A Case Study On Egregious Canadian Corporate Greed: Loblaws
Supposedly Loblaws can’t afford to pay employees more, or charge customers less, so why are its shareholders making more money than ever?
The opinions expressed here are those of the author alone and do not represent the views of any associated entities.
Breakfast of Champions: CEO pay in 2021 hits new all-time high
This report by The Canadian Centre for Policy Alternatives (CCPA) generated quite an uproar when it was released a few weeks ago. It details some startling findings:
“By 9:43 on the morning of January 3, the average member of the 100 highest-paid CEOs in Canada will have made as much money as the average Canadian worker makes in a year—that's $58,800, by breakfast time on the year's first workday.“
“The average top-100 CEO made $14.1 million in 2021—that's 243 times the average worker salary.”
These numbers are truly mind-boggling. We have a serious income inequality issue in Canada, and according to this figure from the report, it’s worsened substantially over the last decade.
While these numbers are shocking, they still don’t capture the full extent of the economic inequalities existing in Canada. To explain why, today we’ll discuss Galen Weston, the billionaire grocery mogul who has become the face of corporate greed in Canada.
Galen Weston, the Chairman and Chief Executive Officer of George Weston Limited (GWL), is number 58 on the CCPA’s list of top-earning executives. In 2021, he was paid about $10 million through a combination of salary, bonuses, and stock options. His earnings were below the average of $14.1 million, and only a fraction of that of the top earner, Philip Fayer, CEO of Nuvei, who made $140 million. But don’t start feeling sorry for Galen…
The Westons are one of the wealthiest families In Canada - they are estimated to be worth around $8 billion.
Yeah, this guy from the No Frills commercials is a billionaire. Much of his wealth comes from a 53.6% stake in the company he runs, GWL.
GWL is a publicly traded company that was founded in 1882 by Galen’s great-great-grandfather. It acts as a holding company for the family's business interests, which are extensive.
According to GWL’s website:
“George Weston has two operating segments: Loblaw Companies Limited, Canada’s largest food and drug retailer and a provider of financial services, and Choice Properties Real Estate Investment Trust, Canada’s largest and preeminent diversified REIT.”
Now that’s what you call diversification!
As mentioned above, one of GWL’s operating segments is Loblaw Companies Limited (LCL). GWL owns 52.6% of LCL.
LCL is a really big deal. Its subsidiaries include Loblaws (obviously), Real Canadian Superstore, No Frills, Independent City Market (independent…lol), Fortinos, No Frills, among many others.
Galen Weston owns 53.6% of GWL, which owns 52.6% of LCL, meaning that Galen himself owns more than 25% of LCL. This one person owns a huge chunk of a company that has immense control over our food supply.
Galen’s earnings go well beyond his reported income
He makes much more money each year as a shareholder than as an employee. In 2021, the most recent year for which we have complete data, LCL paid out $1.68 billion to shareholders through dividends ($484 million), and share repurchases ($1.2 billion).
Galen owns about 25% of LCL, which means that his cut of this $1.68 billion was over $400 million, far outstripping the $10 million he was paid as an employee.
(Note that Galen is not paid directly through LCL’s cash distributions. Instead, he profits from his ownership stake in GWL. LCL’s cash distributions flow through GWL to GWL’s shareholders.)
The leftmost bar shows the $400 million Galen received as a shareholder of LCL in 2021, which dwarfs the middle bar, representing the $14.1 million average income of the top 100 CEOs. Sadly, the rightmost bar, the median income of all Canadians, $56,000, does not even register on this scale. Galen is outearning top CEOs by way more than they are outearning us. The incomes of average Canadians, and even top CEOs, are but a rounding error on Galen’s earnings from his stake in LCL.
Massive shareholder payouts are not new, though they have been getting bigger
LCL spent $1.40 billion and $1.47 billion rewarding its shareholders in 2019 and 2020, respectively. As mentioned above, this grew to $1.68 billion in 2021.
Galen is on track to earn even more in 2022. According to LCL’s Q3 filings, the company has already spent hundreds of millions of dollars more rewarding shareholders in the first three quarters of 2022, as compared to 2021.
Interesting that shareholders are earning more now than before the pandemic, isn’t it?
