When COVID-19 hit North America in the spring of 2020, its impact on millions of Canada’s workers was swift and punishing. In the pandemic’s first two months alone, more than one in ten were laid off — a share significantly higher than in previous economic downturns. Predictably enough, low-wage workers were the hardest hit, with those in the bottom 10 percent of earnings collectively seeing their total work hours drop by 45.5 percent and more than half being compelled to turn to the federal government for financial support. According to the Bank of Canada’s deputy governor, those earning under $16 an hour saw employment decrease by 27 percent last year — with the average loss of labor income for Canadians as a whole totaling $1,600. Many reportedly dipped into savings, and average household spending fell by $4,000 amid the downturn.
As newly assembled data makes clear, the experience of many of Canada’s most lushly compensated corporate executives was practically in another galaxy, if not another dimension. In a new report published by the Canadian Centre for Policy Alternatives, authors Alicia Massie and David Macdonald analyzed filings from over two hundred publicly traded companies on the S&P/TSX Composite Index and the compensation packages offered to more than one thousand executive officers. The report, appropriately titled “Boundless Bonuses,” reveals that, in 2020, executive pay rose by an average of 17 percent, with forty-nine of Canada’s largest companies modifying their own compensation rules on the fly so that executives would receive even bigger payouts.
As Massie and Macdonald explain, even parsing the pay packages of many executives is itself a complicated exercise. While most people are paid by way of a salary or an hourly wage and taxed accordingly, those at the top of the corporate ladder tend to receive the majority of their compensation in the form of bonuses — themselves a convoluted mixture of cash, shares, and stock options. Thanks to this pay structure, more than half of executives who took salary cuts during COVID-19 (for publicity’s sake) actually saw their total pay increase.
Perhaps still more outrageous are the methods many companies employed to boost pay for those at the top. As Massie and Macdonald reveal, nearly a quarter of companies listed on the S&P/TSX Composite Index ended up altering or modifying their own rules and performance metrics, ultimately employing several different methods of numerical alchemy to ensure executives got even cushier packages than they had the previous year. Some companies, for example, used imaginary financial figures designed to simulate what conditions would have been like without the arrival of COVID-19. Others, meanwhile, changed the weighting, percentage scores, and measures on which bonuses were originally based entirely — guaranteeing pay increases even as some executives officially took “salary cuts.”
Those at Air Canada, for example, were compelled to return their bonuses earlier this year amid widespread public anger motivated, at least in part, by the company’s recent receipt of a multibillion-dollar federal bailout. As such, returning CEO Calin Rovinescu and several executive vice presidents officially returned a combined $2 million worth of pandemic bonuses, though this ultimately represented a mere 15 percent of the total (the combined remaining compensation was worth $11 million).
Though most Canadians would likely struggle to understand the twisted ethics involved in justifying such practices, all of them are, in fact, perfectly legal. Thanks to Canada’s lax tax code, some components of such bonuses aren’t even taxed at the full rate. As Massie and Macdonald explain:
Even after recent stock option tax limits, up to $200,000 of executive compensation via option-based awards is subject only to capital gains tax, not income tax. That means a regular working Canadian must pay full income tax on their salary up to $200,000. But a multi-millionaire executive getting a share-based bonus pays only 50%.
Amid a snap pandemic election, it’s really no wonder that support for a wealth tax in Canada hovers near 90 percent. As COVID-19 has yet again shown, one is long overdue.