ICBC president Jon Schubert will step down and the public auto insurer is pledging reforms after a provincial audit found executive pay had soared far too high.
The finance ministry review found ICBC was “not aligned” with the province’s cost-containment priorities and recommended ICBC reduce the number of managers and their pay to levels more consistent with what existed in 2008.
“A culture of cost-containment and financial discipline has been lacking in recent years,” it said, adding expense policies were “generous.”
ICBC had 13 top managers paid more than $200,000 a year in 2007, but that had more than quadrupled to 54 by 2011.
The report also noted there are more than 1,291 other managers and employees earning $75,000 to $200,000 – up 52 per cent from 848 in that bracket in 2007.
Despite a 2011 policy change denying bonuses if ICBC profits fail to top $35 million, more than 85 per cent of management still got at least three-quarters of their eligible bonus that year.
The review said the profit target for allowing bonuses is “unreasonably low” because ICBC hasn’t earned less than $140 million in the past five years.
It also detailed signing bonuses of up to $40,000 to attract new staff and annual allowances for cars and other spending of about $17,000 for each senior executive.
ICBC responded by announcing a management pay freeze, a hiring freeze and said it will cut 135 management positions by 2014.
The corporation has a president, 10 senior vice-presidents who each oversee a division and 13 other vice-presidents.
ICBC also said it will cut its operating budget by $50 million by the end of next year.
Schubert will step down in November but work several more months as a paid consultant.
The changes came as the B.C. Utilities Commission gave final approval to an 11.2 per cent hike in basic insurance premiums that had been provisionally in effect since February.
ICBC says its six per cent cut in optional rates this year offsets most of the impact of the basic coverage increase, and overall auto insurance increases have averaged 0.8 per cent a year for the last decade.
It competes with private insurers on optional coverage but has a monopoly on basic rates.
BC Conservative leader John Cummins accused the Liberals of “profound managerial incompetence” in allowing ICBC executive pay to escalate unchecked for years.
Canadian Taxpayers Federation spokesman Jordan Bateman said a management wage freeze isn’t good enough and called for current managers to take a 15 per cent pay cut.
ICBC takes in more than $3.7 billion a year in insurance premiums and earns another $440 million from investment income.
The review makes little mention of the government’s controversial policy of withdrawing a “dividend” from the Crown corporation to help balance B.C.’s budget.
ICBC increased its reserves from $314 million in 2002 to $3.8 billion in 2010, after which the province ordered it to start handing over surplus cash from the optional side – $576 million in 2010 and $101 million in 2011.
Critics argue motorists should instead get the dividends – in the form of lower rates.