CANADIAN LABOUR:

AVERAGE CEO MAKES 155 TIMES MORE THAN AVERAGE CANADIAN WORKER:

It now the evening of Monday, January 3, and the average Canadian annual wage has already fallen well below that of an average of the 100 top CEOs in this country. In actual fact this happened at 2:30 pm earlier today. As the following press release from the Canadian Centre For Policy Alternatives points out the average top CEO makes 155 more money than the average Canadian.

Does this means, as the myth often says, that they "work harder" than the average Canadian ? For this to be true there would have to be 760 hours in each day, and the CEOs would have to work every second of them. Do they magically "create value" by their cunning business decisions ? If that was true then their remuneration should drop when the company they are in charge of drops in value or income, a thing that rarely happens. As the title of the following makes plain CEO pay is "recession proof". Bonuses come whether the company does well or poorly.

Leaving aside the question of the recent massive bailouts of business by government and the mostly invisible day to day subsidies provided by government I would challenge anyone to prove that any CEO has made a cunning non-obvious decision in any company that increased its value to anywhere near the amount these people are paid. In actual fact most companies "run themselves" despite management decisions. Management, of which CEOs are the "big fish" are better pictured as some sort of tube worm existing parasitically on the body of the company fish. They are hardly ever "propellers" that drive the firm forward.

Is this sort of inequality justified in any society ? What are its costs, and I don't mean merely monetary ones ? Things to ponder. Here's the press release. You can read the full17 page report at the Policy Alternatives website.

CEOCEOCEOCEO

Canada’s best-paid CEOs ‘recession-proof’: study
January 3, 2011
TORONTO – Canada’s best-paid 100 CEOs breezed through the worst of the recession with earnings 155 times higher than the average Canadian income earner, says a new study by the Canadian Centre for Policy Alternatives (CCPA).
The study, Recession-Proof, looks at 2009 compensation levels for Canada’s best paid 100 CEOs and finds they pocketed an average of $6.6 million during the darkest period of the recession – a stark contrast from the total average Canadian income of $42,988.

“At this rate of reward, this handful of elite CEOs pocket the equivalent of the average Canadian wage by 2:30 pm on January 3 – the first working day of the year,” says the study’s author and CCPA Research Associate Hugh Mackenzie.

The study shows executive compensation in Canada wasn’t always this rich. In 1998, the best paid 100 CEOs pocketed an average of 104 times more than the average Canadian wage earner, compared to 155 times more in 2009.

“Even that extraordinary number understates the real story,” says Mackenzie. “Thanks to a change in corporate reporting introduced in 2008, we only have a conservative statistical estimate of the stock options that make up about one third of CEOs’ 2009 pay. The public will never know how much most of these CEOs actually got paid in 2009.

“And that’s only half the story. These CEOs are sitting on $1.3 billion of stock options they haven’t yet cashed in. That’s about $2 in future income for every $1 they declared in 2009.”

When the CEOs decide to exercise those stock options, the study reveals Canadians will subsidize that bonus with an estimated average of $360 million in foregone taxes, since stock options are taxed at a lower rate, as if they are capital gains. Among Mackenzie’s recommendations: getting rid of that expensive and unfair loophole.

The study highlights the role that soaring executive compensation plays in the dramatic growth in income inequality in Canada identified in a recent CCPA study by Senior Economist Armine Yalnizyan. Yalnizyan found that fully one third of all income growth in Canada in the past 20 years went to the richest 1% of Canadians.

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For more information please contact: Trish Hennessy at (416) 551-2059 or Kerri-Anne Finn at (613) 563-1341 x306.

