Among the many faces of rising income inequality over the last four decades is the particularly unpleasant spectre of an explosion in pay for top corporate executives.
Well-paid chief executives, like the poor, have always been with us. But the pay gap between CEO and a typical worker pay has widened from 20- or 30-to-1 in the 1960s and 1970s to 200- or 300-to-1 in the last decade.
In the US, the average CEO at a Fortune 500 firm makes close to $40 million per year, according to Compustat, a global financial, statistical and market information database.
It is now fairly typical for a CEO to make $60 or $80 million, especially if their firms come into the windfall of a good year or a prized contract.
In 2019, the breakdown of Sagicor Financial’s compensation package was as follows:
• Dodridge Miller, Sagicor’s group president and CEO, who now lives in Florida, Miller, received a total of US$14,971,744 in compensation – that’s $29.4 million.
•Miller’s number two, Ravi Rambarran, Sagicor Life’s Trinidad-born president, who is a Jamaica resident, received a pay packet of US$4,876,208;
Group chief financial officer Andre Mousseau, a Canadian, received US$1,835,138 in total;
• President of Sagicor Group Jamaica Ltd, Chris Zacca, collected US$1,554,695; and
• President of Sagicor USA, Bart Catmull, received US$1,078,196.
A Sagicor information circular said Miller’s 2019 salary including housing and car allowances, was about $2.4 million or $213,419.16 (US$106,709.58) a month.
Included in his 2019 compensation was US$8,920,800 paid to him: US$1,345,800 delivered in cash for a reduction in salary, and US$7,575,000 delivered in shares for a substantial reduction in severance entitlement.
The announcement, then, that the insurance giant Sagicor has capped 180 years of its Barbadian story by paying its top five executives a total of $48,631,962 (US$24,315,981) in compensation last year, sends two messages. One is of a Barbadian success story – though the firm now belongs to Canada’s AlignInvest. The other signal is a distressing object lesson – the chasm of inequality.
French economist Thomas Piketty, who has been tracking wealth and income gaps going back to the dawn of the Industrial Revolution in the 18th century, has found that CEO pay is demonstrably lower in countries with a greater worker voice in corporate decision-making. The presence of a union tends to slow down runaway managerial pay, economic research suggests.
Sagicor’s shareholders certainly don’t have such a braking effect on CEO pay.
Yet, of all shareholders, Sagicor’s represent the most democratised of groups, the legacy of demutualisation as policyholders, who were always shareholders, of the former Mutual joined Life of Barbados and other policyholders as owning a piece of Sagicor.
Reducing CEO pay is not a punitive act of retribution against those who’ve done well. It is about narrowing the income gap while actually boosting corporate profits. According to the Economic Policy Institute, allowing greater shareholder control slashed the pay of CEOs and the other top four executives by half. EPI reckons it would increase profits by approximately 3.0 per cent on average. “This would still leave major company CEOs with paycheques in the neighbourhood of $10 million a year,” EPI said.
But if CEO pay was reduced to 1965 levels of 20 times the pay of an ordinary worker, profits would increase by 5.6 per cent.
Only the last year, the Prime Minister expressed “regret” that after 170 years, Sagicor Financial Corporation, successor to the Barbados Mutual Assurance Society, re-domiciled to Bermuda in 2016. The timing was ominous: Barbados had just been slapped with a downgrade of its sovereign credit rating to ‘B’ from ‘BB+’ by ratings agency Standard & Poor’s.
Ironically, Miller and Rambarran were made to accept smaller pay packets in line with Canadian practice among public companies as Sagicor listed on the Toronto Stock Exchange last December.
But in a world where bosses have seen their income mushroom by 940 per cent since 1978, while worker compensation has risen by a paltry 12 per cent during the same period, the average low and middle-income worker continues to bear a disproportionately heavier tax burden and a declining value and quality of the public services they pay for and need even more.
With the slashing of corporate tax rates to a near-negligible two per cent in the last year, these “golden parachutes” to companies have the effect of pouring salt into a festering wound.
We believe it is time for the Government to turn its attention to how to achieve greater equity between what the bosses earn and what the workers who built their wealth are actually worth. This gap has been large and continues to widen.
We need not advert further to the social ills that a large and persistent gap between the haves and have-nots engenders.
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