“Out with the old and in with the new.” This is a phrase we say every year in hope that the New Year will bring something better than the last one. On the first Monday morning of 2016, average Canadians woke up to realize that CEOs would make their yearly salary, on average $48,636, by 12:18 p.m. that same day. Yes, it looks like a bright new year - for CEOs and corporate directors. Meanwhile, those who do the real work, the working class, are suffering harsh austerity cuts. With the global economy in 2016 starting on a very shaky footing, with massive losses on the stock markets, thousands of jobs being lost and rising instability, apparently CEOs have it all figured out. It has been eight years since the economic crisis rocked the world economy in 2008. This also happens to coincide with a huge acceleration in the rate of salary increases for CEOs - those responsible for the recession in the first place. So how has this happened? Why are the guilty being rewarded? What is the solution to the sky rocketing inequality in pay?
CEOs make money not only through their salary, but also through bonuses, shares, options, and pensions. Between 2008 and 2013, the country's 100 top-paid CEOs saw their compensation climb about 25 per cent to $9.2 million - roughly twice as fast as the average wage of Canadians. In 2014, CEOs took home an average of $8.96 million according to the annual report by the Canadian Centre for Policy Alternatives, a slight decrease from 2013. This is a staggering 184 times more than the average Canadian. Blackberry’s John Chen with a ludicrous $89.7 million topped this year’s list of highest paid CEOs. The runner-up, Donald Walker, CEO of Magna International Inc., received $23.4 million. Second runner-up, CEO Gerald Schwartz of Onex Corp., took home an absurd $19.7 million in bonuses only. This rise in CEO remuneration coincides, very interestingly, with the financial crash of 2008. A rise in compensation of 22 per cent has been observed from 2008 to 2014.
But what is the explanation for this absurd increase in CEO pay? Chris MacDonald from Canadian Business magazine repeatedly emphasizes that this is a ‘complex issue’. He argues that CEO salary is linked to performance.
“So Canadian (and American) CEOs are highly paid, for sure. Whether they are too highly paid is another question. I’ve pointed out before that, well, the issue is complicated. Just about everyone recognizes that CEO pay is at least sometimes out of whack. But is the pattern problematic? From a moral point of view, the pattern of CEO pay raises two key questions: first, are shareholders (and others who benefit from competent corporate leadership) getting their money’s worth? And second, do current patterns of CEO compensation contribute to an overall social distribution of wealth that is unjust?”.
Apologists like MacDonald are widespread; their articles are not based on real arguments with premises and conclusions. Instead, their only aim is to raise irrelevant and invalid ‘questions’. Apologists use euphemisms and emotional language to influence our perception of what it is they are really saying: that rising inequality is justified. Whether or not the current patterns of CEO compensation contribute to an unjust social distribution of wealth is not in question - statistics show that this is a fact.
But surely these CEOs must do something responsible and useful with these millions of dollars in their bank accounts. Does buying a yacht and having a mansion worth millions of dollars count as a responsible investment of money to jump-start the economy? We think not. After the 2008 recession, doesn’t it seem a little counter-intuitive that the CEOs, those responsible for the financial melt-down in the first place, are getting higher and higher pay-checks every year?
Based on the rising pay, you would think that Canadian CEOs were overseeing an economic recovery to warrant this ridiculous remuneration. The opposite is in fact the truth with the Canadian economy suffering recession last year. As well, these very same companies are refusing to invest vast amounts of capital into the economy to get it rolling. According to Huffington Post Canada, in 2014, Canadian corporations sat over a record-high $629.7 billion pile of cash. This $629.7 billion is equal to 30 per cent of the country’s GDP! According to the Canadian Centre for Policy Alternatives, this amount actually increased in 2015 to nearly $700 billion. Erin Weir, an economist with the United Steelworkers who has focused on the cash hoard issue in recent years commented that “The story for years has been one of optimism about a recovery right around the corner that never really seems to materialize — at least not in terms of investment and employment in the real economy. But there has been a huge recovery in corporate profits.”
While any indication of a recovery is yet to come, the corporate tops are doing better than ever. The rising paychecks of corporate Canada juxtaposed with harsh austerity measures and mass layoffs are a recipe for social explosion. While thousands upon thousands of workers are being sacked from their already-low-paying jobs, CEOs bring home almost 200 times more money than the average Canadian worker.
This rising CEO pay is a result of the capitalist system, which inherently leads to increasing inequality with huge amounts of wealth stagnating at the very top and a massive deprivation of wealth at the bottom. Rising CEO salaries is not the problem; it is but a symptom of the cancerous system of capitalism. We do not own or control our own economy! As long as the main levers of the economy are privately owned and controlled, we cannot stop this soaring inequality.
If the economy was democratic and rationally planned, the vast amounts of money given to these parasitic CEOs or sitting in corporate bank accounts could be used to the benefit of the people. We could easily bring about free, quality healthcare and education for everyone. Additionally, we could reopen previously closed factories and re-tool them to create massive free public transportation systems for every major city. Massive social housing projects could be commenced to eliminate homelessness. If the economy was managed for the benefit of the majority, for the benefit of the workers, and not for profit, truly sustainable technologies could be developed to decrease our negative impact on the planet. Instead of competing with each other, employed in different companies, scientists and engineers from all over the world could work together to more efficiently develop superior technologies and medicine.
But these achievements would only be possible under socialism, as the capitalists’ sole aim is to generate profit, disregarding people and the environment. This system is built upon exploitation of people and the environment. In this new year, instead of CEO largesse, we say out with the old capitalist system and in with a new, much better system: socialism!