Re­al­ity check on pub­lic sec­tor exec salaries


The Hamilton Spectator - - OPINION - Howard El­liott

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.

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