One Canadian banker had $6.6 million put in her pay packet the day before she reported for work. Another collected $3.75 million in his last nine months before retiring, and left with $25.7 million in stock awards. The bank then announced it would be paying out $2.4 billion in settlement of a lawsuit over the Enron scandal.
In the case of the first banker, the big pay-out represented a bonus of sorts for Barbara Stymiest, who left her job as head of the Toronto Stock Exchange to join the Royal Bank. The bank said that in order to lure her down Bay street to the bank?s big gold-plated headquarters building, it had to make up what she was losing in quitting the TSX.
In the second case, the long-time CEO of the CIBC, John Hunkin, left his bank with a big loss last year, brought about mainly by loans to the now disgraced Texas energy company, Enron.
The two cases are the most notorious of a raft of super-rich executive pay deals that are causing alarm in both Canada and the United States.
Some shareholders of big public companies object to what they consider exorbitant compensation for corporate chieftains.
One outspoken Canadian critic is Stephen Jarislowsky of Montreal, who happens to own $2 billion worth of Royal Bank stock. ?I find it scandalous,? he said of the Royal?s deal with Ms. Stymiest. ?Even a hockey player doesn?t get that kind of money sometimes.?
Another critic is Warren Buffet, probably the most respected investor in America. He has been upfront in lambasting the ?epidemic of greed? that he says has washed over corporate boardrooms.
There?s no doubt that senior executives with a great deal of responsibility deserve top dollar for their efforts in leading their companies to growth and profit.
This is especially true in the financial industry, considering the enormous responsibility these folk have for the way they invest our savings.
The knock on some of the rewards is that they don?t always square with performance. CEOs have to be accountable and take the rap when their companies do badly, but you wouldn?t always know this by looking at the deals executives cut.
Fortunately, more Canadian companies are beginning to link performance with pay. Perhaps having learned a lesson from the Hunkin affair, the heads of both CIBC and Scotiabank have taken pay cuts ? by 50 per cent in the case of the CIBC?s Gerry McCaughey.
The other big concern about executive pay is that it?s getting increasingly out of line with workers? wages.
The trusted Economist magazine looked at pay and perks around the world last year. It reported that the typical Canadian CEO earned 20 times the salary of the average worker.
They?re pikers compared to the chiefs of massive American public companies like Walt Disney, Procter & Gamble, American Express and Yahoo. In the U.S., the top brass of the biggest companies each pick up salaries and perks equal to the annual pay of 300 workers. Back in 1984, their pay was only 42 times greater.
In Japan, where innovative car makers have pushed some North American manufacturers to the brink of bankruptcy, the ratio of CEO to worker pay is only 11 to one.
Companies have also been generous in awarding raises to top management, adds the Economist. At a time when most workers are lucky to get a raise that matches the increase in the cost of living, executive compensation jumped 30 per cent in the U.S. last year.
In 2003, the latest year for which Statistics Canada has figures, there was no growth at all in family income in this country. The average after-tax income for families of two people or more actually edged downward slightly, to $59,900 from $60,400.
The age of the super-executive, with super pay and super perks, has arrived Every ambitious person setting out on a career shoots for the top, and the prospect of big money as an incentive is not going to go away. No law in the land will ever change that. Shareholders will continue to support handsome rewards for profit-building, but they need to make themselves heard when executive pay reaches unreasonable levels, or fails to match performance.
Otherwise, Canada could soon be on the same road as the United States in allowing a vast ? and socially divisive ? gap between those at the top and the rest of us sharing the economic pie.
Ray Argyle can be reached at firstname.lastname@example.org.