Transcript: Executive Pay in Canada | Jan 22, 2018

Steve sits in the studio. He's slim, clean-shaven, in his fifties, with short curly brown hair. He's wearing a gray suit, gray shirt, and striped red and pink tie.

A caption on screen reads "Executive pay in Canada. @spaikin, @theagenda."

Steve says CANADA'S TOP TIER CEOs
EARN ANNUAL SALARIES THAT BOGGLE
THE MIND.
THE HIGHEST PAID FOR 2016 MADE
MORE THAN 83 MILLION DOLLARS, WHILE THE
AVERAGE ACROSS THE TOP 100 CEOs
WAS SOMEWHERE JUST NORTH OF
10 MILLION DOLLARS PER YEAR.
THOSE NUMBERS ACCORDING TO THE
CANADIAN CENTRE FOR POLICY
ALTERNATIVES' YEARLY ANALYSIS OF
EXECUTIVE COMPENSATION.
AND WHILE MANY OF US PROBABLY
ENVY THEM, WE MIGHT ALSO WONDER,
ARE THEY WORTH IT?
JOINING US NOW TO CONSIDER THAT:
DAVID MACDONALD, SENIOR
ECONOMIST AT THE CANADIAN CENTRE
FOR POLICY ALTERNATIVES...

David is in his late thirties, clean-shaven and balding. He's wearing glasses, a gray suit, striped pink shirt, and checked burgundy tie.

Steve continues AND PARTHA MOHANRAM, CHARTERED PROFESSIONAL ACCOUNTANTS OF
ONTARIO AND PROFESSOR OF
FINANCIAL ACCOUNTING AT THE
UNIVERSITY OF TORONTO'S ROTMAN
SCHOOL OF MANAGEMENT.

Partha is in his forties, with short gray hair and a mustache. He's wearing glasses, a gray pinstripe suit, blue shirt, and yellow and blue checkered shirt.

Steve continues IT'S GOOD TO HAVE YOU GENTLEMEN
BACK ON OUR PROGRAM HERE AT TVO
TONIGHT.
YOU ACTUALLY IN PERSON.

David says GREAT TO BE HERE IN TORONTO.

Steve says LAST TIME YOU WERE
ON THE LINE IN THE NATION'S
CAPITAL.

David says THAT'S RIGHT.

Steve says THIS IS FROM YOUR
STUDY.
DOESN'T THIS SUM IT UP?
SHALL WE BRING UP THIS QUOTE, PLEASE?

A quote appears on screen, under the title "What's for breakfast?" The quote reads "As in past years, we express the pay gap as a factor of time. By 10:57 a.m. on January 2, Canada's average top-100 CEO will have already taken home what the average Canadian worker will make all year. When we started compiling this data, the average CEO hat to work until late afternoon to meet this milestone. It has been getting closer to breakfast in most of the years since."
Quoted from Canadian Centre for Policy Alternatives, "Climbing up and kicking down." January 2018.

Steve says OKAY, DAVID, LET'S
DO SOME COMPARING AND
CONTRASTING.
HOW MUCH DOES THE AVERAGE WORKER
IN CANADA MAKE?

The caption changes to "David Macdonald. Canadian Centre for Policy Alternatives."
Then, it changes again to "Mind the gap."

David says JUST UNDER
50,000 AND THE GROWTH IN THE
PAST YEAR HAS BEEN RELATIVELY
SMALL AT HALF A PERCENT SO
THEY'RE PROBABLY LOSING ONCE YOU
INCLUDE INFLATION IN THAT
CALCULATION.
WHEREAS THE CEO PAY ON THE OTHER
HAND WENT UP A MILLION DOLLARS
FROM 9.5 TO 10.5 MILLION DOLLARS IN THE
PAST YEAR.
THAT WAS LARGELY DUE NOT TO
PEOPLE AT THE VERY TOP MAKING
MORE BUT IT WAS PEOPLE AT THE
BOTTOM OF THAT 100 LIST PULLING
THEMSELVES UP, IN ESSENCE.
IT USED TO BE THAT YOU NEEDED
ABOUT 3.5 MILLION DOLLARS TO GET ON THE
TOP 100 LIST.
NOW YOU NEED OVER FIVE.
WHICH MEANS THAT THE MINIMUM
WAGE TO GET ON THIS LIST IS JUST
UNDER 2,500 AN HOUR.
YOU CAN CONTRAST THAT TO THE 15
AN HOUR THAT ONTARIO AND ALBERTA
AND SOME OTHER PLACES ARE GOING
OVER THE NEXT COUPLE YEARS.

