Industry Committee on Nov. 30th, 2010

[The Chair, Conservative, David Sweet]

I apologize, Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

No, that's fair.

[The Chair, Conservative, David Sweet]

Again, as Mr. Wallace constantly quotes me, time is our enemy.

Mr. Rafferty, for seven minutes, please.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much, Chair.

I'd like to make a couple of comments first before I ask you some questions, Ms. Clark-Stewart.

First of all, with regard to Mr. Lake's most recent comments about the banks being the strongest in the world, I'll remind everybody that the Canadian taxpayers did pay--it's off the books, of course, not official--$75 billion to our banks.

Some of our banks made very poor investments in the last number of years, the same as American banks did, CIBC being the most notable, in terms of being in trouble.

[Anne Clark-Stewart]

Right.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

So I hesitate to say that the.... While our banks may be the strongest in the world, they have had their problems too, particularly over the last couple of years.

On Mr. Rota's comments about pensions being deferred wages and him agreeing that they are, in fact that is very true. I agree with Mr. Rota on that. In fact I would go one step further and suggest that all the other agreements that companies make with employees should be legally binding agreements. They are commitments that companies have made, and they should be treated fairly and in the proper order, instead of being somewhere down...and unsecured and being able to get out of those commitments.

For many years Canadian companies have had an opportunity to use the system the way it is, to use money that is not rightfully theirs, in some cases, to increase their bottom line or pay out shareholders or to do all sorts of different things. I guess this bill is an attempt to put an end to that.

We've heard from a number of organizations here over the last few weeks, and there are ones I've met privately with, for example the Canadian Bankers Association and others, and they're very clear that they will work within whatever legislation there is. For them it's a question of risk. That's really the bottom line. How much risk do they have? And will this bill increase their risk? Will it decrease their risk? That's really what they're concerned about.

I would suggest that one of the things this bill will do over the next number of years is make sure that investors invest in companies for the right reasons. In other words, they'll be investing in companies because they have great owners, because they have a wonderful product, great marketing plans, a great future, and 10 years down the road they're going to be making lots of money.

That's why people will start investing in companies--instead of investing in companies by looking at how much money they can borrow and use within that company within the law, which is very wrong.

Now there are people, here in this committee and other MPs, who think, I guess, one of three things about this bill. There's one group that just opposes the bill as it stands.

There's another group that opposes strengthening the bill. When I say strengthening the bill, I'm talking about the amendments that I put forward that clear up some language and close a loophole about unfunded liabilities and so on, of which you're well aware.

Then there are people who oppose weakening the bill. Weakening the bill would be, I guess, instead of talking about secured pensions and other liabilities, talking about preferred, which they would see as a weakening, and they're not happy about it.

So we have these three groups of people. The political reality, and I want to be very clear about this, is that a lot of people will be thinking, particularly in the opposition—I mean opposed to the NDP, not the opposition in the House—that it's an NDP bill, and that's a problem for them.

I mean, there are lots of reasons why people are opposing this bill.

I do have a question.

[Mike Wallace, Conservative, Burlington, ON]

We're waiting, we're waiting.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

I meant to have a question, but I got carried away, and I apologize for that.

So there are two types of things that I just talked about. One is leaving the bill where it is and secure it, the pensions and those other liabilities, determination and so on, being secured; or two, preferred. You've already indicated today that preferred is acceptable to you.

What is your feeling about these two divisions, these two ways of looking at this bill? If an amendment could be put forward to move this to preferred, what would be your thoughts on that?

[Anne Clark-Stewart]

I would be supportive of that, and I would hope that all parties would work together on this bill. I know it's what we have been working on as the Nortel pensioners group. We've been working with every party, trying to get them to work together to get a good bill for the common good of all Canadians who are going to be affected.

Back when Eaton's went bankrupt, this bankruptcy law should have been addressed. Back when Massey Ferguson went bankrupt, this law should have been addressed. Now that Nortel has.... Well, we don't know if it's going bankrupt or if it's going to come out as an IP company. That's still up in the air.

