TORONTO - The next Hydro One boss will likely take home 30-per-cent less pay than his predecessor after the Liberal government accepted recommendations Wednesday to curb executive salaries and perks at publicly owned utilities.
A different formula to calculate salaries should be used by boards at Hydro One and Ontario Power Generation to ensure executives take home between 25 and 30-per-cent less than what most are making now, the expert panel recommended.
Boards will be allowed to make exceptions, but if the company feels an executive should be paid more than their peers elsewhere the inflated salary should be justified publicly, the panel said.
"What we've tried to do is strike a balance between the need to attract the right people to run these complex organizations . . . and on the other hand recognize that they are publicly owned institutions and there are certain attitudes toward payment,'' said James Arnett, chair of the review panel.
"At the end of the day, it's a very difficult balancing act.''
Energy Minister Dwight Duncan set up the panel last winter after former Hydro One CEO Tom Parkinson received $3 million in severance when he quit last year amid criticism of expense account irregularities.
Before he quit, Parkinson was being paid a $1.6-million salary, plus a bonus, partially paid mortgage and travel allowance.
Parkinson's predecessor as Hydro One CEO, Eleanor Clitheroe, was fired in 2002 for lavish spending on top of her $2.2-million annual pay package, but subsequently launched a $30-million lawsuit against the province that is still before the courts.
The current CEO of Ontario Power Generation, Jim Hankinson, pulls in about $1.6 million a year.
The perks handed out at Ontario utilities aren't worth the kind of questions they raise, Arnett said.
"You have to recognize who the owners are,'' Arnett said of the publicly owned utilities. "You've got to be very careful with the money.''
The government has accepted the recommendations and is directing the boards at Hydro One and OPG to follow the panel's guidelines, Duncan said. The panel found the right balance between dictating lower salaries and ensuring Ontario can still attract highly skilled employees, he said.
"These institutions serve the public,'' Duncan said. "Their pay should better reflect that.''
Both the boards and the government of the day will now have to monitor the situation to ensure exceptional salaries allowed in the guidelines don't become the rule, he said. While the New Democrats are calling on the province to cap hydro executive salaries, Duncan said that's not an option.
"I don't want Homer Simpson running our nuclear plants,'' he said.
Conservative Leader John Tory said hydro executives aren't the only ones getting big pay cheques from taxpayers. The Liberals have allowed salaries to go up tremendously across all government agencies, he said.
"People are making stupendous salaries in many cases where they are not people who are being competed for by the private sector,'' said Tory, adding the Liberals should do a better job of disclosing such salaries.
"These people have no idea what transparency is all about.''
NDP Leader Howard Hampton said the Liberals should instruct the hydro boards to go back and renegotiate their executive compensation packages before capping their salaries at $500,000.
This won't deter the best and brightest from working in Ontario, Hampton said, any more than it deters skilled people from working for hydro companies in other provinces where salaries are much lower.
Even with a 25 to 30-per-cent pay cut, Hampton said some executives will still be making over $1 million.
"You cannot justify these kinds of exorbitant salaries,'' he said.
