Jean Dubé

[Canada Pension Plan Investment Board Act, November 26th, 1997]

moved:

Motion No. 2

That Bill C-2 be amended by deleting Clause 37.

Mr. Speaker, I would like to explain to members of this House why it is imperative to delete clause 37 of Bill C-2, which reads as follows:

1. The Board and its subsidiaries shall invest their assets in such a way that tax would not be payable by them under subsection 206(2) of the Income Tax Act if Part XI of that Act applied to them.

Pursuant to this clause, the Canada pension plan investment board should act as if it were governed by the provisions of the Income Tax Act dealing with the foreign content of pension plan portfolios. This means that the new board would not be allowed to invest more than 20% of its assets outside Canada.

Because we believe the board should have the power to make investments that will best protect the interests of the plan's beneficiaries, clause 37 must be struck from the bill.

In fact, the government should increase and even eliminate the limit put on foreign investments, instead of extending it to other types of investments. We must make sure the board is free to choose the investments likely to provide the best return, regardless of any political consideration.

Also, maintaining restrictions on foreign content could trigger major problems.

First, limiting investments abroad could prevent the board from building a portfolio that is sufficiently diversified to reduce financial risks. We all know that this issue is an important one and that it is time to restore Canadians' confidence in a pension plan that was once their pride.

Second, this constraint also has the effect of reducing the competitiveness of Canadian businesses. Knowing that there is a large and secure capital base on which they can rely, they have less motive to be effective and efficient than if they were in direct competition with foreign companies.

Third, and this is certainly an important concern, it prevents Canadians from receiving a fair return on their pension savings: their money is tied up in a stock market that represents only 3% of the capital in the global market.

Quoted in the Ottawa Citizen , Professor James Pesando from the University of Toronto summarizes and illustrates better than I can the concerns that were raised. He said, and I quote:

“You have heard that expression `don't put all your eggs in one basket'. Just imagine that the CPP fund in the extreme case was invested only in Canadian stocks and bonds and then in 2005 Quebec secedes. That would be devastating in terms of its impact on share prices and bond markets in Canada”.

Professor Pesando continued:

<“Think about what would happen if 50% of those funds were invested offshore. Not only would they continue to do well, but the drop in the Canadian—would mean the returns would be magnified”.

It is not complicated: Bill C-2's provisions setting out the rules on the portfolio's foreign content deprive Canadians of over $700 million annually. By eliminating clause 37, that is by eliminating these rules, the market value of the Canada pension plan could increase by 20 to 25%. This is no small amount. I would even say it is significant.

The government should stop limiting potential investments by millions of Canadians and should act to eliminate this outdated and archaic requirement.

It is in fact that same government that is saying to these same taxpayers that they should be more responsible in financing their retirement. I am saying that the government should act more consistently.

During the electoral campaign last spring, the Progressive Conservative Party clearly stated that it wanted changes to the rules governing registered retirement savings plans in order to gradually eliminate restrictions on foreign investments.

Its main argument at that time also applies very well to the issue of the Canada pension plan today: Canadians have the right to seek the best possible return from the market.

To achieve this, it is essential that the investment board be allowed to make its investments in the best interests of the Canada pension plan's beneficiaries.

That is why I urge my colleagues in this House to vote in favour of this motion.

[Canada Pension Plan Investment Board Act, November 26th, 1997]

Mr. Speaker, the motion I moved that is currently under study concerns the mandate of the auditor of the investment board.

We in the Progressive Conservative Party are very concerned about the problems this issue raises, because the Canada pension plan investment board will have huge responsibilities and power. It will oversee the billions of dollars invested by Canadian employers and employees. It will be playing with the financial future of thousands and thousands of Canadians.

Transparency and accountability are therefore of the utmost importance if we want to ensure this sizeable fund is well managed. This is why we wanted to clarify the provisions of clause 42 of Bill C-2.

We first start our amendments to clause 42 by extending the auditor's term from one year as it presently stands in the bill to five years. The one year term set out in Bill C-2 is too short a term to allow for continuity. With such an important fund it does not make sense to allow the possibility to change auditors every year. It does not make for sound administrative practices. We want to make sure the funds will be properly managed and allowing the auditor to have a five year term will help in achieving that goal.

The second amendment we would make on clause 42 is to stipulate that removing the auditor can only be done with just cause. As it stands now, clause 42 says that the auditor of the board may be removed at any time by the board of directors. This is clearly insufficient.

This provision clearly needs clarification because, as it stands now, it would allow the auditor of the board to be removed at any time, without just cause and without anyone having to account to anyone as to the reasons for doing so.