In the context of these massive distributions of cash to shareholders, it’s hard to believe that, as their spokespeople claim, Loblaws had no choice but to behave in the despicable way it did over the last couple of years.
Is $37 really the best price they can offer their customers for 5 chicken breasts?
Could they really not afford to make “Hero Pay”, the extra $2 per hour they paid some employees at the beginning of the pandemic, permanent?
Galen claims that ‘much of this is "maddeningly" out of the company's control as food suppliers pass on higher costs.’
“Experts” also give Loblaws plenty of excuses:
If times are so tough at Loblaws, and there is no choice but to pay employees the bare minimum while charging customers obscene prices, then why are shareholders earning more than before the pandemic?
Shareholder interests reign supreme
Loblaws’ rising grocery prices and resistance to paying workers higher wages don’t come from a place of necessity. Instead, these actions are a product of their priorities; shareholder interests are deemed to be more important than those of workers and customers.
Profits are maximized, regardless of the toll this takes on consumers and employees.
If LCL had “only” paid their shareholders $1 billion in 2021 rather than $1.68 billion, they still would have had nearly $700 million left over to spend elsewhere.
The average Canadian will spend about $4000 on groceries this year. $700 million put towards lowering grocery prices could have helped save 2 million people $350 each. This $350 in savings would be equivalent to a 9% reduction in their grocery bills, effectively reversing all of the food inflation they experienced over the last year.
A minimum wage worker in Ontario is paid $15.50 per hour. This equates to an annual income of $31,000 if they work 40 hours per week, 50 weeks a year. “Hero Pay”, an additional $2 an hour, would bring their income up to $35,000. $700 million could cover this $4000 difference to permanently implement “Hero Pay” for 175,000 employees. LCL only has 200,000 employees, and many of them don’t work full-time.
Many of us could be earning higher incomes and paying less for the things we buy. The money to make this happen exists, but currently, it’s all going to shareholders.
The dominance of Loblaws’ shareholders' interests has been facilitated by high market concentration in the grocery industry, which is controlled by a handful of companies. Indeed, Loblaws has already been caught exploiting its market dominance by colluding with its competitors to steal billions of dollars from its customers by artificially inflating bread prices. Employee pay also suffers in highly concentrated markets; Loblaws was accused of wage-fixing when “Hero Pay” was canceled in tandem with its competitors Sobeys and Metro.
Canada has a serious wealth inequality issue
It wouldn’t be such a big problem that shareholders are rewarded at the expense of employees and customers if we all owned similar stakes in the large companies controlling our economy. If everyone is a shareholder, everyone benefits.
But in reality, ownership of these companies is highly concentrated. There are 50 Canadian billionaires, who together have assets of $249 billion as of November 2022 — just ahead of the $248 billion in assets belonging to the bottom 40% of the Canadian population. Many of these billionaires hold their wealth as large stakes in big companies that dominate our economy.
Canada’s economic system prioritizes shareholders, and billionaires own a disproportionate number of shares. This means that our country is effectively prioritizing billionaires over the masses, which allows them to just keep getting richer:
Many of us feel that hard work doesn’t pay off like it used to, but it does, just not for those doing the work.
To make progress as a society, we need to start prioritizing People Over Profits.
In the future, we’ll discuss in more detail how we got here. It wasn’t always the case that shareholders' interests dominated, and wealth was so concentrated.
For now, I’ll leave you with this question.
Will we ever be able to achieve a higher standard of living for all Canadians while shareholders’ interests are seen as paramount, resulting in so much of the wealth we create being captured by the super-wealthy?
I would love to hear what you think.
That’s all for this time.
Thanks for reading,
Kareem
Galen is a member of the lucky sperm club, not based on merit but inheritance only. This has been the dominant characteristic of the Canadian economic system since the first robber barrens exploited Canada .
Galen is all about Galen. Always has been. Hugely egotistical. I worked for Loblaws for 51 years. When his father stepped down everything changed. His father was a decent man would never allow his employees to strike ( there never was one while he was in charge). He always found a way. When junior took over he eliminated sick days Christmas bonuses and clawed back benefits and vacation time. He really is all about himself and his argyle sweaters.