House of Commons Debates VOLUME 148 Ï NUMBER 125 Ï 1st SESSION Ï 42nd PARLIAMENT OFFICIAL REPORT (HANSARD) Friday, December 9, 2016 Speaker: The Honourable Geoff Regan CONTENTS (Table of Contents appears at back of this issue.) 7883 HOUSE OF COMMONS Friday, December 9, 2016 The House met at 10 a.m. Even the CEOs themselves do not really benefit from this trend. An extra million dollars does not make a material difference in their standard of living. Really, they are concerned about their relative position compared to other CEOs, so if a CEO gets paid more it Prayer increases his or her position on the league tables only by reducing the position of other CEOs. Our economy would be stronger, and even corporate Canada itself would be better off with government GOVERNMENT ORDERS regulation to limit CEO compensation. Ï (1005) [English] Bill C-25 includes some minor improvements to corporate governance, but what is missing is the mandatory and binding say CANADA BUSINESS CORPORATIONS ACT on pay provisions that we find in other advanced economies. Currently, Canadian companies can consult shareholders on The House resumed from November 25 consideration of the executive compensation, but they are not bound by the results of motion that Bill C-25, An Act to amend the Canada Business those votes. The NDP is going to propose amendments to Bill C-25 Corporations Act, the Canada Cooperatives Act, the Canada Not-for- to include mandatory and binding say on pay provisions to limit profit Corporations Act, and the Competition Act, be read the second executive compensation. time and referred to a committee. The Deputy Speaker: When the House last took up debate on the question, the hon. member for Regina—Lewvan had seven minutes remaining in his remarks. Beyond the scope of Bill C-25, the federal government can and should also address out-of-control executive compensation through Resuming debate, the hon. member for Regina—Lewvan. the tax system. I believe in giving credit where it is due, so I want to recognize that this government did modestly increase the top Mr. Erin Weir (Regina—Lewvan, NDP): Mr. Speaker, we are personal income tax rate. However, the government failed to close nearing the end of 2016. New Year's Day 2017 falls on a Sunday. the loophole that allows half of stock options to be exempt from The first payday of the new year will be January 2. By around noon personal income tax. This stock option loophole delivers the largest on January 3, Canada's top 100 CEOs will, on average, have made as benefit to highly paid CEOs and corporate executives, so we need to much money as the average full-time employee will earn over the close that loophole to address executive compensation. entire year. In 2013, and again in 2014, Canada's top CEOs made an average of $9 million each. That means that the top CEOs made 184 times as much as the average Canadian worker. Something else that the federal government could do is to limit the This inequality is not only large, but it is growing. Figures on the amount of executive compensation that a corporation can deduct in top 100 CEOs only go back to 2008 on a comparable basis, but if we calculating its corporate taxes. look at the top 50 CEOs, an even more elite group, in 1995 they made only 85 times as much as the average worker, so there has been an explosion of executive compensation over the past two decades. Ï (1010) Why should we care if private companies choose to pay their CEOs a lot of money? If we take the 100 top CEOs, each making an average of $9 million, that is nearly $1 billion that is not being used The United States currently limits the amount of CEO compensa- to hire other employees, not being invested in machinery and tion that can be deducted in calculating corporate taxes to $1 million. equipment, and not being used for needed research and development. Unfortunately, this limit is not very effective in the United States Corporate Canada as a whole would be better off if it could pay because it does not apply to performance-based compensation, such CEOs less. However, individual corporate boards feel pressure to as stock options. However, we could easily apply a limit to all forms keep up with what CEOs of other companies are paid. This leads to a of executive compensation and ensure that they cannot be deducted circular logic that justifies ever higher executive compensation. in calculating corporate income taxes. 7884 COMMONS DEBATES December 9, 2016 Government Orders In conclusion, out-of-control executive compensation is a He also mentioned a problem with our tax system, where, unlike significant source of worsening inequality, and is a substantial drain other sources of income, only half of capital gains are taxed. This on our economy. The Government of Canada can and should address problem is more apparent when we look at how corporate executives this problem by strengthening corporate governance through Bill are compensated. Often their capital gains are not really investments, C-25, and also by implementing progressive tax reforms. but compensation. That money should be taxed in the same way that [Translation] their employment income is taxed. Mr. Guy Caron (Rimouski-Neigette—Témiscouata—Les Bas- [English] ques, NDP): Mr. Speaker, I thank my colleague from Regina— Lewvan for his excellent speech. Mr. Martin Shields (Bow River, CPC): Mr. Speaker, I appreciate the interesting statements that the member has made about this I would like him to comment further on what he said at the particular issue. I wonder if he might want to respond to a different beginning of his speech about how long it takes for a CEO to earn as group of working people who I know he cheers for, like the Regina, much money as an average employee in the same company. Saskatchewan football team, and many hockey players in the National Hockey League, who are paid more than CEOs. What does We hear a lot about the day when Canadians have earned enough he think of those people who make a considerable amount of money to cover their taxes. If I remember correctly, that is usually in July or more than the CEOs, in their profession? August. Too little is being said about this other extremely important indicator. I think it has gotten worse over the years. In the 1970s, the Ï (1015) gap between CEO pay and worker pay was much smaller. Mr. Erin Weir: Mr. Speaker, as I mentioned in my speech, the I would like to give my colleague an opportunity to talk more average of these top 100 CEOs makes $9 million a year, which is about something that I think is important, even though most vastly more than the average player for the Saskatchewan Rough- Canadians are unaware of it. riders or in the Canadian Football League generally, so I do not Mr. Erin Weir: Mr. Speaker, I thank my colleague for his necessarily accept the premise of the question, but I believe that excellent question. there is a very similar problem with high pay for professional athletes. Part of the solution certainly is to increase the top personal He is right: we make a big deal out of tax freedom day, a day mid- income tax rate as the government has done. year by which, according to the Fraser Institute, the average Canadian has paid all of his or her taxes. There are a lot of problems The problem derives from the fact that people are being paid so with the way this indicator is calculated. much they do not really benefit from the additional money, it is all It is important to consider the value of another method, one about relative position. We have to pay a hockey player a lot because developed by the Canadian Centre for Policy Alternatives, which other hockey players earn a lot, and certainly there are more looks at how long it takes corporate executives to earn more than the equitable ways of distributing that money in our society. average worker. It happens very early in the year, around noon on [Translation] January 3, 2017. Mr. Gabriel Ste-Marie (Joliette, BQ): Mr. Speaker, I want to Mr. François Choquette (Drummond, NDP): Mr. Speaker, I am thank and congratulate my colleague from Regina—Lewvan for his pleased to rise in the House today to take part in the debate on Bill excellent speech. C-25, an act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Income inequality is at the root of our economic problems in Act, and the Competition Act. society, in my opinion. When the gap between the rich and everyone else becomes that wide, we end up with economic crises and all sorts It is always very important to review our laws in order to improve of social problems. Addressing income inequality should be one of them, and to ensure that we make them even more fair and that they the top priorities of this House. will foster gender parity. This bill is a first step in the right direction. My colleague talked about a more technical aspect that the public does not seem so familiar with. In the case of capital gains, only half The NDP will support enhancing the diversity of boards of of net gains are taxable, but when it comes to work-related income, directors and democracy for shareholders. one's entire salary is taxable.