Ontario Agriculture

The network for agriculture in Ontario, Canada

Found this very interesting post on the Canadian Agri-Food blog, managed by the Agri-Food Unit at the Ivey School of Business.

Written by Brandon Schaufele - with the article available at - http://www.canadianagrifood.ca/?p=374

" Today’s edition of the London Free Press had this article on the front page. The story, titled “Execs live high on hog”, admonishes Farm Credit Canada (FCC), its executives in particular, for what it calls a “lavish” employee rewards program.

Several things bother me about this story. I’ll discuss four.

First, the article implies that the executives of FCC are overcompensated because they are employed by a publicly owned firm. It always baffles me that people don’t understand the opportunity costs of public servants. Civil servants, at least those in management and policy positions, are very highly educated and at the top of their fields. More often than not, these individuals could earn much higher wages in the private sector. Instead they accept non-pecuniary rewards – such as interesting work or location of employment – which motivates them to remain in their current position. All Canadians benefit from this. As that opportunity cost grows however, it becomes more challenging to attract the same highly qualified workers. Quite simply, they must forego too much money to work for the public sector.

This logic applies to executives at FCC in particular. FCC is essentially a specialized bank. Qualified bank executives do not have problems finding alternative employment. Still you never know. Maybe FCC’s executives over-compensated. Let’s do a comparison to see how FCC stacks up against a comparable private sector institution, Canadian Western Bank (data are from the annual reports).


Employees...
FCC-1400
Cdn Western - 1400


Offices...
FCC-100
Cdn Western-50


Total assets...
FCC-$17,098 million
Cdn Western-$11,636 million

Revenues...

FCC-$508 million
Cdn Western-$328 million

ROE...
FCC-11.2%
Cdn Western-13.2%


CEO compensation...
FCC-$273,000-$313,010
Cdn Western-$2,461,647 ($550,000 base salary)


Exec VP comp...
FCC-$204,660-$220,735
Cdn Western-$666,568-$786,886 ($247,400-$292,875 base salary)


I think that these numbers highlight the underlying issue. Let’s say that a talented executive VP at FCC was headhunted by Canadian Western Bank. Do you think that they’d stay in Regina? Neither do I.


Next, the article refers to “ailing farmers” more than three times. This sentence is a particular gem:

Farm Credit Canada’s travel and hospitality expenses reveals spending many Canadian farmers can only dream about.


Two points. First, similar to many other Canadians, I can only dream about doing these things. I don’t know why farmers get singled out. Of course, maybe it should be mentioned that neither of us (the farmers nor me) are executives at a bank. My second point is what really irritates me about this argument. Farmers are rich. Farmers are much wealthier than the average Canadians (look at the figures in this post if want proof). Farmers choose not to allocate money towards travel and hospitality. It’s not that they can’t afford them.

Moreover, many of the policies aimed at farm income are social policy (they do not correct market failures). Agricultural lobbyists should be cautious that they don’t attract too much attention to these programs. If the general population starts scrutinizing agricultural funding, farmers will not enjoy the results.


Third, the article quotes Canada’s Auditor General Sheila Fraser:

“Farm Credit Canada should review its award program against a formal, reputation-risk policy to ensure that all awards are in keeping with positive public perceptions and the desired image/reputation of FCC as a Crown corporation.”


If the infamous Sheila Fraser doesn’t call a news conference proclaiming that these employee reward programs are excessive, then these programs are not excessive. Case closed. It might be bad PR, but these programs are likely good for business and employee morale.


Fourth, my favourite paragraph in the article is this:

In March 2009, Farm Credit Canada president Greg Stewart and his wife boarded a plane to Disney World for five expense-paid days . . . Their children remained home in Regina.

Who goes to Disney World and leaves their children at home?


Here’s my conclusion. Canadians want a highly skilled public service. We do not want fraudulent expenses or excessively compensated executives. However, it is important to remember that public servants have opportunity costs. If downward pressure on wages and other forms of compensation continues, the civil service will get hollowed out with less skilled workers remaining. This will be to the detriment of the country.

Based on the information in this article, FCC’s compensation and reward packages seem very reasonable. The media should stop feigning outrage. (It is interesting to note that the total travel and hospitality expenses of the top 8 executives equaled less than 0.25% of net income, a figure so small that it doesn’t even factor into rounding.)"

Do you agree with Brandon's view?
I agree with parts of it, at least around the idea of rewarding good employees and maintaining employee morale. It's an important part of business. Compare 508 million dollars in REVENUE, with an average of 300K/year in special trips. That doesn't seem excessive at all.

Are users of other banks upset their fees are going to pay for a customer service rep to take a holiday? No (And it happens in other banks too)
How about the box seats that the company I bought my car from has in a number of big sports venues across the US? No

Just because it's a crown corporation - doesn't mean they are wasting money.