Steve says LET ME DO ONE
FOLLOW-UP HERE.
DO YOU THINK IT'S REASONABLE TO
COMPARE THE SALARIES OF TOP-PAID
CEOs AND THE AVERAGE WORKER
WHEN THE CEOs OF COURSE HAVE
MORE RESPONSIBILITY, TEND TO
HAVE MORE EDUCATION, AND A
HUNDRED OTHER METRICS THAT WOULD
OBVIOUSLY WEIGH IN THEIR FAVOUR?

David says ABSOLUTELY.
CEOs ARE ALWAYS GOING TO BE
PAID MORE THAN THE AVERAGE
WORKER.
I THINK THE QUESTION IS HOW IS
THAT RATIO CHANGING OVER TIME.
ONE OF THE FIRST THIS YEAR WAS
THE CEOs MADE 200 TIMES, JUST
OVER 200 TIMES AVERAGE WORKER PAY.

Steve says WHEN WAS THAT?

David says THIS YEAR.
SO THIS IS UNUSUAL.
ALTHOUGH THE TREND IS VERY
CLEAR.
IF YOU GO BACK TO THE 1990s,
THE LATE 1990s, THAT RATIO WAS
ABOUT 100 TIMES AVERAGE WORKER
PAY.
YOU GO BACK TO THE 1980s IN
THE U.S., IT WAS ABOUT 50 TIMES
AVERAGE WORKER PAY.
YOU GO TO THE 70s, IT WAS 30.
IT ISN'T THAT CEOs GET PAID
MORE, THEY ABSOLUTELY DO, IT'S
THAT THE GAP IS WIDENING YEAR
AFTER YEAR.
THE CEOs ARE SEEING BIG
RAISES.
THE AVERAGE WORKERS AREN'T.
THE QUESTION IS, YOU KNOW, WE
SEE ECONOMIC GROWTH AND SEE
COMPANIES DO WELL, WHO BENEFITS
FROM THAT?
IS IT EVERYBODY IN THE COMPANY
OR JUST THE TOP TIER OF THE
EXECUTIVE MANAGEMENT?

Steve says LET'S PICK THIS
APART.
OBVIOUSLY CEOs ARE PAID AND
SHOULD BE PAID MORE THAN, YOU
KNOW, THE LOWEST PERSON ON THE
GROWTH CHART IN THE COMPANY.
THE QUESTION IS: THE RATE AT
WHICH THE GAP IS GROWING.
DO YOU FIND THAT PROBLEMATIC?

The caption changes to "Partha Mohanram. University of Toronto."

Partha says I DO.
I READ THE REPORT AND I THINK I
AGREE WITH 90 percent OF WHAT'S IN THAT
REPORT.
THE FACT IS, ARE THEY WORTH IT?
THE ANSWER IS NO.
THEY'VE NEVER BEEN WORTH IT AND
THEY AREN'T WORTH IT NOW.
THEY'VE NOT BEEN WORTH IT FOR A
NUMBER OF YEARS.
IF YOU LOOK AT THIS NOTION OF
PAY FOR PERFORMANCE SENSITIVITY.
THERE'S ALMOST NONE.
SO CEOs... THERE IS A LOT OF
PAY PERFORMANCE SENSITIVITY WHEN
CEOs DO WELL.
WHEN CEOs DO WELL, THE
COMPANIES DO WELL, THEY DO
INCREDIBLY WELL.
WHEN THE COMPANIES DO BADLY,
THEY DO JUST WELL.
AS A RESULT THERE IS NO DOWNWARD
SENSITIVITY, THERE IS NO CEO WHO
GETS, YOU KNOW, OTHER THAN
EXTREME PERFORMANCE CAN LEAD TO
TERMINATION AND SO ON AND SO
FORTH, IT'S A VERY RARE
OCCURRENCE A CEO ACTUALLY GETS
BAD COMPENSATION FOR BAD
PERFORMANCE.
THEY GET LESS GOOD COMPENSATION.

Steve says CAN I ASK YOU A IN
YOUR FACE QUESTION?
WHO ARE YOU DECIDE WHETHER
THEY'RE WORTH IT OR NOT?

Partha says IN FACT, THAT'S THE BIGGEST
PROBLEM WITH THIS DISCUSSION.
THE EXAMPLE I WOULD GIVE IS WE
ARE ALL CONSENTING ADULTS,
RIGHT?
SHAREHOLDERS ARE CONSENTING
ADULTS.
THEY ARE EITHER WILFULLY OR, YOU
KNOW, IN AN IGNORANT MANNER
LETTING CEOs GET PAID THESE
KIND OF COMPENSATIONS.
I GIVE YOU THE EXAMPLE OF FAST
FOOD.
WE KNOW JUNK FOOD AND EATING
FIVE BIG MACS IS BAD FOR YOU,
RIGHT?
BUT WE CAN'T OUTLAW BIG MACS.
WHAT WE CAN DO IS INCREASE
DISCLOSURE.
FOR INSTANCE, YOU GO TO A FAST
FOOD RESTAURANT RIGHT NOW, THEY
VERY CLEARLY LAY OUT WHAT THE
CALORIES ARE.
SO ON THE MARGIN, SOME PEOPLE
MIGHT DECIDE TO NOT GET THAT
THIRD BIG MAC OR SUPER-SIZE
THOSE FRIES.
THEY MIGHT DECIDE TO BE A LITTLE
MORE, YOU KNOW, MODERATE IN THEIR...

