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.