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Steve Lafleur: Crown corporation CEOs are underpaid, actually

Commentary

Via Rail made news over the holidays for all the wrong reasons. A crippling storm combined with a few related infrastructure failures caused massive delays between Toronto and Ottawa. Many passengers, myself included, were delayed by upwards of three hours (the unlucky ones were stuck for much longer). Some got stuck at home alone on Christmas (like my partner). It’s understandable that people are upset.

I won’t re-litigate the issue. As I’ve previously written, I don’t think there’s an obvious scapegoat, and improving rail service in Canada (or at least along the Windsor to Quebec City corridor) will take time. But the travel incident brought renewed scrutiny upon Via Rail, which extended to the CEO’s compensation package. Frankly, it was a reminder that we probably don’t pay executives at crown corporations enough to attract top talent in most cases. 

I don’t mean this to sound disparaging. I have no basis to evaluate the job performance of the current CEOs of Canadian crown corporations. However, failing to offer a competitive compensation package for top executives can mean a shallow pool of qualified applicants (not everyone has the experience to run a passenger rail company). It could be that public-spirited executives are willing to take a pay cut to serve the public or to potentially have a better work-life balance than private-sector comparators. That’s a bit like hockey teams shopping for hometown discounts during the off-season. Now and then they succeed, but more often than not top players won’t take huge discounts. Especially not the kind of discount CEOs of TSX-listed companies would have to take to run a crown corporation.

Just how big would that discount be? The total compensation range listed for the CEO in Via Rail’s corporate plan is $398,212 to $529,280. That sounds like a lot of money until you compare it to what private sector CEOs earn. I’m not talking about Jamie Dimon or Warren Buffet here either. This falls far short of what the top 100 CEOs earn in Canada. Not just at the higher end, but the lower end.

To get a sense of the difference, consider the Canadian Centre for Policy Alternatives’ annual ranking of Canadian CEO compensation. While I don’t tend to agree with their takeaways on the issue, and I’m sure they’d be mortified to have their research used in defence of paying CEOs more, it is nevertheless a handy resource. In 2021, total compensation for the top 100 Canadian CEOs ranged from $6,678,084 to $140,778,515. The latter is far from typical—nearly $100 million greater than the second-place CEO. Let’s focus on the lower-paid CEOs for comparison.

Much of private sector CEO compensation takes the form of bonuses and stock-based compensation rather than salary. In fact, as the CCPA study points out, salary made up around eight percent of total compensation for the top 100 Canadian CEOs in 2021. If we look just at salary, there were eleven CEOs with lower base compensation than the total compensation for Via’s CEO. That includes four CEOs who take zero salary but had compensation of over $10 million dollars. In other words, even if one of the top 100 best-compensated CEOs in Canada left millions of dollars in annual variable compensation on the table to work for a crown corporation, their base compensation would still be lower in most cases.  

That’s more than a haircut. That’s potentially the difference between having a penthouse in New York and a nice home in Oakville; between taking a cruise now and then and owning a yacht; between never worrying about money again and worrying a little bit about money. I’m not suggesting we shed tears for the only slightly rich CEO in Oakville. But I also doubt many readers would trade the yacht and the penthouse for a merely affluent retirement to do the same job at a company they like a bit more.

Money isn’t everything. Sometimes highly sought-after employees decide to take a job for non-monetary reasons. But compensation still matters. Consider John Tavares—the kid with the Maples Leafs pajamas who dreamt of raising the Stanley Cup in Toronto. He only took a 12-15 percent discount to play for the Leafs. It’s hard to picture a CEO at the top of their game taking a fifty or eighty or even ninety percent pay cut to run Via Rail—no matter how much you might romanticize trains.

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Now, of course, one might be morally opposed to high levels of compensation for CEOs. Fair enough. I happen to think that lightly regulated capitalism works pretty well. Maybe at the margins there are some things that could or should be done to tamp down on potential excesses of compensation. That’s not really my view, but reasonable people can disagree. 

I certainly don’t think paying the CEO of a crown corporation one-tenth of what the hundredth best-paid private sector CEO earns is going to attract a deep pool of applicants to run crown corporations. As someone who wants them to run well, I’d be inclined to dedicate a slightly tinier fraction of their overall budgets to executive compensation. Incentives matter, after all. 

That isn’t to say that Via Rail is doing a bad job under the circumstances. Maybe the CEO is doing a good job, maybe he’s not. If he’s doing a good job, great. If he’s not, they should pay someone else more. A national passenger rail operator shouldn’t sweat over a rounding error in its budget. And neither should taxpayers.

