Canadian Heritage Committee on April 27th, 2009

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you, Mr. Chair.

At the outset, Mr. Lacroix, I'd like to say that I'm very pleased you are here today, but I'm very sorry that you have to be here. It is absolutely shameful that Parliament has failed in its fundamental obligation to get its act together in terms of what we expect from the Canadian Broadcasting Corporation. We had an all parliamentary committee study in which we brought forward recommendations to the government that could have addressed many of the issues we are facing today. That wasn't picked up. There was no movement from the previous government, and now we are here today.

What concerns me most is that we are now looking in this present study at the crisis in local broadcasting. We do not say private or public; they are bound up together. I am concerned, just in terms of how we have come to this stage in recent months. CBC came forward with a plan for bridge financing. That seemed to me to be a motion that was fairly ridiculed in the House by the government as some kind of handout. It wasn't a handout, was it?

[Hubert T. Lacroix]

No.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Did you have a plan, and what was the plan?

[Hubert T. Lacroix]

The plan was to use this instead of selling some of our assets and influencing and reducing our resources for the coming years. When you start selling cash flows that are owed to you in the years to come and you accelerate them in one year, obviously you will create cash in 2009, but these cashflows will not be available to you in the years to come, and you'll have to make some adjustments at that particular time.

But right now the crisis is important, and to balance our budget the only way we could do this was by trying to find $125 million. That was the request on bridge financing. The request was denied. Now we are selling some of our assets to make up that difference.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Again, in terms of the crisis we are facing, I think the Conservative government has misplayed this by making it somehow an ideological issue in terms of the request from CBC. It never should have been a public versus private debate. Now when we see the private broadcasters in trouble at the local level...and they are coming. They've had lobbyists meeting with the government. There is talk about a special fund for them. They floated a trial balloon about having the government buy a whole whack of advertising on their stations to keep them afloat. Imagine that one in terms of accountability. They're asking for policy change here to give them a new cashflow. But at the end of the day, we go back to our fundamental contract with the CBC, which Canadians have had for years, to fund the CBC adequately so it can do its job, and the CBC is failing in that job now because it can no longer serve the regions because it doesn't have the mandate.

What would it take in order to have CBC television not have to compete in advertising dollars against the private broadcasters? What would it take to put CBC on an equal footing so it can do its job without having to go head-to-head in the downward spiral of the ratings war?

[Hubert T. Lacroix]

Well, Mr. Angus, if the question is, Lacroix, what kind of model would you present if you took advertising revenues out of the CBC, how many dollars would you need, the answer is pretty simple in terms of what amount of commercial revenues we need to balance our budget. The number is anywhere between $300 million and $325 million in 2009-10 in our budget.

It means that we would have to find stable funding. We would have to have it on a multi-year basis, and there would have to be some commitment that when the services are described, we are matching them with the requirements or the expectations of Canadians. This is simply based on the budget of 2009-10 that we are working with.

What is more important, if you will allow me one second more, is what kind of services do Canadians want? That is where we start. We start with what does the CBC/Radio Canada mean to Canadians and what kinds of expectations should you have of your public broadcaster? What services should we be delivering, and we should match the dollars to those services and not the other way around.

[Charlie Angus, NDP, Timmins—James Bay, ON]

My final point is that in this fight for advertising space, sports is number one. When you lose out on the Olympics or you lose curling, that affects your ad revenues. You were in the ratings battle to get Hockey Night in Canada. Now that you're coming into a six-year new term, my question is twofold. Number one, what did it cost to win that war? How much of a percentage increase are you facing over your previous commitments to Hockey Night in Canada, and are you going to have to pay that for the next six years? Is that part of the big bite that's coming out of the bottom line this year?

[Hubert T. Lacroix]

I can answer the question.

[The Vice-Chair, Liberal, Pablo Rodriguez]

Please do.

