The Rate of Exploitation of the Workers of the Bank of Montreal (BMO), One of the Largest Private Employers in Canada

Introduction

In two others posts I presented the twenty largest employers in Toronto according to level of employment (see A Short List of the Largest Employers in Toronto, Ontario, Canada) and the twenty largest employers in Canada according to profit (see A Short List of the Largest Private Employers in Canada, According to Profit).

I have tried to calculate the rate of exploitation of workers of Magna International in an earlier post (see The Rate of Exploitation of Workers at Magna International Inc., One of the Largest Private Employers in Toronto, Part One); Magna International is one of the largest employers in Toronto as well as the rate of exploitation of workers at the Canadian Imperial Bank of Commerce (CIBC) (see ???).

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in Toronto if they are available in order to calculate the rate of exploitation at a more local level.

The lack of any attempt to determine the rate of exploitation at the city level by has undoubtedly reinforced social-reformist tendencies.

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

The rate of exploitation or the rate of surplus value of Bank of Montreal workers is s/v; therefore, s/v is 7,533/8,162=92 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $0.92 cn surplus value or profit for free (calculated on the basis of the procedure outlined in the post on the rate of exploitation of Canadian Imperial Bank of Commerce bank workers). Alternatively, for every hour worked, a Bank of Montreal worker works 55 minutes for free for the Bank of Montreal.

It also means the following:

Data on Which the Calculation Is Based

The calculation of the rate of exploitation is undoubtedly imperfect, and I invite the reader to correct its gaps.

In millions of Canadian dollars:

Page 18:

Summary Income Statement
Income
Net interest income $12,888
Non-interest revenue $12,595
Revenue $25,483 [add the first two]
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) $2,709
Revenue, net of CCPB $22,774 [subtract $25 483 by $2 709]

Expenses
Provision for (recovery of) credit losses on impaired loans $751
Provision for (recovery of) credit losses on performing loans $121
Total provision for credit losses $872 [add the last two]
Non-interest expense $14,630
Total expenses $15,502

Net income $7272 ($22,774-$15,502)

Adjustments

In Marxian theory, it is necessary to question whether some expenses are expenses for both the individual employer and for the class of employers (and fractions of their class, such as those who live on interest); in such a case, the expense is deducted from total revenue. On the other hand, there are expenses that are expenses for the individual employer but are not expenses when looked at from the point of view of the class of employers; in such an instance, they are paid out from the surplus value produced or obtained by workers and are to be included in income before taxes.

In the annual report, the category of “Non-interest expense” is subtracted from total revenue, to yield the category “Net income.” However, to calculate the rate of exploitation according to the principles of Marxian economics, it is necessary to make certain adjustments. To that end, we need to look in more detail at the category “Non-interest expense.”

Non-Interest Expense
(Canadian $ in millions)
Employee compensation
Salaries $4,762
Performance-based compensation $2,610
Employee benefits $1,051
Total employee compensation 8,423
Premises and equipment 2,988
Other 2,665
Amortization of intangible assets 554
Total non-interest expense 14,630

As in other posts on the rate of exploitation in Canadian banks, the category “Performance-based compensation” causes some problems, which requires adjustments. It appears that most employees receive some kind of bonus based on performance. One site indicates the following:

BMO – Bank of Montreal pays an average of C$4,459 in annual employee bonuses. Bonus pay at BMO – Bank of Montreal ranges from C$993 to C$9,500 annually among employees who report receiving a bonus. Employees with the title Branch Manager, Banking earn the highest bonuses with an average annual bonus of C$9,500. Employees with the title Customer Service Representative (CSR) earn the lowest bonuses with an average annual bonus of C$993.

On the other hand, according to the Bank of Montreal Proxy Circular, all executives receive short-term incentives based on performance, senior executives receive mid-term incentives based on performance, and senior vice-presidents and above receive long-term incentives based on performance.

As I argued in my post about the rate of exploitation of Canadian Imperial Bank of Commerce workers:

However, the gap between executive pay and the pay of regular employees has widened over the years, so it is reasonable to infer that the category “Performance-based compensation” is divided into two parts: one part is a function of the number of hours worked by regular employees as well as the intensity of that work; the other is based on the extent to which bank managers and senior executives are successful in exploiting those regular employees. …

it is probably reasonable to assume that a minimum of 10 percent of the “Performance-based compensation” comes from the exploitation of senior bank executives of regular workers.
It would be necessary to have more detailed information to determine whether more or less of the money obtained in this category were distributed between regular bank workers and management executives. If regular bank workers received more, then the rate of exploitation would be less than the rate calculated below. If management executives received more, then the rate of exploitation would be more than the rate calculated below.

