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Or sign-in if you have an account.Canada Post handed out $30.8 million in management bonuses despite a $1.57-billion loss last year. Photo by Gavin Young/PostmediaThe Canadian Union of Postal Workers (CUPW) is a public sector union that has long engaged in radical left-wing politics, while the Canadian Taxpayers Federation (CTF) is a fiscally conservative activist organization that does much good work pushing back against high taxes and wasteful government spending. There are hardly two more ideologically opposed organizations in Canada, but when Canada Post handed out $30.8 million in management bonuses despite a $1.57-billion loss last year, CUPW and the CTF finally found something they agreed on: the bonuses were outrageous.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorUnfortunately, what CUPW and the CTF have finally found common cause in is wrong. There is much for Canadians to be outraged about at Canada Post, but not the $30.8 million in bonuses. If anything, that number is far too low.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againHere are two statements, seemingly incompatible, but both true. One: Canada Post and its union are a disaster for Canadians, who must depend on service that is often disrupted by strikes, who are price-gouged as a result of Canada Post’s monopoly on letter-mail delivery, and who have to underwrite the corporation’s massive losses by virtue of being taxpayers. Two: $30.8 million in bonuses seems remarkably low, and the optimal amount — even given Canada Post’s awful performance — should be much higher.To put the $30.8 million in context, it was paid to 2,377 management employees at all levels, including 417 executive-level managers but excluding employees represented by APOC (Association of Postal Officials) and PSAC (Public Service Alliance of Canada). So the $30.8 million works out to about $13,000 per management employee, including executives.In a typical private-sector company the same size as Canada Post (i.e., revenue of about $6 billion, not including its interest in Purolator), even junior management — never mind executives — would expect to receive in the neighbourhood of $13,000 for an annual bonus. And because bonuses are generally determined by both personal and corporate performance this would be true even when the company had a bad year. That a company’s financial performance may have been terrible does not mean most of its employees performed badly. And although the portion of the bonus determined by company performance is reduced in a bad year, it usually would not be zero — for the simple reason that inducing an exodus of high-performing employees would quickly turn things from bad to worse.Despite their name, “bonus” payments typically are not rewards for stellar performance on top of what employees expect to earn. The more accurate phrase — used in the records published online by the CTF — is “at-risk” compensation. In most comparable private companies, even junior management employees would likely have a 10- to 15-per-cent target for “bonus” or “at-risk” compensation on top of their fixed base salary. If their and the company’s performance were as expected, they would be paid bonuses at the target level. If performance were worse, they would expect less; if better, more.Because base salaries are negotiated to reflect the expected bonus, the bonuses are not an “extra” but rather simply the portion of employees’ pay that, as the phrase suggests, is at risk. The main purpose of making some employee compensation variable depending on performance is to reward strong employee performance, penalize weak performance, and make employees more interested in their employer’s success.The powerful role of putting employee compensation at risk in order to encourage stronger performance is evident in the management information circulars of publicly traded Canadian companies. At Canada Post-sized companies, they typically show that named executive officers (usually the five most senior executives) have more than three-quarters of their annual compensation at risk. Even in a bad year, the variable component would not be completely eliminated.Putting management compensation at risk is a powerful tool for encouraging better performance, which Canada Post badly needs. The fact that the average Canada Post management bonus, including for executives, is at a level that even junior managers at comparable private-sector companies would typically expect, suggests far too much management compensation at Canada Post is fixed. Contrary to what CUPW and the CTF say, $30.8 million is far too low. For a better-performing Canada Post, we should stop giving management employees so much guaranteed compensation and put much more of their pay at risk. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.