Finance Committee on April 23rd, 2009

[Diane Urquhart]

Yes, I can table that.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you very much.

If we're looking at this, there are three elements in the prosecution. One is either having the teeth or the capacity to do so; the other is having the expertise; and then the third of course is having the independence. Would you rank those in a particular order, with independence basically being number one?

[Diane Urquhart]

I think in a democracy that is founded on the rule of law, the independence of the police, from not only the government but also those who they investigate, is paramount. So I would put the independence of the police at the top of the list. I would follow that with competency.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

Perhaps, Ms. Smith, you represent a significant number of seniors. Many seniors are astute investors, but there are a great many seniors who are not really aware of the sophistication of the particular vehicle or market possibilities that are out there right now. Do you find, in the broad middle range of the people you represent, any anecdotal and/or empirical evidence that they've been guilty of either misleading information or deliberate fraud?

[Marie Smith]

Yes. Misinformation is the biggest one that is coming out from most of my people. It seems we seniors have been brought up to trust people; the younger generation are not on the same wave length as we were brought up to be. So they have trusted their investor and now they are at this stage where they've lost everything. It may be their neighbour, it may be their friend down the road, or it may be their bank, where they've dealt all these years.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

Mr. Valentini, the Pension Benefits Standards Act of 1985 set the particular ratios for the voting shares. The pension plans cannot own 30% or more of the voting shares and/or more than 10% of their portfolio in a single investment. Do you still adhere to that standard within the public pension?

[John Valentini]

We don't comply with that act; we have to comply with our own act, which has similar restrictions. I understand that is under review. There is a study, and PSP has put in a submission where we favour the lifting of those restrictions. The simple reason is that we feel—especially when I talked about certain of the transactions, such as in infrastructure and private investments—those restrictions put limitations on the types of transactions we can do in some of these asset classes. We did submit a submission to the effect that we favour the lifting of those limitations.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

And I think evidence has been given today, quite frankly, about how and why, and what those limitations should be, and your opposing position as well.

Mr. Benson, with regard to the actual voting share breakdown and/or the percentage of investment, I think you were concerned not as much with the percentage as the component of the investment vehicle itself and what it should contain. Would that be correct?

[Phil Benson]

Exactly. Yes, it's much more dealing with the component and not what it necessarily entails.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Kramp.

We'll go to Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

Not surprisingly, I am going to continue my very pleasant conversation with Mr. Valentini. I would like to come back to a phrase he used earlier, in answer to my colleague, Mr. Carrier. He said a number of times that there are industry standards—that this is the way things are done in the industry.

I understand that Mr. Valentini worked previously in the private sector, as did I, but I happen to know the difference between the two. I just want to establish the basis for our conversation. We are not talking about a group of private investments here; rather, we are talking about something that is 100% owned by the public. There is not one cent that you handle that is not public money. There is not one cent of your operating budget that is not funded with public money. Do we agree on that?

[John Valentini]

Yes, I fully agree. When I was comparing standards, I was talking about those of other pension funds in Canada, such as the Ontario Teachers' Pension Plan, OMERS, the Caisse de dépôt et placement, bcIMC and the CPPIB.

[Thomas Mulcair, NDP, Outremont, QC]

All right. Then, when you talk about the industry, you are not trying to convince us that you are part of the private sector. You are using the term “industry” as a generic term to mean “in our line of business”.

[John Valentini]

More specifically as regards pension fund managers such as our Board, yes. We are not comparing ourselves to them. In terms of compensation, we can compare ourselves to our peers, such as OMERS, the Caisse de dépôt and CCPIB, which are other pension funds. I also mentioned that, when we make such comparisons, the information is public. We have done some analysis, and PSP's ranking is no higher than that of our peers.

[Thomas Mulcair, NDP, Outremont, QC]

In fact, you said precisely that earlier, and that is one of the reasons why I decided to pursue this discussion with you during my speaking time. I would be delighted if you could change my perception, but what I take from your comments is that you are trying to rationalize this and say that, on the basis of your performance, your compensation could be enhanced. That is my perception. You keep trying to convince us that, in relation to others, you are not so bad.

