TransLink and Ian Jarvis: why failed CEO job is best gig going
Experts blame 'compensation consultants' for costly executive contracts in the public sector
It's a sad comment on the state of executive compensation that most Canadians can only dream of being a failed CEO.
Either you get fired with full salary for a year or more, or — like Vancouver's former TransLink head Ian Jarvis — the same board of directors that found you lacking keeps you on as an "adviser" at roughly 10 times the national salary.
In a hastily arranged news conference, the board announced it would be removing Jarvis as head of Metro Vancouver's beleaguered transit authority to "restore public confidence" on Wednesday.
"Heads you win and tails you win," said Concordia business professor Michel Magnan.
"Even if you don't succeed, you still succeed financially speaking."
'Why keep him around?'
Even by the gold-plated standards of the average CEO, business experts say TransLink's deal with Jarvis is unusual. Jarvis will continue to draw his $422,000 annual salary until June 2016, when his contract ends. Only now he's an adviser.
"The guy is not adding any value. Why keep him around? Showing the way — showing the bad way?" asks Kai Li, finance professor with UBC's Sauder School of Business.
"All in all, this is outrageous and a manifestation of bad governance within TransLink."
Magnan says the board likely couldn't end Jarvis's contract without a huge severance payout or the threat of protracted legal action.
"In principle, people would say it's a good thing, but in practice, what often happens is that you can disseminate bad practices," he said.
The curse of compensation consultants?
Ironically, increased commitment to government transparency may be making the situation worse.
York University law, governance and ethics professor Richard Leblanc says so-called "compensation consultants" draw on troves of now publicly available data to help CEOs set a price for themselves.
"What happens when you have transparency of public sector salaries, the evidence is that salaries go up. Compensation goes up enormously," said Leblanc.
Leblanc says compensation consultants should be subject to the same code of conduct and professional regulation as lawyers and accountants, to make sure they act in the interests of employers as well as executives.
He questions the notion that lowering CEO compensation will see a drain of talent from the public sector: "That myth is unsubstantiated by the academic research."
A bad reputation
Last year, former B.C. Lottery head Michael Graydon took $125,000 in extra salary, bonuses and vacation after quitting to take a job at a private gambling company. He was asked to pay back $55,000.
And taxpayer groups are still complaining about compensation at B.C. Ferries, where the CEO once earned more than $1 million annually. Last year, the board slashed the current CEO's salary to $500,000.
"B.C. is quickly developing a reputation — particularly in the public sector — for not having its compensation house in order," says Leblanc.
The province has addressed the issue in past years. But to what effect?
In 1997, B.C.'s then-auditor general George Morfitt reviewed executive severance practices in government ministries and Crown corporations.
"I believe it is time to improve controls over the terms of employment contracts for executives in the public sector," he wrote at the time. "Some of these settlements have been excessive, and this should not be allowed to continue."
That was then. Some 17 years later - in June 2014 - the province introduced new "taxpayer accountability principles" to guide the boards of Crown corporations in dealing with executives to "stand the test of public scrutiny."
But as with any contract, the devil is in the details.
A spokesperson for the Ministry of Finance told the CBC the government "would encourage" organizations like TransLink to adopt the principles — but couldn't force them.
The old coach?
TransLink's new interim CEO Doug Allen wouldn't elaborate on the decision to keep Jarvis on as an adviser, referring questions to the board. But in one interview, he drew an analogy.
"In the hockey world, sometimes when they change coaches the old coach goes to play a special role," Allen told CBC's The Early Edition.
"They don't pay him out in the form of severance. They honour his contract and they pay the individual out over time to provide value."
Of course, a CEO can turn down extra compensation.
But that seems about as likely to happen as John Tortorella making a welcome reappearance behind the bench for the Vancouver Canucks.
"It's a very ethical CEO who will refuse money," says Leblanc. "The vast majority of them don't, and they're happy to take it."