Ourpointofview BLOGS Cap hospital salaries, then spread the cure

paid to hospital CEOS in Ontario (Peterborough included) are out whack.

But that’s no surprise. A “star” system that overpays the heads of many public and private corporations has become entrenched over the past two decades or so.

Hospital chief executives are on the firing line because their contracts just became public. We now know that Peterborough Regional Health Centre paid CEO Ken Tremblay $380,000 plus a $12,000 car allowance last year.

Others made a lot more. Salary, bonuses and perks netted the head of the Toronto’s Sunnybrook Health Sciences Centre $758,000.

Provincial Health Minister Deb Matthews, called the huge salaries “sometimes troubling” but defended them as necessary if hospitals are to attract “the best leadership.”

That “pay what’s needed to get the best” line is what hospital boards use to defend the contracts they hand out to CEOS. In fact, those boards have created the problem by continually upping the payment scale without stopping to consider what “the best” might actually work for.

Another contributing factor is private sector compensation, which can seem even more out of whack. A recent study by the Centre for Policy Alternatives found that the average salary of CEOS at Canada’s 100 largest private sector companies is $8.4 million.

But while salaries for top bankers, energy company executives and industrialists might be on the minds of hospital boards when they are looking for a chief executive, the comparison is false. Private corporations make profits, money they can use to pay their CEOS. Canada’s five big banks, for example, had net profits of $22.4 billion last year. That covers a lot of multi-million dollar pay packets.

Ontario, meanwhile, expects to be $16 billion in debt this fiscal year. There is no profit pool that will pump out big salaries. The money comes from taxpayers and that well is drying up.

The issue is fair compensation for people who run public corporations. Peterborough MP Dean Del Mastro suggested a $165,000 cap for hospital CEOS, the same amount the provincial Minister of Health makes. While it is hard to feel sorry for someone whose salary might be “cut” to $165,000, that’s not a realistic number. Politicians know when they run for office how much they will earn.

Public sector executives know they won’t be making multi-millions, but are expecting too much.

NDP leader Andrea Horwath proposed a cap of twice the premier’s salary, about $418,000. Apply that to the current top end of $758,000 for a major Toronto hospital and the pro-rated salary for the head of PRHC would be $220,000. Other PRHC executive salaries would then be adjusted down accordingly.

That seems reasonable. Once it was done, other public sector agencies that are paying big salaries could be instructed to fall in line. PRHC, with more than 1,000 employees and a $250 million annual budget, is substantially bigger than Trent University, Fleming College or any other public institution.

Curing CEO salary inflation at hospitals could be the start of a province-wide readjustment that would pull public sector compensation back to reality.