Who's Worth More? Auston at Team MLSE or Dave at Team RBC?

Auston Matthews should need no further introduction as he prepares to lead Team USA in the 2025 4 Nations Face-Off. Drafted in 2016, Mr. Matthews is the newly minted Captain and face of the Toronto Maple Leafs franchise – he is worshipped by Toronto hockey fans. In the previous National Hockey League (NHL) season, Mr. Matthews led the league in goals scored and he continues to rank amongst the best players in the world.

Dave McKay should need no introduction, as since 2014, he has been the President & Chief Executive Officer of Royal Bank of Canada (RBC), Canada’s biggest bank by assets and market capitalization, which also ranks amongst the largest banks in the world.

Mr. Matthews and Mr. McKay are both the leaders of their teams, leaders in the sectors in which they perform, and by fun coincidence, they are compensated quite similarly. If we then use compensation as a yardstick for value created, why is Mr. McKay compensated at a lower rate? See the “tale of the tape” between “Auston and Dave” below:

Head-to-Head Comparison: Auston Matthews vs. Dave McKay

¹ Average annual value of 4-year contract beginning for the 2024-2025 season

² Total Direct Actual = Base Salary + Short-Term Incentives + Long-Term Incentives (2023 fiscal year). Converted to USD using the Bank of Canada's annual average exchange rate for 2023 of 1 USD = 1.3497 CAD

³ Metro Area population served by the Leafs as per Forbes' valuation of the Toronto Maple Leafs

⁴ As at October 31, 2024

⁵ Efficiency ratio is calculated as career points per game (regular season and playoffs), as at July 1, 2024

⁶ Efficiency ratio is calculated as Non-Interest Expense divided by Total Revenue for the fiscal year ended October 31, 2024

⁷ Canada's Outstanding CEO of the Year® (2022)

Aside from the alarming lack of Stanley Cups for both individuals, one key point to highlight from the above comparison table is the section on Base Salary (% of Total Compensation). A common general perception of CEO compensation is that it is guaranteed and cash-based. Oftentimes, and in the case of Mr. McKay at RBC, this is false. Generally, only a small portion of CEO annual compensation is guaranteed in cash (base salary), whereas the remainder of the compensation package is variable and awarded via short-term and long-term incentives – with eventual payouts that are often linked to the successful performance of the company. In contrast, Mr. Matthews’ compensation package is contracted to be 100% in base salary, and he will receive the full value of his contract even in the event of consistent underperformance.

In all seriousness, very few people on the planet (including other professional hockey players) can perform at the athletic level of Mr. Matthews – so do we feel that his compensation is reasonable? Mr. Matthews consistently performs at an elite level, in a high-pressured and stressful environment in front of thousands of screaming fans, in a city often cited as the greatest (and most cutthroat) hockey market in the world. That said, he’s paid to put a frozen disc of rubber into a net, and his accountability does not stretch far beyond leading by example and maintaining his individual performance standard / personal contributions to the team.

In contrast, do we feel that no average person (let alone average businessman, banker, or CEO) can perform similarly to Mr. McKay? At RBC, Mr. McKay is responsible for managing CAD$57B in annual revenue, appeasing 18M customers, overseeing 98,000 employees across 29 countries, and increasing shareholder value. Arguably, most individuals would flounder in this role, and Mr. McKay’s accountability stretches far beyond individual performance and perhaps even into the realm of economic prosperity in Canada.

Careers in sports are fleeting – 10 to 15 years is an excellent run, with many retiring in their 30s. A CEO candidate is just getting started in their 30s as they aim for that top role in their 40s or 50s. As such, athletes do need to monetize their talent in the short-term. But does that explain the pay difference between “Auston and Dave”?

When disclosed, high levels of CEO compensation draw widespread ire. When another multi-million dollar contract is secured by one of our favourite athletes, we shrug because that’s modern sports. We also acknowledge that these are two completely different compensation markets for talent, and that availability of replacements for Mr. McKay is larger than that of Mr. Matthews when considering the number of CEOs and other executives at banks that are larger or comparable in size to RBC.

Is it a matter of perception? Mr. McKay is measured quarterly in financial results driven by his management of RBC. It is not so easy to intuit the direct drive from his efforts. Many people view athletic superstars like Mr. Matthews as having superhuman capabilities that were given at birth and crafted to perfection beginning at age 2. Perhaps many perceive Mr. McKay’s role as something attainable and a job that they can easily fulfill regardless of their experience and training. However, the CEO role at RBC is not easily attainable, and similar roles often require a global search to find top-tier generational talent – just as NHL hockey scouts search every corner of the world for the next Auston Matthews.

We recognize that the compensation for both Mr. Matthews and Mr. McKay is meticulously calculated by experts and based on market data, so it is unlikely that either of them are grossly overpaid. From a societal perspective, we value the entertainment provided by Auston Matthews with the Toronto Maple Leafs higher than the economic impact created by Dave McKay at RBC, but perhaps we are undervaluing the sheer scope and complexity of the role of CEO at Canada’s largest company. We will leave it to the reader to debate the implications of these views.