Empty promises?
Many of Canada’s top CEOs vowed to take pandemic pay cuts. But some of them took home millions more,
When COVID-19 first hit, it seemed we were united in our misery.
Embattled companies announced sweeping cuts to their workforce, bracing for loss. The country’s unemployment rate soared, driven by an exodus of jobs that made the 2008 recession look tame.
While low-income workers were laid off at triple the rate they were during the Great Recession, many of Canada’s largest companies announced pay cuts for their executive teams — a show of solidarity in a bleak time for many Canadian households.
High profile CEOs opted to forego some or all of their salaries, and some redirected them to charity.
Telus’ top executive, Darren Entwistle, donated a quarter of his salary to “the Canadian health care workers on the front lines, battling COVID-19.” Lululemon Athletica’s CEO, Calvin McDonald, volunteered a 20 per cent pay cut, along with others on the board. At Cenovus Energy, where the company announced more than 1,000 layoffs after merging with Husky Energy, executives pledged to take salary reductions between 12 and 25 per cent.
But how much did these top earners really give up?
To find out, the Star examined recently published financial reports from several of Canada’s largest companies, all of which pledged to reduce executive pay during the pandemic.
The story, among each of them, was the same: executives were showered in riches regardless of company performance. In most cases, the losses sustained through salary reductions were more than made up for with other compensation — cash bonuses, stock options and more.
Some CEOs made millions more in 2020 than the year before, despite pledging a pay reduction during the pandemic.
Top executives at SNC-Lavalin, Gildan Activewear Inc., Cenovus Energy and Telus were rewarded with compensation that eclipsed their 2019 earnings and erased salary drawbacks.
“It’s clearer than ever, now, that the salary cuts were no more than a public relations move,” said Unifor president Jerry Dias, who represents unionized workers at several of Canada’s biggest companies. “It’s just about displaying to people that they’re good corporate citizens, while taking huge bonuses at the expense of the workers.”
For Gildan Activewear, the troubles began in March 2020. With concerts cancelled and travel restricted, the Montrealbased clothing manufacturer had few outlets to sell their staple product — blank shirts bought by wholesalers and used, most often, for band merchandise and vacation swag.
Scrambling to cut costs, the company ordered pay reductions for senior staff and a shortened four-day work week. In an April 2020 press release, it announced a 50 per cent salary cut for its top executives in the second quarter of the fiscal year.
But despite the cuts, Gildan’s top executives emerged from 2020 with higher earnings than before.
Glenn Chamandy, CEO and co-founder of the company, more than doubled his pay from 2019, corporate records show. He received bonuses amounting to nearly $13.5 million and a total compensation of $16.5 million, making him one of the country’s highestpaid bosses.
Gildan’s CFO, Rhodri Harries, received a $5.7-million raise. And Benito Massi, president of manufacturing, earned a $3.4million raise, amounting to a total of $5.4 million.
Chamandy’s bonuses were granted “in recognition of his role in leading the Company through the COVID-19 crisis,” said a company spokesperson in a statement to the Star. But the company reported a terrible year overall, losing $225.3 million by year end.
The story is similar for SNCLavalin, led by recently-appointed CEO Ian Edwards. In March 2020, the company asked employees to take a three-month pay cut as business slowed. “These actions will make a vital difference in dealing with the short-term impacts on our business,” Edwards told employees in a memo. “I hope by doing this quickly and volunteering together, we are able to preserve a stronger future together.”
All senior management, including Edwards, volunteered to take a 20 per cent salary cut. But by the year’s end, Edwards’ compensation had grown to $8.02 million, up almost $1 million from the $7.1 million that his predecessor, Neil Bruce, had earned the year before. Edwards’ $200,000 salary reduction was dwarfed by a $5.61-million bonus paid out in company shares.
On average, CEO salaries comprise just 10 per cent of their total compensation, according to the Canadian Centre for Policy Alternatives. The majority of their pay comes in the form of cash bonuses and awards granted in company shares or stock options, leading some CEOs to forego their salaries almost entirely.
For instance: Murray Edwards, the billionaire co-owner of the Calgary Flames and chairman of Canadian Natural Resources Ltd., received a salary of just $1 for his role at the crude oil and natural gas company in 2020. Through cash bonuses and shares, though, he earned $13.56 million.