Such vagueness, such discretion invites abuse of power on the part of the board of directors, and that cannot be permitted.

What we propose is that the board of directors may remove the auditor at any time. However they must do so with cause and those causes must be made public.

In our amendments, disclosure provisions start in subsection 1.1. It stipulates that if the board decides to remove the auditor it must notify the appropriate provincial minister of each of the participating provinces of that removal. The board must also provide the provincial ministers with a reason for that removal.

It is important to note here that the provinces are an important and integral part of the Canada pension plan. Yet under the current bill they need not be made aware of such an important issue as the reason to remove the auditor or even the removal itself.

It is true that under clause 43 provinces are informed of the resignation or removal of the auditor. However this is only when the auditor herself objects to her removal or has to resign because of differences with the board. The provinces are therefore made aware of a done deed and they have no power to change anything.

That is why we went one step further in our amendments. In subsection 1.2 of our amendments we indicate that the auditor may not be removed unless at least two-thirds of the provinces representing two-thirds of the population agree in writing to that removal.

I hope that my colleagues understand and acknowledge that corporate auditors such as will be the auditor for the CPP board are there to protect shareholders, not the board of directors. The same principle ought to be applied to the Canada pension plan investment board. Furthermore, the protection of shareholders is a recognized principle in Canadian law.

Our amendments reflect this widely used principle such as is found in section 344 of the Insurance Companies Act which requires shareholders to be told the reasons for the auditor's dismissal and to vote on that dismissal. In our case, the provinces stand in as proxies for the shareholders with the standard two-thirds rule replacing the shareholders meeting. Similar rules are part of the Bank Act of Canada, the Canada Business Corporations Act and the Trust Companies Act.

In subsection 1.2 I explained the process to be used in case an auditor is removed by the board. Subsection 1.3 explains the process to occur when an auditor resigns. In this case our amendment would require that the auditor notify not only the board of directors of a resignation, but also must notify the minister and the appropriate minister of each of the participating provinces. Notably the auditor would also be required to provide the reasons for the resignation and the auditor must make those reasons available to the public.

This is again common practice in a corporate world and those principles should be applied to the Canada pension plan investment board.

To ensure full disclosure of the circumstances of the removal or resignation of an auditor, we provided for the requirement for any new auditor to obtain a written statement from the outgoing auditor. This statement would state the circumstances and reasons of the resignation or removal.

It is important to note here that something is missing in French version of subsection (1.4), as compared to the English version. On the third line, we should read “d'avoir demandé et obtenu” instead of just “d'avoir obtenu”.

This would reflect the English wording “has requested and received”. This is an omission that has an effect on subsections (1.5) and (1.6).

Now getting back to the relevance of subsection (1.4), as I explained earlier, there are practices in the corporate world that should be applied to the operation and management of the Canada pension plan investment board.

It is a matter of transparency and accountability. We want to ensure that the funds entrusted to the investment board will be managed properly and that reputable administrative practices are used.

By providing that the incoming auditor must ask the other auditor why he or she resigned or was removed, we are echoing a provision of section 345 of the Insurance Companies Act.

It is so important that the new auditor comply with this requirement that he or she cannot accept this appointment without first having received the written statement of the circumstances and reasons behind the other auditor's resignation or removal.

In clause (1.5), we make an exception to clause (1.4). If the new auditor did indeed request a written statement from the former auditor, but that the latter did not provide a reply within 15 days, the new auditor may nevertheless accept his appointment as auditor. This would avoid having too long a period without an audit being conducted.

In clause (1.6), we reiterate that an appointment as auditor is void if clause (1.4) has not been complied with. For example, if a person accepts an appointment as auditor without having requested a written statement from the former auditor, the appointment will be void.

To conclude, this explains the amendments provided in Motion No. 3 now before the House. As I mentioned at the beginning of my comments, these clarifications to clause 42 of Bill C-2 have to do with the mandate of the auditor of the investment board. Our amendments help ensure the board's transparency and limit the powers of the board of directors, for the benefit of Canadians as shareholders of the fund.

I urge all hon. members to support the motion.

[Canada Pension Plan Investment Board Act, November 26th, 1997]

moved:

Motion No. 3

That Bill C-2, in Clause 42, be amended by replacing lines 40 to 42 on page 21 with the following:

“appointed for a term of five years by the board of directors, and may be removed at any time by the board of directors for cause.

(1.1) If the board of directors decide to remove the auditor before the auditor's five-year term ends, the board of directors must notify the appropriate provincial Minister of each of the participating provinces giving the reasons for the decision.