CANADIAN POLITICS:

AVOIDING A RECESSION-THE CEO WAY:

If you think you've had it bad the last year-you're probably right, but not if you are a member of Canada's management elite. According to a report from the Canadian Centre for Policy Alternatives this country's top ten CEOs had an average income of $7,352,895 in 2008, shortly before the recession began to "bite hard". This was 174 times the average Canadian wage. To put this in further perspective, from 1998 to 2008 the average Canadian wage packet dropped 6% when adjusted for inflation. During the same period the average compensation for top CEOs increased !!! by 70% !!!!. The Globe and Mail weighed in today with an editorial on this report. Not denying the facts of the study, as per usual, because they are pretty rock solid. What the Globe opined is that nobody should pay attention to the difference between the average wage and that of top CEOs, nor to the difference in increase versus decrease. According to the Globe the only matter of concern is that the average wage is declining, and it is all fine and good that corporate executives increase their income.

Well finagled I must say. A few little problems are, however, contained in this little excuse. one is that there just might be a connection between the two arms of this lever. It is entirely possible that corporate executive plunder is inversely correlated with employee compensation, and not just because this sort of thing is a zero sum game where money given to one class is unavailable to another. It is also more than likely that one of the things that corporate executives are rewarded for is their ability to "reduce labour costs and increase productivity". In plain language this means quite deliberately reducing the income of their employees. Quite deliberately. It is also a certain fact that this excessive executive compensation is in another zero sum game where the upper levels of management (and lower ones too to a lesser degree) bleed corporate entities at the expense of the stockholders. In a managerial society such as ours the term "stockholders" means, more often than not pension and other mutual funds held in dispersed ownership by the same employees whose wages are being reduced.

Then there is, of course, simple justice. Nobody in his right mind would try and claim that corporate executives work 174 times as long as the average Canadian does. Neither can one claim that their jobs are 174 times as disagreeable as the average job. Then we come to value. No doubt the value produced by a corporate executive may sometimes be high. Can it be, however, 174 times as valuable as that of the work of people such as nurses, firefighters, ambulance drivers, farmers, miners and to put it bluntly pretty well everyone else ? Think about it for awhile.



The following article from the National Union of Public and General Employees (NUPGE) gives a general summary of the report in question.
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Canadian corporate CEOs average $7,352,895 each:
New CCPA study says top 100 Canadian CEOs pocketed 174 times each what average Canadian workers earn all year.





Ottawa (5 Jan. 2010) - Canada's highest-paid CEOs raked in an average of $7,352,895 in 2008, the latest year for which statistics are available. That's 174 times more than the average wage of the typical Canadian worker.





"To put that in perspective, Canadians will work full-time throughout the year to earn the national average of $42,305," says Hugh Mackenzie of the Canadian Centre for Policy Alternatives (CCPA), which has just released a new report on the subject.





Yet as of 1:01 p.m. on their first working day of this year (Jan. 4) the top 100 CEOs in the country had already pocketed as much as the average Canadian worker will in all of 2010.
The CCPA study says average compensation for the top CEOs has outpaced inflation by 70% between 1998 and 2008. During the same period, Canadians earning the average income lost 6% to inflation.
Here are the top 10 hogs at the corporate trough:
Thomas Glocer, Thomson Reuters Corp. - $36,595,233.
Ted Rogers, Rogers Communications Inc. - $21,484,708.
J. M. Lipton, Nova Chemicals Corp. - $19,753,245.
George Cope, BCE Inc. - $19,551,345.
Robert Brown, CAE Inc. FY end March 08 - $17,293,144.
William Doyle, Potash Corp. of Saskatchewan - $17,026,317.
Hunter Harrison, Canadian National Railway Co. - $13,350,048.
Dominic D’Alessandro, Manulife Financial Corp. - $13,251,274.
Stephen Wetmore, Bell Aliant Regional Com. Income Fund - $11,563,250.
For the entire 100 names please go to the link below and read as much as you can stand. Caution: Not for those with weak stomachs.
NUPGE
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE
More information:Full Report: A Soft Landing - Recession and Canada's 100 Highest Paid CEOs
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A MOLLY PUBLIC SERVICE ANNOUNCEMENT:
I've tried the link to the publication by the CCPA in the report above, and it doesn't seem to work. Here is A LINK that does work, at least for Molly. The report is actually a great report, and it deserves far more publicity than it has been given in the mainstream press. As to the "why" of the astronomical executive compensation, much of the standard justification has been dealt with in my introduction to this post. The real "why" is a totally different matter.