David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, calls it the “golden cushion.” Regardless of salary, executives amass fortunes on bonuses alone. The pay structure is designed so that it’s “extraordinarily difficult” for an executive not to receive massive bonuses, he says.
“While it looks good to forgo part of your salary during COVID-19 from a public-relations perspective, it doesn’t impact pay,” Macdonald said.
SNC-Lavalin, in a statement to the Star, said its CEO’s pay increase was the result of a “rigorous benchmark study on salary versus other similar global organizations.” Through a process called peer benchmarking, the company’s board of directors hired outside consultants to compare SNC-Lavalin to a pool of others in the same industry and allocate pay accordingly.
This is typical of how public companies decide executive compensation, explains Richard Leblanc, a professor of governance, law and ethics at York University.
The board recommends executive compensation based on the average earnings of their peers, and will often recommend aboveaverage pay as a positive signal to its shareholders. “Even when performance goes down, CEO pay will go up, because the system doesn’t account for the actual performance of the company’s CEO. It’s just looking at what their peers are making,” Leblanc said.
And the board committees that examine peer benchmarking studies have very little oversight, Leblanc adds. Compensation committees can compare their company to others that are bigger and more complex while offering their CEO comparable pay regardless.
“You’re pretty much guaranteed to get higher compensation this way,” Macdonald said. “You can bankrupt the company and you’ll probably still receive a bonus.”
Four other oil and gas companies the Star examined — Enbridge, Parkland Fuel, Cenovus Energy and Ensign Energy Services — all increased bonuses for their CEOs despite the industry’s overall downturn.
In a statement to the Star, a Cenovus spokesperson noted that more than half the CEOs in the company’s pool of peer companies received higher compensation than company CEO Alex Pourbaix.
Enbridge, in a statement, noted that the company delivered strong financial results in 2020 despite the effect of COVID-19, and the company reduced costs — including CEO Al Monaco’s pay cut — “to avoid companywide layoffs.”
A spokesperson for Parkland Fuel said the company’s steps to lower costs, including the salary cut, “delivered excellent performance through one of the most challenging years.”
Ensign Energy and Canadian Natural Resources did not respond to the Star’s requests for comment.
Some CEOs argue they deserve the raise given the drastic situation. Across most indus- tries, companies have faced un- precedented pressure in turbu- lent economic circumstances.
Despite the pandemic, with
Entwistle at the helm, Telus reported strong year-end results for 2020. Operating revenues totalled $4.06 billion, up from $3.86 billion, and the company added 253,000 new customers in the final quarter.
But even after donating a quarter of his salary, Entwistle emerged from 2020 as Canada’s top-paid telecom executive, earning $16.04-million in 2020 — a 24 per cent increase from $12.92-million in 2019, company records show.
The bulk of his compensation came in the form of stock option and share awards, which increased to $12.86-million in 2020 from $9.98million in 2019 due to the company’s performance and “Darren’s exceptional leadership,” a recent company report reads.
“Some CEOs are saying that, ‘even when performance is down, we’re still working hard. It’s a pandemic, it’s a workfrom-home environment and we should be paid what we’re worth,’ ” Leblanc said. “There’s fatigue, exhaustion and the challenges of managing a workforce from home. In a pandemic, the boards don’t want to underpay the CEO and potentially search for a replacement.”
But the gap between CEO pay and the average worker’s income has been growing for decades. According to a CCPA report, CEOs make more than 200 times the average Canadian income of $48,700. The average CEO makes in four days what the average Canadian worker makes in one year.
Lululemon Athletica, in a note to shareholders, estimated that CEO Calvin McDonald earned 714 times the amount of the company’s median employee in 2020. Despite a salary reduction at the pandemic’s outset, McDonald earned $10.59 million in the fiscal year.
Dias, whose union represents 310,000 workers in industries ranging from manufacturing to forestry, says there’s no justification for raises when workers are struggling to make ends meet.
“It’s just greedy,” he said. “They make so much more than the average employee to begin with — why do they need more?”
“Even when performance goes down, CEO pay will go up.” RICHARD LEBLANC YORK UNIVERSITY PROFESSOR