When it was announced that British
Columbia's MLAs would net a pay raise of 29 per cent -- and
the premier a whopping 53 per cent bump -- there was
outrage. Now we learn the MLAs are going to get a raise on
top of their raise -- another 10 per cent for most of them
-- plus that hefty pension.
But anyone who complains about
greedy politicians should instead focus on protesting the
stratospheric amounts paid to corporate executives.
Here's how the two are connected.
As long as legislators tried setting
their pay on their own, they were inviting trouble. They've
finally, belatedly, realized that what they have to do is
somehow equate themselves with the private sector with its
outsized compensation for executives, corporate lawyers and
the like. The best way of doing that, in turn, is to have a
certain class of outsiders adjudicate, for they'll
inevitably look for such comparisons.
Right wing silent
This formula is what brought about
increases to compensation for members of Parliament,
formerly a matter of unending controversy. An independent
commission tied MPs' pay to the incomes of federal court
judges, whose pay scales had earlier been established by
tying them to a complex mix of other measures, including
senior lawyers in corporate centres like Toronto and Calgary
and deputy ministers who look to corporate executive pay as
a comparator. A different benchmark is now used for MPs'
incremental increases, but that one interlude with
private-sector links was enough.
MPs now get $151,000 per year, with
automatic increases, plus extra compensation for cabinet
ministers, party leaders, parliamentary secretaries, party
officials (house leaders and whips), and committee chairs
and vice-chairs. The base rate is almost four times the
average wage in Canada, with the ratio even greater for
those who receive extra stipends.
Cabinet ministers pull down
$223,000, putting their incomes, counting their salaries
alone, in the top one per cent of Canadians. Gilles Duceppe
and Jack Layton, leaders of third and fourth parties
respectively, are paid $202,000 annually.
The often heated criticism of MP's
compensation, however, is no longer heard, although the pay
is far out of line with what the most vociferous critics had
previously been prepared to accept. The critics were
effectively silenced because most of them had been
anti-government right-wingers, who now would be forced to
criticize not supposedly greedy MPs feeding from the public
trough but private sector practices they have no inclination
The wonder is that it took so long
for the BC Liberal caucus to fasten on to what is the
foolproof way of getting a big raise. Also ironic is that
critics of MP and MLA salaries and pensions should have ever
insisted on independent assessment by those living in the
supposed "real world" of the private sector. In B.C., two of
the three on the commission turned out to be high-earning
Millions in frills
Let's have a look at the leading
source of comparison: CEO salaries, bonuses and perks and
the compensation accorded in fields such as investment
banking, corporate law, and marketing. Then let us trace the
connections back through to the public sector, and then to
The connections might not always be
apparent. A task force looking into MLAs' pay might not
explicitly say, "Don Mattrick at Electronic Arts pulled in
$21.9 million the previous year, David Thompson at Teck
Cominco pocketed $18.4 million, several other BC executives
managed $14 million, and recently Home Depot's ex-CEO
retired with US$210 million on top of his US$38 million
annual pay; so an MLA, with long hours and an uncertain
future, is therefore worth at least $98,000 a year and a
pension plan." The outsized compensation in the upper
reaches, however, is well known and provides the cultural
background for the demands, and acceptability of demands, of
those in executive and professional functions all the way
down the line.
Let's call those upper reaches the
"private corporate bureaucracy." Compensation there is
exorbitant not only in its principal amounts but also in its
frills. In 2005 the average CEO in the Standard & Poor's 500
stock index pocketed 369 times the pay of the average
worker. This was up from 28 times in the 1970s, itself an
If such compensation occurred in the
public sector, there would be screams of indignation, with
media helping to whip up the anger. But because they occur
in the private sector they are supposedly legitimized by
having been generated by "free enterprise."
