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Royal Bank of Canada CEO David McKay took heat Friday from shareholders for last year’s $13.4-million paycheque.

“How big does your house have to be? How many luxury cars do you have to drive?” complained an investor named Nick when he took the microphone at the bank’s annual meeting. He then tempered the criticism by explaining it was simply the breathtaking size of the CEO’s pay package he objected to; he was happy with the performance of Mr. McKay and his team.

Royal Bank chair Kathleen Taylor was quick to jump to the CEO’s defence, explaining that running a global bank takes big-league talent, who command big-league wages. And she’s right.

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Royal Bank of Canada CEO David McKay.Chris Young/The Canadian Press

This is tough to swallow in a country where the median annual household income is about $70,000 – Mr. McKay earns that much in two days. But when it comes to executive compensation, Royal Bank shareholders are getting a bargain. So are the owners of several rival Canadian banks.

Dig into formulas and philosophies that Royal Bank’s board provides to justify their decisions on compensation, and you find that Canada’s largest bank actually trimmed what it paid the senior executive team over the past five years. Over the same period, profits soared. As a result, shareholders saw a significant reduction in the cost of managing the bank they own.

Here’s how the numbers played out: In 2013, Royal Bank paid a total of $47.6-million to its six most senior bankers, who see their pay disclosed in regulatory filings. Compensation paid to the executive team then dropped steadily, in part because the bank shifted from two bosses to one CEO in its capital markets group. Last year, Royal Bank’s top executives made $40.7-million, including Mr. McKay’s $13.4-million award.

In the same five-year period, Royal Bank’s annual profit climbed from $8.3-billion to $11.5-billion. So shareholders who paid the top brass 57 cents for every $100 of profit produced in 2013 handed the executives just 35 cents for every $100 of profit in 2017.

The same trend is playing out at Bank of Nova Scotia, Bank of Montreal and Toronto-Dominion Bank. Overall compensation is flat for each bank’s executive team. Profits are rising. That means the cost of management is falling dramatically. These are investor-friendly trends.

There are two outliers in banking circles when it comes to compensation. CIBC dramatically increased executive compensation in 2017 to land new talent, including the CEO of its newly acquired U.S. subsidiary. And National Bank of Canada increased the absolute amount it paid to its team from $21-million to $30-million over the past five years, but noted in a filing that while compensation rose 7.8 per cent annually since 2013, total returns to investors climbed at a 15.1-per-cent yearly clip.

The outraged investor at Royal Bank’s annual meeting really should be asking if Mr. McKay’s interests are aligned with those of shareholders. Too often, CEO pay seems to be a “heads I win, tails you lose,” proposition, with the boss getting paid no matter how the business fares.

On this front, Mr. McKay and peers are also delivering for shareholders. All the Canadian banks produce charts that show what the CEO made versus what investors earned. The banks make this an apples-to-apples comparison.

Over each of the past five years at Royal Bank, on average, Mr. McKay and predecessor Gordon Nixon turned $100 worth of pay into $129 worth of personal wealth, reflecting that fact over 80 per cent of their compensation is tied to share performance.

Over the same period, a Royal Bank shareholder turned a $100 investment into $162. The same positive relationship between CEO pay and shareholder returns exists at the other big banks.

Sticker shock over a $13.4-million CEO pay package is understandable. The same eye-rolling took place when Josh Donaldson, a third baseman who crushes fastballs, landed a US$23-million contract from the Toronto Blue Jays, or Tom Cruise pulled in US$43-million for a year’s worth of forgettable films.

The conversation needs to be about the results, not the salary. If the Blue Jays win a World Series or Mr. Cruise anchors a blockbuster, no one sweats the star’s pay. When it comes to banks, focus on the alignment between CEO compensation and shareholder returns, not on moral judgments over the house and car that a CEO can afford.

Editor’s note: An earlier version of this article incorrectly referred to the median annual income of about $70,000. In fact, that is the median annual household income.

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