Life in Canada

TORONTO - By the time you finish lunch on Thursday, Canada's top paid CEOs will have already earned the equivalent of your annual salary.

It may be hard to swallow, but according to an annual review by the Canadian Centre for Policy Alternatives, by 1:11 p.m. on Jan. 2, the average top paid Canadian CEO will have been earned as much as the average full-time worker's yearly income.

The review found the average compensation among Canada's top 100 CEOs was $7.96 million in 2012. This compared with the average annual Canadian worker's salary of $46,634.

The centre says CEO pay for Canadian public companies listed on the Toronto Stock Exchange has ballooned by 73 per cent between 1998 and 2012, the latest figures available.

In contrast, the average Canadian full-time worker's annual salary has only grown by six per cent during this period.

This amounts to the country's top 100 highest-paid CEOs making 171 times the earnings of an average Canadian wage — a jump from 105 times in 1998.

Meanwhile, minimum wage workers employed for 40 hours a week earned an average of $20,989 a year in 2012.

"Compensation packages paid to chief executive officers have come under intense scrutiny and pressure from shareholders, the media, and the general public. There is no clear relationship between CEO compensation and any measure of corporate performance," said the report's author Hugh Mackenzie in a statement.

"But despite the scrutiny, the pay of CEOs in Canada and elsewhere has proven to be remarkably resilient."

The review found the top-earning executive in Canada was the head of the Canadian Pacific Railway (TSX:CP.TO - News), Hunter Harrison, who was paid $49.1 million in salary, stock options and bonuses in 2012.

Harrison, who retired as chief executive at Canadian National Railway Co. (TSX:CN.V - News) in 2009, saw his pay packet boosted some $44.5 million to make up for pension and other payments that CN refused to make when he took the top job at the rival railway.

The second-highest paid CEO was James Smith of Thomson Reuters Corp. (TSX:TRI.TO - News), who took home $18.8 million, followed by former Talisman Energy Inc.(TSX:TLM.TO - News) chief executive John Manzoni who pocketed $18.67 million in 2012.

The lowest-paid CEO on the top 100 list was Lino A. Saputo, of Montreal-based dairy Saputo Inc. (TSX:SAP.TO - News), who earned $3.85 million.

The review also pointed out that three women made it onto the list in 2012 — Linda Hasenfratz, CEO of Linamar Corp. (TSX:LNR.TO - News), Dawn Farrell, CEO of TransAlta Corp. (TSX:TA.TO - News), and Nancy Southern, CEO of ATCO Ltd. (TSX:ACO-X.TO - News).

In 2011, only one female executive was in the top 100 ranking.

The Friday before a long weekend is probably not the best time to hold a rally, but a rally to build support for the big three telecom carriers in their war against Verizon’s possible entry into Canada? That was truly a bad call.

And yet, as I write these words, members of the Communications, Energy and Paperworkers Union and the Canadian Auto Workers (now called Unifor) are getting ready to set up in the middle of downtown Toronto. “No to Verizon!” the poster reads, with an ‘X’ crossed out over the U.S. telecom giant’s name as though it were a ballot. This comes just a few days after Verizon reportedly began trying to buy out its longtime partner Vodofone’s stake in its wireless operation.

This is a $130 billion transaction which some analysts believe may diminish the chances of the company entering Canada and bidding in the forthcoming wireless spectrum auction after all. Though of course no one knows anything for sure, it’s worth thinking about what a Verizon-free Canada would mean, and what we’ve learned so far:

Incumbents are one of the most powerful political parties in Canada:
Forget the Conservatives and their Liberal attack ads. The “Fair for Canada” campaign brought together major carriers to exercise their influence at an unprecedented scale and seemingly relentless vigor. If they can work this hard to coordinate their public relations efforts, why couldn’t they do more to satisfy Canadians’ desires for better pricing and network coverage?

Industry Canada needs a backup plan:
As much as you could admire Minister James Moore’s tough-guy stance against the pressure from Bell, Telus and Rogers, it’s clear that the government’s hopes have been nearly as high as some consumers. Having failed to create a viable fourth national player following previous auctions, the possibility of Verizon coming in represented a chance to save face. Time to start thinking about how to empower the regional carriers and local competition if another foreign juggernaut fails to show interest in our spectrum auction.

