Canadian HR Reporter

CANADIAN HR REPORTER May 18, 2015 8 NEWS Labour law research just got faster, easier and more comprehensive. LabourSource™ on WestlawNext® Canada combines the most robust collection of grievance arbitrations with court and board decisions, expert commentary, legislation and collective bargaining-related content – with Canada's most advanced search engine. A single search delivers the content you're looking for, whether it's case law, legislation, commentary, or legal memos. You can then filter your results to get exactly what you need. With LabourSource, you'll always be confident that your research is complete and that you haven't missed anything. Experience the benefits • Prepare winning grievance arbitrations and labour board applications • Successfully negotiate favourable collective agreements • Stay up to date on the latest labour-related decisions, industrial relations and economic news Legal content that is labour focused, not labour intensive Introducing LabourSource™ on WestlawNext® Canada See the LabourSource advantage View a demo at westlawnextcanada.com/laboursource 00224EP-A47770 credibility is on the line to deter- mine what the market is for their employees' compensation. "So if you come in and say, 'Yay, I'm giving everybody a big in- crease,' then you've basically just undone all the work that these people have done. You're sort of suggesting to your employees that their HR department, their com- pensation department has been lying to them and hasn't been pay- ing them enough." Trend or anomaly? In determining whether Price's pay cut has the potential to be- come a trend, it's important to consider that his is a private com- pany, said Schubert. "When you're looking at this, you have to bear in mind that Dan Price is the founder, he con- trols the company, it's a private company… so he does not have the normal shareholder pressures that publicly traded companies or even more broadly held private companies can have, and that gives him a much freer hand to do things that normally wouldn't be tolerated by shareholders or by the market, perhaps." You just couldn't make this kind of move in a publicly traded company or in very large orga- nizations, said Levasseur — and even in smaller organizations, it may not be tenable because many CEOs don't earn nearly as much as we imagine. "It's more of an anomaly than a trend," he said. "ere are many cases in many private organiza- tions where the owners are not making much more than their employees. ere is this myth that — because of all the stuff that we see in the media around executive compensation — that anyone who has the title of CEO is pulling in about $20 million a year. "at's not the case — there are many, many CEOs, many owners of companies, that are not raking in millions of dollars. Some of them are making slightly more than their highest-paid employees." It's also important to remember that organizations — particularly private companies — can com- pensate people in different ways, said Levasseur. ere are prob- ably many such instances we are unaware of. "Sometimes, they'll suddenly make their employees sharehold- ers or they'll give them a huge bonus. What's unusual about this one is that he's really committing to changing their salaries." Other organizations may some- what follow suit when it comes to raising wages for the lowest-paid workers, said Claudine Kapel, principal at Kapel and Associates in Toronto — WalMart is just one recent example. "Near-term though, likely a lot of the activity will be in the U.S. where the minimum wage tends to be much lower. But I think that we're going to see this pressure building in Canada as well," she said. "e lowest-paying jobs tend to have the highest levels of churn, and turnover has a price in terms of productivity losses, recruiting costs or the costs of bringing newly hired talent up to speed and getting that new tal- ent developed. So there are costs associated with not being able to keep people that if you take steps to bolster wages, you could help mitigate." Increasing wages can have a profound impact on employee loyalty, especially when an organi- zation makes the decision to lead the market or offer more than its competitors for talent, said Kapel. "Such a strategy can really en- hance an employer's brand and company reputation. But it's im- portant to keep in mind that it's not just about the amount of mon- ey being offered — it's also about the timing of the change as well." Early adopters are likely the ones who will distinguish them- selves by being first out of the gate to deliver something to employees that creates a more compelling or noteworthy employment proposi- tion, she said. "If you're the last organization to do something like this, you're not going to get any points — you're just going to be the one that's going to be closing gaps to market," said Kapel. Impact on CEO pay debate Will Price's decision add fuel to the fire of the executive com- pensation debate? It's difficult to say, said Schubert, since Price's circumstances are quite different than those of CEOs of large, pub- licly traded companies. "His circumstances are suffi- ciently unique that I would be sur- prised if it had any material effect. To the extent that you see CEOs at larger, name-brand, publicly traded companies moving in this direction, I would see that putting much more pressure on because then you're dealing with a peer," he said. "(But) I think you'll run into trouble with your shareholders if you say, 'Well, I'm going to pay people double their market value.'" Kapel agreed a move like Price's may not necessarily go over well with shareholders. "Near-term, shareholders may not like the approach because you're redirecting dollars that could otherwise make your or- ganization more profitable into investments in people. But we see the organizations that are push- ing the boundaries are really lay- ing the groundwork for more ef- fective talent management in the years ahead." Even if the CEO of a very large organization were to cut $1 mil- lion from his own pay, it wouldn't have the same impact, said Levasseur. For example, assume the CEO of a company with 20,000 employ- ees is making $10 million a year, he said. "And let's assume this person were to take a 10 per cent pay cut — in other words, give $1 million to their employees. at's $50 per year per employee." Private companies have more leeway with pay CEO < pg. 1 Employees of Gravity Payments react to news from their CEO Dan Price (pictured at back) that he will be cutting his US$1.2- million salary to US$70,000 and they will reach receive the same salary. "e lowest-paying jobs tend to have the highest levels of churn... there are costs associated with not being able to keep people."

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