Nice Work If You Can Get It

Introduction

A couple of weeks ago I had occasion to watch the Canadian Parliamentary Channel.  The President and CEO of Bell Canada, Mirko Bibic, was appearing before a Parliamentary Committee to answer questions regarding recent cutbacks at the corporation.  For those who may not be aware, Bell Media recently cut 9% of its workforce, or approximately 4,800 jobs.  In addition to the elimination of several programs such as W-5, the company also announced plans to sell 45 regional radio stations.

One could argue that the media industry in Canada is under increasing pressure, and that cuts and transformations are necessary in order to remain financially viable. However, what received only scant attention from parliamentarians was the fact that last year Mr. Bibic received $13.59 million in total compensation, up 20% from the previous year.

Not an Isolated Case

Those of us who are self-employed, or who received little or no wage increases last year, are likely aghast at this level of compensation.  I wish I could say this is an isolated case, but the truth is that corporate Canada is rife with numerous examples like this.  The same Parliamentary committee conducted hearings earlier in the year when representatives from the four major grocery chains in Canada appeared to answer questions relating to high food prices.  Galen Weston of Loblaw Companies Limited earned $8.4 in total compensation in 2022, while his counterpart at Empire Company Ltd., Michael Medline, pocketed $8.7 million, and Metro Inc. CEO Eric La Fleche earned a mere $5.4 million.  At least these food retailers were making a profit.

If you think these exorbitant salaries are confined to the private sector dream on.  Earlier in April the Ontario government published what is commonly referred to as its Sunshine List: public servants in the province whose salaries exceed $100K.  The total compensation paid to executives in government agencies, hospitals and public institutions is, to say the least, illuminating.

I understand that not all this compensation came in the form of salaries.  Some was probably stock options, whereas others were likely performance bonuses.  However, my bigger questions are these:  are all these people worth their lucrative compensation packages?  Are the corporations who pay these people receiving full value for what they are paying them?  Is there a point where someone asks, or suggests, that the compensation level being offered is excessive?

 

 

How Much Compensation is Too Much?

Years ago I worked in the resources sector.  The company I worked for was one of a number of smaller entities that had been spun off from a much larger energy conglomerate.  My job had a heavy compensation component, and one of the things I had access to was employee salaries, including senior management.  I also compiled the annual salary survey, so I knew what comparable organizations in the market were paying.

My employer prided itself on paying at the 90^th percentile.  Many of the employees we engaged were well-educated, technically sophisticated, and in high demand.  However, they were also highly specialized.  Outside of a comparatively few employers in the same industry sector their skill sets weren’t readily transferable.  The same was true of executives.  The justification for paying extremely well was that the loss of a few key strategic players would lead to organizational chaos.  Fear can sometimes be both a great motivator as well as a good rationalization.

During this time I compiled annual reports on how many employees were paid over $100K per annum.  The number in 1999 was 53.  Today, it is in the hundreds.  Even allowing for inflation and cost of living adjustments one would have a difficult time rationalizing increases of this magnitude.  Out of interest I’ve tracked the salary of this company’s Vice President of Human Resources, someone with whom I worked with during my employment.  Today, she earns nearly as much as the Prime Minister of Canada!

If I were a rabid libertarian who believed in unbridled free enterprise, I could perhaps argue that the market should be the ultimate arbiter of what is considered fair compensation.  Alternatively, I might suggest that, in the case of publicly traded companies, it is usually the Human Resources Committee of the Board of Directors, that has the ultimate say in executive compensation.  They, more than anyone, should know what is best for their organization.  Sadly, I find both explanations unsatisfying.

Call me cynical, but I can’t comprehend that the contribution of a CEO like Mirko Bibic is 215 times greater than that of the average Canadian who, last year, earned $63,184.  Proportionality would suggest that a CEO with a track record of losing money and substantial downsizings shouldn’t be paid anywhere close to $13 million.  Either the CEO has hidden talents that the public doesn’t fully realize, or the HR Committee at Bell Media simply rolled over and capitulated.

Inequities Breed Contempt and Cynicism

What upsets me more than the overly generous compensation accorded executives is the ever-increasing economic disparity this is creating in our society, and by extension, what it bodes for the future.  A society where a fraction of the population enjoys the pleasures and perques that are derived from generous employment engagements, while at the same time ordinary citizens scramble to keep up with inflation and make ends meet, is a prescription for political upheaval and even unrest.  No one that a boycott is underway of Loblaws stores across Canada starting today.

If an individual works for a private company, and the owner or owners of that company choose to compensate their employees lavishly for the work performed, that is their choice.  However, the situation is profoundly different for a publicly traded company, a Crown corporation, or a public entity.  The former is answerable to a Board of Directors, and one would assume, perhaps mistakenly, that the Human Resources Committee would be exercising its due diligence, holding executives accountable, and compensating according to results.  That Board of Directors is, in turn, answerable to the shareholders.  

The unwillingness of many Human Resources Committees in publicly traded companies to remain fully accountable for executive compensation highlights a significant weakness in the system.  Part of the problem, I submit, is that the oversight is provided by a cross-section of members of the Board of Directors who lack the desire to confront performance issues, and is, at best, perfunctory.  For many, it is a case of going along to get along.  Therein lies a fault in the system.

A Final Thought….

According to recent sources, Bell Media’s advertising revenues declined by $140 million in 2023, and the unit continues to incur more than $40 million in annual operating losses despite having the most-watched network of local TV stations.  The corporation was also granted $40 million in what is called “regulatory relief”.  All of this occurred, despite an increase in its operating revenue.

This begs the question:  if the CEO pockets over $13 million annually while presiding over a company that is steadily “falling off a cliff”, what compensation would he lhave commanded if his corporation had actually turned a profit?  Sadly, I suspect we’ll never know.  My guess is at some point Mr. Bibic will be terminated, and ride off into the sunset with a very handsome “golden handshake” that will allow him to live out his remaining years in opulent splendour and luxury.

The rest of us should be so lucky!