THE CANADA PENSION PLAN INVESTMENT BOARD :

GETTING IT RIGHT

Report of the Standing Senate Committee on Banking, Trade and Commerce

Chairman : The Honourable Michael Kirby

Deputy Chairman : The Honourable David Tkachuk

March 1998


MEMBERSHIP

 

The Honourable Michael Kirby, Chairman

The Honourable David Tkachuk, Deputy Chairman

 

and

 

The Honourable Senators:

 

Angus, W. David Kenny, Colin
Austin, Jack, P.C. Kolber, E. Leo
Callbeck, Catherine S. *Lynch-Staunton, John (or Kinsella, N., acting)
*Graham, Alasdair B., P.C. (or Carstairs, Sharon) Meighen, Michael Arthur
Hervieux-Payette, Céline, P.C. Oliver, Donald H.
Kelleher, James F., P.C. Stewart, John B.

 

 

*Ex Officio Members

 

Note: The Honourable Senators Lawson, Moore and St. Germain were members or present at meetings at various stages during the course of this study.

 

Staff from the Parliamentary Research Branch, Library of Parliament:

Ms. June Dewetering, Research Officer, Economics Division.

 

Staff from the Committees and Private Legislation Directorate:

Ms. Lise Bouchard, Administrative Assistant.

  

Paul Benoit
Clerk of the Committee


ORDER OF REFERENCE

 Extract from the Journals of the Senate, Thursday, February 12, 1998:

"The Honourable Senator Carstairs for the Honourable Senator Kirby moved, seconded by the Honourable Senator Corbin:

That the Standing Senate Committee on Banking, Trade and Commerce be authorized to examine and report upon the governance provisions set out in the Canada Pension Plan Investment Board Act (previously Bill C-2);

That the Committee be authorized to permit coverage by electronic media of its public proceedings with the least possible disruption of its hearings;

That the Committee be authorized to adjourn from place to place in Canada for the purpose of pursuing its study;

That the Committee be authorized to engage the services of such counsel and technical, clerical and other personnel as may be necessary; and

That the Committee present its final report no later than March 31, 1998.

The question being put on the motion, it was adopted."

Paul Bélisle
Clerk of the Senate


TABLE OF CONTENTS

 

LIST OF RECOMMENDATIONS

THE CANADA PENSION PLAN INVESTMENT BOARD:

GETTING IT RIGHT

TRANSPARENCY AND ACCOUNTABILITY
   A. Transparency
    B. Accountability

THE APPOINTMENT OF DIRECTORS
    A. The Qualifications of Directors
    B. The Term of Appointment
    C. The Investment Board’s Effectiveness

THE AUDITING FUNCTION

CONFLICTS OF INTEREST

THE INVESTMENT FUND
A. The Number of Funds
B. Passive Versus Active Investment
C. The Objective of The Investment Policy
D. Provincial Debt Obligations

THE FOREIGN PROPERTY RULE

THE TRIENNIAL REVIEW

SCRUTINY OF REGULATIONS

CONCLUSION

APPENDIX A - Witnesses


LIST OF RECOMMENDATIONS

 