(1.2) The auditor may not be removed unless at least two thirds of the participating provinces having in total not less than two thirds of the population of all of the participating provinces has agreed in writing to the removal.

(1.3) An auditor who resigns before the end of the five-year term shall notify the board of directors, the Minister and the appropriate Minister of each of the participating provinces giving the reasons for the resignation and make those reasons available to the public.

(1.4) Where the auditor has resigned or been removed, no person or firm shall accept an appointment or consent to be appointed as auditor until the person or firm has requested and received from the other auditor a written statement of the circumstances and reasons why the other auditor resigned or why, in the other auditor's opinion, the other auditor was removed.

(1.5) Notwithstanding subsection (1.4), a person or firm may accept an appointment or consent to be appointed as auditor if, within fifteen days after a request under that subsection is made, no reply from the other auditor is received.

(1.6) Unless subsection (1.5) applies, an appointment as auditor is void if subsection (1.4) has not been complied with.”

[Employment Insurance, November 24th, 1997]

Mr. Speaker, it would be sustainable at $2.00.

Last week finance officials led the finance committee to believe that the auditor general agreed not to be the auditor for the CPP board. The auditor general had to send a letter to the finance committee to clarify his position. He clearly indicated that he believes he should be the auditor for the CPP board, yet on Friday the Minister of Finance persisted in saying that this is not the auditor general's position.

Does the minister now have his facts straight and can he tell the House why his officials misled the finance committee?

[Employment Insurance, November 24th, 1997]

Mr. Speaker, the government announced on Friday that it would be reducing EI premiums by only 20 cents, from $2.90 to $2.70.

Business leaders all over the country agree that EI premiums could be reduced by 60 cents to 70 cents. Even the actuary for the EI account says the fund could be sustained if premiums were reduced by 90 cents.

Why did the Minister of Human Resources Development choose to put the interests of the Minister of Finance ahead of giving Canadians the tax relief they need, especially in view of the $11 billion tax hike—

[Canada Pension Plan, November 19th, 1997]

Mr. Speaker, Canadian workers had better keep their eyes open on this one.

Until now, the Minister of Finance has shown no interest whatsoever in reducing employment insurance premiums. If these are not reduced, the employment insurance account will have a $7 billion surplus, a $7 billion tax on jobs. When Canada pension plan contributions are raised, still more jobs will be jeopardized.

Would the Minister of Finance commit, once and for all, to offset the increases in pension plan contributions by reducing employment insurance premiums?

[Canada Pension Plan, November 19th, 1997]

Mr. Speaker, in 1995 the Department of Finance conducted a study on the impact of the increase in CPP premiums between 1986 and 1995. The department estimated that the increase in CPP premiums would lead to a loss of some 26,000 jobs.

Could the Minister of Finance inform this House how many jobs will be lost this time with a 70% CPP increase in premiums and is there a job impact analysis?

[Canada Post, November 17th, 1997]

Mr. Speaker, the Minister of Labour has known for two and a half weeks that Canada Post and the Canadian Union of Postal Workers would be in a position for a strike or lockout this week. A work stoppage at Canada Post will hurt thousands of Canadian charities and businesses at their busiest time of the season.

Does the Minister of Labour intend to introduce pre-emptive back to work legislation today or does he have his heart set on shutting down Canada Post for Christmas?

[Canada Pension Plan Investment Board Act, October 6th, 1997]

Mr. Speaker, I thank the hon. member for her comments. I heard about the consultation in major cities, but not all cities were affected by the consultation.

The people of my riding in northern New Brunswick did not hear about the consultations. All Canadians have a right to be consulted if it is going to affect their wallets.

The hon. member says that consultations have been ongoing since 1996. If that is so, why are seniors throughout Canada very nervous about the changes being made to the CPP?

We saw the effect which changes to the EI had on the citizens of Atlantic Canada. We want to ensure that does not happen again.

[Canada Pension Plan Investment Board Act, October 6th, 1997]

Mr. Speaker, if we had been given a chance, I think we could have changed it in a positive way. Our party believes there is a need for change in the system, but it is how the changes will be made and how they will affect Canadians, low income earners, youth a women.

We heard the government a while ago say that there was no problem because there was a lot of money in the fund. We have heard it say no problem before. We heard it with the last referendum in Quebec. We heard it with the EI, that there was no problem.

In my riding in New Brunswick I have seen what the EI reform did to the citizens there. It was detrimental. We want to make sure that the government listens to what Canadians have to say and make sure that Canadians are consulted. There are problems in the way the plan is being presented. Believe me, if it does not listen it will have a problem.

I am saying to the government today to make sure that consultations continue.