Industry Committee on Jan. 31st, 2024

[Prof. Andrew Clement]

I'd repeat that you would have to talk to the people who are affected.

I believe it was a person from LEAF who made that earlier remark. However, I don't see personally that this bill would provide it. It hasn't been something we would have thought of or anticipated—having that particular way for groups who are affected to register their concerns.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you.

I'll give the rest of my time to Mr. Vis.

[The Acting Chair, NDP, Brian Masse]

You have another 45 seconds. You're good.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Very quickly, Mr. Papernot, the bill does not prohibit the government to ban an AI system that may cause harm. The bill contains monetary penalties.

Do you think we need to consider putting in a power for either the commissioner or the minister to ban certain AI systems when they are proven to be detrimental either to Canadian society or individuals?

[Prof. Nicolas Papernot]

I think it's more important to think about how we can support responsible AI than to focus too much on the penalties, because there are socially beneficial applications of AI. Openness in science has led to a lot of improvements in AI and how responsible it is.

I would focus on that aspect in particular.

[The Acting Chair, NDP, Brian Masse]

Thank you very much.

With that, committee members, we wrap up our first session.

I want to thank the online witnesses as well as our witness here for participating.

We will briefly suspend and get set up for the next hour.

Thank you.

[The Acting Chair, NDP, Brian Masse]

Colleagues, we're going to get started. We have until eight o'clock.

Pursuant to the motion adopted November 7, the committee is resuming consideration of the study of recent investigation and reports on Sustainable Development Technology Canada.

I'd like to welcome our witness today, Ms. Lawrence, former president and chief executive officer of Sustainable Development Technology Canada.

Ms. Lawrence, as you know, you have five minutes for an opening statement. Please begin, and thank you again for coming to the committee here today.

[Leah Lawrence, Former President and Chief Executive Officer, Sustainable Development Technology Canada, As an Individual]

Thank you, Mr. Chair, and good afternoon, honourable members. I guess it's good evening.

As said, my name is Leah Lawrence and I'm the former president and CEO of Sustainable Development Technology Canada. I served there from 2015 to 2023.

When I started at SDTC, it was on the brink of shutdown, but I was able to put in place a team that transformed the organization. We took it from being consistently 20% over budget to under budget. We were formally commended by the Auditor General of Canada and the Treasury Board Secretariat for our increased flexibility, our diverse funding streams and overhead costs that were half of those of comparable federal programs. Given this, ISED increased SDTC's funding during my tenure by over 200%.

Over the last year, I spent a lot of time responding to various inquiries as a result of the actions of a whistle-blower. This, and the resulting media attention, took a big toll on me and the organization. I felt that my leadership had become a distraction that would prevent SDTC, an organization that I had dedicated myself to for over eight years, from fulfilling its mandate, so, despite having the continued confidence of SDTC's board of directors, I resigned. I note that in resigning I received no severance, and because SDTC's employees are not civil servants, no government pension.

I decided to resign two days after appearing before the House of Commons ethics committee after I listened in disbelief to ISED CFO Doug McConnachie testifying on the same panel. He told the committee he had spent 30 hours talking to SDTC's whistle-blower, speculating as evidenced by recordings obtained by media on the outcomes of the various investigations under way while they were still ongoing, including saying that these investigations “could have been done in a way that exonerated the board and scapegoated Leah”.

As the ISED overseer of the investigation, Mr. McConnachie's actions were unethical and compromised the investigation. Despite his actions, the investigation still found no wrongdoing or misconduct and made several administrative recommendations that the team and I were implementing when I decided to resign. However, I am here today to talk primarily about governance and conflict of interest.

The SDTC Act and the Government of Canada set the public policy framework. The board of directors sets the governance framework. In the case of SDTC, half of the board is appointed by the Government of Canada. Also, an assistant deputy minister from ISED attends all board meetings and is privy to all materials. That includes all funding recommendations and all discussions of conflict of interest.

The CEO's and the management's job is to take that policy direction from the government and the governance direction from the board and turn it into operating practices for the organization. I note the board also approves all project funding.

From 2015 to 2019, I did a lot of work on governance reform with the previous chair and the chair of governance, Jim Balsillie and Gary Lunn.

A key change—to harmonize the conflict of interest rules for our two categories of board members, including limiting and eliminating direct conflicts and implanting cooling-off periods—was blocked when a non-government appointee got a ruling from the Ethics Commissioner that they did not need to follow the same governance standards as government appointees. This made it impossible for management to hold all board members to the same rules.

Early in 2019, it became very apparent to me that the government wanted to replace the chair of the board. In May or June of 2019, I was informed by ISED's official representative, ADM Andy Noseworthy, that Ms. Annette Verschuren was going to be appointed to replace Mr. Balsillie.

I expressed concern SDTC was funding a project for her company. I expressed concern there was a potential for both conflict of interest and the perception of conflict of interest. I expressed concern that both Ms. Verschuren and SDTC could potentially be damaged by the appointment.

In the days that followed, our government relations lead contacted the minister's staff to reiterate our concerns about Ms. Verschuren's appointment, noting that no previous chair had direct or perceived conflicts of interest and that, further, it was previously a condition of the chair's appointment to be conflict-free. ADM Noseworthy subsequently told me that in the absence of a written policy explicitly prohibiting a beneficiary of funds from becoming chair, the appointment would go ahead.