  1. The Minister of Finance implement whatever measures are needed to ensure that appointments to the Canada Pension Plan Investment Board, and the operation, administration, and investments of the Board, are as transparent as possible. These measures must be examined during each triennial review to ensure that the maximum degree of transparency is maintained.
  2. Moreover, the Committee recommends that all public documents commenting on the Board, its operation, administration, and investments be available in a variety of easily understood formats. Such documents should include statements of the Board’s investment policies, standards, and procedures, conflict of interest guidelines, financial statements and the Annual Report. Delivery mechanisms should include the Internet and one-page summary sheets included with such general mail-outs as the annual income tax form.
  3. The Canada Pension Plan Investment Board’s Annual Report, any special examination or audit, be referred to an appropriate committee in the Senate, in the House of Commons and in the legislature of participating provinces for review. This review should include the appearance of the Chairperson and the Chief Executive Officer before the committees. Moreover, the Board must table sufficient information, along with the Annual Report, to permit a thorough review.
  4. The auditor be required to attend the public meetings held every two years in participating provinces. As well, at least one director of the Canada Pension Plan Investment Board should attend the meetings, rather than at least one director or officer, as is the current legislative requirement.
  5. The board of directors of the Canada Pension Plan Investment Board be increased from 12 to 15 members.
  6. The Minister of Finance be required to establish a committee to make recommendations for the appointment of directors to the Canada Pension Plan Investment Board and the Minister should be required to select directors from this list. Further, the nominating committee should provide the Minister with a list of 30 candidates for positions on the board. Finally, the process for assembling a list of candidates should be an open process, publicised in an appropriate manner.
  7. The Minister of Finance ensure that all appointments to the Canada Pension Plan Investment Board be made on the basis of qualifications and expertise.
  8. Directors of the Canada Pension Plan Investment Board collectively have a broad range of experiences and expertise. While the benefits of appointing directors with proven financial ability are clear, the Committee believes that a majority of the directors should have expertise in pension fund management and other relevant skills.
  9. The term of appointment of directors be re-examined during the next and subsequent triennial reviews to determine whether the term should be lengthened. At that time, consideration should also be given to whether there should be a limit placed on the number of times an individual can be reappointed. The Committee believes that the Minister of Finance, in consultation with provincial finance ministers in participating provinces, should develop performance standards to be met by directors prior to any reappointment.
  10. The Canada Pension Plan Investment Board be required to develop measures by which its performance can be evaluated. These measures, and the Board’s success or failure in meeting them, must be made public annually.
  11. The auditor of the Canada Pension Plan Investment Board be chosen by the Minister.
  12. The Canada Pension Plan Investment Board adopt stringent conflict-of-interest guidelines, and that these follow models such as the Ontario Municipal Employees Retirement System.
  13. At this point in time, there should be only one Canada Pension Plan investment fund. The Committee believes, however, that the creation of multiple funds should be considered during each triennial review, particularly in the future when the size of the fund is larger.
  14. After the initial two-year period, the fund be more actively managed.
  15. The objective of the Canada Pension Plan Investment Board, as currently articulated in the Canada Pension Plan Investment Board Act, remain unchanged.
  16. The Minister of Finance immediately introduce amendments to the Canada Pension Plan Investment Board Act to increase the foreign content limit from the current 20% to 30%, two percent per year over a five-year period. In the longer term, the Minister of Finance should remove the limit for the Canada Pension Plan investment fund, and more generally for all investments.
  17. All triennial reviews should encompass all aspects of the new investment regime being created by the Canada Pension Plan Investment Board Act and Regulations. In particular, the Committee believes that consideration must be given to: mechanisms to ensure transparency and accountability, and the extent to which they are easily understood by and accessible to the public; the contents of the Canada Pension Plan Investment Board's Annual Report; the term and qualifications of directors; the auditing requirements; whether there should be one or more funds; and the extent to which the fund should be passively managed.
  18. A copy of each regulation that is proposed pursuant to section 53 of the Canada Pension Plan Investment Board Act shall be deposited with the Clerks of both the Senate and the House of Commons at least 30 days before the day on which the regulation is proposed to be made.
  19. A regulation deposited with the Clerks of the Senate and House of Commons stands referred to such committees of the Senate and the House, as are designated or established, prior to the deposit, to review the regulation. It is the Committee’s intent, through these recommendations, to establish a procedure whereby these regulations may not come into full force and effect until such time as they have been either affirmed by Parliament or the 30 day period after deposit has lapsed.

