BY Jim Harding
We are living in harsh times. Governments pursuing corporate globalization steadily deregulate the economy giving the super-rich license for even more greed. Inequality mushrooms and we now speak of the 99 and 1%. Youth unemployment in Canada now doubles the average rate and could doom many of the up and coming generation to the “precariat”. Meanwhile CEOs earn record-breaking salaries. Last year the CEOs of Canada’s four big banks earned from $9.2 to $12.6 million dollars each.
Defenders of this kind of economics call for more unfettered growth as if this is the solution to unemployment and poverty. More growth, not redistribution, is the mantra; Harper’s slogan “Jobs, Growth and Prosperity”. Lower taxes and more profits and wealth to the super rich will supposedly trickle down to help the needy. But it hasn’t and it won’t.
I do hear people complain that “the rich are getting richer”. Sometimes, however they are so resigned to this trend that they stop short of complaining, though you can hear a little anger in their voices. Perhaps we don’t want to imagine a positive alternative for fear that we may be let down. But we have to face up to what’s happening and carefully rethink what we need to do to achieve local and global justice.
AIR CANADA’S CEO
It’s instructive to look at specifics. The June 1, 2013 Globe and Mail Business section reported on the earnings of Air Canada’s CEO. While others in the organization have had to toe the line, the CEO more than doubled his earnings from “$ 4 million in 2011” to $9.5 million, “thanks to a $5 million retention bonus”. Even the base salary of $1.4 million, 35 times the Canadian average income, is exorbitant. Then the cash bonus “climbed to $1.9 million from $325,000” and added to that there were huge “share and option-based awards”.
Why does one man doing one job in an organization get several hundred times the average income? Especially when an organization like Air Canada couldn’t successfully provide a safe service without a vast array of qualified workers? In the crunch passengers are concerned that the pilot operating the plane 30,000 feet above ground is skilled, rested and supported with an array of technical and human services. The hugely paid CEO is the last thing on our mind.
While the CEO and other managers can help nurture an organizational environment that filters down to the safety of actual flights, it’s the front-end professionals – technical crews, pilots and airplane stewardesses that ensure this happens. The justifications for the doubling of pay however aren’t about services and safety, but “exceeding the pre-tax operating profit target”, “boosting liquidity levels”, “completing arbitration with employees” and launching a “low cost carrier”. It’s all about corporate self-perpetuation.
WHAT IS FAIR?
The super-rich are not an invention of ecumenical or social justice advocates; people in high places also know about the problem. Prior to heading off to lead the Bank of England, Bank of Canada Governor Mark Carney spoke to a Christian think-tank, Cardus, on the spectre of greed in our economy. “When banks become detached from the end user, from the real economy, then the only measure left is money”, he’s reported as saying, in the May 15, 2013 Prairie Messenger.
But in the end Carney did not call for regulation but a return to virtue. Of course we want a more virtuous society, but as the saying goes, “the road to hell is paved with good intentions.” We require people to drive below the speed limit and to be legally as well as morally responsible if they don’t or if they harm others through derelict driving. So why are we so shy about increased regulations on those who, when motivated by unabashed greed as in the global bank scandal of 2008, can harm millions upon millions of ordinary people?
As the Dean of the Rotman School of Mangement said at the same event, regulations are required “to close off new opportunities to make money from money, rather than making money from real enterprise.” Carney had already condemned banks for chopping up and repackaging “various kinds of debt” and thereby losing “their basis in goods, services, wages and investment of real life.” But, going off to an $874,000 a year job he wasn’t prepared to go the extra mile.
All these economic activities – goods, services, wages and investment – can also lose contact with meeting the real needs of people in real life. And ensuring that they serve the interests of sustainability is part of our challenge.
We’ve come a long way since people received a fair wage for a fair day of productive work. It is understandable how the idea took hold that the more skilled the work and the more education it required, the more pay there should be. But if we take medical doctors as one example, they don’t earn several hundred times the salary of their secretaries or office managers. (On average doctors earn about seven times Canada’s average income.) Yet that’s the scale of the pay going to many CEOs.
How did this managerial strata get to its level of wealth and privilege? It’s not due to the amount of work they do, the educational level achieved or the dependence of the organization on a particular person filling the job. Something else is going on. We now have a powerful economic network that includes managers and supportive politicians who go back and forth between governments and boards of directors, who in turn give and get cross-appointments on other corporate boards. It is largely from this network that CEOs are selected. It is an incestuous sub-culture that enables people to inflate salaries and to fill their pockets. Even when CEOs “fail” to meet corporate expectations they can leave with severance packages greater than a lifetime of savings for an ordinary worker in that firm.
All this goes on behind the cloak of the neo-liberal competitive “free market”, but it has nothing to do with fair compensation for work. The corporate elite is largely self-perpetuating and as we are increasingly learning, it doesn’t always go by the book.
ETHIC OF SERVICE
The ethics of work have been fundamentally altered by the incestuous corporate sub-culture. Pay is not about compensation for service, for a true ethic of service would never justify such extreme, obscene levels of compensation. Nor would true public servants ever want this kind of compensation for it would undermine the quality of service they purport to deliver. And we are now seeing this corporate mentality encroaching on explicitly public service institutions, including CEOs for healthcare agencies, crown corporations, etc.
Good management and coordination skills clearly matter in an organization, large or small. One of these skills is ensuring there is an environment of trust and a positive recognition of healthy interdependence. And a healthy organization depends on all the other skills and capacities without which it could not exist. There is dignity and importance attached to all the work within any organization.
So why does a CEO of a large corporation earn several hundred times what the other people, without whom the organization couldn’t exist, earn? This has gotten completely out of hand.
We now talk about the need to ensure that the super-rich don’t hide their money in off-shore tax havens making the rest of us pay more to provide essential services. Isn’t it time we also demanded significant caps on management pay? It is not only a fiction but a disgrace to say that the free-market solves all, including setting a fair, competitive price for CEOs. It’s the CEOs and the corporate elite which share this worldview of self-perpetuation that determines such huge salaries. There’s nothing free about this other than a “free ride.”