Bill C-2 (39th Parliament, 1st Session) Committee on May 31st, 2006

[Pierre F. Côté]

You're absolutely right on the issue of principles, on correct behaviour. Of course we have to convince people to act ethically and not break the law. Given human nature, however, there aren't many places in the world where, despite our best efforts, people act perfectly ethically or appropriately. Those contributions can come indirectly from businesses and the issue must be examined closely.

I have a solution to suggest. I would suggest treating businesses as corporate citizens who contribute in their own way to democratic development. They should be regulated in order to prevent them from breaking the law and making indirect contributions. The regulations would be very strict and parameters would be set requiring very appropriate behaviour on their part.

[The Chair, Conservative, David Tilson]

We have to go to Mr. Lukiwski.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Thank you, Mr. Chair, and good evening, gentlemen.

Monsieur Côté, I have one brief question for you. Let me get some background first. When did you leave the position of chief electoral officer in Quebec? What year?

[Pierre F. Côté]

In 1997. I was chief electoral officer for 19 years.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Then obviously you have a wealth of experience dealing with election returns, both from candidates and political parties.

My question to you is whether or not this situation would have ever occurred in Quebec, and if it had, whether it would be considered appropriate, legal, or not.

Let's assume for a moment that a political party—one of the provincial parties, not a candidate—hired 10 people to work in their war room, or whatever. This is legal, I understand. They can pay salaries and claim them as an expense, which would then be entitled to a rebate. Let's just assume for a moment they hired 10 people, paid them $1,000 each for whatever purpose, and then those 10 individuals at some point in time during the campaign donated $1,000 each to the political party. Would that be considered, under Quebec election laws, a violation?

[Pierre F. Côté]

If I understood your question correctly, I believe not. In Quebec, the maximum amount an individual can contribute is $3,000. The question, as I pointed out earlier, is whether the $1,000 contribution to a political party from an individual is personal money or money that would be reimbursed by the business the individual works for.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

I'm not sure if I communicated my hypothetical situation correctly. Say that a political party hired 10 campaign workers and paid them $1,000 each; those 10 workers then contributed, at some point in time, $1,000 each to the political party. Now, within the strict rules, as I understand them, that's perfectly allowable, but if you connected the dots, it would appear the individuals had made a deal with the political party to take money for services they performed and then donate that money back to the political party. In addition, because the political party would be able to claim those salaries as an expense, they would get a rebate back. So not only would they get the full amount of money back, they would also get a rebate from the taxpayers; they would be making money off the situation.

My question to you is whether you have you ever experienced that in Quebec, and would that be considered a violation of the Quebec elections act?

[Pierre F. Côté]

It may have happened but I don't think it would have happened in the way you described. There is a basic overarching rule and that is that you can't do indirectly what is not directly allowed. If you indirectly do what is directly forbidden by law, you may be taken to court and fined.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Your point, however, earlier in your presentation, was well taken. As Mr. Martin stated, it would appear obvious that there were some wrongdoings, but it's very difficult to prove. I'm wondering whether there are any particular rules in place.

While I don't know what has happened over the past few decades in Quebec, I can assure you, sir, that this situation has occurred in Saskatchewan several times. I have lodged complaints with the chief electoral officer in Saskatchewan to no avail, because there cannot be any wrongdoing proven. But at first blush it would appear quite obvious that it involved an agreement.

What makes it even more egregious in my mind is the fact that the political parties would not just be receiving their donations back; they would be making money on top of it, because they would claim a rebate, and with taxpayers' dollars. To me, that's the type of “accountability” we need to clamp down on.

That was my only comment, sir.

[The Chair, Conservative, David Tilson]

Mr. Rob Moore.

[Rob Moore, Conservative, Fundy Royal, NB]

Thank you, Mr. Chair.

From the testimony I've heard tonight I'm more convinced than ever that we're on the right track. I find it a little defeatist to suggest that because businesses are going.... No one is perfect, so no matter what rules we put in place, people are going to find ways to break them. But I think we're on the right track to having enforceable rules, strong oversight, and empowered parliamentary officers. I could be missing something, but Mr. Villemure was saying we need principles and values that would guide people and need to set out the values. To me that sounds like what businesses have—a mission statement for their employees.

But we've had this discussion with other witnesses on the question, can you legislate honesty? Is that what you're saying, basically—that we need this mission statement and that somehow people would be so influenced by it that it would impact upon their behaviour?

I think generally most people—and this was certainly what Judge Gomery found—are honest and do their job and try to do what we think of as the right thing, but there are those who are bad apples and, no matter what we do, are going to do the wrong thing. What this bill, Bill C-2, is doing is putting the rules and the oversight and the officers in place to do everything we can as a Parliament to prevent the bad apples from doing bad things.

