The NDP is calling on the federal government to claw back pandemic wage subsidies handed to companies that took advantage of the cash to boost executive compensation. THE CANADIAN PRESS/Justin Tang

The NDP is calling on the federal government to claw back pandemic wage subsidies handed to companies that took advantage of the cash to boost executive compensation. THE CANADIAN PRESS/Justin Tang

NDP demands federal wage-subsidy clawbacks, but critics question feasibility

Last month’s federal budget extended the wage subsidy through September

The NDP is calling on the federal government to claw back pandemic wage subsidies handed to companies that took advantage of the cash to boost executive compensation, but economists say other paths to worker support may mark a more feasible route.

In a May 13 letter to Finance Minister Chrystia Freeland, New Democrat Peter Julian said all publicly traded companies that received the Canada Emergency Wage Subsidy (CEWS) should repay any bumps in salaries and bonuses for senior management.

“The wage subsidy was clearly supposed to go to workers and toward protecting Canadians’ jobs — not bonuses for top corporate brass,” the letter states.

“In a case where there’s a clear violation of what the clearly stated goals of the program were, it is absolutely appropriate to ask for that money back,” Julian said in an interview.

Though Freeland has repeatedly said the subsidy can only be used to pay employees, nowhere does it bar beefier executive compensation as a condition of that support.

Julian also criticized Ottawa for failing to add caveats restricting share buybacks and higher dividends.

Last year, hundreds of chief executives and senior managers enjoyed millions in dividends paid out by publicly listed firms that also gobbled up hundreds of millions from the CEWS program, which provides a subsidy of up to 75 per cent for payroll expenses and is estimated to cost $110.6 billion.

The NDP finance critic slammed the government for its “aggressive” moves to crack down on abuse of the Canada Emergency Response Benefit, intended to help Canadians who lost work during the COVID-19 pandemic.

“They’ve been putting pressure on people who received CERB, even when they were the victims of fraudulent behaviour by other people. But they have not stepped up and given any indication at all on the wage subsidy. And that’s simply wrong,” he said.

Freeland’s spokeswoman, Katherine Cuplinskas, stressed that the program aims to protect jobs, saying it has helped more than 5.3 million workers stay on payroll or get rehired.

CEWS, which she noted received unanimous approval in the House last July, “applies to businesses of all sizes and across all sectors to ensure that no worker falls through the cracks,” she said in an email.

Smaller retailers and the entertainment, tourism and aviation sectors reeled amid lockdowns over the past 14 months, but big-box stores, tech companies and transport firms fared well as remote work and online delivery ramped up.

Many countries introduced bans on dividend payments and other rewards within months of the first wave. Spain demanded full reimbursement of job-retention funding for companies that paid any dividends. The Netherlands imposed a ban on dividend payments, share buybacks and bonuses for executives at companies that took advantage of wage relief in the same year.

Last month’s federal budget extended the wage subsidy through September, but with a new clawback system for jacked-up executive compensation at publicly traded companies — a step the NDP now wants applied retroactively.

David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, says a tax rule effectively forcing reimbursement from companies that declared profits while receiving the subsidy might offer a simpler, if blunter, solution.

“The federal government can certainly change the tax rules. And they can do it retroactively if they want to,” he said.

Ottawa could also tighten the new clawback measures by including dividend boosts and share buybacks among the repay items. “There’s $25 billion that’s going to be paid out in this fiscal year, starting April 1. So there’s still time, the program’s not over.”

University of Toronto economist Michael Smart says a future program overhaul makes more sense than retroactive clawbacks, and suggests the federal government limit the subsidy to small businesses and battered sectors or apply it only to at-risk jobs.

“Any company that issues stock on the Toronto Stock Exchange does not need the government to step in,” he said. “We’ve got to get back to a focus on workers and Canadians who are experiencing income losses.”

Smart called it a “mistake” to zero in on clawbacks, highlighting potential loopholes.

“If the government were to pass a rule that CEWS gets clawed back from any company that increases dividends this year, then as the CFO of a company I would know exactly what to do: Don’t pay out a special dividend this year; pay out a special dividend next year,” he said.

“All it does is it takes the heat off of Ottawa.”