Expectations have been irrevocably raised:
Had the Verizon issue never developed, most everyday Canadians would probably never have taken notice of the next spectrum auction, or wondered whether anyone would rise up to replace the financially struggled incumbent alternatives we briefly enjoyed with Public Mobile, Mobilicity and Wind Mobile. The Fair for Canada campaign, meanwhile, suggests that consumers would be far better off with market that continues to be dominated by the established oligarchs. Should Verizon fail to appear, they’ll need to prove it.

We’ll know in due time whether the notion of entering Canada was just a “bargaining” chip Verizon was using with Vodofone, as some have described it. What this summer proved, however, is that everyone from the incumbents to Industry Canada are gambling over the future of quality wireless service across Canada. With or without Verizon, those are still important stakes sitting on the table.

An Aside:
The crises at the heart of the international financial and political systems in my view go beyond the debt woes currently gripping the Western world and to the heart of the way the global economy has been run for over two decades.

After relying on it to deliver years of growth, lift millions from poverty, keep living standards rising and citizens happy, nation states look to have lost control of globalization.

In the short term, that leaves policymakers looking impotent in the face of fast-moving markets and other uncontrolled and perhaps uncontrollable systems -- undermining their authority and potentially helping fuel a wider backlash and social unrest.

In the longer run, there are already signs the world could repeat the mistakes of the 1930s and retreat into protectionism and political polarization. There are few obvious solutions, and some of the underlying problems have been building for a long time.

"In times of economic recession, countries tend to become isolationist and retrench from globalization," says Celina Realuyo, assistant professor of National Security affairs at the US National Defense University in Washington DC.

"Given the increased number of stakeholders on any issue -- climate change, the global financial system, cyber security -- it is unclear how traditional nation states can lead on any issue, let alone build consensus globally," she said.

The financial system, the Internet and even the supply chains for natural resources have quietly slipped beyond effective forms of state control.

These instruments of globalization have delivered huge wealth and kept economies moving with arguably greater efficiency, but can also swiftly turn on those in authority.

Just as Egyptian President Hosni Mubarak discovered that shutting down the Internet was not enough to prevent social-media fueled protest overthrowing him, the world's most powerful nation states are confronting their helplessness in controlling markets and financial flows.

Technology and deregulation allow both information and assets to be transferred around the world faster than ever before -- perhaps faster than states can possibly control, even with sophisticated laws, censorship and other controls.

The broad consensus at the 2009 London G20 meeting has already been replaced by a much uglier tone of polarization and mutual recrimination at both domestic and international levels.

Where once they would have lobbied quietly, Russia and China now angrily criticize the United States, with Russian Prime Minister Vladimir Putin describing it as an economic "parasite."

In the United States and Europe, far right groups including the Tea Party, eurosceptics and nationalist forces look to be rising, sometimes potentially blocking policy-making. On the left, calls grow for greater controls on unfettered markets and capital.

Over the past year, global currency valuations have become the source of new international tensions as major states accuse each other of "competitive devaluation" to boost exports.

In cyberspace, nations worry powerful computer attacks on essential systems could one day spark war, with rows over cyber spying already fuelling mutual distrust.

CENSORSHIP, CONTROLS IMPOSSIBLE?

It's unlikely that nations can genuinely pull back from globalised systems on which they have become reliant.

"The Net sees censorship as damage and routes around it," computer science guru John Gilmore said in 1993. In the modern, high-speed globalised system, one could say the same of attempts at financial and economic restrictions.

Many areas of the global economy have also become effectively "ungoverned space" into which a host of actors -- from criminals to international firms such as Google and Goldman Sachs to countless other individuals and groups -- have enthusiastically jumped.

International companies and rich individuals move money -- and even entire manufacturing operations -- from jurisdiction to jurisdiction to seek low wages, avoid tax, regulation and sometimes even detection. In many states, that helped fuel a growing wealth gap that is self producing new tensions.

Some argue demands to impose new controls may miss the point. In any case, many of the current crises in the system are the result of attempts to control or distort markets and economic flows.

