CEO pay has nothing to do with the operation of the free market. It is a rigged system in which all forces conspire to push pay packages even higher regardless of results. Hardly a month goes by and we continue to hear of more outrageous compensation packages and wage hikes for failed corporate leaders.
Vancouver Islanders are facing ever increasing ferry rates and route cuts and yet taxpayers are forced to pay for executive salary increases once again. Mike Corrigan the CEO of BC Ferries salary is $563,000 plus bonuses. It is an 8% increase in salary because of his promotion to CEO. Two other BC Ferries executives received $130,000 in bonuses bringing each of their salaries up to $500,000.
Vancouver Island Health Authority just appointed its CEO with a compensation package of $400,000. At Nanaimo City Hall the City Manager was recently “crowned” by council and given a $209,000 salary package. The City of Nanaimo never advertised this position to give other qualified candidates the opportunity to apply.
The sad fact is that all these positions are 100% funded by the taxpayer. It is a complete myth that we must pay for talent. Let us take a look at our neighbour to the south and see what big money gets you.
Consider the following: at Merrill Lynch CEO Stanley O’Neal received on average $50 million a year and at the Citigroup CEO Charles Prince collected on average $30 million a year. Under their leadership these financial giants incurred more than $20 billion in losses during the subprime mortgage mess. Thousands of people lost their jobs and went bankrupt yet these two walked out the door collectively with almost $300 million.
Defenders of today’s CEO loot bags cite academic research showing compensation has risen appropriately and that is the price to pay for these “stars”. These people are no more brilliant than the next.
Robert Nardelli walked away from Home Depot with at least $250 million after five years all the while stock values were flat. Hank McKennel left Pfizer with just under $200 million even though during his leadership market share dropped $130 billion. Carly Fiorina departed Hewlett Packard with $100 million for herself while the company was almost bankrupt. Morgan Stanley executives Philip Purcell and Stephen Crawford were both fired yet collectively walked away with $200 million.
This is a far cry from the 1950’s when George Romney who was CEO of American Motors told the company’s board that no executive needed to make more than $225,000 and he turned down proposed pay increases. This was at a time when the car companies in America were at their peak! Can you imagine any CEO north or south of the border walking away from pay increases or bonuses now? Absolutely not.
Hard working people on the treadmill of Canadian and American meritocracy are learning that working hard, acing every test, attending the top schools are met with unpaid internships and glassed walled rooms full of clubby over paid executives only looking to offshore jobs.
As globalization and free trade eat up layers of white collar jobs this professional group of people will find their eyes opening wide in shock as their children are left with a very different level of ‘success’ than their parents imagined. Merit no longer seems to determine where people end up; increasingly peoples’ fate will be shaped by degrees of luck or structural advantage. So what happens when people do not end up economically where they deserve to? Will the upper middle and the lower upper classes start to rumble while watching the rich become über rich and the middle class evaporate?
The old saying still holds true: A fish rots from the head down. Who has the guts to say enough is enough?