Canada’s highest-paid chief executive officers saw their incomes soar to pre-recession levels in 2013, a new survey finds.

The top 100 CEOs earned on average $9.2 million in salary, bonuses and stock options, the second-highest level since 2007, the year before the global financial crisis hit, the Canadian Centre for Policy Alternatives says.

In comparison, the average Canadian earned $47,358 in 2013.

The list of high-flying executives was led by Gerald Schwarz, CEO of Onex Corp., who earned $87.9 million in 2013, most of it in stock options. Nadir Mohamed, who was then CEO of Rogers Communications Inc., earned $26.7 million. Michael M. Wilson, of Agrium Inc., earned $23.8 million.

All five CEOs of Canada’s biggest banks were in the top 30.

Only three of the highest paid CEOs were women: Nancy Southern, at Atco Ltd. in Calgary and Linda Hasenfratz at Linamar Corp. in Guelph, who both run family-owned businesses; and Marigay McKee, who was named chief executive of Saks Fifth Ave. after the U.S. retailer was bought by Canada’s Hudson’s Bay Co.

The increase in average CEO pay at a time when public outrage over the widening wealth and income gap is growing came as a surprise, said the report’s author, economist Hugh Mackenzie.

“Despite the recession, the public outrage, the criticism of political leaders and the devastating analyses of key business thinkers, the practice of compensating Canadian CEOs has not changed perceptibly since the global economy meltdown,” Mackenzie wrote in the report.

Indeed, the income gap widened in 2013, according to the report by the progressive Ottawa-based think tank, which began tracking executive pay in 2005.

Canada’s highest-paid CEOs earned 195 times the average Canadian in 2013. That’s up from 105 times in 1998, the oldest date for which comparable figures are available,

The report is the latest to demonstrate an issue of increasing public policy concern.

Indeed, a growing list of policy heavyweights — from the Organization for Economic Co-operation and Development to Canada’s TD Bank — has noted that when the poor get poorer, the whole economy suffers.

The increase in executive pay in 2013 was partly due to the big jump in Schwartz’s compensation, which skewed the average, Mackenzie noted. However, even the lowest-paid CEO on the list earned more in 2013 than in 2008, he said.

“The other general explanation is that there is a piece of the Canadian corporate elite that surfs on crude oil. Keep in mind this was 2013, when oil prices were really high. So there was probably a bit of uplift from the energy sector,” he said in an interview.

While little data is available on CEO pay prior to the 1990s, it is generally accepted that the ratio of executive pay to average pay in the late 1980s was 40:1 in the U.S. and somewhat lower in Canada.

That’s when compensation experts came up with the idea of granting a portion of CEO pay in stock options, in which executives are granted options to buy shares at a “strike” price, usually the current market value of the share. Executives can’t “exercise” the option until a future date, at which time the share might be worth more or less than the original strike price.

If the shares are worth more, the executive can opt to “buy” the stock and then immediately sell it at the new, higher value. If they are worth less, he or she can simply let the option expire at no cost to them.

Boards of directors were sold on the idea that options would more closely link executive pay to company performance. Instead, the practice encouraged share price volatility at the expense of long-term value, critics say.

Among other things, they say, stock options have encouraged executives to cut costs, lay off staff, sell assets and merge with other firms — all to boost the share price in the short term, often at the expense of the company’s future value.

Loading... Loading... Loading... Loading... Loading... Loading...

They have also led to the rise of activist investors and hedge funds that buy shares in companies with the goal of splitting them up in order to unlock shareholder value.

Three-quarters of the top 100 CEOs on the list received a portion of their compensation in stock options. The average value of those options was $3.16 million per executive.

Despite growing recognition executive pay is a problem, voluntary efforts to rein it in have met with limited success, Mackenzie says.

“If you put together the traditional clubby nature of CEOs and boards of directors, add to it public salary disclosure and the role that compensation consultants play in the process and then layer on top of that an evolution of investment markets toward a shorter and shorter time horizon, and basically there are not enough of the right people who care enough to do anything about it,” he said in an interview.

In other words, peer pressure isn’t working. Even the new “say on pay” votes — which give shareholders a say on executive pay — are having little effect, he said.

“It’s time to consider simple tax measures that provide a much more effective approach to closing the income gap in Canada,” the report for the think tank suggests.

The federal government could start by eliminating the estimated $500 million tax break the top 100 CEOs will enjoy on the stock options they’ve been granted but have to yet to exercise, the report says.

Stock options are treated like all other capital gains, which receive more favourable tax treatment than regular income, Mackenzie notes.

But he argues there’s no justification for doing so in this case, as stock options carry none of the risk associated with normal stock purchases, where the investor can lose money as well as gain.

“A dollar earned through a stock option is worth two dollars of salary income,” he notes. The difference “amounts to a public subsidy paid to these already highly compensated executives,” the report says.

Despite the apparent failure to shrink the income gap in 2013, Mackenzie says he believes it’s just a matter of time.

“I think the longer we go on with the middle income stagnating and the upper end of the income scale continue to rise without reference to gravity, the more likely we are to get to the point where the government will just change the rules,” he says.