"Ironically, the theory was always that.. the (euro) single currency would stop the unpleasant capitalists from destabilizing Europe," says Charles Robertson, chief economist at Russian-British bank Renaissance Capital, pointing to its intention of freeing European states from never-ending local foreign exchange hassles.

"So the short answer is no, without massive capital controls, states cannot stop this."

Arguably, the wider global financial system has similar inbuilt problems and imbalances -- but after decades of being largely ignored, they look to be unraveling rapidly, by the same fast-moving markets that previously fed them.

That is a problem not just for already struggling Western countries but the emerging powerhouses some hoped would replace them as a source of global leadership.

UNSUSTAINABLE SYSTEMS UNRAVEL?

"For most of the last decade, growth and economic activity in many places has been driven by forces that were inherently unsustainable," says Simon Derrick, head of foreign exchange at Bank of New York Mellon.

"What's happening now is these... are coming under pressure and it's getting to the stage where that can no longer be ignored. But none of these issues are going to be politically easy to do anything about."

Low U.S. interest rates and taxes particularly after 9/11 and the dot-com crash fueled the asset booms that produced the credit crunch.

But they were only sustainable in part because U.S. government spending -- including on expensive foreign wars -- was effectively underwritten by emerging economies, particularly China, buying up their debt.

Beijing could make those purchases because it was earning billions from soaring exports underpinned by what most observers agree was an unrealistically low-pegged currency.

Those dynamics fueled record economic growth that help to maintain domestic stability. If that slows, some worry unrest could return -- particularly if Chinese Internet controls and other domestic security measures prove as unable to control dissent as the admittedly less sophisticated systems of North Africa.

Critics say most attempted financial crisis fixes -- bailouts and stimuli-- have simply "kicked the can down the road," providing short-term relief but little more.

"Nobody's kicking a bigger can with more force than the Chinese government," wrote Ian Bremmer, president of political risk consultancy Eurasia Group. "The entrenched dominance of their state-led economy has created the greatest near-term buffer to instability in the developing world... (but it is also) by far, the most unsustainable and volatile long-term."

TORONTO - Canada's five biggest banks earned a combined $4.8 billion in third-quarter profit — nine per cent more than last year — as they cashed in on strong growth in mortgages, consumer and corporate loans and other retail operations which we will all pay for LATER.

While the results were higher than the $4.4 billion in profits booked in the same 2009 period, the banks took a major hit from weakness in their capital markets divisions as economic uncertainty affected returns on stock markets because they had to use their own brains for investment opportunities.

The economic recovery in the last year and continued growth in the housing market helped boost the banks' main lending businesses to ordinary consumers, homeowners and companies. As well, the healthier economy reduced the number of bad loans whci the Bank write off anyway. I would love to see the write-off figures..anyone?

TD Bank chief executive Ed Clark said the bank saw the best credit quality and lowest credit losses in seven quarters across all of our businesses.

"The continued strength of the housing market drove strong volumes in real estate lending and business deposits also became a very good source of growth. As was the story last quarter the tailwind of improving credit led to lower provisions for credit losses," he said on a conference call with analysts to discuss the bank's strong third-quarter earnings.

However, it was hard to ignore some of the potential dangers that still threaten Canada's banking industry, which has often been championed as one of the best in the world after surviving the financial crisis with little significant damage. Championed but never proven.

One key weakness was on full display in each of the Big Five banks' capital markets results. Overall, earnings for the divisions were nearly halved to $1.05 billion, as trading revenues declined from lofty heights last year when the economy was first showing signs of a recovery. Amazingly these brains of Canada did not see this was going to happen....Duh?

"Wholesale earnings continue to normalize, as we have been indicating," Clark said.

"Last year, we were seeing unsustainable market activity and positive valuation adjustments, given a broad rebound following the financial crisis. Today, we're generally seeing softer capital market activity and earnings declined 45 per cent versus last year."

Troubles in Europe and the continued weakness of the U.S. economy eroded global economic optimism and with that stock markets have taken a hit. That has led to lower corporate financing and weaker profits on stock and bond trading.

The capital markets decline has put a major pressure on overall results when compared to the second quarter of this year, when big banks' profits were a beefier $5.09 billion.