[Hubert T. Lacroix]

Hockey Night in Canada is most probably, in terms of CBC television, the most important brand. It also carries most of the revenues, the important part of our revenues, and it connects Canadians. Right now across the country, even if the Maple Leafs are not playing and the Canadiens just got eliminated, there are people in Vancouver and Calgary who are pretty excited about being able to tune into CBC/Radio-Canada and watch hockey. That's what it brings. It brings Canadians together very strongly.

There's an ad revenue concept to it, but it's also 450 hours of programming, Mr. Angus, that we would have to replace, and there would be an important cost to that.

[The Vice-Chair, Liberal, Pablo Rodriguez]

Thank you.

Mr. Del Mastro, you have five minutes.

I'm sorry, it's Mr. Bruinooge. What a change.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

Thank you, Mr. Chair. I appreciate the introduction.

Mr. Lacroix, thank you for your testimony thus far, though a few of the comments that you made I'm not sure I can completely agree with, based on the information that I've received. In terms of government dollars allocated to the CBC, it's my information that there weren't cuts in relation to the 2007-08 and 2008-09 years, and that actually when we really think about any significant cut to the CBC, we really have to go back to the mid-nineties to look at the 4,000 jobs cut back in 1995. Of course that was under a different government, which I won't name.

I'll move on, though, to the topic of something that has made the news somewhat recently. It's something that I do have some concern about because of course we are going through some tougher economic times at the moment, as everyone is well aware. Your network is covering it quite well, I'll admit.

There have been some reports about how the CBC has made some difficult choices in terms of various cuts. For instance, I read that CBC has cut some of its bonuses to its executives by about 50%. Would you be able to tell the committee how much money was still paid out to executives? Fifty per cent of the previous amount: what was that amount?

[Hubert T. Lacroix]

So here's what you're referring to, sir. In the context of preparing the 2009-10 budget, 553 of our managers are on an incentive program. They're not on a guaranteed bonus program; they're on an incentive program. These programs allow an executive of CBC to get a bonus, based on some percentage of his or her salary, if the targets are met. This is incentive pay, but it's also pay directly related to the achievement of targets.

For 2009-10, in the context of the budget, we reduced the target incentive pay for our senior executives by anywhere from 25% to 50% and for the top senior people by 50%. This will represent a take-home hit for these senior executives that goes up to 20%. That is, sir, what you're referring to. And it's a contribution, by the way, of about $4 million to the budget cuts and the budget initiatives that we have for 2009 and 2010.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

So the 50% that remains represents roughly $4 million?

[Hubert T. Lacroix]

It's a target for next year, yes. I can do the math.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

And that's above and beyond the salary?

[Hubert T. Lacroix]

Absolutely, sir.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

Do you feel that this is fair pay based on current circumstances in the broadcasting sector?

[Hubert T. Lacroix]

Absolutely. First, let me tell you how our salaries are set and how our incentive pay is set.

We have a board of directors populated by outsiders who have expertise in these matters. We have an HR committee that reviews this every year. Our salaries are basically benchmarked with those of consultants. We are below market. We use the incentive pay to try to bring back our executives to a certain level.

Right now, in the current environment, I must tell you that it's very difficult to keep our senior executives at CBC/Radio-Canada. We just lost four key managers at Radio-Canada. We can't retain them in these conditions.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

The conditions are difficult, there's no question about that.

[Hubert T. Lacroix]

Absolutely, sir.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

But do you believe that perhaps keeping actual staff who are delivering Canadian content is more important than having this bonus structure in place?

[Hubert T. Lacroix]

We have 553 very capable executives, managers, who are incentivized in a very normal and reasonable way. We unfortunately had to cut 800 jobs. We asked our senior executives to contribute to the budget next year and to put dollars back. I think this was a very strong commitment on the part of our management team.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

You're in the media business, and of course in the United States we saw a major uproar, a very dramatic uproar, in relation to bonuses being paid. There is a lot of sensitivity amongst the general public, especially when the CBC is talking about layoffs and potentially some loss of content.

Wouldn't you agree that there is that concern out there?

[Hubert T. Lacroix]

There is surely a concern. You referred to the bonuses particularly to bankers in the States. I would like to simply put back in perspective the size of the bonuses we're talking about for 553 people.