This week I happened to receive a copy of Telus’ information circular. Included with the usual financial data is a disclosure of performance pay for the top executives. For example, at-risk compensation metrics for business unit performance — 15 per cent for “culture and brand,” 35 per cent for “customers first” and 50 per cent for “profitable growth and efficiency” — are reported for each senior executive. Because 2022 was not a particularly good year the performance awards dropped in value (although executives continued to reap more risky stock awards).

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Jack Mintz: We should dock the pay of politicians who break their fiscal promises Back to video

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Telus is not unusual in this regard. FW Cook’s survey of the top 250 corporation compensation packages reports that 83 per cent use formula-driven annual incentive plans. Of those three-quarters use profits and half use revenues as metrics. On average, almost a third of the incentive is based on individual performance, the balance on the organization’s performance.

Unlike corporate executives, politicians who make fiscal promises don’t have their pay docked for poor performance. In last year’s budget, Finance Minister Chrystia Freeland was eloquently adamant: “Let me be very clear: We are absolutely determined that our debt-to-GDP ratio must continue to decline… This is our fiscal anchor — a line we shall not cross.”

This year, however, she both raised the anchor and crossed the line. The budget forecasts a rise in debt/GDP from 42.4 per cent this year to 43.5 per cent next. Minister Freeland should have her pay docked. So should the prime minister and cabinet, who are jointly and severally responsible for the $43 billion deficit this past year despite a windfall of $29 billion in revenues.

This is not the first time a government promised to reduce the debt-to-GDP ratio only to have it rise. Liberal and Progressive Conservative governments periodically predicted declines in the ratio in the 1980s and early 1990s and failed each time. When Liberal Paul Martin took the reins at Finance in 1993, he committed to re-establishing the department’s credibility after several years of its having repeatedly missed its fiscal targets. To his great credit he succeeded.

Politicians’ compensation is not yet related to performance targets, but the bureaucracy’s is. In the federal government, performance packages apply to deputy ministers, agency heads, government-in-council appointees and Crown corporation CEOs. If targets are satisfied, performance pay can reach as high as 39 per cent of salary for deputy ministers and 33 per cent for Crown corporation heads.

Unlike with private company disclosure documents, however, voters would have a tough time understanding how performance pay is determined. Treasury Board provides data on how many executives receive no, partial and maximum at-risk pay and bonuses.  But — unlike in the Telus documents — it is not clear how the criteria are applied.

In the absence of transparency, it could be the bar is so low even the most underperforming bureaucrats are rewarded with bonuses. That didn’t seem to be the case during the Harper years. From 2011 to 2015, for example, typically only 10 per cent of deputy ministers received the maximum at-risk pay.  After 2015, the Liberals rewarded half of deputy ministers with maximum at-risk pay — an amazing performance turnaround in a short time!

In the latest reported year (2020-21), only 124 of 6,862 executives (1.8 per cent) did not receive at-risk pay while 14 per cent got the maximum plus a bonus. Performance pay costs taxpayers $107 million, with the average payout for those receiving an award being $16,000.

How performance pay is awarded is certainly a mystery. For example, the 153 executives — yes, 153! — at Finance Canada received the second highest average performance award at $19,200 in 2020-21. Only two per cent received no award at all. Yet that year the department had a very mixed record. It helped avoid a major recession in 2020 but excessive transfers to individuals led to a resurgence of inflation.

Performance pay at Transport Canada is a real puzzle. Having just had a flight sit on the tarmac for a half hour, followed by a 40-minute wait for luggage at Toronto’s dysfunctional airport, I find it hard to believe anyone in Transport Canada received performance pay. Yet in the year before the pandemic, when demonstrations put a stranglehold on railway transportation in Canada, 99 per cent of Transport Canada executives with at-risk pay received an average payment equal to what the rest of the government paid.

Bureaucrats do not make final decisions on policy, of course. Ministerial responsibility is key to democratic decision-making. And these days decision-making is highly centralized, a point strongly argued by Don Savoie in his recent book Government. If any decision-maker should be subject to performance pay, it is the prime minister.

Though we don’t yet dock ministers’ salaries for poor performance, voters do have the ultimate recourse: throw the government out.  But then a minister can retire with a gold-plated inflation-indexed pension. Not much of a financial penalty there.