There is however, one class of government employee that has done remarkably well. It does not involve nurses, paramedics and other vital healthcare workers. Nor does it include professional staff who should be working in natural resource, environment and finance ministries, nor school teachers who have been a favourite punching bag for a Premier who sends her child to an expensive private school few citizens can afford.
It is the management class, a small group of public servants, and one that is treated royally. Holding down directorships and other appointments that provide separate remuneration, some top earners only work part-time for British Columbia.
The United Kingdom’s High Pay Commission examined trends over 30 years and cited the example of Barclays, where top pay is now 75 times that of the average worker. The commission concluded that rich ancillary rewards are now a routine part of executive pay rather than dependent on performance. Among the driving forces:
“human nature, aspiration and endeavour are seen through a prism of self interest, or as some would put it “greed” as ever larger rewards are required to generate performance from individuals at the top of companies whose predecessors but a generation ago did the job for a tenth of the pay.
…As pay escalates for those at the top it creates a new point of comparison – a new norm. Executives look to finance,finance to private equity, and private equity to footballers – each proclaiming the other is where the problem lies.
Yet, research demonstrates little relationship between pay and performance. The notion of corelation is built into the philosophy of management and unquestioned because decision makers and overseers are almost exclusively drawn from groups who are beneficiaries of the mantra. As in a game of playground leapfrog, people take turns advancing forward. This self reinforcing cycle ratchets up executive compensation. According to business writer David Bolchover,
It’s not a manifestation of capitalism, it’s a corruption of capitalism. People are creaming off the benefits without taking any risk. It’s entirely right that people who improve the economy and people’s lives and take risks get well paid, but these people are not taking risks and getting a huge pay packet based on a myth.
“Evidence does not suggest that performance related pay is always actually linked to performance.”
In British Columbia, pension funds create an unprecedented pool of public capital: about $115 billion. But, there is little oversight and no fund placements or guidelines for investment are subject to citizen review. Members of the legislature pay zero time evaluating investment practices and philosophy and, given the absence of independent review, the potential for personal gain and misuse of funds is significant. bcIMC invests in fossil fuels, tobacco, deadly arms, gambling and companies involved in criminality and unethical practices.
In this blog, I’ve pointed out repeatedly that executive salaries and administrative costs of the Washington State Investment Board are about one-third of those paid by bcIMC. Over time, particularly when currency exchange gains are removed, the American agency has had superior results. (From 2011 to 2014, bcIMC’s American dollar investments increased 15% by exchange gains alone.)
As you scan the list of payments to bcIMC executives, consider the BC government’s financial treatment of other public servants. Paramedics, for example, look forward to five years of annual wage increases that average about $7 a week while, 20% of bcIMC staff averaged raises of $800 weekly and as much as $4,000 a week, in each of the past five years, during a period of so-called restraint.
Consider also if bcIMC is an out-of-fashion old-boys club. None of the six highest paid people are female and only seven of the top paid 40. Yet their Annual Report paints a different picture. The “global governance team” is pictured as one man and five woman. In the words of Phaedrus, “Things are not always what they seem…”
Categories: BC Investment