OTTAWA – Canada’s 100 highest-paid CEOs had their second best year in 2020, even as the COVID-19 pandemic left the country in the worst economic slowdown since the Great Depression.
“While the pandemic has been a very bad year for most Canadians, especially in terms of unemployment, it hasn’t really been that bad for Canada’s richest CEOs,” said David MacDonald, an economist at the Canadian Center for Policy Alternatives.
Mr. MacDonald is the author of a report released on Tuesday examining how much money the top 100 highest paying CEOs made for listed companies in 2020. According to the report, as of noon on Tuesday, the average management of these companies already earned what the average Canadian worker earns for a year 2022.
In 2020, as many Canadians experienced interruptions in working hours or lost their jobs entirely during frequent shutdowns and forced closures, the 100 highest-paid presidents of publicly listed companies earned an average of $10.9 million.
This is down from the 2018 record of $11.8 million, but an increase of $95,000 from 2019.
MacDonald said it was a “big achievement” for top managers to earn the second highest wages on record, given that the pandemic has taken a toll on many of the companies they run.
Over 82% of the average compensation came from bonuses, mainly cash or stock options. According to MacDonald, companies have had to use creativity in their calculations to ensure that poor performance during the pandemic has not affected their bosses’ pay.
“It only happens in bad times,” MacDonald said. “When work becomes difficult for the company, CEOs are protected in many cases. When things are going well for the company, there is no limit.”
MacDonald said CEOs often justify their bonuses by claiming that they are only paid because they are exceptional in their jobs, but he noted that half of the CEOs who received bonuses in 2020 worked for companies that received government assistance such as Emergency Canada. subsidy, or they only got their bonus because of the bonus formula modification.
“I think that really illustrates the bankruptcy of the idea that it is somehow based on merit,” he said.
The gap between employers and ordinary workers
The highest-paid CEOs earned 191 times more than the average worker in 2020, which is lower than the 202 multiplier for 2019. It’s also the smallest gap in six years.
However, this narrowing of the gap was not attributable to the increase in workers’ wages. Indeed, MacDonald explained, if average worker wages rise in 2020, it is due to the layoffs of many lower-paid workers, which excluded them from the picture when calculating the average.
The report makes several recommendations for addressing excessive executive compensation through a review of tax systems, including how to handle capital gains and stock options.
Mr. MacDonald also recommends that the federal government establish a wealth tax for wealthy Canadians, as the large gap between average earnings of Canadians and the highest-paid CEOs is expected to widen over time.
“When we think about how to structure taxes, so that they are based on what people can pay, a wealth tax makes more sense,” he said.
New Democratic Party (NDP) leader Jagmeet Singh campaigned last fall promising a 1% wealth tax for anyone with a net worth over $10 million and a 35% tax on income over $210,000.
The Liberals raised the tax rate from 29% to 33% for people who earned more than $200,000 in their first year in office. Due to inflation, the top tax bracket now starts at $216,511.
Finance Minister Chrystia Freeland has now been tasked with setting a minimum tax base of 15% for wealthy Canadians, which will include an effort to prevent them from reducing their tax burden through several tax planning loopholes.
He was also asked to invest in the Canada Revenue Agency to combat tax evasion and increase corporate income tax for banks and insurance companies that generate more than $1 billion in profits.
–
This article was produced with financial support from the Facebook Stock Exchange and The Canadian Press for News.
Sophie Laurent is a contributor to Vaughantoday.ca, covering a wide range of topics including local news, politics, business, technology, sports, entertainment, and lifestyle. She focuses on delivering clear, balanced reporting that helps readers stay informed about current events and issues that matter to their communities. Sophie is committed to presenting accurate information, practical insights, and relevant stories in a straightforward and reader-friendly manner, making complex topics accessible to a broad audience.