BC Ferries

Carry on cruising, carry on regardless

Our friends at the helm of BC Ferries are in the news again over executive compensation issues. Now subject to Freedom of Information, BC Ferries must release salary information that was previously secret. Recent data led Globe and Mail reporter Tamsyn Burgmann to write:

“Senior managers at BC Ferries are hauling in hefty salaries their counterparts at Crown-owned corporations can only dream about.”

Despite a finding by the Comptroller General that excessive salaries resulted from a flawed process in which the recipients helped select the comparators used as benchmarks, their flawed salaries were continued, exempt from rules that apply to new hires.

One scenario suggested to me by a mid-level employee is that top managers of BC Ferries are being rewarded for silence, in the same way the brass of BC Rail were allowed to stay on earning salaries at the top level of public sector executives even though the railway they managed had been sold years before and almost no employees remained outside of the executive offices.  Ferry insiders believe the FastCat aluminum catamarans were sold for less than scrap value and parked in North Vancouver for years solely to strengthen BC Liberal claims that the ships were a giant mistake by the preceding NDP government. More about this HERE.

If you question whether or not the Pacific FastCats have been a continuing part of BC Liberals’ strategy, check out Vote Smart BC, an anti-NDP rant maintained by Philip Hochstein’s Independent Contractors and Businesses Association of B.C. This website has an inane feature: Race a Fast Ferry. Hochstein, a bounteous booster of Liberals, is behind American style attack ads intended to raise fears about the recall of Victoria MLA Ida Chong.

In another matter, internal reports uncovered through FOI give a different version of the story about the  Queen of Nanaimo dock crash in August, 2010.  David Hahn and flak Deborah Marshall initially blamed crab trap lines for the causative fault but BC Ferries internal reports raise concerns about vessel maintenance and safety practices and makes clear the BC Ferries effort to blame crab lines was incorrect, which surprises no one with marine experience.

The following from Northern Insights was published August 13 2010:
——————————————————————————————-

Remember a year ago when Shirley Blond, Liberal ditz responsible for BC Ferry Services Inc., claimed she was ‘shocked’ to learn that CEO David Hahn was drawing a seven figure salary and his four lieutenants were taking another $2 million plus between them. That led to the Cabinet sending in a Comptroller General’s hit team, who concluded:

“compensation paid to the executive team members of BCFS in 2008/09 was significantly higher than executives of large public sector entities.”

Salary levels had been set by the BC Ferry Board after a review of comparators that included Coca Cola, Ford, Nike and other huge companies the Comptroller General said were inappropriate.  That the salary determination process was flawed is not surprising since, according to the Comptroller General, the salary recipients at BC Ferries had:

“significant input into the selection of the comparators a consultant used as benchmarks, which raises questions about the independence of the benchmarking process.”

A year after Bond’s feigned outrage, it is worth examining progress in rationalizing excessive ferry salaries. Perhaps the action was hard but Liberals know about hard choices. PABsters told us regularly about the need for hard choices when Liberals cut off services to disabled, hiked long term care rates for the elderly to the highest in Canada, diverted lottery funding from community groups, privatized thousands of civil service jobs and matched Canada’s lowest minimum wage to the country’s highest cost of living. Yes, Liberals make the hard choices when it comes to hospital cleaners and utility or medical service plan administrators. Apparently though, not for the chosen ones earning wages 50 times higher.

Sean Holman at Public Eye writes Ship for BC Ferries executives has come in, showing that despite last year’s huffing and puffing, the boys at BC Ferries are even richer. Rather than being slashed or frozen, executive salaries are up again. For CEO David Hahn, nearly 10% more, bringing his annual remuneration to almost $1.2 million.

The BC Ferries situation was not hard to resolve. After all, when the ferry folks feathered their own nests using a flawed compensation process, they completely ignored the executive pay history at the ferry service. They didn’t follow past practices, they established new ones. Clearly, they were cheating. It was a program of self-improvement – at our expense.

That Liberals allowed this is no surprise to observers of the Campbell government over the last decade. Their programs are changing the social landscape through regressive income redistribution. This is not an unintended consequence. Since 2001, while BC Liberal policy has aimed to suppress wages of common workers, the rewards to elites have grown dramatically.

Executive compensation at BC Ferries is wildly out of line.

I’ve written before about how the CEO of Washington State Ferries was paid $141,000 in 2008 but I accept that while that is a valid comparison, it is not excellent. WSF is smaller, with less challenging service needs and it has not been perceived as a well managed corporation for some years. Regardless, it sets a base standard.

Tom Kelly, Executive Director with Irish Continental Group, is responsible for Irish Ferries and earns total compensation of $359,000 CAN (269 EUR). ICG is involved in other shipping and logistical operations, unlike BC Ferries. As part of its fleet, Irish Ferries operates a ship with the largest car carrying capacity of any ferry in the world.

At the other end of the comparison scale would be Stena AB, a Swedish company involved in shipping, ferry lines, property management and numerous other enterprises. Stena is much larger, with over $13 billion in assets while BCF has less than $2 billion. Stena’s annual revenues exceed $4 billion and the local ferry company generates less than one fifth of that amount.