That's another reason why I want to make sure that this reading says that it's not just when it comes out of bankruptcy but when it comes out of CCAA as well, because once a company comes out of CCAA it has no responsibility to its former employees or its former pension plan or former employee obligations.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Ms. Clark-Stewart, two years ago, when I made my first speech in the House, I was very clear that I wanted to work with everyone in this House. Canadians expect us all to work together to bring forward legislation that helps everyone and is good for everyone.

With regard to this bill, I've said from the very beginning that I hope we can all work together to make it a good bill. If we need to make changes, we'll make some changes, but we'll do what needs to be done because Canadians expect us to. Quite frankly, that's our job.

I want to assure you that I believe everybody on this committee is of the same mind. I would suggest to you that most members of Parliament in the House are also with us. I hope we come up with something that will be acceptable to everyone.

[Anne Clark-Stewart]

I hope so too.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Rafferty and Madam Clark-Stewart.

Mr. Benson, before we go into our next round of questions, perhaps you could go ahead with your five-minute presentation.

[Phil Benson, Lobbyist, Teamsters Canada]

Thank you, Mr. Chair.

I do apologize for being late. For some reason I had the wrong time in my agenda. As we know, we're slaves to our BlackBerrys.

It's somewhat novel to come back in a week or so before a committee to talk about a bill. As I understand it, there were some drafting errors that had to be fixed.

Clearly, we spoke to the bill to put workers in preference in bankruptcy. It's something we've supported for many years. That's in the documentation I gave you.

I want to deal with two issues based upon prior testimony with regard to the bill. To continue a little bit about the discourse or dialogue on what we see as rigours in the marketplace, when the market doesn't have to look at a particular debt of a company, in this case a pension, we think it sends the wrong signals to shareholders, the people buying shares. Would they treat two companies the same in the marketplace if they had to look at a pension deficit?

With reference to bondholders, a big deal was made about a difference in cost of, what, 12 to 50 basis points? You can take the view from one way that this hurts companies, but if you view it from the other way, bondholders are losing returns. They're not looking at the full risk of a company. They'll be asking for more money. In fact, bondholders are being hurt.

You can look at it from the point of view of unsecured creditors. Most unsecured creditors wouldn't know that this great big pension elephant was going to land in their lap. Would they be willing to continue with discounts and all sorts of preferential treatment to companies? Probably not. Should they? Probably not.

As taxpayers, why should we be on the hook for a company that goes bankrupt? As I understand it--and we have people at Flextronics--from the Nortel elephant we're going to get 26¢ on the dollar, rather than 70¢. That's what I understand. Should the taxpayer be on the hook to pay for GIS and equivalent tax credits? Probably not.

Finally, we have our members and other members and people who lose their pensions.

I want to address one thing I heard, and I hear this all the time: “The only way to guarantee a pension is the viability of a company”. It's a truism, said over and over and over again.

What tripe. What absolute tripe. What that says is that if I work for a company for 30 years and I'm retired for 20 years, I can still get a little letter in the mail that says I have to take a haircut.

But what company lasts 50 or 60 years in the modern world? Not too many.

The only way to protect a pension is to first make sure, to use the earlier analogy, that the horses are in the barn. That means the money is put in. It is not treated like company money. They've said, before other committees that I've been in front of, that they have to use that money to build their company. But no one's trusted money has to go away.

We also need rules that make sure it's invested conservatively--small-c, of course--prudently, and wisely. It is all workers' wages. All we're asking is that every nickel gets paid. Workers 20 years down the road shouldn't find out that they have to take a haircut because the rules weren't in place and their pensions weren't protected.

This bill, if I'm reading and understanding it correctly, is to close that barn door. It's to simply say to workers that in bankruptcy, your wages will be protected. Your pension will be protected. I think it's part of the discipline that's sent to the marketplace, which I think and we think is important.