TD Bank (TSX:TD) was the last of the Canadian banks to report its third-quarter results, saying that its profits grew 29 per cent to $1.18 billion, narrowly missing analyst expectations.

The results released Thursday were equivalent to $1.29 per diluted share for the quarter, and compare to a net income of $912 million in the same period a year ago.

On an adjusted basis that excludes certain items, earnings were $1.43 a share, falling a penny short of analyst expectations according to Thomson Reuters.

Revenue rose to $4.74 billion from $4.66 billion a year earlier.

In its wholesale banking division, TD's profits dropped about 45 per cent to $179 million on weaker trading results as economic uncertainty affected stock markets, leading to lower corporate financing activities and weaker profits on stock and bond trading which is always a risky business...yes?.

TD's North American retail banking operations were the high point of its results with the Canadian division's profits increasing 24 per cent to a record $841 million.

"We expect continued strong earnings growth, but not at the rate we've seen this year," said Tim Hockey, chief executive officer of TD Canada Trust.

He added that the Canadian housing market is cooling and a competitive environment continues to put pressure on margins.

U.S. retail operations reported a profit up 30 per cent to US$271 million, as the bank continued to grow its operations in New England and parts of Florida.

TD now operates about 1,300 branches in the United States and bills itself as the bank with the widest presence across North America, having roughly 1,000 branches in Canada.

Provisions for credit losses dropped to $339 million versus $557 million in the comparable period of last year, as more of the bank's corporate and retail clients paid their loans back on time. TD said it expects credit losses on personal loans will remain stable for the rest of this year.

Barclays Capital analyst John Aiken said that TD's results are unlikely to surprise the market considering that it's relatively close to expectations.

There's "not enough of a disappointment to generate a significant decline in valuation, but not enough positives to produce near term valuation outperformance," he wrote in a note.

TD Bank has more than 74,000 employees across its retail operations in both Canada and the United States.

TORONTO - Rogers Communications is a "$20-billion bully" that aims to crush competition in Canada's wireless telecom industry with its planned unlimited talk and text service Chatr, says the head of recently arrived rival Mobilicity.

"I didn't launch this business to be dealt an underhanded card by someone who's much bigger," Mobilicity chairman John Bitove said Friday, adding that his company plans to pursue legal action under the Competition Act if Rogers launches Chatr as it announced June 30.

Bitove alleges Chatr's offerings are suspiciously similar to Mobilicity plans offering unlimited calling and texting overseas for flat-fee plans ranging from $15 to $65.

"You look at the markets they're targeting, they're our markets. You look at the plans they're offering to the consumer, they're basically ripping off the plans that we've put in place," Bitove said.

Bitove said the timing of Chatr's launch is no coincidence, Rogers having had years to introduce a discount service but choosing to do so only now that Mobilicity has entered the market.

"What they're basically being is a $20-billion bully to try and destroy the competition as quickly as they can."

Bitove — who also heads up the Priszm Income Fund, operator of most of Canada's KFC, Taco Bell and Pizza Huts — claimed Rogers would have to subsidize the new service and is launching it only to stifle new competition.

"The only reason you'd subsidize is to kill the competition. This is not a practical business plan," Bitove said at a news conference.

Mobilicity was one of the new competitors that emerged after the federal government sold additional spectrum — the radio frequencies used to carry wireless messages — in a 2008 auction that raised $4.25 billion for Ottawa.

Part of the available spectrum was set aside for newcomers, as part of the government's goal of promoting competition in Canada's wireless industry — which had been reduced to three national players after years of takeovers.

Rogers acquired the Fido service and its customers when it bought Microcell Telecommunications, which had challenged the larger players with a low-price strategy. Prior to that, Telus acquired Clearnet Communications and combined it with Telus Mobility.

Chatr is set to join Rogers Wireless and Fido as the third wireless service offered by Rogers Communications Inc. (TSX:RCI.B).

The company wouldn't say Friday when it plans to launch the service other then "when it is ready," said John Boynton, executive vice-president and chief marketing officer at Rogers.

However, Boynton denied Bitove's allegations as to his company's motives, saying the idea of providing a low-cost service to those with below average incomes had been pioneered not by Mobilicity but wireless carriers in the United States like MetroPCS and Leaf.

