Reality check on public sector exec salaries
THE SPECTATOR’S VIEW
Public sector executive compensation is a migraine headache for the provincial government. Everyone, from backbench MPPs to cabinet insiders, knows how huge CEO and executive salaries at hospitals, universities, colleges and public utilities make ordinary taxpayers see red. While regular folk make do with regular financial stresses — stagnant wages, rising costs, increasing taxes and user fees and food prices, to name a few — senior managers at public institutions typically enjoy compensation in the mid six and sometimes even seven figures.
Many can’t reconcile the financial gulf. It’s bad enough when private sector execs pull down as much in a day as regular citizens do in a week. But when those salary figures fall within provincial control, it’s a grating irritant.
Consider: Ontario Power Generation says executive salaries are poised to increase by up to $8 million over the next few years as a public-sector wage freeze is lifted. OPG’s CEO currently earns $1.5 million and could see that rise to $3.8 million. Metrolinx is proposing to boost its CEO’s pay to $479,500, an increase of $118,000. Ontario colleges recently brought forward proposals that would see presidential salaries increase by 50 per cent, but they were sent back to the drawing board.
It’s understandable that many people react with anger on this subject. But a reality check is in order. Public sector executive compensation figures don’t come out of the blue. They are typically based on comparators, or benchmarking. Decision-makers look at comparable jobs in comparable jurisdictions. They make recommendations and ultimately the government signs off or doesn’t, as with community colleges.
So when you swear up and down that no hospital administrator or city manager could be worth that fat paycheque, what you’re really saying is that compensation in that particular field overall is inflated. Not just in Hamilton, Ontario or even Canada, but worldwide, because that’s the market competing for leadership at this level. And if you want the best, you have to pay competitively, at least within reason.
There are exceptions. Anything to do with hydro in Ontario at this point is a very hot button, and the government would be wise to recognize that and encourage and enforce restraint on all spending. Out-of-control hydro rates are causing real hardship, even though government relief to date has resulted in an 8 per cent overall reduction in consumer costs. (That’s not enough, given that rates increased an average of 15 per cent in 2016.)
On this subject, overall, it’s best to avoid knee-jerk populist responses to executive compensation in the public sector. But the government needs to recognize and manage the resulting angst, and especially avoid making a bad situation worse in areas like hydro.