Fresh Takes

A different perspective on CEO pay

As it does every year, the Canadian Centre for Policy Alternatives published its latest report on January 2 indicating that the CEOs of large companies had already earned in a few hours the equivalent of the average annual salary in Canada. Indeed, the remuneration of Canada’s 100 highest paid CEOs was 227 times greater than that of the average worker in 2018. The organization thinks that government should intervene to reduce this inequality.

In a recent article in the Financial Post based on the conclusions of his CIRANO study, economist Marcel Boyer offered a different perspective, looking at the remuneration of the CEOs of S&P 500 companies. Their average salary of $14.2 million is 281 times higher than the median salary of their employees.

These very large firms average 52,000 employees. Taking into account company size, CEO salaries correspond to 0.5% of total payroll. From this point of view, it’s as though the typical employee contributed $273 a year toward the boss’s salary. That’s a lot less impressive!

As Mr. Boyer points out, the CEO personifies the design and implementation of the firm’s fundamental strategies. The CEO’s decisions have a potentially enormous impact on the well-being of employees and of thousands of others (shareholders, clients, suppliers, etc.). If employees were asked whether they were ready to make this reasonable contribution to have the best possible boss to ensure the company’s profitability, as opposed to paying the boss 281 times more than them, the response would certainly be much more positive.

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