I fear that my ongoing efforts to continue to strengthen the governance regime at the board level were largely stymied from this point on. Henceforth, it became largely an exercise in managed conflict, rather than precluding or eliminating conflict.

I continued to work on governance reform with legal advisers, and was pleased when the board finally adopted a policy of post-directorship cooling-off periods and hired a board ethics adviser. These are good developments; however, they are not enough. Another important reform remains outstanding: that any appointee to the board be free of conflicts of interest.

My second recommendation is that the Treasury Board Secretariat convene a group of chairs and CEOs from the many independent agencies that provide funds on behalf of the government and ask them what supports they need to discharge their mandates from a governance and public accountability point of view.

In closing, independent government-funded organizations like SDTC play an important role. They have access to people and resources that the government does not, and can deliver on outcomes that complement and support government policy.

The action plan that ISED has required of SDTC, which they have implemented, does not address the matters of governance and conflict of interest that I have raised here today and that I advocated for throughout my time at SDTC.

I thank you for your time today, and I am happy to take your questions.

[The Acting Chair, NDP, Brian Masse]

Thank you, Ms. Lawrence.

Mr. Perkins, you have six minutes.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

Thank you, Ms. Lawrence, for being here. We appreciate it. It's probably been a very challenging time for you. I appreciate your willingness to come here and speak of it.

You mentioned in your opening statement the period of time when there was a change in the chair. Maybe I could start there.

You were originally hired by the newly appointed chair at the time, Jim Balsillie, to clean up some of the governance practices and management practices at the place. In 2017 or so, these internal reports were done by the Treasury Board and the Auditor General. I think you said they gave SDTC a clean bill of health on all of these things that you had fixed. Is that correct?

[Leah Lawrence]

That is correct. The Auditor General's report was in 2017, and I believe just after that, the Treasury Board Secretariat report was completed.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

It would seem to me that with all of that going on, shortly thereafter would be an odd time to change the chair, unless the chair requested that. In the time when that was going on....

Mr. Balsillie is not a shy guy. He speaks publicly on a lot of issues and has for a long time, as one of the co-founders of one of Canada's most iconic companies.

Did the minister's office or anyone at the political level ever contact you and express concern about what he was saying publicly while chair of SDTC?

[Leah Lawrence]

In particular, in the time period of 2018 and into early 2019, there were several moments when it was raised with me or with my team that there were concerns about public statements Mr. Balsillie was making as an individual. At the time, there was a consultation under way on data and digital legislation. Of course, this is an area he's an expert in. He would make critiques about legislation and provide input in his role as an individual. Often, in the aftermath of those statements, we would get calls asking why he was making statements—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Who would you get those calls from?

[Leah Lawrence]

On one occurrence, it was the associate deputy minister, when I was in a meeting on another thing. I was asked if he should continue as chair and if it was a thing to continue. The second instance was at the working level, when mid-level people called our government relations team.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Did that ever get communicated to you as a reason why there would be a change in the chair?

[Leah Lawrence]

It was clear that there was evident discomfort and that they were actively looking for another chair. Although I was not privy to the conversations with Mr. Balsillie in the minister's office, it's my understanding that he wanted to continue, and he communicated that to them. Around May 2019 and June 2019, I was informed that there were two candidates they'd like me to talk to as potential candidates for the board chair. One of them was Ms. Verschuren.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Who informed you of that?

[Leah Lawrence]

Minister Bains actually asked me to speak to those two potential candidates, and I did.

When I spoke to Ms. Verschuren, I asked her to speak to the Ethics Commissioner. This was well in advance of her appointment. I indicated that I thought it was important that she talk to them about her direct conflicts. At the time, SDTC had a contract with her company. This was well known. It was public information. It's posted both on SDTC's website and, of course, on Ms. Verschuren's company's website.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

According to your opening statement, after that—I'm assuming it was after, based on what you just said—Minister Bains suggested that she would be a good replacement. How many days did it take between when that happened, you did the review, and Mr. Balsillie was switched to Ms. Verschuren?

[Leah Lawrence]

It was probably about two or three weeks later when I had a call from ADM Noseworthy telling me that Ms. Verschuren would be the new chair. When I raised the concerns again, he told me that without a policy it would continue, and it happened.

I think it was on June 19 that she was appointed. I actually was the one who called Mr. Balsillie to tell him that he was no longer chair. She was chairing a meeting three days later.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Is this where this idea of “managed conflict” comes from, that somehow you could manage the conflict that the government was aware of when they appointed her?

[Leah Lawrence]

Well, I have to say that the management team has to put in place policies and procedures that are required when they are following the direction of the board and/or the government when they have an appointee who has a direct conflict. Yes, now we're in a position of direct conflict where you have to have a disclosure, which we did have before, but it did not have a chair's name on it with a direct conflict. Then you have to make sure that you are following the procedures very closely.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I'm not understanding whether you had a policy or not. It seemed to be the issue that you didn't have a policy on conflict, so it was okay to have conflicts. The SDTC act itself in subsection 16(2) states that no member shall profit or gain any income from the foundation or its activities.

Clearly the associate deputy, the deputy and Minister Bains, in making that appointment, must have been aware of that. If they weren't aware of that, then they must have been aware of section 4 of the public office holder act which says that in the exercise of their duty no public office holder shall further their private interests or those of their family and friends. They must have been aware of that, regardless of whether or not you had a corporate governance policy on it. They were breaking those acts by doing this.

[Leah Lawrence]

I was never asked about any of those things. I do not know if they reviewed those before making the appointment.