Earlier, you and I agreed—although it was very difficult to have you admit this—that you lost billions of dollars last year. Earlier, you said that, as regards ABCP, the risks associated with the liquidity of these products were underestimated. You come here and tell us that you did a poor job, that you lost billions of dollars, but at the same time, you persist in asserting that, compared to others, you are not the worst off in your industry. I see that as an attempt to pave the way for your giving yourselves bonuses.

Am I wrong?

[John Valentini]

Yes, you are wrong. Mr. Mulcair, in the investment business, you never have a 100% success rate. Sometimes you win and sometimes you lose. In fact, in the past, we have won more often than we have lost, because our returns have been good. We are talking about ABCP now, but I could also spend the next 15 minutes telling you about all the times that we won. In the investment business, sometimes you win and sometimes you lose.

[Thomas Mulcair, NDP, Outremont, QC]

Okay, Mr. Valentini, we are making progress. Earlier, we were able to agree on the fact that you lost billions of dollars.Now, we have just agreed on the fact that you are managing public money. However, when you talk about industry standards and compare yourselves to the rest of the industry, I would like to insist on one thing: I would like you to pass on the following message to your partners on the Board of Directors: if they are convinced that they deserve more, they have only to leave and move into the private sector, where they may, indeed, be in a position to earn more. But, for the time being, they are managing public sector funds and, in the public sector, when you lose billions of dollars, you do not pay yourself a bonus. Do we agree on that?

[John Valentini]

I hear what you are saying. Once again, we are not comparing ourselves to the private sector, but rather, to other public sector pension funds.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you very much, Mr. Valentini.

[The Chair, Conservative, James Rajotte]

Okay. Merci.

I want to thank all the witnesses for your presentations here today and for your responses to our questions. If you have anything further you'd like to submit on pensions, please feel free to do so.

Colleagues, we have 15 minutes, but we do have some future business items we need to discuss very briefly, particularly credit card issues. I will thank the witnesses and they can excuse themselves. We will continue on with our discussion.

Let's suspend for two minutes, and we'll come right back.

[The Chair, Conservative, James Rajotte]

Colleagues, I will ask you to find your seats, please.

We need to discuss future business. You should all have a calendar in front of you. We obviously have one more meeting with respect to pensions under the access to credit issue. We have the Governor of the Bank of Canada on the 28th. We have what should be our final meeting on April 30 with respect to access to credit, unless members want a further meeting.

I do want to raise the issue of the credit card study. I know it is being debated in the House today, so we'll obviously have that vote before we have the study, but it's still the will--

[John McKay, Liberal, Scarborough—Guildwood, ON]

Welcome to the wonderful world of Parliament.

[The Chair, Conservative, James Rajotte]

Yes, welcome to the wonderful world of Parliament. But the reality is we have a motion here and the industry committee has a motion to study the credit card issue. I've been in discussions with the chair of the industry committee and we've tried to come up with a proposal to make to both committees.

There are two options. One is that both committees study the issue and try to focus on different areas. Industry would try to focus on competition; we would try to focus more on the credit or the consumer issue. That's a challenge, because you're obviously dealing with the same witnesses, so our proposal is that we do a joint committee. Our session is 9 a.m. to 11 a.m. on Tuesdays and Thursdays; their session is Tuesdays and Thursdays, 3:30 p.m. to 5:30 p.m.

The chair of that committee says they are pretty much booked up until May 7, so the option we have is to do it on Tuesday, May 12 and Thursday, May 14, from 9 a.m. to 11 a.m. and 3:30 p.m. to 5:30 p.m.

We have a good organization in terms of witnesses. The challenge is having 24 members. The vice-chair raised that. I don't know whether parties think that perhaps they could substitute so that we actually only end up with 12 members around the committee table, or 13 or 14, rather than 24, but I want to get your reaction to that. If this committee agrees to that, perhaps we could have the two subcommittees meet and do the specific logistics, if we had to.

That is my proposal. That's what the chair of the industry committee is going to propose to his committee this afternoon.

I'd like to hear the reaction to that.

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I would respond that a committee of 24 is unworkable, and I can't imagine anybody wanting to participate in that.

What about a joint subcommittee? The subcommittee would be equally composed of the two committees.