|Subject: WHAT'S A BANK BOSS REALLY WORTH? - The Globe and Mail
The Globe and Mail Report on Business Thursday, May 11, 2000
It's plain wrong that Matthew Barrett's $20-million
salary is equivalent to 847 tellers
By Mark Leier
A recent story in Report on Business raises an interesting question:
How should we determine what people ought to be paid?
Matthew Barrett, recently retired from the Bank of Montreal and now
at Barclays Bank, was not the best-paid Canadian boss in 1999, but he
did make $20,342,500. At 40 hours a week with two weeks' vacation,
that works out to $10,171 an hour, give or take a sawbuck or two.
The teller at my bank made $24,000 last year, or $12 an hour. If Mr.
Barrett had quit before lunch on his first day, he would have made more
than the teller did all year. Put another way, if the bank wanted to
improve service, it could have laid off Mr. Barrett and hired another 847
Why is the bank president paid so much money? Is it because he's a
better person -- 847 times better -- than the teller? It seems unlikely.
people would argue that bank presidents are the salt of the earth.
Is the work of the president dangerous? It's the tellers who would find
themselves face to face with a gun-toting robber. Is the work physically
harder? He's not on his feet all day, and it's the tellers who get paper
cuts from counting money and carpal tunnel syndrome from
Is he 847 times smarter? If he is, why does he need to hire so many
experts? How smart do you have to be to realize you'll get rich if you
borrow money at 3 per cent and lend it at 6 per cent? Or to save money
by firing people, reducing services and raising fees?
Is the president's job more stressful? Stress is caused by a lack of
control over your environment. Bank presidents have lots of control, over
their environment and ours.
Does he work longer hours? He certainly doesn't work 847 hours for
each hour the teller works. Aren't bankers notorious for keeping, well,
banker's hours? As a friend in the banking industry remarked, the old
banking rule of "3-6-3" is still followed: Borrow at 3 per cent, lend at 6
cent and hit the golf course at 3 o'clock.
Has he risked his own money? No, banks risk your money, not their
own, and certainly not the president's.
Has he boldly gone where no one has gone before? Banks are so
unadventurous they won't lend you money unless you can prove you
don't need it.
Is it supply and demand? Is the supply of potential bank presidents
low? The bank presidents tell us it is, but we need only six or seven
presidents in Canada. I suspect there are hundreds, perhaps thousands,
of people who could do the job. There are at least 10 senior executives
at each bank who believe they could do the job. In other jobs, 10
applicants for every opening drives salaries down, not up. But bank
presidents have the best closed shop around, and they artificially limit
the supply of labour to inflate salaries.
How should we decide what people deserve to be paid? The U.S.
economist George Brockway has proposed a reasonable idea.
Assume the future bank president starts as a teller at $12 an hour,
and that it takes 10 promotions to get to the top. Assume he's 10 per
cent better than the person he beats out at each promotion. That's pretty
generous: It's the equivalent of beating Donovan Bailey by 10 metres in
the 100-metre sprint. Job competitions, like the Olympics, are usually
much closer than that, but it makes the math easier.
Ten steps at 10 per cent a step, compounded, works out to
$62,249.81 a year for the president's salary.
That's $31 an hour -- better than working as a union nurse or
carpenter. It's double what the average Canadian makes, and it's more
than the average household makes. It's more than 90 per cent of
Canadians make. If the current presidents resigned in protest, we could
replace them cheaply, increase profits and still lower the service
Does it matter that a small group of people make so much more than
the rest of us? It does because, just like taxes, that money comes from
you and me, in the form of service charges and interest and prices. And,
just like taxes, you don't have much choice about paying.
There are fewer banks each year, and there's little difference
between them. Wasting our money on bloated private sector salaries is
no better than wasting it on government expenditures. At least with the
government, you don't have to buy a share to get a vote.
More importantly, in our society money buys health, education,
security and political clout. More money buys more of these things. That
means the rich are more equal than the rest of us. In a democracy, that's
Mark Leier is a labour historian at Simon Fraser University. His most
recent book is Rebel Life: The Life and Times of Robert Gosden,
Revolutionary, Mystic, and Labour Spy, published by New Star Books.