It also sends a message to companies--namely, you have to invest prudently, it's not your money, you have to put it away for a rainy day, you have to be careful with it, you have to fund it.

With that, I'd be more than willing to answer any questions you have.

Thank you very much, Mr. Chair.

I do apologize for being late. Again, we are slaves to our BlackBerrys these days.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Benson.

Mr. McTeague, you have five minutes.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Thank you.

Mr. Benson and Ms. Clark-Stewart, thank you very much for being here again, both of you.

I'm sure Mr. Braid will appreciate the significance of the BlackBerry malfunctioning in this particular time of Mr. Benson's tardiness....

[Phil Benson]

[Inaudible--Editor]

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I thought I heard that.

I just wanted to create a bit of controversy here.

[Voices]

Oh, oh!

[Phil Benson]

It's more to do with garbage in, garbage out. It's probably my fingers.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Well, welcome again.

I've spent a number of years being taken as a bit of a thorn in the side of some of the largest corporations in this country. I've been labelled a bank basher, not a big friend of big pharma, and certainly not a friend of big oil.

I have a question that goes to both of you, and it will relate more to the realities, I think, that we're confronted with. I'm sympathetic, and I think my party has demonstrated this.

Mr. Benson, you and I will have a chance to talk again this afternoon.

I wanted to underscore what, in your view, would be the practical reactions of corporations in this country if they now have to factor in this bill in terms of existing employment. This is to both of you, and in particular Ms. Clark-Stewart.

In other words, given international realities that didn't exist 20 years ago...packing up and leaving, we didn't have the regulatory protections that we once had in this country. What would stop a corporation....?

Never mind the issue of bonds for a moment; set that aside, recognizing what this would mean in terms of the bottom line impact. What would this mean for jobs across the country today?

I mean, yes, it's great to say we would have these pensions, but is it not the practical reality that companies may just start to cut off some of their employment or suspend future employment opportunities?

[Anne Clark-Stewart]

What's actually happening is that companies are not doing defined benefit pension plans. There hasn't been a new one in over 11 years, and they're going to defined contribution pension plans.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Benson.

[Phil Benson]

Teamsters, probably unlike most unions, really live in a global marketplace. Though we do many things that are not global--dairy, beverage, brewery, film, all sorts of stuff--we are Canada's transportation union. Every boat that shows up in the Vancouver, Halifax, and Montreal docks is yet another teamster's job.

To be quite honest with you, companies will choose to move global or not, depending on many factors, and I don't believe pensions are going to be one of them. The issue is that having made a promise and a commitment and taken the wages of workers...because there's no such thing as a corporate contribution. It's workers' contributions. It's part of the pay package. The argument is more about what we do with that money when they get it. Do we continue to use it to build a company? For example, do we take holidays, do we avoid doing it? The big thing they were doing was taking riskier investments to boost the value of their plan, as we found out in 2005 and 2009.

Do I think it would be imminent? No. But to go to the root question that I think you're raising, and I raised this last time, you might be talking about an issue of cap and phase-in rather than imminent.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Well, Mr. Benson, you may not have had the opportunity to be here when Ms. Clark-Stewart suggested there is now a prima facie case, that she has legal opinions that suggest retroactivity could occur. It's in that context that I asked the question, because it seems to me that if.... I haven't even plumbed the idea of bankrupt companies in existing bankrupt companies, the impacts that would have should the legislation pass.

Perhaps I could ask the researchers at this point, through you, Chair, if they might be able to determine for us for the next meeting the suitability or practicality of a provincial statute, a Supreme Court decision, I believe, B.C. versus Imperial Tobacco, and its application to federal statutes. There may be a subtle difference.

Ms. Clark-Stewart, I'm not doing this to slight you, I'm just trying to get our own bearings straight on whether we can do this.

My final question is this. Nortel has failed. What does Ericsson do? What does Motorola do? What have they done for their pensions and for their pensioners?

[Anne Clark-Stewart]

I can't answer that question, but I could find out for you.