Editorial: Canada can’t afford cut-rate leadership

Top talent doesn’t come cheap.
 That marketplace reality is readily accepted in the world of sports and entertainment but not in business.

In a recent Canadian Centre for Policy Alternatives (CCPA) report, author David Macdonald sounds what is now an annual alarm bell over the widening salary compensation gap between corporate executive suite and factory floor.

Compensation at Canada’s corporate top end, he notes, is back to pre-2008 levels and has consequently pushed “the income gap between Canada’s top executives and the average worker to record highs.”

Macdonald’s report rightly raises red flags over a misguided executive compensation system that too often ties CEO salaries to emotion-driven stock prices rather than to revenue, profit and other more intrinsically valuable corporate management metrics. It advises government to institute a co-ordinated strategy of tax measures to deter compensation committees from approving executive salary packages that widen the pay gap between executives and employees rather than recognize astute management and corporate vision.

The CCPA’s populist push for salary fairness makes some good points.

Many CEOs don’t earn their lavish pay packages and are overpaid by corporate compensation committees and contracts, but genuine leadership talent is rare and is worth whatever the market dictates.

As noted by Jason Clemens, Fraser Institute executive vice-president and CEO to Worker Pay: A Broader Examination co-author, top performers, whether they’re in business, sports or entertainment, are now being paid at historically high levels because “they are in high demand globally, there are limited substitutes and they’re highly mobile, making it fierce competition for the very best.”

Canada has a talent shortage at various levels in a wide range of industries, but one of its most serious deficits is in leadership. 

Applying additional market restrictions in the competition for that talent in Canada will do more to hobble the country’s ability to rise above mediocrity on the world stage than it will to legislate financial fairness.