Challenging the one per cent

The Downside of Upsizing Bank Executive Salaries

31 March 2014

Toronto: Bill Davis is one Bank of Montreal shareholder who’s not happy to see his dividends being used to pay exorbitant salaries to top bank executives. In fact, he’s hoping other shareholders will agree with him when he addresses the bank’s annual general meeting in Toronto on April 1.

“Our global business model is broken. It has gradually fostered excessive levels of compensation for senior executives, placing them in a small elite who are drawing resources from our shareholders’ return and from other stakeholders,” says Davis.

Davis is a familiar face at these gatherings of shareholders. He regularly attends annual general meetings of all five major Canadian banks. In this instance he will be exercising his own proxy as well as representing The United Church of Canada. The United Church has asked Davis to add its voice to the effort to apply shareholder influence toward a more responsible program for executive compensation because it shares Davis’s concern about income inequality.

Davis’s pitch every time he speaks at one of these annual meetings is for banks to consider incorporating vertical benchmarking—comparing executives’ salaries to the society where their friends and neighbours live and work, to their staff, and to executives in other occupations—when they calculate executive compensation.

He says the banks’ overreliance on horizontal benchmarking—comparing salaries only to other bank executives who are also already excessively remunerated—has been a major factor in the past 20 years in spiralling senior levels of remuneration upwards.

“How do compensation packages of bank executives compare with the senior people at major universities or large medical facilities over the past 20 years? What role does cost of living or the consumer price index have? And, should there be a base level where all staff is protected but above which the percentage increase is entirely merit based?” asks Davis.

He also wonders why, as shareholders, “we passively accept the premise that senior executives are only motivated by excessive remuneration far beyond the range that senior leaders received 20 or 30 years ago.”

He notes, as well, that 21 pages of this year’s BMO proxy circular are devoted to justifying the enormous remuneration lavished on the bank’s senior people. “Where is there any reference to the real world where the 99 percent live and work?” asks Davis.

For further information:

Mary-Frances Denis
Program Coordinator, Media and Public Relations
The United Church of Canada
Tel: 416-231-7680 ext. 2016
Toll-free: 1-800-268-3781 ext. 2016
E-mail: Mary-Frances Denis

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