Stena Routes

So which company pays higher salaries to its executives? The large private company with international operations or the public monopoly that does most of its business within hollering distance of head office? You probably guessed already. Remuneration paid to BC Ferry’s President and Vice Presidents totals over $3  million in 2009. According to documents filed with the American SEC, remuneration paid to the Stena CEO and Executive Vice President totaled $1.56 million in 2009.

To repeat, David Hahn is paid almost eight times the salary of the WSF CEO and is paid more than the CEO of Stena AB, an international corporation far larger than BC Ferries.  By any measure, BC Ferries is paying far too much executive compensation, particularly since operations of the company are no better managed than in earlier years. The Spirit Class ferries built in the early nineties remain the largest and most efficient ships in the fleet and outperform the Coastal Class ferries acquired more recently by Mr. Hahn and his helpers.

One minor point to add is that BC Ferry executives, as part of their compensation packages, which include luxury cars, private healthcare accounts and pensions well beyond ordinary, also get ferry system passes for themselves and their families. They are shielded from paying the outrageous fares imposed on the rest of us.

10 replies »

  1. Campbell government approval of the “pillaging of the public purse” – how corrupt is that?

    Notice how the MSM is very quiet on this practice and all it's implications.

    Thanks Norm – an excellent article.

    JW

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  2. Norman,

    You can't imagine how greatly I appreciate your work on BC Ferries.

    As a former Gulf Islander, I watched the ferries and the whales every day from my home, and enjoyed the 40 minute ferry trip to Swartz Bay as an opportunity for coffee with friends and neighbours, catching up on local news. BC Ferries was part of our good, healthy lives. More than that … BC Ferries always seemed symbollic of the spirit of who we are.

    Not so different from BC Rail, which was our inland lifeline, doing well, with a special ability to support and protect the citizens and industries of this province.

    It's horrible to watch the deliberate reduction of these values. I don't even know who owns BC Ferries now. Or how we could apply our collective toes to the ample behind of Mr Hahn and send him into exile.

    How about we take back our Province?
    .

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  3. WSF is smaller, with less challenging service needs and it has not been perceived as a well managed corporation for some years

    I'm certain you aren't implying that BC Ferries under Admiral Hahn IS well managed, you're not, are you? Increased costs to the public combined with deteriorating service standards is hardly good management.

    As a long ago resident of Haida Gwaii, I was disgusted with the lack of concern for the needs of the north coast in the aftermath of the sinking of the Queen of the North was shameful to the nth degree. There were so many options for interim service until the Queen could be replaced that apparently weren't even considered by this cracker-jack overpriced team of A-holes.

    On the other hand, I'm confident that many Islanders, those not dependent of tourist dollars, enjoyed the lack of mainlanders cluttering up the highways and by-ways and heck, sports fishers and such could still fly in and out as usual. Only the locals who may have wanted to visit the mainland WITH their vehicle were seriously inconvenienced.

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  4. WSF was the subject of KING News scrutiny where engineering staff apparently was playing self-interest games with overtime payments. Additionally, the new 64-car ferry Chetzemoka cannot be delivered because of excessive drive line vibrations. The vessel was already behind schedule through WSF design errors.

    At least WSF builds ferries in Washington so capital dollars get recirculated in the local economy instead of being shipped offshore.

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  5. What more can we expect of a “person” (can't bring myself to call him a man, sorry) who's willing to sink the BC shipbuilding industry, and their contributions to our economy for his own ego?

    From the BC Shipyard Workers website:

    “David Hahn, president of BC Ferries told BCTV Friday while local industry “can and should” build three new Super C-Class vessels for his fleet, he is prepared to send 2,000 jobs and half a billion dollars to an overseas company in defiance of political pressure from local industry.”

    Don't look to the NDP for help on this one either…Dan Miller is part of the problem.

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  6. What else can you expect hahn must have a lot of info gordo is trying to keep secret,thus the blackmail wages its time to wake up and smell the coffee because hes not the only one collecting these ransoms,yes ransoms surely you don't think there wages do you?

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  7. Your article led me to me to searching the history and other stories written about BC Ferries & Mr. David Hahn. First of all let me say that Mr. Hahn IS NOT WORTH over a million dollars a year. In fact, no one working in a government/private operation should be paid that kind of money. Running an operation like BC Ferries is not rocket science and I guarantee you, there are plenty of highly qualified CANADIANS that can do the job for far less and most of all they would be very thankful. You see we live in a society that people like Hahn ( with the support of others in the game ie: Politicians) can make people that they're entitlent is a result of hard work and a successful resume. How we allowed this man ( and his politically appointed board ) to get away with such huge wage increases is beyond me. But let me say again, he IS NOT worth a million tax dollars a year ( not including the excessive benefits ). And if you believe that he can't be replaced, then you need a wake up call. I guarantee you, that if I was in charge ( politically ), the first thing I would do is give him his get away package and I guarantee you, once he's gone, the Ferry will still make it from Swartz Bay to the mainland.

    Guy in Victoria

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  8. The modern CEO of any corporation is very capable of incurring and managing debt. Big debt. That is how it is done nowadays. The bigger the debt and the more creative the accounting,the larger the salary and bonuses. That is why Mr Hahn is getting a salary increase and bigger money year over year. He is putting the BC Ferry Corp into a scary place, full of risk and in danger of financial overload!! Warp speed ferries!

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