A recent flagship report on CEO-pay from the left-leaning Canadian Centre for Policy Alternatives (CCPA) presents a flawed perspective through selective use of data, says the Montreal Economic Institute (MEI).
The CCPA report "Canada’s richest 100 CEOs make 210 times more than average worker" says this gap is twice what it was in 1998 when top CEOS made only 104 times more than the average worker’s wage.
CCPA Senior Economist David Macdonald notes, “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 to earn that amount.”
In 2023, the cash bonus was, on average, $2.3 million per CEO. This is double the 100 CEOs’ average salary line. Only three women are among the top 100 CEOs. Of these 100, 76% were promoted from within the company and had worked there for on average 21 years.
The report finds two federal government initiatives—capping the stock option deduction and increasing the capital gains to 66%—could make a difference: The proportion of CEO pay coming from stock options has since been cut in half. And thanks to the 2024 change, the top five stockholders on the top 100 CEO pay list will owe $829 million more in income taxes because capital gains are taxed slightly more like working income.
Renaud Brossard, vice president of communications at the MEI, says the splashy CCPA findings offer a skewed depiction.
“As with every other edition, this report makes a big splash but gives little substance to help guide good policy decisions,” says Brossard. “By taking such a small sample, and only from the best-performing firms, the CCPA basically cherry-picks the data to suit the conclusions it wants.”
The CCPA’s report, which relies on data from Industry Canada, looks at "a non-probabilistic sample of 0.008% of Canadian companies," Brossard says.
"The CEOs of those firms tend to employ some of the best compensated workers in the country, as they are amongst the most productive,” explains Brossard. “They are employees of telecommunications companies, big banks or the resource sector, for instance, which are all known for paying rather well.”
While little information is available regarding the compensation of employees in these top 100 firms specifically, data from Statistics Canada shows that employees of businesses that employ over 500 workers earn, on average, 15.5% more than those in firms with fewer than five workers.
According to the MEI, a more appropriate comparison would be between the average income of full-time workers and that of the average full-time senior manager.
Data from Statistics Canada shows that in 2023 (the latest year for which data is available) the average full-time senior manager earned $195,775 while the average full-time worker earned $72,758. This results in an average worker-to-senior manager pay ratio of 2.7 to one – a far cry from the 210 to one contained in the CCPA’s report.
“Unlike what the CCPA likes to trot out, there has been ample research that shows the compensation of executives such as CEOs to be largely linked to performance,” adds Brossard. “Things like stock options, for instance, gain their value purely from the performance of the company and its outlook for the coming years.”
A series of economic research papers published in the wake of the financial crisis dug into the issue of CEO-pay, and found that it varied significantly based on corporate performance and firm size.
In a 2019 paper looking specifically into the compensation of Canadian CEOs, researchers found that firm size had a strong effect on CEO compensation, and that market performance had a strong effect on performance-based components of compensation packages, such as stock options.