Canadian CEOs make 171 times the average

Peter Drucker, "limit executive pay," Photo courtesy Creative Commons
Peter Drucker, “limit executive pay,” Photo courtesy Creative Commons

In November 2013, people in Switzerland voted in a referendum on something called the 1:12 Initiative for Fair Pay. Under that proposal no one in a Swiss company would earn more in a single month than someone else in that company earns in an entire year. Corporate spokespersons in Switzerland and some in government warned of dire negative economic consequences if such a proposal were accepted. Although it was defeated by a significant margin, it is significant that the issue was being discussed at all.

It is a debate that we should have in Canada. The Canadian Centre for Policy Alternatives reports that in 2012 Canada’s top 100 CEOs pocketed an average of $7.96 million. That was an income equal to 171 times that of the average Canadian worker, and 194 times that of the average female worker.

Growing inequality

In fact, the Globe and Mail newspaper reports that those who are already affluent have benefited handsomely from Canada’s economic growth and productivity gains in the past 30 years. But real income for most people has barely budged in that time. The reasons cited are many.

Globalization rewards the highly specialized skills of some people but there is less demand for the skills of others. For example, the manufacturing sector in Canada has been hard hit as companies move abroad where wages are low, working conditions are inferior and environmental regulations are lax. Canadian factory workers who are laid off, particularly if they are older, are not in demand and their future may be grim.

Economic equality has been further undercut by the falling rate of unionization, by government tax cuts, and the resulting decline in transfer payments and public services needed to pay for those tax breaks.  We are becoming a less equal society and one conspicuous example of that is the yawning difference between CEO incomes and those of most others.

Chorus of justification

Any criticism of that disparity triggers an immediate chorus of justification from its defenders. The well-worn argument in Switzerland was that the Initiative for Fair Pay would make their companies less attractive and their country a less competitive place in which to do business.

In Canada, greed-is-good advocates such as the CBC’s business pundit Kevin O’Leary celebrate the income gap. O’Leary and others argue that the market dictates the salary levels for skilled and motivated people.

Peter Drucker

That is  something the late Peter Drucker, a highly-regarded American business theorist, once dismissed as being “nonsense.” Drucker said it was not the market but rather the “internal logic” of corporations — hierarchical in nature and controlled by their managers — that dictated levels of pay. Drucker called for a published corporate policy fixing the maximum compensation of all corporate executives 20 to 25 times that paid to the lowest regular full-time employee.

Lee Valley Tools

Leonard Lee has put that philosophy into practice at Ottawa-based Lee Valley Tools. In his company, the highest-paid worker never makes more than 10 times the wage of the lowest-paid. Lee has profit sharing in his company, too, and as he told the The Globe and Mail, a flatter pay structure results in better worker retention and more engaged staff.

Wagemark Foundation 8:1

Meanwhile, a Toronto-based organization called the Wagemark Foundation is advocating for an international wage standard that makes sure the ratio between the highest and lowest earners is no greater than 8:1. Peter Macleod, Wagemark’s director, knows that it will be a tough sell to companies and even some non-profits, but his organization believes that large wage gaps undermine good business practices and have proven “detrimental to economic growth and the existence of a healthy middle-income population.”

Eye of the needle

Quite aside from the policy discussion there is a question of fundamental values. Who would want to be paid 171 times more than someone else in their company, and why would anyone want all of that money? What was it that the bible said about camels and needles?

This article appeared in slightly shorter form in a United Church Observer blog on February 27, 2014.


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Dennis Gruending is an Ottawa-based writer, blogger and a former member of Parliament

8 thoughts on “Canadian CEOs make 171 times the average”

  1. What Canada needs is an actual redistribution of wealth that ensures no Canadian has to live under the official poverty line. Giving a low wage earner a 75¢ per hour wage increase, while the CEO gets several hundred thousand dollar bonus as a tax free stock option is no solution. For every penny a poor person gets they lose the purchasing power through inflation in no time. Wealth redistribution brings the gap between rich and poor closer instead of wider. As long as greed rules our society wealth disparity will only continue to destroy any progress on this matter. We need a truly progressive tax system with fewer loopholes.