THE CANADA PENSION PLAN INVESTMENT BOARD:

GETTING IT RIGHT


In December, 1997, the Minister of Finance delayed the coming into force of the governance and investment provisions of the Canada Pension Plan Investment Board Act until April 1998, in order that the Standing Senate Committee on Banking, Trade and Commerce could study the provisions. At that time, the Minister also agreed to refer the draft regulations governing the board to the Committee for review and comment. This followed from his appearance, at the request of Progressive Conservative Senators, before a Committee of the Whole to respond to questions concerning this Act.

The Committee’s examination of the Act’s provisions and the draft regulations involved presentations from individuals and groups in Toronto, Calgary, Vancouver, Halifax and Ottawa. The Committee is grateful for the thoughtful and helpful advice received from these groups and individuals.

In general, witnesses focused their comments and recommendations on the areas that are of particular concern to Committee members: transparency and accountability, the term and qualifications of directors, the auditing function, conflicts of interest, the investment fund and the foreign property rule.

 

TRANSPARENCY AND ACCOUNTABILITY

A. Transparency

Virtually all the witnesses who appeared before the Committee stressed the related themes of transparency and accountability, both of which are fundamentally important as Canada embarks on a new regime designed to safeguard the future of the Canada Pension Plan and benefits for Plan members. Canadians -- whether employers, employees or self-employed persons -- are the owners of the Plan, and they must have confidence in the security of the benefits to which they are entitled.

The Canada Pension Plan Investment Board ("the Board") is being established at a time of high public cynicism about bureaucracy and governments at all levels. Thus, it is critical that every aspect of the new Board -- the appointment of its directors, as well as all of its policies, procedures and methods of operation -- be as transparent as possible.

The Committee’s witnesses provided a variety of useful suggestions as to how greater transparency could be achieved. For example, Mark Milke of the Canadian Taxpayers Federation recommended that the Access to Information Act apply to the Board's minutes, deliberations and decisions. Stanley Hamilton and Robert Heinkel of the University of British Columbia suggested that information on the assets and liabilities of the fund should be available at public meetings and that the Board's audit committee should provide comparative information so that the fund's performance could be properly assessed. William Stanbury of the University of British Columbia recommended that the Board should disseminate information on its performance more widely, by publishing full-page advertisements in newspapers in Canada’s 25 largest cities, creating a web site with "downloadable" information, and mailing out an annual or biannual two-page summary of how it is managing the fund.

Although their comments were not specifically related to the Canada Pension Plan Investment Board Act or the draft regulations, Dick Martin and Robert Baldwin of the Canadian Labour Congress shared their belief that federal-provincial negotiations undertaken with respect to the Canada Pension Plan are too closed, and that greater public input should be permitted. They also suggested that parliamentary hearings should be held before federal-provincial negotiations begin. In their view, greater transparency could help to overcome the current lack of public confidence in the Plan.

The Committee, like the witnesses, believes that transparency must exist if public confidence in the Canada Pension Plan and in the availability of benefits is to be maintained. In the Committee’s view, beneficiaries of and contributors to the Canada Pension Plan must be confident that adequate mechanisms are in place to ensure that the funds are truly held in trust for them. Confidence is enhanced with transparency. Consequently, the Committee recommends that:

the Minister of Finance implement whatever measures are needed to ensure that appointments to the Canada Pension Plan Investment Board, and the operation, administration, and investments of the Board, are as transparent as possible. These measures must be examined during each triennial review to ensure that the maximum degree of transparency is maintained.

Moreover, the Committee recommends that all public documents commenting on the Board, its operation, administration, and investments be available in a variety of easily understood formats. Such documents should include statements of the Board’s investment policies, standards, and procedures, conflict of interest guidelines, financial statements, and the Annual Report. Delivery mechanisms should include the Internet and one-page summary sheets included with such general mail-outs as the annual income tax form.

