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Managers justify generous treatment of managers

Posted September 20, 2014 by Norm Farrell

In 2013, the consulting firm Ernst & Young was hired to review trends in compensation across the BC Public Sector. It is now available through the Legislature’s public documents.

Reports of this kind are almost worthless documents of political propaganda. The only important question asked of the executives who commissioned it was the one aimed at determining what the report should say. Inevitably, consultants who hope for more assignments, pander to the interests of the senior managers who hire them. That leads to recommendations like this:

“Based on the market reviews, it is possible that some of the lower levels (e.g. administrative positions) may be above market and could require “adjustment down” over time. This is an assumption not based on analysis of BC data but on a literature review of typical public/ private benchmarking in Canada, and comments from stakeholders in BC…

“It is believed that the Strategic Leadership group and other key management roles are compensated at a lower level than Canadian and Federal peers, and it is therefore anticipated that bands would need to be adjusted up…”

I will translate the bureaucratese:

“Most public service workers are paid too much and deserve less. We can’t demonstrate that to be true but it is regularly stated by groups like the Fraser Institute, Business Council of BC (BCBC), Canadian Federation of Independent Business (CFIB), The Independent Contractors and Businesses Association (ICBA), the Canadian Taxpayers Federation (CTF), the BC Chamber of Commerce, the Coalition of BC Businesses and other “stakeholders” that we admire.

“BC’s top managers, the people who arranged for this report, are paid too little for their loyal and dedicated service and deserve significantly more money. We can’t demonstrate that to be true either but it feels right and they sign our cheques.”

The report echoes assertions of the rabid Fraser Institute (6 mentions), BCBC (6), ICBA (4), CFIB (17) and CTF (8). It is based largely on the opinions and one-sided research of deconstructionist organizations who might believe that equality and democratic government are failed experiments but certainly hold that fair wages and organized labour are the bane of any economy. Here is a sample:

“The vast majority of Regional and Local Government workers are part of large and sophisticated unions. Even local Government unions, for example, are local chapters of the Canadian Union of Public Employees, which is a member of the Canadian Labour Congress. CUPE provides even small local unions with sophisticated assistance for bargaining and contract negotiations. (See Appendix C-15).

“Without a coordinated response to organized labour, there is a real risk, that unions can divide and conquer…”

Yes, that ought to appeal to the BC Liberal base. A union worker is the bogeyman, backed by the wealth of fellow members who unfairly pool resources by kicking two or three hours of wages each month into union coffers. From that, they’ve been known to coordinate with others who share objectives and fund research staffs and create advertising and economic research that treats the labour movement fairly. (It’s OK though if business groups make efforts for themselves and use funding from billionaires in China.)

Not that government would ever try sophisticated efforts to manipulate opinion, except for the almost 300 “communications” people working for the BC Liberal government, the numerous PR agencies with budgets of millions, reports of consultants like Ernst & Young, the army of “social influencers” and the captured corporate media that has come to rely on preferential treatment and handouts of packaged stories, leaks, hospitality and financial rewards. Nor would the well funded astroturfers and big business groups aim to divide and conquer the proponents of equal opportunity and protection of the environment.

Northern Insight has previously spotlighted the generous treatment of senior public servants. For example, the top five executives at BC Investment Management Corporation went from $1.9 million in 2007 to $5.8 million in 2014, an increase of 310% for people already earning in the high 6-figures. Compare that to a “greedy” school teacher earning in the mid 5-figures who, after three years of 0%, gains 0% in the first year of a six-year agreement that totals 7.25%, certainly less than the rate of inflation.

While the thrust of this report from Ernst & Young is more for the big guys and less for the little guys, they did note the potential for political embarrassment when word spreads about overly rich compensation in government agencies that thumb their noses at restraint in executive suites. They note one that Northern Insight revealed,

“In 2013, it was made public that BC Ferries CEO Mike Corrigan made more than the top three Washington State Ferries executives combined.”

By the way, Corrigan made about double the combined earnings of the three highest paid WSF executives. Apparently, there is no possible solution to that situation because, as the consultants report,

“Under its legislation, BC Ferry Authority is only required to align executive compensation in BC Ferries to peers in Canada which thereby excludes Washington state ferries.”

Addendum:
A Pulitzer Prize winning article by the Wall Street Journal in 2002 demonstrates that runaway compensation for executives has been a fact of life for many years. Fuzzy disclosure rules and incomplete public information enable business leaders to focus their best creative energy on their own pay packages.

Other good reads:

Fatter Cats: Executive Pay and American Inequality

Top 10 highest paid hedge fund managers

Ten Highest Paid CEOs

Executive compensation: Canada’s 100 top-paid CEOs

Full Story »



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