Canada’s best-paid 100 CEOs breezed through the worst of the recession with earnings 155 times higher than the average Canadian income earner, says a new study by the Canadian Centre for Policy Alternatives (CCPA).
The study, Recession-Proof, looks at 2009 compensation levels for Canada’s best paid 100 CEOs and finds they pocketed an average of $6.6 million during the darkest period of the recession – a stark contrast from the total average Canadian income of $42,988.
“At this rate of reward, this handful of elite CEOs pocket the equivalent of the average Canadian wage by 2:30 pm on January 3 – the first working day of the year,” says the study’s author and CCPA Research Associate Hugh Mackenzie.
The study shows executive compensation in Canada wasn’t always this rich. In 1998, the best paid 100 CEOs pocketed an average of 104 times more than the average Canadian wage earner, compared to 155 times more in 2009.
“Even that extraordinary number understates the real story,” says Mackenzie. “Thanks to a change in corporate reporting introduced in 2008, we only have a conservative statistical estimate of the stock options that make up about one third of CEOs’ 2009 pay. The public will never know how much most of these CEOs actually got paid in 2009.
“And that’s only half the story. These CEOs are sitting on $1.3 billion of stock options they haven’t yet cashed in. That’s about $2 in future income for every $1 they declared in 2009.”
When the CEOs decide to exercise those stock options, the study reveals Canadians will subsidize that bonus with an estimated average of $360 million in foregone taxes, since stock options are taxed at a lower rate, as if they are capital gains. Among Mackenzie’s recommendations: getting rid of that expensive and unfair loophole.
The study highlights the role that soaring executive compensation plays in the dramatic growth in income inequality in Canada identified in a recent CCPA study by Senior Economist Armine Yalnizyan. Yalnizyan found that fully one third of all income growth in Canada in the past 20 years went to the richest 1% of Canadians.