  2. Hi Dennis,

    I note the typo in the Peter Drucker paragraph. (Drucker said it was not the market but rather the “internal logic” of corporations — hierarchical in nature and controlled by their mangers — that dictated levels of pay.) The word”mangers” is supposed to be “managers”, but I think the typo is apt. It brings up visions of pigs in the trough. Surely, that is what the high pay is about – greed.

    1. Thanks Kay. You are as sharp eyed as ever. I did change “mangers” to “managers” but for the reasons you mention I was tempted to leave it as it was.

  3. The Mondragon Corporation ( is a federation of worker coops founded in 1956 and is among the top 10 employers in Spain.

    From its inception there have been wage ratios between the lowest paid workers and the executive. Those ratios range from 3:1 to 9: 1 with the average being 5:1.

    But despite the world-wide reputation of the Moses Coady Institute (, founded three years after Mondragon at St. Francis Xavier University in Antigonish, NovaScotia little is known of it in Canada, and my experience in Catholic secondary schools in Ontario saw little impact of its work in Business Education classes.

    You may be interested in the film Shift Change ( that highlights worker-owned enterprises in North America and in Mondragon, Spain and also (

    1. Thanks John for the information. I have heard about Mondragon, especially from Prof. George Melnyk at the University of Calgary. Thanks also for sharing Mondragon’s wage ratios (average of 5:1), and for the link to Shift Change.

  4. Dennis,

    This article strikes a chord with me. I have worked all of my career as an engineer in private industry. Over the years I have seen benefits gradually taken away in the name of ‘belt tightening’. In the final years I have had to put up with layoffs and job insecurity. I have also seen many successful Canadian companies bought out by American corporations only to layoff people and eventually close the doors to those operations. While it’s easy to point the finger at CEOs, our society needs to share the blame for continuously allowing this to happen. People have come to accept all this as, “That’s just the way things are!”. Our government historically has maintained a ‘laissez faire’ attitude towards private industry. Nortel is a prime example of this. Many former employees lost their pensions while those who worked in other countries for Nortel enjoyed better protection. When will we ever wake up?

  5. I heard your article mentioned on the CBC today. This is also something I have thought about over the last few years. The trick is how do you execute it as we all know the tax accountants and compensation experts would spend a lot of effort trying to figure out a way around it.

    Ratio of lowest wage in a company to the highest wage. This rule would be easy to circumvent by merely subcontracting out all the low paying jobs. It also seems to me that you would want it to be all compensation and not just wages otherwise executives would take their compensation in stock options and grants, bonuses and the like. Or corporations could hire management consulting firms to perform executive services paying executive’s through their own corporations. I think Frank Stronach used to get paid this way. Either way, the wage disparity could be managed.

    My solution would be to use the tax code to only allow compensation (in all its forms) to be deducted from the calculation of corporate income taxes that are no more than a specific multiple of the average Canadian wage. This allows a corporation to still give its executives and high income earners a high wage (thus dealing with the Swiss concerns about being competitive in attracting “good” help) but not be deductible for tax purposes – in other words, they would be showing either a higher profit (or lower loss) than they would under current tax regulations.

    Say the average Canadian wage is $50,000 and the CRA allows compensation to be as high as 20 times this wage. The ceiling would be $1,000,000. Anything above this could not be deducted for the purposes of tax calculations. If the executives compensation was $5,000,000 – then $4,000,000 would be taxed at the corporate tax rate. I think of this as being similar to the CRA treatment of meals and entertainment where only 50% is allowed to be deducted. It allows the corporation to still be extravagant but at a reduced rate.

    Anyway, I welcomed your article and the discussion that it is engendering. And now you have some of my thoughts on the matter.


    Andrew Stewart

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