Backdropped by Europe's bleak economic landscape, compensation for B.C.'s top 100 highest-paid public company executives fell 6% in 2011 to $366 million, compared with $390 million in 2010.
Former Ivanhoe Mines (TSX:IVN) president John Macken topped Business in Vancouver's list with total compensation of $23.3 million, which accounted for just over 6% of the list's entire combined total. The lion's share of his compensation (approximately $22 million) came from options-based awards.
Macken, who was ninth on last year's list, recently relinquished his role as Ivanhoe president and has since been appointed chairman of the board at Western Lithium (TSX:WLC). This comes as Edward Flood, Western Lithium's founder, has taken a step back from the mining sector and resigned from the board.
Macken has been on Western Lithium's board since 2008.
The top-paid executive in 2010, Fortress Paper (TSX:FTP) CEO and founder Chad Wasilenkoff, dropped off the top 100 list completely in 2011. Fortress produces dissolving pulp, specialty papers and security paper products, including banknotes and passport and visa documents. Wasilenkoff's compensation in 2010 included $5 million he will earn if Fortress' recently acquired Fraser Papers cellulose mill generates earnings of $225 million by the end of 2014, and $5 million in deferred stock he will receive if he leaves the company. This year he earned no bonuses or other awards besides his $1 million salary, knocking him off the top 100 list.
In 2010, his compensation totalled $16 million, which included a $5 million bonus and share-based awards of $10 million.
Although total compensation for the top 100 executives decreased 6% when compared with last year's total of $390 million, their total pay has risen 30% over the past five years.
Iglika Ivanova, public interest researcher for the Canadian Centre for Policy Alternatives (CCPA), said that doesn't reflect the fiscal reality for most British Columbians.
She said the increase highlights rising income inequality and cited a CCPA study that shows CEOs being paid 180 times that of the average person compared with 105 times more in 1998.
"The gaps we are seeing are much bigger now than they used to be," Ivanova said. "It's a definite change since the mid-'90s.
"What we've seen is a rise in income going to the very top, and we have a really big concentration of wealth."
Kai Li, professor of finance at UBC's Sauder School of Business, agreed that there's a marked discrepancy if you compare the increase in total compensation for executives to that of average workers.
But she pointed out that it's more important to look at the composition of the compensation rather than total pay.
Executive compensation typically has two components: cash salaries and options linked to company share prices.
Li said linking compensation to stock prices provides incentive for executives to work in the best interests of company shareholders.
If CEOs are not paid based on that metric, she said they can just "take the money and do nothing," which is not good for the company.
More than 60% of total compensation for B.C.'s top 100 public company earners in 2011 was based on stock prices. That's a double-edged sword for those executives: their compensation is good if company stock prices are up, but far less lucrative if those prices drop.
Executives from BIV's list with the highest percentage of their compensation based on options or shares included:
•Francois Marland (Yukon- Nevada Gold Corp. director): 98%
•Wanze Pan (SouthGobi Resources vice-president of coal marketing): 97%
•George Johnson (B2Gold Corp. senior vice-president of operations): 94%
•Randy Reifel (Chesapeake Gold Corp. president): 93%
Only two women made this year's top 100 highest-paid executives list:
•Christine Day (Lululemon Athletica CEO) – No. 32 ($3.6 million); and
•Dawn Moss (Eldorado Gold's vice-president of administration) – No. 64 ($2 million). Moss was appointed Eldorado's executive vice-president and corporate secretary on July 1.
In 2010, three women were on the list:
•Lululemon's Christine Day (No. 10) and executive vice-president Sheree Waterson (No. 54); and
•Westport Innovations Inc.'s executive vice-president, strategic development Elaine Wong (No. 90).
Ivanova said the degree to which women are under-represented on the list is surprising.
She added that women's pay equality progress has stalled in the 2000s.
"There was progress in the '90s, and then we're either stagnating or going backward," Ivanova said, noting the low numbers of women in science and academia in particular.
Li said there are many reasons for the dearth of top-paid women executives.
"One is a lack of mentorship – women helping women. If you don't have top women already there, junior-position women will not be getting promoted.
"It's a circle; you have to have more females in the corporate suite to lead to more changes."
Li added that men are more likely to mentor other males and pointed to possible sexual harassment concerns as a reason.
"If you're too close to your female subordinates, you might get burned."
Barry Cook, partner at Western Compensation & Benefits Consultants, agrees that in theory, stock price-linked compensation provides the incentive for executives to work in the best interest of the shareholders.
However, he said, in practice it is not quite that straightforward.
"The first thing a shareholder would think about, perhaps, is a portion of the company is being transferred to the executives," Cook said. "That's called dilution of equity."
He explained the shareholders' proportional ownership would be lower, leading to decreases in both earnings per share and dividends, because there would be more shares overall. This is not a big deal for larger companies where it may essentially amount to a very small difference, he said, but it still remains a factor.
"The shareholders would need to feel that there were other sufficient reasons why this makes sense in order for them to accept the dilution of equity that they're going to experience."
