I’ve written (here) about the Scottish strain in Canada. Their masterful hands sculpted the historic Rideau waterway, including the largest dam in North America in its day (1832) at Jones Falls (above). Their great qualities of prudence and moderation pervaded the banking system and large segments of Canadian business until the country was a hundred years old, an era I’ve written about here. Today I’m reminded how profoundly things have changed in the past half century or so. Scots are no longer in the ascendant. We now have moguls of English, German, Austrian, Hungarian origin. Even Irish. Even from among Pammy‘s fast spreading family. And the change is nowhere more evident than in pay packets.
The July-August 2013 edition of the Globe and Mail Report on Business Magazine (ROB) tells the tale in its analysis of the Top 1000 corporations in Canada. The Royal Bank of Canada leads the list, as it usually does, with profit of $7.4 billion. Its CEO, Gord Nixon, collects $14 million for steering RBC.
Way down at the bottom of the ROB list is gas-producer Encana Corp. of Calgary, No. 1000 with a loss of nearly $3 billion. (ROB ranks the Top 1000 companies in Canada by profitability but just over half of the thousand — 544 to be precise — show any profit at all. The rest are all losers for 2012.) Encana’s CEO last year, Randy Eresman, was paid only $7 million. As ROB meanly calculates, Mr. Nixon’s bank made $542 of profit for every loonie he was paid. Mr. Eresman was paid more than $2,500 for every million dollars down the toilet at Encana. According to a calculation by Corporate Knights magazine, Mr. Nixon and Mr. Eresman were each paid 92 times the average salary in their respective companies, an intriguing coincidence.
Who decides this kind of compensation practice, and why? There’s no denying that, like the Big Mac, it’s an importation from the U.S. of A. Mr. Nixon explains it this way in the ROB. “It is a global market, a competitive market . . . most of my top executives have been offered very big positions in the United States and elsewhere.” As if on cue, Mark Carney makes his debut as the new governor of the Bank of England, filched by the Brits from the Bank of Canada. Mr. Nixon might point to this but he refrains. Mark Carney’s salary will be $1.4 million (decimal point not misplaced). He’s a public servant. At the Royal Bank of Scotland, which predates RBC by a hundred and forty years, the CEO was dismissed last month amidst a scandal over high salaries and bonuses. His salary had been the equivalent of $3.5 million with a chance three years forward at another $2.6 million. These are all big numbers. But some are a lot bigger than others. So who decides? Does Mr. Nixon set his own pay level? Does Mr. Eresman? No way. These are Board decisions. Directors decide.
Research for the New York Times (June 29), finds that for the “top 200 chief executives at public companies with at least $1 billion in revenue . . . the median 2012 pay package came in at $15.1 million — a leap of 16 percent from 2011.” Of course even the most ambitious and self-confident Canadian business executive might feel it a long stretch to become CEO of a multi-billion dollar American enterprise. That’s OK because it’s not necessary to reach the very top in order to become very wealthy. As the NYT points out, “Because the data shows only chief executives’ pay, it does not reveal how good it still is to be a prince . . . compensation of the No. 2 executives at some of these companies would have vaulted them to the top ranks on the C.E.O. roster.”
Jim Hynes recalls that, “My father retired as President of C-I-L with a very modest pension just about a decade before it became fashionable to push CEO compensation up to obscene levels. Had I stayed in the banking business, I might have gotten a monumentally unearned slice of this pie myself. This phenomenon, like the credit default swap, is an American invention that we’re stuck with, and like gun control, it isn’t going to get fixed anytime soon.”
At least noone in Canada tried to push Larry Ellison last year. The larger-than-life CEO of Oracle took $84.5 million from the company to fund his expensive and enduring pursuit of yachting’s America’s Cup. Peter Munk’s gold-plated lures for directors at Barrick or Frank Stronach’s platinum-lined parachute from Magna don’t compare. Not since 2001 have we seen anything like it, when Canadian Pacific was split into five independent and self-sustaining companies after a century at the core of Canadian business and regional development. The CEO who made that break-up call received compensation, according to reports, somewhere above $83 million. This was Canadian money, of course, not American like Mr. Ellison’s. Then again it was a dozen years ago.
Who makes these decisions? Directors do and primus inter pares of directors is the Chair. The Chair usually gives a lead and the Board decides. In some cases the Chair and the CEO are one and the same. This was the case at CP in 2001, when the Chair and CEO who got the Canadian break-up fee of the century was Pammy’s great2grandson, David. The titles used to be joined at the RBC as well, in Earle McLaughlin‘s day (Earle’s day was about the same as Jim’s dad Leonard Hynes and he had a similar restrained grasp), but they’ve been split for some time now at Canada’s biggest bank. Mr. Nixon is CEO. The Chair is Pammy’s great2grandson David. Similarly at Encana. Mr. Eresman was succeeded early this year as CEO by Clayton Woitas. But the Chair remains the same as before. That would be Pammy’s great2grandson David.
Pammy’s starting wage as lockmaster at Chaffey’s on the Rideau Canal was $0.80 a day. During the boating season that was a 24 hour day. I write about some of that here.