 

B. Accountability

Clear accountability structures and procedures are essential. The Canada Pension Plan Investment Board Act and draft regulations provide a variety of accountability measures and mechanisms, including: an obligation to provide the Minister of Finance and the ministers of participating provinces with any by-laws made by the board of directors and to make these available at the Board’s head office for public examination; quarterly financial statements which are to be sent to the Minister of Finance and the ministers of participating provinces, as is an annual report on the operation of the Board; the tabling of the Annual Report in Parliament by the Minister of Finance; a public meeting to be held by the Board once every two years in each participating province, with one or more directors or officers attending; and the preparation of an annual report on the administration of the Act by the Ministers of Finance and Human Resources Development. The Act also permits the Minister of Finance, after consultation with the appropriate provincial ministers, to request a special examination of the Board to determine if its systems and practices are being maintained according to the Act’s requirements; such an examination must be conducted at least once every six years.

The proposed regulations specify that the Board’s Annual Report would include a statement of the corporate governance practices of the board of directors specifying: its duties, objectives, and mandate; its committees, their composition, mandates, and activities; the decisions requiring its prior approval; the procedures in place for the assessment of its performance; and its expectation of the Board’s management. Moreover, the Annual Report would have to include a summary of the Board’s procedures related to potential conflicts of interest and the procedures for resolving those conflicts, as well as the code of conduct for the Board’s officers and employees. The total compensation awarded to the Board’s directors and to the top five most highly paid executive officers would have to be reported.

Witnesses presented the Committee with a variety of opinions about accountability. Claude Lamoureux of the Ontario Teachers’ Pension Plan Board indicated that it must be clear to whom the Board is accountable, and argued that accountability should be to Parliament, with no requirement to hold meetings in participating provinces. Allan Tupper of the University of Alberta also argued that Parliament must have a greater role in scrutinizing the CPP Investment Board. The Canadian Taxpayers Federation argued for the creation of a parliamentary oversight committee in the House of Commons to oversee the Investment Board’s creation and activities. William Robson of the C.D. Howe Institute noted the absence of a requirement for formal reporting to the legislatures of participating provinces. In his view, continuing dissatisfaction with the CPP would incite future controversy about whether some provinces should opt out of the Plan, which could be defused by increasing visibility and accountability to provincial legislatures.

Two witnesses argued for an explicit double fiduciary responsibility for the Board’s directors. Margot Priest of the Regulatory Consulting Group, Inc. and William Stanbury told the Committee that the directors should have a fiduciary responsibility to both the Board and to beneficiaries of the Canada Pension Plan.

The Committee agrees that the lines of accountability must be clear, and that Parliament has a role to play; so, too, has the Canadian public. The meetings required every two years in each participating province are necessary to provide information and allow the public to question Board directors. Fundamentally, current and future contributors and beneficiaries own the investment fund, and federal and provincial legislators ultimately bear responsibility for the Canada Pension Plan since they have the ability to effect legislative changes to it. This is why the public and legislators must be provided with proper and adequate information. While the legislation requires the tabling of an Annual Report in Parliament, this obligation does not go far enough. As a result, the Committee recommends that:

the Canada Pension Plan Investment Board’s Annual Report, any special examination or audit, be referred to an appropriate committee in the Senate, in the House of Commons and in the legislature of participating provinces for review. This review should include the appearance of the Chairperson and the Chief Executive Officer before the committees. Moreover, the Board must table sufficient information, along with the Annual Report, to permit a thorough review.

The Committee believes that the line of accountability runs from the Canada Pension Plan Investment Board through legislators to current and future contributors and beneficiaries. Accountability is also enhanced if the public is able to question those with a fiduciary responsibility and those involved in auditing the Board. Consequently, the Committee recommends that:

the auditor be required to attend the public meetings held every two years in participating provinces. As well, at least one director of the Canada Pension Plan Investment Board should attend the meetings, rather than at least one director or officer, as is the current legislative requirement.

The Committee believes that the transparency and accountability mechanisms in the Canada Pension Plan Investment Board Act and draft regulations, along with the implementation of the Committee’s recommendations, will result in enhanced public confidence in the Plan and its ability to pay benefits.

