies to profits made in a single year that are more than $250,000. Most Canadians are never going to have stock profits of a quarter of a million dollars in a single year. This change will affect the rare few—including company men on this highest-paid 100 CEOs list, who hold an astounding $45.2 billion in shares in their own companies. The 2024 federal budget change would raise a stunning $955 million in tax from just 100 CEOs.
Tags: economy, ideology, standard of living, tax
This entry was posted on Thursday, January 9th, 2025 at 12:35 am and is filed under Equality Delivery System. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
Recent Comments