Steve says BECAUSE THEY HAVE
THE INFORMATION.

Partha says BECAUSE THEY HAVE THE
INFORMATION.
SO THINGS LIKE... SAY ON PAY.
A LAW HAS BEEN PASSED ALMOST...
SORT OF MOST WESTERN COUNTRIES
WHERE COMPANIES ARE REQUIRED TO
AT LEAST GET NON-BINDING SH...
SHAREHOLDER APPROVAL FOR ANY
COMPENSATION PACKAGES TO THE
CEOs AND SO ON OR THE RISE OF
ACTIVIST SHAREHOLDERS WHO ARE AT
LEAST HOLDING SOME OF THESE
BOARDS FEET TO THE FIRE, HOW
COME OUR RETURN WAS BELOW THE
MEDIAN YET OUR CEO EARNED THIS
MUCH MONEY?

Steve says GENTLEMEN, HUMOUR ME
HERE FOR A SECOND.
FOR ME, EVERYTHING IN LIFE COMES
BACK TO BASEBALL, OKAY?
JOSH DONALDSON, THE BLUE JAYS'
THIRD BASEMAN, JUST SIGNED A
ONE-YEAR CONTRACT FOR, LET ME
GET THE NUMBER RIGHT,
23 MILLION DOLLARS FOR ONE YEAR.
HE IS A FORMER MOST VALUABLE
PLAYER OF THE LEAGUE, HE BRINGS
PEOPLE INTO THE STADIUM, HE'S A
FANTASTIC PLAYER, HE'S YOUNG.
PEOPLE LOVE WATCHING HIM.
HOWEVER, MEREDITH MARTIN THE
PRODUCER SAYS INTO MY EAR, AND
HE'S HANDSOME TOO.
THAT'S HER OBSERVATION, NOT
NECESSARILY MINE.
HOWEVER, HE COULD GET INJURED
THE FIRST DAY OF SPRING
TRAINING, MISS THE WHOLE SEASON,
AND HE'S GOING TO MAKE THAT
MONEY ANYWAY.
HERE'S THE POINT: IF THE MARKET
SAYS YOUR CEO, DAVID, IS WORTH
10 MILLION BUCKS A YEAR AND THE
COMPANY DOESN'T PERFORM LIKE YOU
THINK A GUY WHO MAKES 10 MILLION
BUCKS A YEAR OUGHT TO HAVE IT
PERFORM, THAT'S LIFE, ISN'T IT?

David says WELL, I
MEAN, I THINK WHAT'S IMPORTANT
IS HOW CEOs ARE PAID IS A BIG
PART OF WHY CEO PAY IS
INCREASING.
WE TALK ABOUT CEO PAY.
IT'S NOT THAT THEY GET A SALARY
OF 10 MILLION DOLLARS.
IN FACT, THEIR SALARY IS A VERY
SMALL PORTION...

Steve says WE'VE GOT A CHART.
SHALL WE BRING THIS UP?
LET'S SHOW THE CHART.

A slate appears on screen, with the title "Top 100 CEO compensation by type (2016)."

In the slate, a pie chart shows that 33 percent is share-based compensation, 26 percent is bonus, 15 percent is option-based compensation, and the base salary is only 11 percent.

Steve reads data from the slate and says
WE HAVE MICHAEL SMITH SITTING IN
FOR SHELDON OSMOND TODAY.
AS YOU POINT OUT, LOOK AT THE
RED WEDGE OF THE PIE.
THE BASE SALARY IS ONLY 11 percent.
DAVID, DO YOU WANT TO TAKE US
THROUGH THE REST OF IT?

David says SURE.
THE BASE SALARY IS 11 percent.
MOST OF THE OTHER CATEGORIES
OUTSIDE OF THE PENSION VALUE
WHICH IS 3 percent ARE IN SOME WAY
RELATED TO THE SHARE PRICE.
EITHER THEY'RE RECEIVING SHARES,
EITHER THEY'RE RECEIVING OPTIONS
TO BUY SHARES IN THE FUTURE AT A
SET PRICE, OR THEY'RE RECEIVING
SOME BONUS WHICH IS OFTEN
RELATED TO THE SHARE PRICE.

Steve says THAT'S THE SECOND
BIGGEST WEDGE OF THAT PIE, THE BONUS.