I'd like your comment on that. What is that piece that's missing?

[René Villemure]

We can't legislate honesty; you're right, definitely.

Earlier on, I began my remarks by saying that Bill C-2 constituted an ethical moment. It is generally well perceived. However, I think that only half the work has been done because the bill acts only in terms of prohibitions. Do we need a

“mission statement”, something such as we'll find in businesses? I don't think so. But I think we do have a need to reinstate the importance of values such as respect and fairness,

equality and equity, regardless of which ones apply.

I think these things are so obvious that we don't see them any more, and I think they need to be reinforced.

Also, and as Justice Gomery used to say, l'exemplarité is something that needs to be demonstrated, and it hasn't been in the past.

So I think a strong demonstration of such values is necessary, although you can't legislate honesty and you will not do so. But the introduction of the fundamentals of the project is missing. You would gain a lot by being more precise.

[The Chair, Conservative, David Tilson]

Our time has expired.

Did you have point of order, Mr. Murphy?

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Yes. In the interests of fairness and respect, should we hear a few words from Monsieur Quintal?

[The Chair, Conservative, David Tilson]

Is there unanimous consent?

I do what I'm told here, gentlemen, and both my clocks have gone off.

Monsieur Quintal, did you have some remarks? We haven't given you a chance to speak all night.

[Michel Quintal, Project Manager, Institut québécois d'éthique appliquée]

I would like to talk about the commissioner's role or mandate. If we're talking about ethics based on values, then an advisor would be an appropriate choice. However, if we're talking about a code of ethics, and violations of certain standards, then the choice should be a commissioner with vast experience in investigations, because allegations of breaches of a code must be founded in fact. Finding the evidence requires extensive interview and analytical experience. A background in ethics would be an asset for someone acting as an advisor in cases of non-compliance with certain values, for example, an individual innocently doing something that was not allowed. On the other hand, in cases of deliberate attempts to break the law, an investigative approach is necessary, one that involves collecting facts and evidence that will ultimately lead to recommendations. The ideal candidate should have both types of experience.

[The Chair, Conservative, David Tilson]

We appreciate your time. Thank you very much.

We'll break for a moment.

[The Chair, Conservative, David Tilson]

We're going to reconvene.

Our final delegation this evening comprises three representatives from the Public Sector Pension Investment Board. We have Paul Cantor, the chairperson of the board; Gordon J. Fyfe, the president and chief executive officer; and Assunta DiLorenzo, the general counsel.

I believe the procedure has been described to you. You make a few introductory comments, then the four caucuses will each have seven minutes to make statements and/or ask questions.

I don't know who is speaking.

Mr. Cantor?

[Paul Cantor, Chairperson, Public Sector Pension Investment Board]

May I speak, Mr. Chairman?

[The Chair, Conservative, David Tilson]

Yes, please do, sir. Thank you for coming, and welcome.

[Paul Cantor]

Thank you very much, and thank you for giving us this opportunity to meet.

My name is Paul Cantor and I am the chairperson of the Public Sector Pension Investment Board. I'm accompanied by Gordon Fyfe, our president and chief executive, and by Assunta Di Lorenzo.

We welcome this opportunity to talk to you. We have a prepared statement, which I believe has been circulated to the members of the committee. It is not my intention to drag you verbatim through that, but just to highlight the key issues and to turn the floor over as rapidly as possible to you for your questions.

We at the PSPIB do welcome the government's initiative to move towards greater transparency. In our comments, which will be restricted to how they relate to the PSPIB, we're supportive of the bill as drafted, and we look forward to its speedy passage for the reasons we will outline to you.

As neither Mr. Fyfe nor myself have had an opportunity to present to this committee before, we've taken a bit of the opening here to provide you with our résumés, which are there for your consideration. The only comment I would make about myself is that I started my career in government. I actually worked in a crown corporation and then moved into the financial service sector. It was when I was at the CIBC that I was most particularly focused on the capital markets issue, when I was treasurer of the bank and responsible for its trading operations, and thereafter when I was president of the investment committee.

My other expertise in order to hold this job relates to my general experience as a president and chief executive officer, and subsequently as a consultant. If you look down at the bottom of the section about me, you'll see that I serve and have served on a number of other boards in publicly listed companies and subsidiaries, affiliates, and so on.

Mr. Fyfe is much more deeply embedded in the capital market, having spent his entire career working in it, first at Canadian Pacific and then at RBC Dominion; thereafter at JP Morgan in London, as they say, taking on positions of increasing responsibility; then as a president at TAL, which was ultimately sold to the CIBC--unfortunately not when I was the president of the investment bank, as I badly wanted to buy it when I was there--and then finally for the Caisse. He became the president and chief executive officer of the PSPIB in 2003, and I became the chairman shortly before that.