 

THE APPOINTMENT OF DIRECTORS

The Canada Pension Plan Investment Board will have 12 directors, who will manage or supervise the management of the business and affairs of the Board, write investment policies, standards and procedures, and establish procedures for the identification of potential conflicts of interest and procedures to resolve them. One of the directors will be designated as the Chairperson, to hold office during good behaviour and for whatever term is deemed appropriate by the Governor in Council. Based on its extensive work in the area of corporate governance, the Committee holds the view that a board of 12 members may have difficulty discharging the serious responsibilities assigned to it by this Act. Two witnesses argued that the size of the Board should be increased to perhaps 15 or 18. William Stanbury argued that 12 directors is too few, given that: each province will probably insist on at least one representative; the Board needs a diversified portfolio of directors having specialized knowledge of various types of investments; and, several directors could be eliminated from major decisions because of conflict of interest. Similarly, Margot Priest argued for 15 to 18 directors, highlighting the "likely onerous responsibilities of committee membership and the need for a mix of regional representation and other qualities." Stanley Hamilton and Robert Heinkel argued, however, that a smaller Board of 12 directors would be manageable yet provide a good cross-section of expertise. Consequently, the Committee recommends that:

the board of directors of the Canada Pension Plan Investment Board be increased from 12 to 15 members.

Directors will be appointed by the Governor in Council on the recommendation of the Minister of Finance, and will hold office during good behaviour for a maximum term of three years, although reappointment is possible; the Act contains no limit on the number of times a director may be reappointed. The Minister of Finance may establish a committee to advise on the appointment of directors, in which case the committee would include a representative designated by the Minister and a representative of each participating province designated by the appropriate provincial minister. In any case, the Minister must consult with ministers of participating provinces prior to recommending the appointment of directors.

The Act obliges the Minister of Finance to "have regard to the desirability of having directors who are representative of the various regions of Canada and having on the board of directors a sufficient number of directors with proven financial ability or relevant work experience ... ."

 

A. The Qualifications of Directors

The Committee received a great deal of testimony about the directors of the Canada Pension Plan Investment Board. Virtually all testimony stressed the importance of minimizing political influence in the selection of Board members and of appointing the best possible candidates to the first board. Keith Ambachtsheer of Keith P. Ambachtsheer & Associates Inc. stated: "good boards beget good boards beget good boards." Similarly, John Por of Cortex Applied Research Inc. argued that "only effective Boards can beget future effective Boards." It goes without saying that the best candidates should be selected when vacancies arise on the Board. Appointing directors and especially a Chairperson of extremely high quality may, however, be particularly important with the first Board, since they will make major initial decisions. The Canadian Taxpayers Federation told the Committee that "[t]axpayers must have the assurance and confidence that their money will be invested prudently and without regard to the political issues of the day or the whims of any particular bureaucrat or well-connected political party member." The Association recommended that no director hold a political party membership while serving on the Board.

Some witnesses commented on the nominating committee which is to provide the Minister of Finance with advice on the selection of members of the first board. The Ontario Teachers’ Pension Plan Board suggested that an independent nominating committee aids in the creation of a strong, independent board, made up of qualified members, that is removed from the direct control of any one government. Stanley Hamilton and Robert Heinkel argued that the use of a committee to determine a pool of potential directors removes, by one step, the potential for political patronage appointments to the Board. Michael Goldberg of the University of British Columbia also supported an arm’s length advisory committee which would receive nominations and make recommendations to the Minister of Finance.

A different approach was suggested by the Canadian Taxpayers Federation, which recommended a House of Commons oversight committee that would vote on candidates for the Board, with a two-thirds approval being required for appointment; directors could also be removed by two-thirds approval of the committee. Still another approach was put forward by Randall Morck of the University of Alberta, who suggested that Canada Pension Plan beneficiaries should elect the Board of directors regularly in a mail-in ballot. Michael Brown of Venture West also suggested a new type of nominating committee that would include representatives from such organizations as the Canadian Bankers Association, the Canadian Bar Association, the Canadian Chamber of Commerce, and the Pension Industry Administrators of Canada, among others.

