Finance Minister Jim Flaherty rarely gets a chance to rein in corporate high flyers who fail to meet their business obligations. Last week he did — and he made the most of it.

Air Canada, a federally regulated company, sought a 10-year extension of the deadline to return its pension plan to solvency. It is now $4.2 billion in the hole. Flaherty gave the airline a seven-year reprieve but attached strict conditions: a freeze on executive compensation, a ban on special bonuses and management incentives, and a prohibition on dividend payments or share buy-backs.

This will hit Air Canada’s senior executives where it hurts. President and CEO Calin Rovinescu took home $4 million last year. Four of the company’s vice-presidents pocketed more than $1 million. The firm eked out a modest profit of $53 million.

The men at the top did not complain. Without the pension rescue, the company would have been in immediate financial danger. But it came at a high — and carefully targeted — price.

“By taking this action, we are ensuring that Air Canada remains viable, that thousands of jobs are protected and the service is there when Canadians need it,” Flaherty said in a written statement.

Most private companies are not federally regulated. But Flaherty set a clear example for his provincial counterparts and sent a strong message to corporate Canada: for companies with underfunded liabilities, the belt-tightening should start at the top.

This was a welcome departure from the uncritically pro-business stance the Harper government has taken in the past. More than that, it signalled that the time is ripe for a national debate on executive compensation.

Last year, 65 senior executives in Canada made more than Rovinescu. The highest paid, Michael Pearson of Valeant Pharmaceuticals, took home $36.3 million. For most Canadians, it was a lean year: the economy scarcely grew, jobs remained scarce, the median income was flat, and 97 per cent of defined benefit pension plans (the kind that got Air Canada into trouble) were underfunded. But at the top of the corporate apex, it was a lucrative year.

The primary responsibility for holding the line on executive pay lies with corporate directors and shareholders. But Flaherty gave them a sharp and unmistakable prod.

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