Sean Speer: Ontario’s health-care reforms are a sign of Left-Right policy convergence

Commentary

The reaction to this week’s announcement from Ontario Premier Doug Ford that his government is expanding the role of private delivery within the province’s publicly-funded health-care system was swift and predictable. We heard various claims that it reflects a “purely ideological path” and a “fatal threat” to public health care that will ultimately risk lives

The real story here though isn’t the Ford government’s ideological fervour. It’s actually the growing ideological convergence—from the NDP government in British Columbia to the United Conservatives in Alberta to the Legault government in Quebec and now the Progressive Conservatives in Ontario—around the need to leverage private diagnostic and surgical capacities to address pandemic-induced backlogs in the short term and prepare for demographic pressures on health-care services over the long term. 

These governments have each come to their own pragmatic conclusion that the supply-demand quandary at the heart of Canada’s health-care woes can no longer be met merely by rationing through backlogs and waitlists. We need surge capacity

Ontario’s diagnostic and surgical backlog isn’t a new development. The government estimates that it was roughly 200,000 people even prior to the pandemic. But it increased markedly at the height of the pandemic as the province’s health-care system reallocated its capacity and resources to deal with the crisis. The province’s Financial Accountability of Office estimated in a 2021 report that it could take three years to clear the pandemic-induced backlog that resulted. 

There’s reason to believe however that these even estimates may understate the problem. Delays in diagnostic testing underplay the magnitude of incipient health-care demand. There was also a problem with self-reporting during the pandemic. The Quebec government, for instance, reported a 24-percent drop in requests to be placed on a surgical waitlist during the pandemic compared to non-pandemic years. The net result is what’s become described as an “invisible waitlist” and the “crisis behind the crisis” in the context of the pandemic. 

Provincial governments started to roll out plans to deal with these growing backlogs as early as spring 2020. The plans typically involved some combination of more public funding, expanding the number of surgeries and tests within the public system (including running MRI machines and operating rooms on evenings and weekends), and leveraging private diagnostic and surgery capacity in particular areas such as cataracts, hips, and knees. 

The Ford government’s initial plan to cut its backlogs was an outlier among the provinces for its limited use of private provision. As I wrote in a policy brief with former BC Premier Gordon Campbell in February 2022: “The provincial government’s plan essentially aims to clear these backlogs without drawing any surge capacity into the system.”

This stood in stark contrast with other provinces, including the NDP government in British Columbia which first announced its plan to leverage private delivery in May 2020. The province’s Surgical Renewal Plan specifically committed to “increase capacity at contracted private surgical clinics that agree to follow the Canada Health Act and not extra bill patients.”

It’s worth noting that this is essentially the same promise since made by the Ford government. Its press release quotes the premier himself: “Our government is taking bold action to reduce wait times for surgeries, all while ensuring Ontarians use their OHIP card to get the care they need, never their credit card.”

Notwithstanding the rhetoric from unions and left-wing academics, it’s difficult to argue that the Ford government is driven by a hard-right, anti-public health-care ideology if it’s merely matching an NDP government’s plan more than two-and-a-half years later. 

The real story may be less pleasing to ideologues and partisans, but it doesn’t make it less true. These governments with different priorities and preferences have come to the same conclusion: we need to expand health-care supply to meet demand and it would be irresponsible to forgo private diagnostic and surgical capacity solely for ideological reasons. 

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There are legitimate questions about billing, staffing, and standards between public and private delivery, but these are mostly technocratic undertakings. They can be easily solved through a combination of regulation, funding conditions, and market forces. Ontario isn’t the first jurisdiction in the world to confront these elementary questions. The government may even consult with other provinces as well as international peers on how best to introduce greater private provision without undermining the public health-care system. 

The key point though is that the lazy critique that the Ford government is comprised of right-wing dogmatists hellbent on eroding the principle of universal health care simply belies the facts. Its plan is run-of-the-mill stuff that should help to dig the province out of its pandemic-induced hole without confronting the Canada Health Act and more fundamental questions about how we finance and deliver health care in Canada on a more efficient and sustainable basis. 

Health-care reform won’t be achieved without any opposition. There are of course certain groups and voices who are committed to protecting the failing status quo due to a combination of ideology and self-interest. But the conditions for reform have never been greater and the ad hominem attacks have never been weaker. The Ford government should be lauded for its pragmatic, common-sense steps to address Ontario’s diagnostic and surgical backlog—even if just it’s borrowing from its provincial peers, including progressive ones, elsewhere in the country.