The caption changes to "David MacDonald, @DavidMacCdn."

David says WELL,
YEAH, IN ALL THESE CASES EVERY
SINGLE ONE OF THESE PIECES
DOUBLES OR TRIPLES THE AMOUNT OF
THEIR BASE SALARY.
SO YOU END UP WITH THE AVERAGE
CEO MAKING ABOUT 1 MILLION DOLLARS IN
BASE SALARY OUT OF THE AVERAGE
10.5, MOST OF WHICH COMES FROM
SOME SORT OF SHARE-BASED
COMPENSATION.
NOW, THE PROBLEM OF COURSE WITH
COMPENSATING CEOs ALMOST
ENTIRELY ON SHARES AS OPPOSED TO
ON INTERNAL METRICS OF SAY
REVENUE GROWTH OR SOMETHING LIKE
THAT IS THAT THERE'S A VARIETY
OF WAYS TO MAKE THE SHARE PRICE
INCREASE, AND THAT MAY NOT BE
BENEFICIAL FOR THE LONG-TERM
GROWTH OF THE COMPANY OR FOR THE
CANADIAN ECONOMY, FOR INSTANCE.
A GOOD EXAMPLE OF THAT IS YOU
COULD ENGAGE IN A MERGER AND
ACQUISITION.
YOU COULD BUY ANOTHER COMPANY.
TAKE ON A BIG LOAN, BUY ANOTHER
COMPANY.
IT'S ONE OF THE BEST WAYS TO
DESTROY SHARE HOLDER VALUE WHEN
IT GOES SIDEWAYS.
THAT MAY BE A GOOD LONG-TERM
MOVE FOR THE COMPANY.
IN MOST CASES IT ISN'T.
THIS IS PARTICULARLY RELEVANT
FOR CANADA WHICH HAS SEEN A
MASSIVE INCREASE IN CORPORATE
DEBT IN THIS COUNTRY, A BIG
PORTION OF WHICH HAS GONE TO
MERGERS AND ACQUISITIONS.
WE COME BACK TO THE CEO
COMPENSATION.
CEOs ARE COMPENSATED IN SUCH A
WAY THAT THERE IS A BONUS FOR
SHORT-TERM THINKING, WHICH IS TO
SAY, SHARE PRICE GOES UP, THEY
CAN MAKE MORE THROUGH THEIR
OPTIONS OR SHARES AND THE
CAPITAL GAINS AND SO ON.
THAT MAY NOT BE GOOD FOR THE
COMPANY.
IT'S CERTAINLY NOT GOOD FOR
CANADA AND OUR ECONOMY.
BUT THAT'S HOW THEY'RE PAID.
SO THE INCENTIVES REALLY MATTER
HERE WHEN 90 percent OF YOUR PAY COMES
WHETHER SHARE PRICE GOES UP AND
DOWN, PARTICULARLY IN THE SHORT
TERM, WHERE INVEST VOLATILITY,
YOU CAN COME IN, GET SHARES AT A
LOW VALUE AND EXERCISE YOUR
OPTIONS AT A HIGHER VALUE.
YOU'RE GOING TO ENGAGE IN
MERGERS AND ACQUISITION OR COOK
THE BOOKS IF THINGS REALLY GOOD SIDEWAYS.

The caption changes to "Connect with us: @theagenda, TVO.org, Facebook, YouTube, Periscope, Instagram."

Steve says I'M GOING BACK TO
BASEBALL HERE.
WHEN DONALDSON SIGNED THAT
ONE-YEAR CONTRACT FOR WHAT IS A
VERY HIGH SALARY, I FRANKLY, YOU
KNOW, I'M TALKING TO MY FRIENDS
ABOUT THIS, TALKING TO BASEBALL
BUDDIES, I DIDN'T HEAR ANYBODY
COMPLAIN ABOUT IT.
GIVEN THE ECONOMICS OF BASEBALL,
I DIDN'T HEAR THEM SAY, THAT'S
AN OUTRAGEOUS PRICE TO PAY FOR
THE GUY.
OF COURSE IT'S A LOT OF MONEY.
I DIDN'T HEAR ANYBODY
COMPLAINING.
PEOPLE SAID THAT'S WHAT THE
MARKET SAYS AND IF HE CAN GET
IT, GOOD FOR HIM.
WHY DON'T WE TAKE THE SAME
APPROACH IN THE CORPORATE WORLD?