Where I have to part company with the CCPA is not in what they have reported. It's obviously true. Neither, unlike the Globe and Mail, do I disagree with them that this sort of inequality is a "bad thing" and totally unjustified. I do, however, have to disagree about the realism of the remedy that they, as good left wing social democrats, have proposed. The simplistic way of summed up their solution (see the report) is "tax the bastards heavily". I wish them well in this enterprise, though it makes me a bit queasy knowing that social democrats rarely find a tax that they cannot love. The CCPA is under the impression that they can find a realistic way to tax such things as "stock options" (whereby management steals from the shareholders- as I said above usually ordinary citizens with dispersed portfolios). Maybe yes. Maybe no. What they will be unable to do , however, is find some magical formula in the byzantine tax regulations that will prevent upper management from switching their compensation to non-taxable benefits. That's the way that tax law has operated in the past, and that probably the way that it will operate in the future despite the best laid schemes of social democrats.




For what it is worth Molly has her own proposals that can be summed up in the brief bon mot of "abolish management". No doubt there will be tax law changes in such a process-mostly involving exceptions for ordinary people rather than attempts to penalize the ruling class. The main steps, however, depend more upon the easing of the legal burden of the state that prevents actual democratization of the workplace. It does not depend upon the failed illusion (demonstrated by the failure of over a century of attempts to build a more egalitarian society by taxation policy that the ruling class evades) of government largess rather than citizen action. That's why I am an anarchist, what I consider a "realistic socialist" and not a left social democrat.




Just in closing, here is the press release of the CCPA about their report, something that will probably never be quoted in anything but brief excerpts in the mainstream press.
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Soft landing for Canada’s CEOs:
January 4, 2010
TORONTO—Canadians may have been hit hard by a worldwide economic recession, but it appears Canada’s 100 highest paid CEOs are enjoying a soft landing.





A report on executive compensation by the Canadian Centre for Policy Alternatives (CCPA), a progressive think tank, reveals Canada’s 100 highest paid CEOs pocketed an average $7.3 million in 2008, the year recession broadsided the nation.





“Canada’s top 100 CEOs earned 174 times more than the average Canadian wage,” says economist Hugh Mackenzie, CCPA Research Associate.





“To put that in perspective, Canadians will work full-time throughout the year to earn the national average of $42,305. The top 100 CEOs pocket that amount by 1:01 p.m. on January 4 – the first working day of the year.”





Soft Landing: Recession and Canada’s 100 Highest Paid CEOs shows executive compensation remains as resilient to worldwide economic forces as ever.





“Between 1998 and 2008, Canada’s top 100 CEOs’ average compensation outpaced inflation by 70 per cent,” says Mackenzie. “In contrast, Canadians earning the average income lost six per cent to inflation over that period.”
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Soft Landing: Recession and Canada’s 100 Highest Paid CEOs is available at www.policyalternatives.ca
For more information please contact: Kerri-Anne Finn, CCPA Senior Communications Officer, at 613-563-1341 x306.
Related Reports & Studies
A Soft Landing
Recession and Canada’s 100 Highest Paid CEOs
Canadians may have been hit hard by a worldwide economic recession, but it appears Canada’s 100 highest paid CEOs are enjoying a soft landing. The total average compensation for Canada's 100 highest paid CEOs was $7,352,895 in 2008—a stark contrast from the total average Canadian income of $42,305. They pocketed what takes Canadians earning an average income an entire year to make by 1:01 pm January 4—the first working day of the year. During the worst of economic years, the...January 4, 2010 National Office
Read the full Report

CANADIAN POLITICS:

TAX FREEDOM DAY:

According to the Fraser Institute, a right wing Canadian public policy think tank, "Tax Freedom Day" fell on today, June 14, this year. The concept of "tax freedom day" originated in 1948 with Florida businessman Dallas Hostetler. Since then the idea of such a measure has spread worldwide. Within federal systems such as Canada and the USA this presumed day falls on different calendar dates in different provinces and states. The concept of such a measure may seem straightforward. Calculate total "income". Calculate the total payments in taxes. Subtract b from a . The result would be the proportion of national income that is not paid out in taxes. Divide a by b sand multiply by 365, and you would theoretically get the day of the year where "you begin to work for yourself rather than for government". The problem is that it is nowhere near so simple. In Canada the Fraser Institute calculates this day annually. The American equivalent is the Tax Foundation.

