Executive pay in Canada is outpacing the average worker’s wage growth rapidly, raising concerns for investors, according to new research from the Shareholder Association for Research and Education (SHARE).
The Vancouver-based research firm reports that its study of the executive compensation practices of 135 Toronto Stock Exchange-listed companies shows that median pay for top executives has grown at double-digit during over the past couple of years while the average worker has only seen modest increases in his or her remuneration.
SHARE’s research found that executive pay rose by 10.7% between 2015 and 2016, and by 15.3% the following year. In contrast, the median wage for Canadian workers grew by just 1.6% from 2015 to 2016 and by 2.3% in the year after that. For CEOs, the disparity with the average worker was even more dramatic, as median CEO pay increased by 16.7% from 2016 to 2017.
The much faster growth rate for executive pay is exacerbating income inequality, which represents a concern for some investors, SHARE reports.
“The institutional investors that work with SHARE are paying attention to inequality because evidence shows that too much inequality can weaken economies, stall growth and contribute to social and political instability,” the SHARE report states.
The group adds in the report that companies “need to find a healthy balance between paying executives, reinvesting in the company, paying their other employees and rewarding shareholders. Doing this will allow them to maintain their productivity and retain the stable, motivated workforce necessary to remain profitable for the long term.”