Canada’s top 100 CEOs took a $1 million pay cut in 2019

Earlier this month, the Canadian Centre for Policy Alternatives released a report on CEO compensation in Canada.

In it, David Macdonald, a senior economist with the CCPA, reviews the data behind compensation for CEOs for 2019 and predicts 2020 compensation—which hasn’t been released yet—based on company share performance.

For example, he found that, in 2018, Canada’s 100 highest-paid CEOs made, on average, 227 times more than the average Canadian income. That was the highest this gap has ever been. In 2019, that gap dropped to 202 times the salary of the average Canadian.

In other words, in 2019, the average top-100 CEO made what the average Canadian made in an entire year, before noon on 4 January.

In absolute numbers, the average salary for these 100 CEOs was $10.8 million, while the average Canadian income was under $54,000. In 2018, the average salary for these CEOs was $11.8 million.

So, it seems millionaires had a paycut of a million dollars in 2019.

Macdonald reports that the primary cause of the $1 million paycut was massive payouts in 2018 for retiring CEOs. Now, that being said, to make the top 100 list in 2018, CEOs had to make $6.1 million; that jumped to $6.3 million in 2019.

So, while the average salary may have dropped, the bottom salary actually increased.

Something to keep in mind is that CEOs aren’t paid the same as you and me. Or rather, not exactly. According to Macdonald, only about 12% of the pay CEOs received came from their salary in 2019. 82% of it, on the other hand, came as a bonus, which was divvied out in 3 ways: $4.2 million in cash, $2.5 million in stock options (buying stocks in the future at a price set now), and $2.1 million in actual shares. Again, these are average amounts.

The great thing about getting stock options instead of cash is that the federal government gives you half off on your taxes. Stock options are taxed at 50% the rate that income is.

Despite a 2015 promise to change this, the Trudeau government has yet to do anything; although, apparently, they’re going to cap the discount at $200,000 later this year, despite already backtracking on similar initiatives in the past. Their 2015 campaign platform had promised a $100,000 cap.

Payments in stock are taxed at usual rates.

Interestingly, Macdonald claimed that cash bonuses have increased (from under 20% to about 40% of total bonus pay) over the last 5 years or so, while bonuses in shares have significantly decreased (from 45% to under 20%). All other bonus payouts (including stock options) have stayed relatively the sam.

Now 2020.

Macdonald points out that despite the economic turndown (which led to over 360,000 Alberta workers losing their jobs, 125,000 of which haven’t recovered), the S&P/TSX was up 3% by 11 December 2020, compared to its 2019 levels. This increased stock performance means companies are in a better financial situation than they were before the pandemic, and that leads to better pay for CEOs.

In fact, he estimates that about half of the CEOs will likely have received as much pay in 2020 as they did in 2019, or even more. The other half are with companies whose stocks performed 15% more poorly—or worse—than they the year before, so they likely will get no or little increase.

About a third of these top-100 CEOs took advantage of the federal Canada Emergency Wage Subsidy programme, which covered up to 75% of a company’s payroll during the pandemic. Three of those who took CEWS have publicly indicated that they plan to waive their 2020 salaries.

Remember, however, that actual salaries make up only about 12% of CEO compensation. Those electing to waive their salaries will probably still get bonuses.

R. Jeffrey Orr, the president and CEO of Montréal-based investment firm Power Financial Corp, had the highest salary of the 100 CEOs. His $4.776 million salary was 46% higher than the second highest salary, which belonged to Irwin D. Simon, CEO of Aphria Inc, a cannabis producer and distributor based in Leamington, Ontario.

Orr also had the highest pension value in 2019 of those on the list: $1.81 million.

The CEO who received the highest compensation in company shares was José Cil, CEO of Restaurant Brands. Although the company owns the Canadian icon Tim Hortons, it’s unclear why Cil, who resides in Florida, made the list, other than the fact that RBI is traded on the Canadian stock market. Regardless, according to Macdonald, he received over $24.861 million in company shares in 2019, more than twice that of D. Mark Bristow, the president and CEO of Toronto-based mining firm Barrick Gold, who received just shy of $12 million.

Cil also received the highest total amount of compensation of all 100 CEOs on the list: $27.482 million.

The highest amount paid out in stock options went to Rod N. Baker, president and CEO of Vancouver-based Great Canadian Gaming, which specializes in gaming, entertainment, and hospitality services. Baker received about $9.218 million in stock option. Second place went to Bruce Linton, co-CEO and chair of Canopy Growth—another Ontario-based cannabis company—who received over $8.556 million.

As far as cash bonuses go, N. Murray Edwards received the highest total amount in 2019: $10.773 million. Edwards was the executive chair of Canadian Natural Resources, a Calgary-based oil and gas extraction company. He was the only CEO in the list to exceed $10 million in cash bonuses. The next highest cash bonus was $8.559 million and was paid to Linda Hasenfratz, CEO of Linamar, a manufacturing firm based in Guelph, Ontario.

Jim Nikopoulos, former president of Toronto-based financing firm ECN Capital, received just shy of $11 million in “other” compensation, the highest amount in this category paid out to any of the other CEOs. R.M. Kruger, chair and CEO of Calgary-based Imperial Oil, received $3.126 million, the second highest of those receiving “other compensation”.

The lowest paid CEO on the list was Scott Shaw, the CEO of Kessler Financial Services, who received total compensation of only $6.469 million in 2019. Kessler is based in Boston, but its parent company, ECN Capital, is publicly traded in Canada.