On the assumption of 10 percent, though, this means that 10 percent of the total of “Performance-based compensation, ” is reduced by 10 percent.

Adjusted Results

This 10 percent reduction in Performance-based compensation results in a reduction in total employee compensation” by $261,000,000 and an increase in net income by the same amount. This adjustment yields the following accounts:

Adjusted net income $7,533 (this represents surplus value or s)
Adjusted total employee compensation $8,162 (this represents variable capital or v)

The Rate of Exploitation of Bank of Montreal Workers

The rate of exploitation or the rate of surplus value of Bank of Montreal workers is s/v; therefore, s/v is 7,533/8,162=92 percent.

This means that, in terms of money, $1 of wage or salary of a regular bank worker results in $0.92 cn surplus value or profit for free (calculated on the basis of the procedure outlined in the post on the rate of exploitation of Canadian Imperial Bank of Commerce bank workers). Alternatively, for every hour worked, a Bank of Montreal worker works 55 minutes for free for the Bank of Montreal.

According to a few people who have worked at the Bank of Montreal, the length of the working day is the following (it is unclear whether lunch is included and unpaid or not]:

• Eight thirty to four thirty [8-hour working day]
• Working hours are steady. 8:45-5:15 everyday Monday to Friday [8.5-hour working day]
• The bank has a 7.5 hours work day and is a 9am – 5pm environment. However, the bank has flexibility to accommodate your commuting schedule. [8-hour working day]
• At that time i think they were M-W 10-3, T&F 10-8 and Sat. 10-4 [average of 410 minutes, or 6 hours 50 minutes, or 6.8 hours]
• The Hours of what I work is 8:00am to 4:30pm [8.5 hours]
• 9 hours, sometimes up to 12, but hours can be cut any time
• 9.5 but paid for 7.5 often losing breaks due to lose of break time as others underperformed and I had to pick up the slack… regularly.
• 7.5 hours per day
• The hours were fixed at 8 hours a day. However, working days were flexible along with more shifts.

I will calculate the division of the working day from the shortest to the longest in the above quotes accordingly. I use minutes rather than hours.

1. For a 6.8-hour working day (410 minutes), BMO workers spend 214 minutes (3 hours 34 minutes) to obtain their wage for the day, and they spend 196 minutes (3 hours 16 minutes) in obtaining a surplus value or profit for BMO.
2. For a 7.5-hour working day (450 minutes), BMO workers spend 234 minutes (3 hours 54 minutes) to obtain their wage for the day, and they spend 216 minutes (3 hours 36 minutes) in obtaining a surplus value or profit for BMO.
3. For an 8-hour working day (480 minutes), BMO workers spend 250 minutes (4 hours 10 minutes) to obtain their wage for the day, and they spend 230 minutes (3 hours 50 minutes) in obtaining a surplus value or profit for BMO.
4. For an 8.5- hour working day (510 minutes), BMO workers spend 266 minutes (4 hours 26 minutes) to obtain their wage for the day, and they spend 244 minutes (4 hours 4 minutes) in obtaining a surplus value or profit for BMO.
5. For a 9-hour working day (540 minutes), BMO workers spend 281 minutes (4 hours 41 minutes) to obtain their wage for the day, and they spend 259 minutes (4 hours 19 minutes) in obtaining a surplus value or profit for BMO.
6. For a 9.5-hour working day (570 minutes), BMO workers spend 297 minutes (4 hours 57 minutes) to obtain their wage for the day, and they spend 273 minutes (4 hours 33 minutes) in obtaining a surplus value or profit for BMO.
7. For a 12-hour working day (720 minutes), BMO workers spend 375 minutes (6 hours 15 minutes) to obtain their wage for the day, and they spend 345 minutes (5 hours 45 minutes) in obtaining a surplus value or profit for BMO.

It should be noted that I have used the verb “obtain” rather than “produce.” In Marxian economics, bank workers, as well as sales workers do not produce surplus value but rather transfer the surplus value already produced. This does not mean that these workers are not exploited capitalistically; they are used impersonally by the employer to obtain surplus value and a profit. Furthermore, things produced by others are used by employers such as Bank of Montreal to control their working lives in order to obtain surplus value or profit.

Bank of Montreal workers do not belong to a union. Would their becoming unionized turn their situation into one where they had a “fair contract” and “decent work?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left.