Low pay, high risk should be transparent about executive and Early in the pandemic, there was a sudden and widespread reali- employee pay, and connect bonuses to the zation that grocery workers stocking shelves were, in fact, essential organization’s success at meeting various workers. But it also became clear that many were paid at such a low ESG and sustainability-related targets that rate, they weren’t earning enough to cover their rent and basic costs. the company has set, Hatanaka said. To do When people are not paid a living wage, corporations are “headed so, he added, it’s more important than ever straight for a huge chasm,” said Roger Martin, professor emeritus of to have several independent board members strategic management at the University of Toronto’s Rotman School with expertise in corporate compensation. of Management. “Directors, if they were really responsible, would The board’s compensation committee say ‘We’ve got to be a force in the opposite direction.’” needs to work closely with management to When it comes to compensation, low-end wages are the most enshrine the principles that ensure fairness significant problem facing directors of corporations. The wage gap at various levels within the firm, while also of hundreds or thousands of times salary between executives and maintaining competitiveness in the compa- workers is “a red herring” Martin said. “It’s a ratio for journalists. ny’s sector. The appropriate compensation It sounds horrible, but it’s not. If we took executive compensation structure should include not just the salary down, but didn’t raise wages of the low end, I wouldn’t say the component, but other variables, such as ex- world has gotten one iota better. tended health benefits, vacation time, and “The real problem is [pay] that people can’t live on. I think there pension contributions, said Hatanaka, who is a potential corporate crisis coming of society revolting over that.” also serves as vice-chair of the electronic So if directors want an environment where their company can suc- trading company ICE NGX Canada Inc. ceed, they need to realize low pay is a “flash point” and do some- Good board governance also means en- thing about it, he said. suring that executive compensation is as Studies have shown that when companies give workers precar- transparent as possible and in line with ious jobs with irregular hours, low hourly pay, no benefits and no amounts paid across the sector in which training, this results in an environment where there is poor quality the company competes, said Hatanaka, work, including more errors and weak customer service, because who noted that the compensation gap in employees have too many worries and insecurities, he said. some sectors is more acute than in others. In contrast, “If you pay them well, they do a much better job, For example, the health care and universi- make you much more productive and much more profitable,” said ty sectors in Canada feature a relatively egal- Martin, who noted that directors in the United States are currently itarian distribution of compensation that presiding over 53 million low-wage jobs, in which the median take is disclosed for a wide range of executives, home pay is under US$18,000 annually. compared with the financial services sector, To try to correct that inequity, board members need to challenge where only the very top earners have their executives to make sure they pay workers a living wage. Where compensation publicly disclosed, he said. shift work is involved, employees should be receiving their sched- ules well in advance. Workers in retail are sometimes assigned their Pulling back the curtain shifts just the day before, creating disruption for families – espe- Pay equity and transparency are hallmarks cially single mothers, Martin said. of being a good business, said Allison Ven- “There are all sorts of economic studies that say what a living ditti, the founder of Moms at Work, an edu- wage is, and as a director I’d want to know ‘What employees are be- cation, advocacy and community-building low that? And what is our plan to get them up to a living wage?’ If organization in Toronto that helps women directors are not doing that, they are hastening the crisis,” he said. network for job success. But while executive pay is, in many ju- Board awareness risdictions, legally required to be disclosed, Demographics and technology are putting a bigger spotlight on the there needs to be greater disclosure about wage gap. Younger generations, for instance, have “seen the Inter- why executives make what they do. Boards net democratize information [and] flow through social media in need to set expectations on what they think a way that’s given them broader access to the environmental and is realistic and meaningful for executive com- social issues of the day,” said Bill Hatanaka, who serves as chair of pensation. For example, “People are taking Ontario Health, a provincial agency for co-ordinating health care. great issue with golden parachutes,” those “They want their firms to demonstrate a social conscience and to massive payouts top executives get when they follow through on that commitment in a meaningful way.” leave a company, said Venditti, who is also a For an organization to be considered socially responsible today, it career coach and human resources expert.