This is my first ‘commentary’ post.
A commentary from me is a mix of fact, sarcasm with a dash of dry humour.
Life is too short not to have some fun with it so here we go!
It has been highly publicized that the CEO of Hydro One – Mayo Schmidt – has been taking home a very large salary since taking over from Carmine Marchello.
According to a 2015 article in the Financial Post, the former CEO earned $751K in 2014 in contrast to a base salary $850K with incentives of up to $2.3 million for Mayo Schmidt. The article claims that a survey by Bloomberg shows that CEOs from Canadian Power Companies make a median salary of $3.37 million annually.
In the same article the Financial Post reported Stanley Marshall, former CEO of Fortis Inc (a private power company) earned about $7.1 million in 2014 plus a $4.4 million retirement award in his final year as CEO. That was 4 years ago. In 2017 Barry Perry the current CEO of Fortis earned $8 million.
When it came to light that Mayo Schmidt earned $6.2 million in 2017 it started a storm among politicians and public alike.
Industry experts were quick to point out that with assets of $25 billion and revenues of $6 billion, a $6.2 million dollar salary is almost insignificant. In 2017 Hydro One paid out $518 million to shareholders.
Even companies that lose money pay their CEOs big money. In 2018 Canadian Business Magazine published the ‘Top 100’ list of CEOs in Canada and Alain Bellemare of Bombardier was paid $12.6 million in spite of the poor performance leading to $372 million in interest-free government loans in 2017 to keep afloat. Mr. Bellemare was down the list at #16 on the top 100. There are several executives from private power companies on the list.
So what should a private company like Hydro One pay a CEO? That’s entirely up to the people who run the business. Shareholders and board members. Not ratepayers. I am quite sure that the average person has no clue what goes on in big business.
The government of Ontario still owns 47.4% of shares in Hydro One and represents the single largest investor. They still have something to say about executive compensation.
But someone left the barn doors open and the horses are long gone…
To make matters look worse, the Hydro One board of directors just voted themselves a $25 thousand increase and $70 thousand for the chair of the board. That’s a lot of money for a chair. I have one that they could have for free. A bit worn, but I would donate it to a good cause.
The board of Hydro One is made up of 13 regular members that meet 12 times a year. If you look at their resume’s they are an impressive bunch. Apparently they were all appointed by the government just before they went public in 2015. But I digress.
None of this helps the cause of the current government. It’s like adding gasoline to a camp fire. And the opposition parties love it!
But does any of this matter more than a Tinker’s damn?
Nope.
It isn’t going to impact your taxes and Hydro One customers won’t notice this mixed in with their other rate hikes. Nor will they notice the rise in energy costs or that it is where the biggest problem lies. People don’t even know if they are Hydro One customers!
It is all just a distraction to avoid any meaningful debate about the real issues around electricity in Ontario.
Not Hydro.
Electricity.
I was speaking with a person (who shall remain anonymous) last week and I asked for some thoughts on the issue. The person was concerned that their rates were going to go up and that executives were getting raises when people couldn’t afford to pay their bills.
This person didn’t realize that they were not a Hydro One customer. Most ratepayers aren’t. Nor did they realize how little it trickles down to ratepayers who are.
This person is highly educated and yet doesn’t know the first thing about their electricity bill. So I spoke to various other individuals about it and everyone was equally appalled by the compensation of executives but knew nothing about how it impacted them. That speaks volumes to me about how unconcerned many people are about how much they pay for electricity. Surely if you were concerned you would make the effort to learn about it?
Perhaps not.
So along comes Doug Ford. He is going to fire the CEO and replace the board.
Hallelujah!
Pass me the Tylenol.
His own energy critic later acknowledged that the Premier can no longer do that. The government sold out that option.
There is a process that a business can follow to make changes like this, however firing the CEO triggers a $10 million payout. From a business perspective it is likely cheaper to let Mayo Schmidt continue until the end of his contract. Same with the board. A mutiny of the shareholders would also likely drive share prices down. We don’t want that – do we?
So this situation actually works itself out. And it doesn’t really impact a ratepayer let alone someone who isn’t a Hydro One customer.
So who cares?
It makes for great drama as it plays out in an election campaign! It saves talking about something more important but much more difficult. The non-Hydro One part of the electricity sector.
What a fabulous strategy!
Look at the Puppy:
Isn’t that a cute puppy?
You may be wondering what the puppy has to do with our electricity bills in Ontario?
Nothing.
Same as Mayo Schmidt’s salary.
So here is the takeaway.
There is nothing you can do about this and it will resolve itself with the least cost to ratepayers over the short-term.
But its great fun to see Doug Ford talk about it.
I feel much better knowing that Doug has my back. You know, I’m one of the people. The little people.
If you are still angry about this – look at that puppy!
He’s so cute!
Be nice to someone – every day.
Derek