Rogers has been watching the progress of those American concerns and decided it was time to "fill that customer need," he said

Asked about Bitove's allegation that Chatr would be a subsidized operation, Boynton replied: "I don't know where he gets his information because he doesn't work for Rogers so he couldn't possibly know that."

Boynton described Chatr as a separate division within Rogers with a separate staff, its own billing system and separate profit and loss statement.

"So just like Mr. Bitove's company, and we wish him all the best of luck, Chatr will also compete vigorously for the same customer segment," he said.

Like any other startup, Chatr would start with no customers and a lot of expenses and try to attract as many customers as it can.

Boynton said the issue is about competition, adding that there was a little "bewilderment" at Rogers over Mobilicity's response to the challenge.

"We thought competition was good" for fulfilling the needs of customers, he said. "... You have to really worry when somebody doesn't want competition."

Mobilicity said it will file a complaint with the Competition Bureau alleging that Rogers has contravened the "abuse of dominant position" section of the Competition Act, which disallows the "use of fighting brands introduced selectively on a temporary basis to discipline or eliminate a competitor."

Bitove said he believes that Rogers will eliminate the discounts once it has driven Mobilicity out of the market, citing Canada's largest wireless service's earlier move to buy smaller discount carrier Fido in a bid to stifle competition.

The Competition Bureau examines whether there is evidence that a behaviour is having an adverse effect on the marketplace in order to determine whether there has been an abuse of dominance, said its spokesman Greg Scott. He said he could not comment on whether the bureau was investigating this case.

"There are certain marketing practices that might raise questions from the point of view of the rival company, but we clearly need to look at all of the issues before we can make a determination as to whether there is any anti-competitive behaviour," Scott said.

Telecom analyst Iain Grant believes Mobilicity has a strong case against Rogers under the Competition Act, given the timing of the launch and the language Rogers has been using in introducing the brand.

Many incumbents have so-called flanker brands or "fighting brands," including Telus's Kodoo and Bell's Solo and Virgin Mobile, which launched a few years ago.

"The difference is when you do it and how you do it," Grant said. "This is almost a perfect example of what the act was trying to (prevent)."

"Now, when Mobilicity and Public Mobile and Wind poke their heads up with their new competitive plans, if you introduce your flanker brand at that time, you might be thought to be a little opportunistic."

Grant believes Mobilicity decided to announce its plans in advance to delay Rogers' launch by weighing it down in legal wrangling and buy itself time to sign up more subscribers.

"For Canadians, the benefits to us are that we are getting a much more interesting, much more vibrant marketplace," he added.

Bitove argued that Chatr is a way for Rogers to compete with it without having to bring down prices for about 8.5 million current customers.

"They're not repricing their whole base, they're just trying to create a certain segment to go after us in a targeted fashion."

He said Rogers has a cosy connection with handset providers and has already flexed its muscle to limit availability for others.

Meanwhile, Mobilicity has already retained legal counsel and could pursue other legal actions, including a possible civil lawsuit, he said.

Mobilicity launched its advanced wireless network in the Greater Toronto Area in May, one of several new companies that have launched wireless services in recent months.

The company, which targets Canada's urban ethnic communities with unlimited international calling, also plans to be up and running in Vancouver, Edmonton, Calgary and Ottawa later this year.

Mobilicity competes with the big three established players and new cellphone entrants like Globalive's Wind Mobile, the first new wireless players in Canada's cellphone industry in about a decade.

Public Mobile is another recent new entrant and Quebecor's (TSX:QBR.B) Videotron will also launch its new wireless business in Quebec and eastern Ontario later this year, delaying a planned summer launch, while Shaw Communications (TSX:SJR.B) has said it will launch in late 2011.

Multiple listing service (MLS) is short-hand for a system that co-ordinates the orderly buying and selling of real estate. One of the key components of the MLS system is a centralized database of listed homes for sale. Owned by real estate associations like The Canadian Real Estate Association (CREA), it can effectively shut out competition by setting their own rules on membership and deny the flow of information to non-members.

