Thursday, January 2, 2014

Study Distracts from Message about High CEO Pay

Yet again, the Canadian Centre for Policy Alternatives released a study of CEO Pay in Canada that misleads readers. A quote:
“Just as most Canadians are wrapping up lunch break on the first official work day of the year — 1:11 p.m. on January 2 — the average of the 100 highest paid CEOs will have already pocketed what it takes the average Canadian an entire year to earn. All in a day’s work.”
If you thought that meant that the average Canadian CEO earns in about 4 hours what the average worker earns all year, you’re mistaken, but I don’t blame you. In reality, the average CEO pay is 171 times higher, which means that it takes CEOs about a day and a half to earn what the average worker earns in a year. The idea is that the CEO was paid for Jan. 1 as well.

I don’t see the point of being unclear about this. CEO pay is extreme enough that there is no need to make it look worse. Perhaps the mention of “January 2” was meant to add some clarity, but it doesn’t help much. Only more mathematically curious readers would figure this out from the pay ratio of 171.

I have no problem with CEOs who are genuinely worth the money they are paid. Too often, though, the company’s board of directors aren’t doing their jobs properly. The board is supposed to represent stockholders and negotiate for a good CEO at a reasonable price. This doesn’t work well when the CEO controls the board and gets friends elected to it.


  1. Over the past decades, we've watched the number of secretarial-type administration staff drop significantly at a couple of big corps. So now they have upper managers fiddling around trying to make PowerPoint presentations. At what they're paid an hour, this is a ludicrous misuse of money. And at the VP and up level, there darn well better be someone whose job is to bring them a cup of coffee, because it would be insane to pay them that much an hour and have them take 4 minutes to go and brew themselves a cup.

    I do agree with the Dilbert cartoon, though, where he realizes he had his most innovative idea for work while taking a (unpaid) shower at home.(Similar to )
    We aren't really paying upper execs by the hour but hopefully by the idea.

    1. @BetCrooks: Sadly, we often pay CEOs by how well they can fire potential rivals and stack their boards of directors.

    2. Or - also hopefully - by their leadership and ability to see exactly the value of their own time as you ably demonstrate. 4 minutes for coffee indeed.