After outcry, Air Canada says its top executives giving back bonuses
Air Canada says its senior executives have chosen to return their 2020 bonuses in response to “public disappointment.”
The airline company says in a news release the president and CEO, as well as executive vice-presidents of Air Canada, have volunteered to return their bonuses and share appreciation units.
Former president and CEO Calin Rovinescu, who retired in February 2021, says he will also donate his share to the Air Canada Foundation.
The statement does not include middle managers, whose bonuses made up more than $8 million of the $10 million bonus program, among those who are volunteering their bonuses.
Finance Minister Chrystia Freeland signalled her displeasure Wednesday over the multi-million-dollar packages handed out to the airline’s executives as the company negotiated a federal bailout, calling the bonuses “inappropriate.”
Freeland blasts Air Canada for paying $10M executive bonuses while receiving bailout
Last Monday, the airline disclosed its annual proxy circular to shareholders that gave the bonuses to people the investor document called instrumental in the airline’s survival over the past year as air travel plunged during the COVID-19 pandemic.
“Air Canada’s leadership team is completely focused on Air Canada’s recovery from the COVID-19 pandemic and preparations to welcome back furloughed colleagues and travelling customers as soon as possible,” Sunday’s statement says.
“The airline looks forward to continuing to work with all stakeholders, notably the Government of Canada on many fronts, including [on] the safe re-start of our industry.”
It’s unusual for public outcry to be successful in nudging C-Suite employees to return their bonuses, said David Macdonald, an economist with the Canadian Centre for Policy Alternatives.
He says the problem here is that restrictions on executive pay didn’t apply retrospectively to 2020.
Macdonald says there’s a problem in general in the corporate world, where bonuses are supposed to be performance based, but that doesn’t actually happen.
“We’re seeing this year, that after the facts, executives go back, change the compensation package so that they just exclude the impacts of bad things like COVID-19,” he said.
Outcry after government aid package
In April, Air Canada and the federal government agreed to a $5.9 billion loan package that includes money to help refund passenger tickets, but also capped executive compensation at $1 million until 12 months after the loan is fully repaid.
The government also paid $500 million for a six per cent stake in the country’s biggest airline, which Freeland said was done to ensure taxpayers could benefit once Air Canada’s revenue rises when regular travel resumes.
In early 2020, senior executives and 3,200 management employees voluntarily agreed to total reductions of $11.5 million in their base salaries, subject to compensation through share appreciation units that might allow employees to recover some of the foregone salary if the share price rises higher in December 2022 than December 2020, the company says.
Freeland and Transport Minister Omar Alghabra said Canadians “are right to expect responsible corporate behaviour — particularly with respect to executive compensation — from companies receiving government financial support during the pandemic.”
“While this situation could have been entirely avoided by Air Canada, we acknowledge this step in the right direction by the top five executives to repay 2020 bonuses and share appreciation units they received,” the ministers said in a joint statement released Sunday night.
“It doesn’t bother me at all,” Ian Lee, a business professor at Carleton University, said in an interview with CBC News.
“I can understand that it’s politically sensitive and the optics aren’t good but this has been studied.”
He compares CEO salaries to star athletes or musicians.
“The politicians that criticize this simply don’t understand that this is a very competitive market,” he said.
Lee points out the skill set for the type of work these executives do is quite involved.
“There is a market for their skills and they’re very unique skills — they’re running companies with 20, 30, 40, 50,000 employees,” he said.
“Here we are right next door to who? The largest economy on planet Earth. And if we go and start mucking about and legislating salaries or returns of these executives … we will lose them to the United States. It’s going to facilitate and encourage brain drain.”
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