My position and the other board of directors positions are order-in-council positions. Mr. Fyfe is selected by the board, and it is the board's decision pursuant to our statute to hire--and I hope not fire--the chief executive officer.

The Public Sector Pension Investment Board is a crown corporation. We're charged with the responsibility of managing the contributions from employees and the employers of the Public Service of Canada, the RCMP, and the armed forces. We have the responsibility for all of the contributions that are received after April 2000, and we have a growing proportion of the responsibility to dispense the liabilities that are associated with that.

During the period when the liabilities are catching up with the assets, we receive funds at the rate of about $3.5 billion a year in excess of the liabilities. So growth is a significant challenge for our organization.

Currently, we're about $30 billion, and over the course of the next 10 to 15 years we will end up being about $100 billion.

You'll see from the materials provided that our statute requires us to act in the best interests of the contributors and the beneficiaries under their public service pension plans and to invest their assets at the maximum rate of return, not surprisingly, without undue risk of loss. Thus, the board of directors of the pension fund has a statutory duty, which parallels the fiduciary duty expected of the boards of most pension funds.

My summary comments this evening will be directed towards four areas. The first is the accountability bill and how it relates to the appointment process. I'll make some summary comments on the conflict of interest issues, I'll make some summary comments on the audit issue, and I'll finish by an introduction to the access to information issues, which my colleague Mr. Fyfe will be able to deal with in greater detail.

On the appointment process, there are three issues on which I'd like to touch. The first is the appointment process, the second is board expertise, and the third is the competence of the people who are board members, both in terms of expertise and whether or not they have the capability of actually conducting themselves as board members.

The appointment process that's set up by our legislation is a very desirable framework, as it achieves a maximum of interest and a disinterest in the process. Unlike the provisions that are generally under discussion, we have a separate nominating committee that is not part of the PSPIB board itself. That nominating committee is chaired by an expert from the capital markets. Currently, it is Claude Lamoureux, who is the president and chief executive officer of Ontario Teachers' Pension Plan. The balance of the members of the nominating committee are composed of representatives of the public service, the RCMP, and the armed forces, who are selected by the relevant ministers—the President of the Treasury Board, and the Ministers of National Defence and of Public Safety.

From the outset, this nominating committee has retained an executive search firm to assist in ensuring that the widest range of candidates are considered by the ministers for appointment to the board. More recently, the nominating committee has adopted the advertising requirements that are set out in the accountability bill.

The legislation on the Public Sector Pension Investment Board requires us to ensure that the directors who are selected have proven financial ability or relevant work experience that allows them to actually conduct the activities of the board. This is extremely important because the legislation provides that there are certain activities that the board cannot delegate to management, including the approval of the investment policies standards and procedures and the appointment of investment managers, who in turn are given full discretion to invest on our behalf and for approving internal controls.

Thus, it's important that we have on the board the expertise required for these activities, and we have identified that expertise as people who among them have expertise in public market securities, private equity, real estate, infrastructure, finance, accounting, and actuarial experience, technology, public affairs, and judgment.

Well, that's the expertise side. In addition to that, we need to ensure that the people who are on the board conduct themselves on a basis that contributes to excellent board governance.

To that end, the PSPIB has conducted annual reviews of itself as a board from the outset. A number of years ago, we initiated a peer review of the chairman--that's me--so that I get feedback from the board members as to how I'm doing as chair. Last year we extended that process. All members of the board are now subjected to peer review by the other members of the board.

That's important for two reasons. First, it provides us with a way of improving our own ability as directors. It also provides a channel for feedback to the nominating committee, which is separate from the board, as I described to you, so that they can make assessments on what additional kinds of expertise are needed. It also ensures that the people who are on the board, if they are subject to renomination, ought to be renominated.

In other words, there is a process in place that allows the nominating committee to make judgments about the capability of the board members as well as the expertise of the board members--

[The Chair, Conservative, David Tilson]

Mr. Cantor, you can proceed if you like, but if you want to allow questions, time is short.

[Paul Cantor]

Thank you for that, Chair. I'll make just two more comments, on conflict of interest and audit, before I turn it over to Mr. Fyfe to deal with access to information. My comments will be brief, I promise you.

[The Chair, Conservative, David Tilson]

Okay.

[Paul Cantor]

The conflict of interest provisions provided in the Accountability Act are consistent with those in the Canada Corporations Act, which is the basis of our statute. On that basis, the conflict of interest rules provided in the accountability bill will work for us.

Under audit, there are requirements that we have no members of management on the audit committee. We never have, and still don't.

That takes me to the completion of my remarks. From here on in, we'll talk about access to information, unless there are questions that members wish to address first.