As inflation pressures grow, Bank of Canada execs take home millions in bonuses: CTF

Despite its governor warning business leaders not to factor soaring inflation into worker compensation, Canada’s central bank handed out millions of dollars in bonuses to nearly all of its top executives last year.

According to documents uncovered by the Canadian Taxpayers Federation, all but two of the Bank of Canada’s 82 executives received some sort of “performance pay” in 2022, totalling $3.5 million.

Senior public servants in Canada earn both a base salary and “performance pay” — a two-part compensation program that offers eligible managers an opportunity to earn extra income based on performance metrics.

“The PMP (performance management program) encourages excellent performance in the senior ranks of the public service by recognizing and rewarding the achievement of results linked to business plans and government objectives and the demonstration of leadership competencies,” reads an explainer published by the Government of Canada.

Performance pay consists of “at-risk pay” — a variable amount that must be re-earned each year, and an additional bonus amount if performance goes above and beyond.

At-risk pay for agency heads or governor-in-council appointees ranges from 10.6 to 20.4 per cent, with bonuses between three and eight per cent.

Deputy ministers could earn an additional 20 to 30 per cent of at-risk pay, with bonuses between six and nine per cent, while chief executive officers of Crown corporations can earn at-risk pay bonuses of up to 33 per cent.

The average amount of compensation for each executive works out to around $43,700.

Franco Terrazzano, federal director of the Canadian Taxpayers Federation, said it makes little sense for central bank executives to be getting large bonuses when so many Canadians are suffering under punishing inflation and cost-of-living increases.

“Executives at the Bank of Canada shouldn’t be showering themselves with big bonuses when Canadians can’t afford gas, groceries or mortgages,” Terrazzano said.

“Most organizations don’t give 98 per cent of their executives bonuses when they have their worst year in four decades.”

Senior management at the Bank of Canada have received nearly $21 million in executive bonuses since 2015.

While speaking at an event last July hosted by the Canadian Federation of Independent Business, Bank of Canada Governor Tiff Macklem warned attendees against triggering a wage-price spiral by using high inflation as an excuse to raise wages.

“Don’t build that into longer-term contracts. Don’t build that into wage contracts. It is going to take some time, but you can be confident that inflation will come down.”

In economics, a wage-price spiral is a theory that blames rising prices on an increase in disposable income brought on by increased wages.

Canada’s consumer price index rose to a 40-year high of 6.8 per cent last year — the largest increase in inflation in over 40 years.

Canada’s current monetary policy framework states the agreement between the government and the Bank of Canada sets inflation targets at “two per cent mid-point of the one to three per cent inflation-control range.”

Last April, Macklem admitted to the Senate banking committee the bank had underestimated how strong inflation would strike Canada, and promised to make things right.

Economists, reported the Financial Post last year, levelled criticism at the central bank for its surprise decision not to hike interest rates last January, with some saying the decision puts the Bank of Canada’s credibility into question.

Last month, the Bank of Canada announced it would hold key interest rates near five per cent until the third quarter of 2024 — but won’t cut them.

Over the summer, the National Post reported that Bank of Canada employees earned $72 million in pay raises since the beginning of the COVID-19 pandemic, with $20 million in raises paid out just last year.

In a statement, the Bank of Canada reiterated its use of the performance management program, and that management who meet performance objectives are entitled to bonus pay.

“Our independent Board of Directors oversees the management and administration of the Bank, including our human resources policies,” the statement read. “Like many employers in the financial sector, we hire and retain within a highly competitive environment.”