Partha says I THINK
THAT'S A FAIR QUESTION.
IN THE CORPORATE WORLD IT'S NOT
HOW THE SO-CALLED MARKET WORKS.
IF YOU LOOK AT WHO IS SETTING
COMPENSATION.
THE COMPENSATION IS BEING SET BY
A SO-CALLED COMPENSATION
COMMITTEE OF A SUPPOSEDLY
INDEPENDENT BOARD.
MIND YOU, THE PROBLEM IS NOT
UNIQUE TO CANADA.
THE SAME PROBLEM HAPPENS IN THE
U.S.
TO A LESSER EXTENT IN EUROPE
WHERE YOU HAVE LABOUR ON BOARD.
YOU HAVE THESE PEOPLE THAT SIT
ON EACH OTHER'S BOARDS.
EVEN IF THEY'RE NOTIONALLY
INDEPENDENT, I CAN'T SIT ON YOUR
BOARD BUT JIM CAN SIT ON YOUR
BOARD OR YOU CAN SIT ON MY
BOARD.
THEY'RE NOTIONALLY INDEPENDENT
BUT YOU BELONG TO THE SAME
CIRCLING.
THE AVERAGE CANADIAN BOARD IS
MALE, PALE, AND STALE.
SO IT'S THE SAME PEOPLE COMING
FROM THE SAME SET OF
SOCIOECONOMIC INDICATORS.
THERE'S VERY LITTLE DIVERSITY,
YOU KNOW, ETHNIC, GENDER, OR
OTHERWISE, SO THESE PEOPLE ARE
CONDITIONED INTO BELIEVING, TO
USE THE LINE WHICH WAS JUST
USED, THAT 5 MILLION DOLLARS IS A
MINIMUM WAGE FOR CEOs.
SO IF THAT'S THE WAY THE MARKET
WORKS, IT'S CLEAR THAT, YOU
KNOW, THE MARKET IS BROKEN.

Steve says I PRESUME, THOUGH,
YOU'RE NOT ABOUT TO RECOMMEND
THAT GOVERNMENTS IN THE COUNTRY
PASS A LAW LIMITING HOW MUCH
PEOPLE ARE ALLOWED TO EARN?

Partha says ABSOLUTELY NOT.
I THINK IT'S LIKE... JUST LIKE I
THINK A LAW WHICH SAYS YOU CAN'T
EAT THREE BIG MACS OR SUPER-SIZE
YOUR FRIES ARE ALSO
COUNTERPRODUCTIVE.
YOU CAN WORK ON THE DISCLOSURE
AND YOU CAN TRY TO WORK ON THE
GOVERNMENT'S ASPECT OF IT.
BUT IF I MAY, I'D LIKE TO JUST
BRING MY ATTENTION TO ONE OF THE
POINTS WHICH WAS RAISED EARLIER
BY JOHN ABOUT THE FACT THAT, YOU
KNOW, IF YOU COMPENSATE PEOPLE
ON EARNINGS INSTEAD OF, LIKE,
YOU KNOW, STOCK MARKET RETURNS,
IT MIGHT FIX THINGS.
THAT MAY OR MAY NOT WORK BECAUSE
CEOs CAN MANIPULATE EARNINGS.
I'M A PROFESSOR OF FINANCIAL
ACCOUNTING, OKAY?
IT'S INCREDIBLY EASY TO INCREASE
REVENUES.
IT'S INCREDIBLY EASY TO NOT JUST
INCREASE, SOMETIMES THEY MAKE
THE NUMBERS LOOK WORSE.
YOU MIGHT ASK WHY.
IF YOU'RE ABOUT TO GET A NEW
OPTION GRANT, YOU WANT THE
PERFORMANCE TO GO DOWN.
YOU MAKE THE PERFORMANCE LOOK
REALLY BAD.
YOU HAVE BAD EARNINGS...

Steve says CREATIVE ACCOUNTING.

Partha says ABSOLUTELY.
THAT LOWERS STOCK PRICE
TEMPORARILY, YOU GET NEW OPTIONS
AND THE COMPANY TURNS ITSELF
AROUND.
AND THIS HAPPENS ALL THE TIME.
I THINK THE PROBLEM
FUNDAMENTALLY IS NOT JUST ABOUT
OPTIONS VERSUS LET'S SAY
EARNINGS-BASED MEASURES.
HAVING SAID THAT, I THINK THE
POINT HE MADE ABOUT M and As IS
ABSOLUTELY RIGHT.

Steve says MERGERS AND ACQUISITIONS.

The caption changes to "Partha Mohanram. Rotman School of Management."

Partha says PEOPLE LOOK AT ABSOLUTE
PERFORMANCE.
THIS PERSON EARNED THIS MUCH OF
EARNINGS.
THEY DON'T LOOK AT RELATIVE
PERFORMANCE.
WHAT I MEAN IS YOU NEED A SCALED
MEASURE OF PERFORMANCE.
RELATIVE TO SHAREHOLDERS'
EQUITY, HOW MUCH INCOME DID HE
CREATE?
LOOK AT ASSETS AND EQUITY...

Steve says AT THE END OF THE
DAY, SOMEONE HAS TO ENFORCE THAT.
WHO DOES THAT?