Noting that the current nominating committee consists largely of provincial public servants, Margot Priest suggested that these should be supplemented with outside experts in pension/financial areas and representatives of the general public. In her view, appointments to the Board of directors would be made from among candidates suggested by the nominating committee. Peter Van Loon, of the Government of Nova Scotia, and a member of the nominating committee, said he believed that, even in the absence of a legislative requirement, the nominating committee would continue to exist.

The Committee also believes that a nominating committee is a useful mechanism for recommending candidates, both for the initial selection of members of the Board of directors and for any future vacancies. This structure should both provide a broader range of potential candidates and help to minimize perceptions of political interference. The Committee believes that the current language in the Canada Pension Plan Investment Board Act is too permissive. To ensure transparency, accountability, and a lack of political involvement, it is imperative that a permanent nominating committee be established, rather than permitting the Minister of Finance to make recommendations to the Governor in Council on his or her own, following the required consultation with the ministers of participating provinces. Therefore, the Committee recommends that:

the Minister of Finance be required to establish a committee to make recommendations for the appointment of directors to the Canada Pension Plan Investment Board. This nominating committee should provide the Minister with a list of 30 candidates for positions on the board. When vacancies arise, the nominating Committee will provide the Minister with a list of candidates. The Minister should be required to select directors from this list. Finally, the process for assembling a list of candidates should be an open process, publicised in an appropriate manner.

A variety of opinions were expressed about the qualifications that directors should have. Dale Richmond and Tom Gunn of the Ontario Municipal Employees Retirement Board suggested that directors, though they will need an understanding of investment matters and benefits, as well as of how assets and liabilities interact and should be managed, do not necessarily have to be investment experts. The Canadian Taxpayers Federation, on the other hand, recommended that all Board of directors be experienced investment advisors, with qualifications equal to or greater than those required for similar positions in the private sector. Don Cayo of the Atlantic Institute for Market Studies argued that all appointees should have investment expertise.

Most argued that while regional and gender representation are desirable, the prime criteria for appointment to the Board should be experience and expertise. The Canadian Labour Congress presented a somewhat different point of view, suggesting that the Board of directors should be broadly representative of shareholders, rather than being dominated by investment professionals. In this view, the Board of directors should have a broader perspective, with regional and gender representation taken into account. Peter Van Loon identified a need for regional representation on the Board and argued that public servants who are investment professionals should not be precluded from being appointed; this position was supported by Richard McAloney of the Nova Scotia Association of Health Organizations Pension Plan.

A number of witnesses argued that the directors, collectively, should have a variety of backgrounds and work experiences. Michael Goldberg told the Committee that "(a) strong and diversified portfolio of Investment Board directors can help ensure that the right investment, liability and policy questions get asked and answered satisfactorily so that the Investment Board meets its fiduciary responsibility." He said that needed skills include: general business knowledge and experience; international business knowledge and/or experience; financial knowledge and/or experience; economic knowledge; qualitative or quantitative analytical skills; team skills; integrity; honesty; reliability; and public service. In his view, social, regional, ethnic, and gender diversity might be secondary selection criteria once the primary criteria have been met. Other suggestions for collective expertise were provided by the witness for the Nova Scotia Association of Health Organizations Pension Plan who suggested knowledge of: fiduciary duty; pension legislation; the pension promise from the Canada Pension Plan; actuarial principles; capital markets; and risk management.

Some witnesses recommended a training or orientation program on such issues as liabilities, pension administration, and investment issues, and use of an executive search firm and newspaper advertisements as part of a public process for seeking candidates for the Board. Margot Priest suggested that job descriptions be developed, taking into account the mix of skills required of the board collectively.

