For the third year in a row, Canadian corporate executives made more than 200 times the average worker’s salary, according to the annual CEO compensation report by the Canadian Centre for Policy Alternatives.
Using 2019 data, the report calculated that average total compensation for Canada’s 100 top paid CEOs was $10.8 million while the average worker’s annual salary was just $53,482.
Complete data was not available for 2020, but the report estimated that based on company share performance, half of Canada’s top CEOs will continue to see their compensation increase despite the pandemic.
The findings are further proof that the government must take action to address extreme inequality in Canada and prevent those at the top from profiting in the COVID-19 crisis. Federal and provincial governments could do much more to reduce these growing inequalities and pay for the costs of the pandemic by eliminating tax loopholes that favour CEOs, raising top income tax rates, restoring corporate tax rates and introducing an annual wealth tax.
Two separate reports last year by Canadians for Tax Fairness found the top billionaires in Canada grew their wealth by $53 billion during the pandemic while dozens of large corporations raked in record profits over the first three quarters of 2020. Some of those companies used federal public subsidies to pad their profits and payouts to their shareholders and billionaire owners. The Financial Post found 68 companies receiving billions in CEWS continued to pay out dividends to shareholders and use profits to buy back shares and boost their stock prices instead of investing in jobs and workers.
Similarly, the CCPA found more than a third of the top paid CEOs belong to companies that received government funding through the CEWS program.
Excessive CEO pay is problematic on its own, but corporations using public funds to compensate wealthy executives and shareholders is even more disturbing. When the CEWS program launched last spring, we urged the government to attach conditions to funding for corporations to prevent this type of pandemic profiteering. Other countries such as Denmark and Poland restricted corporate recipients of state aid from paying dividends and share buybacks.
It is not too late for Canada to require companies receiving federal aid to limit total executive compensation to $1 million. The federal government could also prohibit those corporations from engaging in corporate stock buybacks, executive bonuses, golden parachutes and shareholder dividend payouts for at least one year after receiving funding.
While these short-term measures would help prevent pandemic profiteering, longer-term tax reforms are needed to tackle extreme inequality.
As we pointed out last year, when the CCPA’s annual report found 13% of Canadian corporations pay their top five executives more than they pay in corporate income tax, unfair tax rules contribute to the problem of excessive CEO compensation.
The bulk of CEO pay doesn’t come from salary, but from cash bonuses, shares and stock options. Investment income is taxed at half the rate of regular income, so while average workers are taxed on their salary, wealthy executives benefit from a much lower rate of tax on their investment earnings.
These tax loopholes not only aggravate wealth inequality, but gender inequality as well. Over 90% of the benefits from tax loopholes like the stock option deduction go to the top 1% and 77% goes to men. This year’s CEO report found there were as many men named Paul among the top 100 paid executives as there were women -- only four.
In the September speech from the throne, the Liberals committed to find new ways of taxing extreme inequality. They can do this by closing tax loopholes that primarily benefit wealthy executives, particularly the lower rate of tax on capital gains and the billion-dollar stock option deduction. The government could also send a message that no one should profit in a crisis by limiting corporate deductions for executive pay to no more than $1 million per executive.
Many of the CEOs and corporations on this year’s top paid CEO list also appear in C4TF’s reports on billionaire wealth growth and corporate profits, including Thomson Reuters, Loblaw, Shopify, TC Energy Corporation, and large Canadian banks.
Extreme wealth inequality is directly linked to corporate profits and excessive executive pay. The federal government should address the growing concentration of wealth at the top by introducing an annual net wealth tax on the fortunes of the richest Canadian households.
Decades of corporate tax cuts have resulted in record share buybacks and cash-hoarding for corporations and executives while draining public funds for social programs to help average workers. Restoring corporate tax rates would help reduce inequality and pay for the public services Canadians need.
With the second wave surging throughout Canada alongside a record deficit, it is more important than ever that large corporations and wealthy individuals contribute their fair share of taxes.
Ahead of this year’s federal budget, C4TF will continue pushing for these much-needed tax reforms. In the meantime, please help us send a message to Ottawa that it’s time to tax extreme inequality.