Partha says I DON'T THINK IT CAN BE ENFORCED.
THESE ARE THINGS WHICH BOARDS...

Steve says THAT'S WHAT I MEAN,
THE BOARD WOULD HAVE TO ENFORCE IT.
BUT THEY'VE SHOWN NO INTEREST IN DOING IT.

Partha says ABSOLUTELY.
BECAUSE THEY SIT ON EACH OTHER'S
BOARDS.
IF YOU TIGHTEN THE LAWS ON BOARD
INDEPENDENCE, RIGHT?
DIVERSITY ON BOARDS, RIGHT?
HAVING PEOPLE FOR WHOM
5 MILLION DOLLARS IS NOT A MINIMUM WAGE
ON THE BOARD MIGHT ITSELF LEAD
TO A REINING IN OF EXCESSIVE
EXECUTIVE COMPENSATION.

Steve says ANYTHING YOU'RE
PREPARED TO DO ABOUT THIS?
YOU DON'T WANT TO PASS A LAW EITHER, RIGHT?

David says THIS IS THE TROUBLE.
IF YOU PASS LAWS, AS YOU SAW ON
THE CHART, THERE ARE A WHOLE
VARIETY OF WAYS THEY ARE PAID.
WHAT'S INTERESTING IN THE DEBATE
FEDERALLY IN TERMS OF CLOSING
THE STOCK OPTION DEDUCTION, FOR
INSTANCE, IT STARTED IN 2014,
LEADING INTO THE FEDERAL
ELECTION.
IT HAS NOT BEEN CLOSED.
WHAT YOU SEE ON THE GRAPH WHEN
YOU'RE TRACKING WHICH PROPORTION
CEOs ARE BEING PAID IN, YOU
FIND THAT STOCK OPTIONS ACTUALLY
DECLINE PRETTY SUBSTANTIALLY
AFTER THAT POINT.
I THINK IN PART BECAUSE CEOs
AND PAY COMMITTEES WERE
CONCERNED THAT THEY'RE GOING TO
BE TAXED IN THE FUTURE ON THESE
STOCK OPTIONS.
SO WHAT YOU SEE INSTEAD IS YOU
SEE THAT COMPENSATION PUSH OVER
TO THE SHARE AWARD SIDE.
YOU DON'T SEE A DECLINE IN
COMPENSATION, YOU JUST SEE A
MOVEMENT IN HOW THAT
COMPENSATION IS PAID.
AND SO IF YOU WANT TO MAKE A
CHANGE, IT CAN'T BE TO SAY, THIS
IS THE SILVER BULLET.
WE NEED TO CLOSE THIS ONE TAX
LOOPHOLE AND THAT'S GOING TO
SOLVE THE PROBLEM.
THIS TALKS ABOUT THE TAXATION
ASPECT OF IT.
YOU COULD CERTAINLY MAKE
TAXATION FAIRER SO THAT CEOs
WHO ARE AWARDED STOCK OPTIONS
DON'T GET 50 percent OFF ON THEIR TAX
BILL, WHICH THEY PRESENTLY DO.

Steve says HOW ABOUT THIS,
THOUGH, DAVID: IS THERE ANY
EVIDENCE YOU'VE SEEN AROUND THE
WORLD IF YOU PUT, LET'S SAY, AN
EMPLOYEE OF THE COMPANY OR A FEW
EMPLOYEES OF THE COMPANY ON THE
BOARD, THAT SOMEHOW HAS A
DAMPENING EFFECT ON THE SALARIES
THAT EXECUTIVES MAKE?

The caption changes to "Getting value for money."

David says IF YOU LOOK AT THE RATIO
RANKINGS OF DIFFERENT COUNTRIES,
THE U.S. IS THE WORST, CANADA IS
THE SECOND WORST, AND THEN YOU
GO TO THE EUROPEAN COUNTRIES,
GERMANY FURTHER DOWN THE LINE
WHERE YOU SEE MANDATORY
REQUIREMENTS OF HAVING WORKERS
ON THE BOARD OF DIRECTORS.
AND SO THERE'S CERTAINLY A
DAMPENING EFFECT THERE IN HOW
YOU DESIGN THOSE BOARDS OF
DIRECTORS.
THERE'S NOT A FREE MARKET.
IT'S NOT A FREE FOR ALL FOR
THESE PUBLIC COMPANIES.
THERE ARE SUBSTANTIAL DISCLOSURE
RULES, GOVERNANCE RULES AND SO
ON.
WE COULD CHANGE THOSE RULES SUCH
THAT YOU DISCOURAGE THIS KIND
OF EXTREME PAY.

Steve says WOULD YOU DO THAT
HERE IN CANADA, FORCE EMPLOYEES,
YOU KNOW, THERE'S A BOARD SEAT
FOR AN EMPLOYEE ON THE COMPANY?

