Facts and figures
on Productivity and Compensation
After the close of business on October 20,1998,
CN announced that it plans to permanently lay-off 3,000 workers over the
next two years. This will reduce its total workforce to about 18,000 by
the end of 1999 - a decline of 50 percent since 1992, the year Paul Tellier
joined CN.
As of the end of 1997, CN's CEO Paul Tellier
owned 113,800 stock options (granted as part of his overall compensation
package). At that time, these options were worth $7.7
million dollars.
On the first full trading day (October 21,
1998) after the latest lay-offs were announced, CN's share price rose by
$3 (from $72 per share to $75). This represents a gain in the company's
total market value of over 4 percent (or a quarter billion dollars) in
a single day.
The value of Paul Tellier's CN stock options
rose by over $340,000.
in that same single day - an amount equal to the annual salary of close
to seven average CN workers!!! He said publicly that he "deplored"
the lay offs (even though it was his decision to make them), yet his personal
fortune grew substantially as a direct result of his decision.
Paul Tellier received salary and bonus totalling
$ 1.3 million during 1997 (this excludes the value of stock options). This
is the equivalent to the earnings of over 30 average CN workers.
He has received total salary and bonus during the three years since CN
was privatized of some $2.8 million.
In just the first two years after CN's privatization,
the productivity of CN's workforce (measured in revenue ton miles per employee)
grew by 34 percent. Revenue per employee grew by 30 percent (to over $190,000.
per worker). Revenue generated for each dollar of labour expenses grew
by 14 percent; CN now takes in over 3 dollars of revenue for each dollar
it spends on labour. Average labour cost per employee (including all fringe
benefits and payroll taxes) grew by 14 percent.
In those same two years (from 1995 to 1997),
Paul Tellier's salary and bonus (again
excluding stock options) grew by 108 percent, although CN's profits
(before special charges) grew by just 17 percent!!!! We
might measure Paul Tellier's productivity in terms of dollars of profit
generated per dollar of CEO salary & bonus. By this standard, Tellier's
productivity has declined by 44 percent since 1995.
Shareholders love him anyway however, because of the big run-up in share
prices that has accompanied his relentless downsizing!
Remember: Most of CN's shares are now owned
by U.S. investors, so the creation of shareholder wealth that accompanies
the lay-offs islargely exported
from Canada!!!!
Source: Brother Jim Stanford,
Economist, CAW Canada