Corporate boards are often made up of directors who know each other and sit on each other’s’ boards and so, have an incentive to approve higher pay packages, according to a new study. They often form exclusive networks of corporate acquaintances and cannot be trusted to keep CEO pay in check, say Prof. Fei Song of Ryerson University and Chen-Bo Zhong, an associate professor at the University of Toronto.
Average Canadians did not get that kind of raise
Criticism of executive pay has escalated since new laws in North America forced publicly listed corporation to reveal what they pay their leaders. Recent studies have revealed that CEO pay has increased at twice the rate for average Canadians since 2008 and the average Canadian CEO pay jumped 11 per cent in 2013.
Besides just making ordinary Canadians angry, the study says the big payouts take resources away from other areas of their corporations, including investment, employee pay, and shareholder returns.
Song recommends companies give shareholders more powers to monitor board meetings to keep pay compensation for CEOs in check.
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