CANADA:How to pay the CEO? - 23 June 2009

In the US the average American large-company CEO
makes on average 225% more than the average large-company CEO in the
other 13 largest industrial countries. The ratio of CEO pay to average
employee pay is approximately 300:1. Even when being baled out by their
government, US CEO's are still taking home lavish packages. While not
quite as excessive in Canada, CEO's still take home a disproportionate
pay package relative to the average worker.

Justification for higher executive compensation has historically
been linked to the impact of their role. By default, in public
companies, this has become linked to the stock price which is an
external measure of performance, the reasoning being that if the stock
performs obviously the CEO has done a great job and gets a better
bonus. However, as recent events demonstrate, many CEO's still take
home big pay packages even when the stock doesn't perform!

It seems like the whole entitlement thing is just as prevalent in
the boardrooms as it is in the union rooms. This sense that you deserve
the high compensation because of who you are is no different than a
unionized worker expecting to make more because of seniority. The
performance factor has fallen by the wayside.  A recent Report on Business
survey of Canada's top 100 corporations found very little linkage
between CEO compensation and market performance. Base salaries were up
10%. Bonuses were down by 20% but that is not in line with an overall
market drop of more than 30%. All in all, CEO's were only out 10% on
pay increase - despite massive layoffs and restructuring - hardly a
solid link with market performance of their stock.

Excessive CEO and senior executive compensation can have serious
consequences for employee morale and company performance. Once the
trend is started it becomes hard to stop.  As both Canada and the U.S.
begin to examine top executive compensation perhaps they can look to
the company, Whole Foods Markets, as an example

For more information on Executive Compensation in Canada.