Time to move on to bigger issues.

Views: 587

Comment

You need to be a member of Ontario Agriculture to add comments!

Join Ontario Agriculture

Agriculture Headlines from Farms.com Canada East News - click on title for full story

Showcasing Alberta in the Middle East

Alberta’s Premier, Danielle Smith will travel to Saudi Arabia and the United Arab Emirates from Oct. 27 to Nov. 5 to promote Alberta as a global leader in responsible energy production and competitive destination for investment in energy, technology, agriculture and manufacturing. While in Saudi Arabia, Premier Danielle Smith will meet with government leaders in the energy and health sectors and leaders managing sovereign wealth investments, as well as the oil industry, including executives from Saudi Aramco, one of the largest oil companies in the world. In the energy meetings, the Premier will showcase how Alberta’s traditional and emerging energy resources, emissions-management expertise and technology leadership can help drive can drive energy security and reliability in global markets. The Premier will also promote Alberta as a competitive destination for investment across a range of sectors. The Premier will travel to the United Arab Emirates to join Alberta’s Minister of Jobs,

Beef Beyond Borders

Canada’s beef industry is built on exports. In 2024, Canada exported 550,000 metric tonnes of cattle and beef (net of imports). Most of Canada’s exports (75% of export volume and 79% of export value) went to the US because it’s right next door, our products are similar and American and Canadian consumers have comparable quality preferences and expectations. Japan was Canada’s second largest export market (9% of volume and 7% of value). Japan primarily buys brisket, flank/plate, chuck and rib from Canada. The “rib” primal is home to the ribeye steak, which is one of the most highly marbled and high-quality cuts. But “highly marbled” and “high-quality” are subjective terms! Anyone who has seen or tasted Japanese Wagyu beef knows that it is much more highly marbled than Canadian beef. The difference in marbling between Canadian and Japanese beef is partly due to genetics. Japanese Black cattle raised for Wagyu beef in Japan deposit more marbling than the beef breeds traditionally used i

Rooted in adventure, Alberta agri-tours grow

Over the past year through Travel Alberta’s investment program, $1.7 million has supported new and expanded agri-tourism experiences across Alberta. From farm-to-table dinners to ranch stays and corn mazes, these projects are giving visitors more ways to experience Alberta’s rural roots and support local communities. “By supporting agricultural-based businesses and operators, we are helping showcase Alberta’s small businesses and farms to the world, while boosting the local economy and creating jobs across the province.” Andrew Boitchenko, Minister of Tourism and Sport These investments are driving jobs and growth in rural communities and helping reach Alberta’s goal of growing the visitor economy to $25 billion annually by 2035. Support continues for Alberta Open Farm Days through the Alberta Association of Agricultural Societies, helping connect Albertans and visitors with the farmers and producers who put food on their tables. The event has also become a catalyst for expanding foo

Kinew says drop tariffs on Chinese electric vehicles to get Chinese duties dropped

Manitoba Premier Wab Kinew is asking the prime minister to scrap Canada’s 100 per cent tariff on Chinese electric vehicles in return for China lifting its tariffs on Canadian canola and pork. Kinew says in a letter to Mark Carney on Saturday that while he believes protecting Canada’s vehicle industry is important, he says the country’s approach “has created a two-front trade war that disproportionally affects Western Canada.” The premier says in the letter that China’s tariffs — widely seen as a response to Canada imposing the electric vehicle levy — have already caused a sharp drop in canola prices and that one vertically integrated pork producer in Manitoba is reporting a $19 million negative impact on an annual basis. Canada imposed the electric vehicle duty last year in lockstep with the United States, which also has a 100 per cent tariff on Chinese electric vehicles, with Canada arguing the measure is meant to protect the country’s automobile industry.  Saskatchewan Premier Sc

Saskatchewan legislators spar over motion calling on Ottawa to remove EV tariff

Saskatchewan politicians levelled accusations of preening and reckless behaviour as they debated China’s punishing tariffs on Canadian canola in the legislature Thursday.  The furor was over the Saskatchewan Party government changing an Opposition NDP motion, which called on the federal government to remove its 100-per-cent tariff on Chinese electric vehicles and restore market access for Canadian agriculture products.  Premier Scott Moe’s caucus struck out the NDP’s wording and added their own version that called for the same thing. His caucus also added a line commending Moe’s leadership on the file. The motion passed with the Saskatchewan Party majority voting in favour, while the NDP voted against.    New Democrats said the motion’s congratulatory wording of the premier was pompous and arrogant.   “They’re making it all about themselves and trying to fluff the feathers of the premier … at a time where we need to have the backs of producers,” Trent Wotherspoon, the party’s depu

© 2025   Created by Darren Marsland.   Powered by

Badges  |  Report an Issue  |  Terms of Service