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Compensation interference looms

With growing intolerance for the pay gap between workers and CEOs, expect more poking and prodding from the public – including government

By Todd Humber

Hello, compensation. Welcome to the limelight.

OK, so money has always been in the spotlight — “greed is good,” after all, as Gordon Gekko said in Wall Street in the 1980s.

But an avalanche of stories in recent weeks has really thrust the issue of who gets paid what to a whole new level.

In Switzerland, they even held a national referendum on what companies pay workers in relation to executives. The Swiss proposal would have limited salaries of top executives at an organization to no more than 12 times what the lowest-wage earner on the payroll takes home.

Two-thirds (66 per cent) of voters rejected the idea, which was floated by the youth wing of the Social Democrats. The basic thinking behind the ratio was that nobody at an organization should earn more in a month than one of its employees earns in a year.

The Swiss proposal came hot on the heels of efforts by Wagemark, a Canadian-based firm, to push for an even more restrictive, albeit voluntary, pay ratio of eight to one, as outlined in the Nov. 18, 2013, issue of Canadian HR Reporter. It pitches the ratio — and it has a logo companies that meet it can trumpet — as a sort of corporate social responsibility initiative.

If the Swiss measure had passed, it would have meant that an organization paying a worker $10 an hour (translating into $20,800 annually, assuming a 40-hour workweek) could pay its top wage earner no more than $249,600. The Wagemark ratio would restrict it to $166,400 annually.

In the United States, the Securities Exchange Commission (SEC) is mulling a rule change that would require companies to report the ratio of CEO pay to employees’ median compensation.

Executive compensation has clearly caught the public’s imagination, which is not surprising given the growing disparity between high income and low income workers, not just in Canada but around the world.

In addition to efforts to limit pay for top wage earners, there is also a movement afoot to increase the minimum wage — or even implement one. Germany doesn’t have an official minimum wage, but its minority government is being pushed towards a proposal that would introduce a wage of 8.50 euros ($12.12 Cdn).

Ontario is currently undergoing a navel-gazing exercise about its minimum wage, and the Ontario Chamber of Commerce has come out with a strong endorsement for tying it to the Consumer Price Index — a move that makes the wage more predictable and less political. If I were a betting man, I’d put my money on a CPI link becoming a reality in Canada’s largest province. It’s already happening in other jurisdictions — Alberta, Nova Scotia and the Yukon tie their minimum wage to inflation. Saskatchewan and Newfoundland and Labrador are also mulling it over.

But expect brouhaha at Queen’s Park in Toronto over whether the wage needs to first be adjusted upwards before the notion of tying it to inflation becomes law in Ontario.

Headlines also abound about the wages for workers in impoverished countries. H&M stepped into the fray this week by announcing plans to pay a fair “living wage” to some 850,000 textile workers by 2018 — and it chastised governments for acting too slowly.

The wage gap between rich and poor is growing universally, but the public tolerance for it is not keeping pace. While measures to limit executive compensation, or to vastly ramp up minimum wages or implement living wages, haven’t met with much success, one thing is certain: In the coming years and decades, there will plenty more poking and prodding of the corporate books when it comes to payroll from outside influences.

Todd Humber is the managing editor of Canadian HR Reporter, the national journal of human resource management. He can be reached at todd.humber@thomsonreuters.com or visit www.hrreporter.com for more information.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Todd Humber

Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber
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