Partha says I THINK
THAT'S SOMETHING THAT NEEDS TO
BE CONSIDERED.
IT'S NOT JUST ABOUT THE
COMPENSATION.
PEOPLE HAVE DONE RESEARCH
LOOKING AT HOW FIRMS MANIPULATE
THEIR EARNINGS AND THEY FIND
THAT WHENEVER THEY'RE
NEGOTIATING WITH THE UNIONS,
THEY ALWAYS PERFORM BADLY THAT YEAR.

Steve says WHAT A COINCIDENCE?

Partha says WHAT A COINCIDENCE, RIGHT?
I'M SORRY, I'D LOVE TO PAY YOU,
BUT LOOK AT OUR BOOKS, WE DON'T
HAVE ANY MONEY.
WHAT THEY DON'T SEE IS THAT'S
THE YEAR WHEN THE COMPANY IS
TAKING ALL KINDS OF EXPENSES,
CHARGES, WRITE-OFFS.
THAT KIND OF STUFF HAPPENS ALL
THE TIME.
SO IF YOU HAD, LET'S SAY, SOME
SORT OF REPRESENTATION, YOU
KNOW, ON THE BOARD, IT DOESN'T
EVEN HAVE TO BE AN EMPLOYEE.
WHEN YOU GET DIVERSITY ON THE
BOARD, RIGHT, YOU HAVE PEOPLE
WHOSE BACKGROUND IS IN SUCH A
WAY THAT THEY WILL NATURALLY BE
LOOKING BEYOND THE INTERESTS OF
JUST THE BOARD MEMBERS AND THE CEO...

Steve says SOMEONE WHO WOULD
BLOW THE WHISTLE ON THAT?

Partha says NOT JUST BLOW THE WHISTLE.
THEY WOULD SAY, THIS IS WRONG.
WE SHOULDN'T BE DOING THIS.
THE PROBLEM IS, YOU HAVE A BOARD
WHERE THERE'S VERY LITTLE
DIVERSITY, NOT JUST OUTWARDLY,
DIVERSITY OF THOUGHT.
THESE PEOPLE COME FROM THE SAME
TRAINING AND BACKGROUNDS...

Steve says NOT THEORETICALLY,
IN FACT THE ONTARIO GOVERNMENT
DID PASS A RESOLUTION OF SOME
KIND SAYING THAT IT HAD SOME
TARGETS THAT IT WANTED COMPANIES
THAT DID BUSINESS IN THE
PROVINCE OF ONTARIO TO MEET IN
TERMS OF FEMALE MEMBERSHIP ON BOARDS.

Partha says RIGHT.

Steve says AND FROM WHAT I
UNDERSTAND, THE MEMBERS WENT
FROM HERE TO HERE OVER THE PAST YEAR.
SO IT HASN'T MUCH IMPACT...

Partha says THEY WERE NON-BINDING AND
MORE IN THE SENSE OF, IF YOU ARE
UNABLE TO MEET THIS TARGET, YOU
NEED TO WRITE A ONE-PARAGRAPH
NOTE AS TO WHY YOU DIDN'T MEET
THAT TARGET, RIGHT?
AND PEOPLE HAD THAT ONE GRAPH
ABOUT HOW WE COULDN'T FIND THAT.
THESE THINGS CAN BE DONE.
I'LL GIVE YOU AN EXAMPLE.
THE RULE IN THE NFL...

Steve says I SHOULD EXPLAIN
WHAT THAT IS.

Partha says IT SAYS THAT YOU HAVE TO AT
LEAST INTERVIEW MINORITY
CANDIDATES...

Steve says FOR HEAD COACHING.

Partha says FOR HEAD COACHING VACANCIES.

Steve says IT'S CALLED THE
ROONEY RULE FROM THE PITTSBURGH
PENGUINS.

Partha says IT HASN'T CHANGED THINGS
DRAMATICALLY.
NOW PEOPLE GET INTERVIEWS.
AND THAT'S THE FIRST STAGE,
RIGHT?
EVEN WHEN YOU MAKE THESE NEW
RULE CHANGES, YOU CAN'T EXPECT
THE CHANGE TO BE INSTANTANEOUS.

Steve says FOLLOWING UP ON THAT.
THE FACT IS THAT THE ROONEY
RAOUL IS VIOLATED ALL THE TIME,
AND MUCH OF THE TIME IT'S JUST
FOR SHOW.
YOU MIGHT BRING AN
AFRICAN-AMERICAN CANDIDATE IN
FOR A PERFUNCTORY INTERVIEW WITH
NO INTENTION OF HIRING THAT
PERSON WHEN IN FACT THE OTHER
WHITE CANDIDATE YOU REALLY WANT
IS WAITING IN THE LOBBY AFTER
YOU'VE HAD YOUR OBLIGATORY
INTERVIEW THERE.
THE QUESTION THEN BECOMES: CAN
YOU FORCE BY LAW PEOPLE TO DO
WHAT THEY DON'T WANT TO DO IN
THIS CIRCUMSTANCE IN ORDER TO
TACKLE THE ISSUE THAT YOU'VE
DECIDED HERE?

