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Time to talk about a maximum wage

Canada’s top CEOs make 171 times the average

By Dennis Gruending

In November 2013, people in Switzerland voted in a referendum on something called the 1:12 Initiative for Fair Pay. In it, no one in a Swiss company would earn more in a single month than someone else in that company earns in an entire year. Although it was defeated by a decisive margin, it is significant that the issue was being discussed at all.

It’s a debate that we should have here. The Canadian Centre for Policy Alternatives reports that Canada’s top 100 paid CEOs pocketed an average of $7.96 million in 2012. That’s income roughly 171 times that of the average Canadian worker, and 194 times that of the average female worker.

In fact, the Globe and Mail reports that those who are already affluent have benefited handsomely from Canada’s economic growth and productivity gains in the past 30 years. But real income for most people has barely budged during that same time. Any criticism of that disparity triggers an immediate chorus of justification from its defenders. The well-worn argument in Switzerland was that the Initiative for Fair Pay would make their companies less attractive and their country a less competitive place in which to do business.

In Canada, greed-is-good advocates, such as the CBC’s business pundit Kevin O’Leary, celebrate the income gap as "fantastic news." O’Leary and others argue that the market dictates the salary levels for skilled and motivated people — something that the late Peter Drucker, a highly-regarded American business theorist, once dismissed as being “nonsense.” Drucker said it was not the market but the “internal logic” of corporations — hierarchical in nature and controlled by their mangers — that dictated levels of pay. Drucker called for a published corporate policy limiting the compensation of all corporate executives to 20 to 25 times that paid to the lowest regular full-time employee.

Leonard Lee has put that philosophy into practice at Lee Valley Tools. In his company, the highest-paid worker never makes more than 10 times the wage of the lowest-paid. Lee has profit sharing in his company, too, and as he told The Globe and Mail, a flatter pay structure results in better worker retention and more engaged staff.

Meanwhile, a Toronto-based organization, called the Wagemark Foundation, is advocating for an international wage standard that makes sure that the ratio between the highest and lowest earners is no greater than 8:1. Peter Macleod, Wagemark’s director, knows that it will be a tough sell to companies and even some non-profits. But his organization believes that yawning wage gaps undermine good business practices and have proven “detrimental to economic growth and the existence of a healthy middle-income population.”

Quite aside from policy are questions about fundamental values. Who on earth would want to be paid 171 times more than someone else in their company? Don't they know what the Bible said about camels and needles?

Author's photo
Dennis Gruending is an Ottawa-based author, blogger and a former Member of Parliament. His work will appear on the second and fourth Thursday of the month. His Pulpit and Politics blog can be found at www.dennisgruending.ca.
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