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Why inflation is bad for workers, but good for CEOs: Best paid CEOs see pay rocket up 26% in 2021
Canada's 100 highest-paid CEOs made an average of $14.3 million in 2021, surging past a previous record of $11.8 million set three years earlier.
Before you take a coffee break this morning — by 9:43 a.m. on Jan. 3 — the average CEO on that list will have made $58,800, the amount an average Canadian worker earns in an entire year.
Those numbers are from the latest annual report on public company CEO compensation published by the Canadian Centre for Policy Alternatives (CCPA) on Tuesday.
David Macdonald, senior economist at the CCPA and the report's author, crunched the numbers using compensation disclosures from documents filed by publicly traded companies on the S&P/TSX Composite index as of June 2021. He turned to Statistics Canada for the average worker's pay in 2021.
"It's worth figuring out who are the winners and who are the losers in our economy," Macdonald told the Star. "When we have big crises like the pandemic, like the crisis in inflation, who benefits and who loses from that?"
Macdonald said that in 2020, the year the pandemic hit and economic disruption was widespread, CEO pay still went up from the year before because in many cases companies lowered the revenue or profit targets their top executives needed to hit in order to receive their bonuses.
In 2021, when rising prices became more widespread, average workers saw their pay decline by two per cent, after taking the effects of inflation into account.
The CEOs on Macdonald's list, meanwhile, saw their total compensation go up by 26 per cent after adjusting for inflation, he said. That was because corporate profits soared, which the CCPA has said was due in part to inflation, and executive compensation is linked to profitability.
"Think of inflation as bad for everyone else and not bad for CEOs," Macdonald said.
The lowest-paid CEO on Macdonald's top 100 list for 2021 made $6.7 million, up from $6.1 million in 2020.
At $14.3 million, the average pay increased by 31 per cent from $10.9 million in 2020.
The top-paid individual on the list was Philip Fayer, the founder and CEO of payments processing company Nuvei, whose compensation was listed at $141 million because of stock options and share-based awards valued at more than $138 million at the time they were granted. The company's share price has since declined dramatically.
The next highest-paid executive in 2021 received total compensation of $43 million. But Macdonald maintains that the Nuvei figure is not an outlier because it's actually the third-largest pay package that he's seen in the history of tracking CEO pay packages.
There were just three women on the list in 2021. That was tied with men named Michael or Scott but behind the four Marks who made the top 100.
"Despite all the attention on gender equality that's been going on for years, nothing has changed here," Macdonald said. "Women do not break the glass ceiling. They just never get to the top chair. It's always men."
The CCPA has four proposals for policy changes that could help address the income inequality highlighted by historically high CEO pay.
It suggests that companies should not be able to deduct compensation above $1 million as an expense and should instead pay corporate tax on those amounts.
CEOs receive a large portion of their compensation through shares and options and when those increase in value, the capital gains tax exemption means only half of that increase is taxed. The CCPA suggests that increases in the value of these assets should be taxed like normal income from employment.
It also proposes raising the top marginal personal income tax rate so wealthy executives pay more.
Finally, the CCPA suggests a small wealth tax on Canadians with a very high net worth, noting that as CEOs accumulate company shares over time, their personal wealth often becomes immense.
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