We are told they are determined by
"the market for executives." The phrase, with the word
"market" in it, has ideological resonance, but it's really a
cover for an entrenched bureaucratic process. In my 1991
book, The New Bureaucracy: Waste and Folly in the Private
Sector, I detailed how it happened: Executives, with their
collaborative boards of largely fellow executives, used
comparative compensation data to leapfrog each other year
after year until, in their salaries, bonuses, options and
perks, they were collectively in the stratosphere.
Scattered shareholders were no
problem. Shareholder governance was a myth for large
corporations with widespread ownership, as it had always
been. Every once in a while there would be an attempt, or
the show of an attempt, to tie compensation to results, to
help pretend that there was at least some rationale to the
exorbitant pay packages -- say by increasing the role of
stock options -- but that would occur from already inflated
standards as well. No matter what initiative was taken,
moreover, there would almost always be adjustments made with
new devices or compensation fads if events proved perverse,
so that the pattern of high and higher pay would continue
regardless. Performance indicators could be hollow anyway,
heavily influenced by outside factors that had nothing to do
with a CEO's own actual performance.
What does the money buy?
One should keep in mind, too, that
western economies performed magnificently in the post-World
War II period when executive compensation was a relatively
low multiple of the average wage and when, at the same time,
the marginal tax rate on upper incomes, including corporate
executive incomes, was quite high.
The escalation of these pay
packages, in sum, took place by a very bureaucratic process
within an entrenched bureaucracy, protected ideologically
just as surely as commissars were ideologically protected in
the old Soviet Union.
The New Bureaucracy also documented
variants of this entrenched, self-inflating process among
investment banks, institutional investors, stock-exchange
communities, a rampant, often self-feeding
mergers-and-acquisitions bureaucracy, associated law firms
and consultants, commodity traders, and advertising and
It was inevitable that this would
eventually have repercussions in the public sector.
Executives of major crown corporations, for example, began
making invidious comparison with their peers in
private-sector corporations. Something had to give. In B.C.
and across the country, compensation for crown corporation
executives was pushed up. The same went for deputy ministers
and others with executive responsibility like health
authority managers and hospital administrators although,
again, they had all previously been well paid by most
Ironically, but logically,
anti-public-sector, right-wing governments rather than
left-wing governments have most radically pumped up those
public-sector compensation packages. In their minds, the
closer crown corporations and other agencies are to
private-sector corporations, the better, and that includes
the way executives and directors are rewarded. Right-wing
governments, in this way, are ideologically compelled to
inflate public-agency executive and board compensation.
Consider the pay of the chair of the
BC Securities Commission, Doug Hyndman, whose largesse was
in the news last year. He was earning $511,000 at the time,
a 370 per cent increase since 1998. The earnings of those
immediately under him had been similarly inflated. When
Hyndman's pay was questioned, a BCSC spokesperson pointed
out that his counterparts in Alberta and Ontario had earned
$698,000 and $652,000 respectively.
The press fingered the ability of
the commission to set its own compensation levels as the
problem, but the government could always have reined in that
ability. The latitude given to BCSC, however, parallels the
ability of corporate boards to set compensation and indulge
their executives. The main, underlying reason for such
extravagant pay is that BCSC is as close to the
ideologically sanctified corporate world as it can be
without formally being in that world, so that world's norms
and benchmarks set the frame.
Blain's big cheque
It's the same reason that Larry
Blain, the head of Partnerships BC, has been raking in
$500,000, twice what a deputy minister is paid, for what
amounts to a public relations job. Partnerships BC interacts
with the private-sector corporations and is premised on
private-sector corporate ideology. Paying Blain a more
reasonable rate would undermine that premise. And Blain's
compensation, unlike Hyndman's, is set by cabinet directly.
People wonder with amazement how
such compensation comes about and how its beneficiaries
continue to get away with it. A government that sees the
corporate model as ideal is going to insist on such
extravagance, viewing it as approximating how free
enterprise works -- an unqualified good -- and hence
business enlightenment rather than extravagance.
Next to all that, raising MLA's pay
29 per cent, or 50 per cent, or 100 per cent, reasonable or
not, is just an insignificant incidental.