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: 580

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

Tariffs, Greenbelt and food security: Farmers share what's important to them as Ontario election nears

Shawn Brenn, a farmer near Millgrove outside of Waterdown, Ont., spends a lot of time thinking about how U.S. tariffs will affect Ontario farms. As the chair of the Ontario Fruit and Vegetable Growers Association and owner of Brenn-B Farms, he fears produce prices will see a huge hit in the likely case that American buyers aren't willing to pay an extra 25 per cent after proposed tariffs are enacted March 4. "Eighty per cent of our fruits and vegetables get exported," Brenn told CBC Hamilton last week. "It will affect everyone hugely, but especially our greenhouse sector." Brenn knows that negotiating tariffs is a federal issue, but says there are things the province can do to buffer their effects, such as programs that invest in farms and help them mitigate risk. The province committed an additional $100 million in such funding in January, but it's not enough when compared to farm subsidies in the United States, said Brenn, 46. Leaders of Ontario's major parties have all pitched

Agricultural focus for all-candidates meeting in Teeswater, Feb. 20

Agriculture should be a top priority for provincial election candidates, says the Ontario Federation of Agriculture (OFA). “The OFA encourages all provincial election candidates to take clear and decisive stances on critical issues that affect agriculture, food security, and rural development,” said Sara Wood, OFA vice-president. “Protecting our domestic food supply and ensuring the sustainability and prosperity of Ontario’s farming businesses impacts all Ontarians.” On Feb. 20, an all-candidates meeting for the riding of Huron-Bruce is being hosted by the Bruce County Federation of Agriculture, the local branch of the OFA, ahead of the Feb. 27 provincial election. From 7 p.m. until 9:30 p.m., Huron-Bruce candidates will answer questions submitted by the public at the Teeswater Community Centre, located at 21 Marcy St. E. “We believe candidates must show leadership in three priority areas to best support food, farming and rural development in Ontario: Protecting farmland through re

Ken Forth of Lynden to be inducted into agricultural hall of fame

Ken Forth is a fifth-generation Lynden farmer, leader and storyteller who will soon be entering the Ontario Agricultural Hall of Fame. “When I was young, I remember the time I was cutting asparagus with my parents and grandparents and someone was lamenting the weather,” Forth, 72, said. “My grandfather said ‘it’s nothing to with the weather, it’s the government you have to worry about. “That was 60 years ago and compared to the government of that day, to the government of today there’s a lot to worry about it.” Agriculture isn’t treated the way it should be within government, mostly because many of those in government don’t understand farming, Forth said. “We want them to understand so we’re always telling and sharing the story of agriculture,” Forth said. “That’s been my job for 40 years now, explaining agriculture to those who don’t know or understand it.” Forth doesn’t cast aspersions on those who don’t understand. It’s just that these days more people in leadership positions c

Beef Farmers of Ontario asking members to support checkoff increase

BFO members will vote on a checkoff increase this week

Proposed Changes to the Milk Act to Include Adding Sheep Milk

The government is proposing changes to the Milk Act that will include adding sheep milk under the Act and developing new regulations for sheep milk production, transport and processing. Today, sheep milk producers are regulated under the Public Health Act, which does not have an extensive regulatory or inspection regime. The changes proposed by the government will address, “inconsistent regulatory oversight of milk in Ontario”. The full language of the proposed changes to the legislation can be found here: Proposal to amend the Milk Act and the Food Safety and Quality Act, 2001 with more detail in the included PDF. Ontario Sheep Farmers is working with the Dairy Sheep Co-operative to coordinate a response from sheep milk producers to the proposed changes to the Milk Act. OSF would also like to hear from producers who are milking sheep and have questions or concerns about the proposed changes to the regulatory environment. OSF will be holding a meeting to discuss the proposed change

© 2025   Created by Darren Marsland.   Powered by

Badges  |  Report an Issue  |  Terms of Service