To ensure that directors devote adequate time to their task, William Stanbury and Margot Priest argued that directors of the Board should hold only a limited number of other directorships, if any at all, with compensation provided accordingly. Gordon MacDougall of Connor, Clark & Lunn Investment Management Ltd. commented, however, that it might be difficult to find directors who would be willing to limit themselves to directorship of the Canada Pension Plan Investment Board.

Most witnesses noted that compensation should be competitive, and many argued for some level of performance-based pay. According to Herb Grubel of Simon Fraser University, managers and directors should be compensated through "a package of salary and bonuses which spurs them to do their best and punishes them financially if they do badly." The feeling was that competitive compensation is needed to attract and retain the best qualified candidates for appointment as directors or as members of staff. Michael Goldberg argued that, given the sensitivity of remuneration issues, compensation should be determined at arm’s length, perhaps by the nominating committee with the assistance of external consultants who specialize in remuneration for board members.

The Committee, like the witnesses, believes that the primary qualifications for appointment as a director are experience and expertise, and that politics should play no role. Nevertheless, once competence has been assured, the Committee believes that such criteria as gender, region, and ethnicity might be considered. Consequently, the Committee recommends that:

the Minister of Finance ensure that all appointments to the Canada Pension Plan Investment Board be made on the basis of qualifications and expertise.

The Committee also believes that, for the Board to be an effective team, a variety of skills are needed. It is for this reason that the Committee recommends that:

directors of the Canada Pension Plan Investment Board, collectively, have a broad range of experiences and expertise. While the benefits of appointing directors with proven financial ability are clear, the Committee believes that a majority of the directors should have expertise in pension fund management and other relevant skills.

As noted above, current and future contributors to and beneficiaries of the Canada Pension Plan must be confident that the Plan will continue to exist to provide them benefits. This confidence will be enhanced when the best available candidates are appointed to the Board, and when the Board collectively possesses the qualifications needed to fulfil its mandate. Cortex Applied Research Inc. drew a parallel between a good board and a good hockey team, commenting that various kinds of expertise are needed for the effective discharge of duties.

 

B. The Term of Appointment

The Committee heard a variety of opinions on the appropriate term of appointment for the Board’s directors. Most suggestions were for between four and ten years, with a maximum number of terms of office specified. Arguments for a longer term of office were based on the necessary "learning curve" and the need for directors to focus on long-term performance rather than short-term objectives. The Canadian Labour Congress, however, stated that the current three-year term is appropriate, a view shared by Margot Priest; she also commented that she sees no reason to limit the number of terms a director could serve.

The Committee believes that appointment for a three-year term, with the possibility of reappointment, is not unreasonable, assuming that those appointed would already have some familiarity with the relevant issues. Nevertheless, it must be said that witnesses advocating a somewhat longer term of appointment also made compelling arguments, particularly with respect to the desirability of a long-term focus. For this reason, the Committee recommends that:

the term of appointment of directors be re-examined during the next and subsequent triennial reviews to determine whether the term should be lengthened. At that time, consideration should also be given to whether there should be a limit placed on the number of times an individual can be reappointed. The Committee believes that the Minister of Finance, in consultation with provincial finance ministers in participating provinces, should develop performance standards to be met by directors prior to any reappointment.

The Committee believes that there is a clear relationship between the term of appointment and the desirability of reappointments; if the term of appointment is long, there may be limitations on the possible number of reappointments. Furthermore, to achieve transparency and accountability, and to minimize perceptions of political influence, the Committee believes that the performance of directors must be assessed and approved prior to reappointment.

 

C. The Investment Board’s Effectiveness

Several witnesses focused on the importance of assessing the Board’s success or failure in meeting its objectives. Cortex Applied Research Inc. made the point that pension boards are unaware of the degree of their success or failure unless they create their own specially designed feedback and monitoring systems. William Stanbury recommended that the Board be required to submit detailed information to at least two recognized experts who could evaluate the Board’s performance in managing the fund in comparison to other pension plans, mutual funds and comparable investment managers, and submit these reports for inclusion in the Board’s Annual Report.