MLS were seen by some as uncompetitive. As with all things having to do with consumer protection, Canada, better late than never, acted on the allegations of MLS’ uncompetitive conduct, with the Competition Bureau announcing it was challenging how MLS does business.

What exactly is the problem?

Real estate associations (often USA) and MLS are analogous to the legal profession: an insular, self-governed body which guards its intellectual property like a jealous lover. In the 1980’s, Jane Harvey opened a pure retail law firm to the horror of the profession. All her offices were in malls and she advertised her prices; advertised was prohibited by the Rules of Professional Conduct. In 1987, the Law Society of Upper Canada allowed advertising due in part to Jane being a ground breaker.


MLS is, in practice, a totality of real estate services. For the real estate agents, it is a way for listing agents to publish its compensation along with the property description. For the public, in order to list real estate on MLS, one typically has to buy the bundle of services which includes hiring a real estate agent, using the standardized agreement of purchase and sale forms, negotiating the deal, registering the sale etc.

There are two primary ways around this traditional model. Flat-fee MLS describes a real estate agent posting a property for sale on MLS for a customer with no other services provided; The compensation is paid immediately.

Others attempted to set up internet-based businesses outside of the MLS system. Typically, these allowed customers to search a separate database downloaded from MLS themselves rather than having a broker do it. For the time saved, brokers could, and often did, charge less commission. These types of sites are sometimes known as virtual office websites (VOW) because they operate without traditional bricks and mortar operations.

Various MLS’ prohibited flat fee MLS to prohibit real estate agents competing on price (according to the Canada Competition Bureau, CREA engages in this practice). In other cases, real estate brokers simply did not deal with brokers who set up VOWs or information from MLS was not provided in a timely manner to VOWs.

What has been the solution?

In 2008, the U.S. Department of Justice settled with the National Association of Realtors (the equivalent of CREA) after an investigation of its practices in connection with VOWs (here is the press release). As part of the settlement, VOWs will be treated no differently than the traditional broker. A real estate broker operating a VOWs must be accepted as a member of MLS regardless if she is operating a non-traditional business model. The VOWs shall be provided with timely information and MLS members who do not operate VOWs must treat VOW brokers the same as a non-VOW broker.

Two comments after reading this settlement:

* First and foremost, the settlement really speaks to real estate association conduct against its broker members. In many respects, the Department of Justice is settling a civil war between agents who uphold the status quo vs. agents who want to provide different service offerings.
* The settlement protects the proprietary intellectual property of MLS. VOW must take precautions against any customer misappropriating MLS information. The settlement is not about smashing MLS; it is about defusing the information in a responsible way which acknowledges the capital costs of building and maintaining the MLS.

In many respects, the settlement acknowledges that real estate agents can chose to race to the bottom on fee or provide traditional services with traditional compensation. The question comes down to what the customer perceives as value.

What does this all mean to me?

MLS’ get big for a reason; they are smart and ruthless. What did some MLS’ do in the wake of the Department of Justice settlement? They set up their own VOW to compete with the existing VOWs. More service offerings to the consumer is not such a bad thing. After all, a MLS owned VOW can always up sell a customer to full brokerage services.

In Canada, the Canada Competition Bureau has examined the Department of Justice settlement critically. I would not be surprised if it took a similar approach and, in addition, force CREA to allow flat fee MLS.

The ultimate effect may be a choice between a quantity based model (low margins, high volume) of a VOW and flat-fee MLS and a quality based model (high margins, lower volume). This is not too bad for the consumer.

Canadian Capitalist has a post on the MLS’ alleged uncompetitive practices. I found some of the comments have a sky is flying tone to them and others believe this will alter the real estate industry for good. The result will be somewhere in the middle.

In some cases, vendors and purchasers will require a full set of real estate brokerage services just like some smaller clients may need a larger law firm to represent them (if your civil liberties are at stake, you really don’t want to hire the lawyer on a fixed price schedule). In other cases, a flat-fee MLS may do them just fine.

However, at the end of the day, you get what you pay for in life and, if given a range of choice, you choose You cannot deny the option of that person to make that choice and that mistake and policy-making should not be around this concept.

It will be interesting to see when and how the Competition Bureau rules but don't hold you breath