The caption changes to "Watch us on Facebook Live: Weekdays at 8 PM."

David says IT IS DIFFICULT.
WHEN YOU LOOK AT THE LIST OF
CEOs, OF THAT HUNDRED PEOPLE,
ONLY THREE ARE WOMEN.
THAT'S OUTRAGEOUS.
IT'S UP FROM TWO LAST YEAR.
YOU MIGHT SAY, WOW, THAT'S
PROGRESS.
THE PROBLEM IS DAVIDS, MY FIRST
NAME, DID BETTER THAN WOMEN.
THERE WERE TWO LAST YEAR AND
THREE THIS YEAR.
OUTPERFORMED ALL WOMEN.
THERE ARE MORE BRIANS AND PAULS
THAN WOMEN IN TOTAL.
SO IT JUST SHOWS THAT THIS IS AN
EXTREMELY... YOU KNOW, IT'S AN
OLD BOYS' NETWORK, IT CONTINUES
TO BE, DESPITE HIGHLY QUALIFIED
WOMEN THAT COULD CERTAINLY DO
THESE JOBS.

Steve says ALL RIGHT, DAVID.
HOW DO WE GO FROM... IF WE GO
ONE A YEAR, IT WILL BE HALF A
CENTURY BEFORE WE HAVE PARITY.
PRESUMABLY WE DON'T WANT TO WAIT
THAT LONG.
WHAT DO WE WANT TO DO ABOUT THAT?

David says PART OF IT IS TO CONTINUE TO
SAY, TO HAMMER ON THE FACT THAT
CEOs, THE C-SUITE IN GENERAL,
THE DIRECTORS, ARE NOT AT ALL
REPRESENTATIVE OF CANADIAN
SOCIETY.

Steve says WE KNOW THAT.
WHAT DO WE DO?

David says WE WRITE A REPORT EVERY YEAR
IN JANUARY.

Steve says NAME AND SHAME IS
BASICALLY WHAT YOU'RE SAYING.

David says I THINK THAT'S PART OF THE
STORY.
CERTAINLY PART OF THE INCREASED
DISCLOSURE THAT COMPANIES ARE
PROVIDING, THAT ALLOWS FOR THE
TYPES OF REPORTS WE PUT OUT THAT
ANALYSE THOSE DISCLOSURES AND
SAY THE CEO'S PAY IS GOING UP,
THERE'S NO WOMEN, THAT'S
TERRIBLE.
WE'RE NOT IN GOVERNMENT SO WE'RE
COMMENTING FROM THE OUTSIDE.

Steve says LAST 30 SECONDS TO
GO AS TO WHAT YOU THINK CAN
ACTUALLY BE DONE ABOUT THIS?

Partha says I'M NOT
SURE WHAT CAN BE DONE.
THIS IS A SERIOUS PROBLEM.
BUT I THINK WHAT CAN BE DONE,
YOU CAN'T EXPECT PEOPLE TO BE AT
THE C-SUITE LEVEL RIGHT AWAY.
AT THIS STAGE YOU NEED TO BE
ENCOURAGING PEOPLE WHO ARE AT
THE MID-CAREER MANAGEMENT.
IF YOU GET DIVERSITY AT THE MID
LEVELS NOW, HOPEFULLY SOME OF
THAT WILL LEAD TO DIVERSITY.

Steve says OVER TIME.

Partha says OVER TIME, RIGHT.
THAT DIVERSITY WOULD LEAD TO
BETTER, MORE REPRESENTATIVE
BOARDS, WHICH WILL SOLVE A WHOLE
BUNCH OF PROBLEMS, ONE OF WHICH
HAPPENS TO BE... I DON'T WANT TO
USE THE WORD EXCESSIVE, BUT
CERTAINLY, LIKE, UNEARNED OR
UNMERITED CEO COMPENSATION.

The caption changes to "Producer: Meredith Martin, @MeredithMartin."

Steve says CAN I TELL YOU HOW
MUCH I APPRECIATED THE POETRY OF
THIS DISCUSSION, THE NAME AND
SHAMING AND WITH MALE, PALE, AND
STALE.
THAT'S A GOOD ONE TOO.
DAVID MACDONALD, PARTHA
MOHANRAM, WE THANK YOU BOTH FOR
APPEARING WITH US ON TVOTONIGHT.

David says THANK YOU.

Partha says THANK YOU.

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