Executive Compensation
Average compensation to the 100 highest paid CEOs of Canadian
corporations was recently estimated to be 209 times the compensation of
the average Canadian worker. The average compensation for the top 100
CEOs was $10.4 million in 2016; by contrast, the average Canadian
worker earned $49 738. In the United States this ratio is above 350, the
highest such ratio in the world. In contrast, these compensation ratios
were approximately 40 during the 1980s. Some economists argue that
these high earnings for top managers and executives have come at the
expense of lower wages and benefits for middle and lower-skilled
workers.
Superstar Theory
In a famous paper called “The Economics of Superstars,” U.S. economist
Sherwin Rosen argues that advances in communications technology allow
talented individuals in entertainment and sports to earn far greater
incomes than was true in an earlier era with less sophisticated
communications. A century ago the world’s best singer could physically
perform for only one paying audience at a time, perhaps a few hundred
people at most. Today that same quality of singer can have his or her
talents transmitted instantly to a global paying audience of millions of
people by means of Internet, TV, and radio. The demand for any given
superstar performer is thus far greater today than a century ago, and the
result is the kind of superstar earnings that we all hear about on the news,
with individuals earning hundreds of millions of dollars per year.