While Canadians may be “surprised or shocked” that emergency funds landed at companies that promptly lined the pockets of their C-suite staff, “that’s a tiny fraction of the overall issue of this program,” he added.

Starting in June, the revised CEWS program will raise the eligibility threshold to 10 per cent revenue loss relative to the same four-week period in 2019. A progressively lower subsidy rate as September approaches is also part of the plan.

“This money should be going to people who actually need it, businesses that actually need it, to try to stay afloat for hopefully what’s just the last few months of the pandemic,” Macdonald said.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

NDP Leadership

Just Posted

An example of the forest land in the Port Renfrew and Fairy Creek area of Vancouver Island is shown on May 11, 2021. THE CANADIAN PRESS/Jen Osborne
Old-growth logging opponents launch hunger strike as arrests continue at Fairy Creek

Zain Haq says the hunger strikers will gather today at Burrard Street in downtown Vancouver

The City of Victoria is hoping to ring in the summer by celebrating local art and offering some distanced, live music to surprise people in parks, plazas and other public spaces. (Photo courtesy of the City of Victoria)
Live, pop-up concerts and local art being showcased in Victoria this summer

People will see surprise serenades at 16 locations throughout the summer

An example of the forest land in the Port Renfrew and Fairy Creek area of Vancouver Island is shown on May 11, 2021. THE CANADIAN PRESS/Jen Osborne
Old-growth logging opponents launch hunger strike as arrests continue at Fairy Creek

Zain Haq says the hunger strikers will gather today at Burrard Street in downtown Vancouver

The 14th annual Oak Bay Young Exceptional Star (YES) awards June 3. (Christine van Reeuwyk/News Staff)
Oak Bay celebrates its Young Exceptional Stars with outdoor award ceremony

Nine young people recognized in 14th annual awards

Jada Benwell and Connor Larkey are the valedictorians of the 2021 graduating class at Parkland Secondary School. (Wolf Depner/News Staff)
Pandemic taught lessons in perseverance for North Saanich high schoolers

Parkland Secondary School to release 2021 grad ceremony video on June 25

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

Premier John Horgan speaks as provincial health officer Dr. Bonnie Henry, right, and health minister Adrian Dix look on during a press conference to update on the province’s fall pandemic preparedness plan during a press conference from the press theatre at Legislature in Victoria, Wednesday, Sept. 9, 2020. THE CANADIAN PRESS/Chad Hipolito
B.C. officials to provide details on Step 2 of COVID reopening plan Monday

Step 2 could allow for larger gatherings and a resumption of recreational travel

Indigenous Services Minister Marc Miller is seen during a news conference, Wednesday May 19, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Indigenous child-welfare battle heads to court despite calls for Ottawa to drop cases

Feds are poised to argue against two Canadian Human Rights Tribunal rulings

The Great Ogopogo Bathtub Race has been held in Summerland as a fundraising event. Do you know which Canadian city introduced this sport? (Black Press file photo)
QUIZ: A summer’s day at the water

How much do you know about boats, lakes and water?

Two-year-old Ivy McLeod laughs while playing with Lucky the puppy outside their Chilliwack home on Thursday, June 10, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO: B.C. family finds ‘perfect’ puppy with limb difference for 2-year-old Ivy

Ivy has special bond with Lucky the puppy who was also born with limb difference

A million-dollar ticket was sold to an individual in Vernon from the Lotto Max draw Friday, June 11, 2021. (Photo courtesy of BCLC)
Lottery ticket worth $1 million sold in Vernon

One lucky individual holds one of 20 tickets worth $1 million from Friday’s Lotto Max draw

“65 years, I’ve carried the stories in my mind and live it every day,” says Jack Kruger. (Athena Bonneau)
‘Maybe this time they will listen’: Survivor shares stories from B.C. residential school

Jack Kruger, living in Syilx territory, wasn’t surprised by news of 215 children’s remains found on the grounds of the former Kamloops Indian Residential School

A logging truck carries its load down the Elaho Valley near in Squamish, B.C. in this file photo. THE CANADIAN PRESS/Chuck Stoody
Squamish Nation calls for old-growth logging moratorium in its territory

The nation says 44% of old-growth forests in its 6,900-square kilometre territory are protected while the rest remain at risk

Most Read