The calculation of both taxes and income, however, is subject to more than a few subjective choices. The problems with the Fraser Institute's method of calculation have been extensively discussed at 'Tax Freedom Day: A Flawed, Incoherent, and Pernicious Concept" by Neil Brooks. The previous link is a pdf file available at the Centre for Policy Alternatives. The Fraser calculations both understate income and overstate taxes. Even calculations by different groups such as the Fraser Institute and the Tax Foundation have widely different methods, and applying the American method to the Canadian data would show TFD as falling far earlier in the year.

The estimate of income is underrated because of a number of assumptions that the Fraser Institute makes. They first of all only include "cash income" in their calculations. This ignores such things as pension and health/dental insurance contributions made by employers and investment income accumulating in pension funds and life insurance policies. The amount of taxes paid is also overstated by including such items as the employers share of payroll taxes as "family income". The Fraser Institute itself provides different methods of estimating income, but they insist on avoiding "total income" in making their estimates of TFD. The way that the Fraser Institute uses the "average" family income and taxes rather than the "median" also tends to inflate the amount of taxes that are presumably paid by lower income groups. Anyone interested in the full story of the Fraser Institute's calculations is urged to consult the reference above.

All that is well and good, and Molly has little doubt that both sides of this debate have an interest in exaggeration. The Fraser Institute is influenced by people with higher incomes, ones who do indeed pay higher taxes, and they attempt to garner political allies by making it seem as if lower income groups have the same magnitude of a problem as their natural constituency does. Leftist think tanks, on the other hand, are not straightforward spokespeople for the poor either. Their natural constituency is the salaried government employee engaged in "helping" ie "managing" the poor and other disadvantaged groups. The class position and income of such people depends in a very obvious way on continued high levels of taxation, and such groups naturally minimize the effect that taxes have on poor and middle income groups, once more to appeal to potential political allies. They even have their own version of the right wing's "trickle down economics" in that they believe that money spent on the social control bureaucracies automatically helps the situation of the so-called "clients". If I were to sum up I would say that this sort of debate has all the hallmarks of being nothing but a squabble amongst different factions of the ruling class over the division of the spoils.

So where to go from here ? Molly is a "libertarian socialist". She believes in socialized enterprise which is democratically controlled by its workers, the community it is in or its customers- or a mixture of all three. By this definition the so-called "socialism" of both Marxism and social democracy where property and enterprise is controlled by the state is not socialism at all. State enterprise and property are the property of that part of the ruling class embedded in state bureaucracies, and their class rule is not the democratic alternative envisioned by socialists who are not apologists for class rule. It would be useful to recognize the obvious, something that the leftists are usually reluctant to do, that the burden of taxes- no matter the quibble over the exact amount- represent a withdrawal of income initiated by a faction of our ruling class. Left with its original owners this income would be available for many other purposes-including the building of socialist institutions. With the right wingers Molly is in agreement that taxes should indeed be reduced. The significant caveat is that they should be reduced in a careful way that promotes the development of cooperative solutions to the many problems that the state presently pretends to address. On this point Molly is in agreement with the leftists who recognize another obvious fact- that a large majority of the population benefits to at least some degree from many of the government programs presently financed by taxation and that some people are utterly dependent on them. Where Molly parts company with the leftists is in refusing to believe that such programs are an unalloyed good and that there are not other and better solutions to the same problems. Molly sees the task of an anarchist movement in a industrial country as very much nothing more than thinking about how such institutions could be developed and then trying to carry such plans into practice. In the end there would be working models that could simply be expanded and generalized to replace the "social welfare" functions of the state. Taxes could be reduced as such institutions grew.