The Committee agrees that the Board’s performance must be assessed on an ongoing basis. As mentioned earlier, the Board has a responsibility to contributors and to beneficiaries of the Canada Pension Plan, and an assessment of performance is critical to instilling public confidence. Therefore, the Committee recommends that:

the Canada Pension Plan Investment Board be required to develop measures by which its performance can be evaluated. These measures, and the Board’s success or failure in meeting them, must be made public annually.

Great care must be taken in developing these standards. In the words of Malcolm Hamilton of William M. Mercer Ltd., "what gets measured gets managed"; by implication, what doesn’t get measured doesn’t get managed.

 

THE AUDITING FUNCTION

The Canada Pension Plan Investment Board Act contains various provisions with respect to auditing. For example, the board of directors is required to establish an audit committee that will, among other duties, review, evaluate, and approve internal control procedures, and review and approve the Board’s annual financial statements. It must also meet with the Board’s auditor to discuss those annual financial statements and the auditor’s report, and review any investments and transactions that could adversely affect the return on the Board's investments that are brought to its attention by the Board's auditor or officers.

As well, an annual auditor's report must be prepared. The auditor will be appointed annually by the board of directors, can be reappointed, and can be removed at any time by the Board of directors. Furthermore, the Minister of Finance has the authority, under the Canada Pension Plan Investment Board Act, to appoint an auditor to conduct a special audit of the Board or any of its subsidiaries.

As well, at least once every six years and following consultation with ministers in participating provinces, the Minister of Finance is required to request a special examination of the Board or any of its subsidiaries to determine if the systems and practices related to financial statements have been maintained so as to provide reasonable assurance that legislative requirements have been met. The examination is to be carried out by the Board's auditor or, where the Minister has consulted the board of directors and feels that it is necessary, by an auditor appointed by the Minister. The results of the examination will be reported to the Minister of Finance and the ministers of participating provinces.

The annual financial statements of the Canada Pension Plan must be audited by the Auditor General of Canada, and the auditor appointed by the Canada Pension Plan Investment Board must provide the Auditor General with any records, accounts, statements or other information considered necessary to audit the annual financial statements of the Plan.

Witnesses made a number of comments about the auditing function. The Ontario Teachers' Pension Plan Board, for example, expressed a concern about too many audits, while Stanley Hamilton and Robert Heinkel argued that the Auditor General should be provided with the information needed to audit the Board. The Canadian Taxpayers Federation argued that the Auditor General should have complete access to the Board’s minutes, deliberations and decisions, and that findings should be reported to Parliament on an annual basis with the Board responding to each specific recommendation and/or critique made by the Auditor General within four months. William Stanbury noted that there is no opportunity for the Auditor General to evaluate the performance of the Board, while Margot Priest argued that the Auditor General "should have the power to audit, whenever and in whatever way he considers appropriate, the Board itself." She argued that if this is not the case, then the Auditor General should be given the responsibility to conduct the special examinations provided for in the Act.

In contrast, William Robson argued that "[t]he provisions for audits of the board by its own auditors and audits of the CPP by the Auditor General seem, especially in conjunction with the Chief Actuary’s periodic reports, to be adequate."

The Committee notes that the first responsibility of any auditor is to protect stakeholders, and not management. It is for this reason that, in the private sector, the final decision to hire or dismiss an auditor rests with the shareholders and not the board of directors. Private sector managers and boards of directors may recommend the hiring or dismissal of an auditor, but they cannot do so on their own.

Similarly, in the federal public sector, most Crown corporations and agencies cannot simply pick their own auditor. The various statutes governing Crown corporations either assign the power to hire an auditor to the Ministry, or specifically name the Auditor General.

In Quebec, the provincial Auditor General is the auditor of the Caisse de dépôt et de placement du Québec, the agency responsible for investing monies from the Quebec Pension Plan. In Alberta, the provincial Auditor General audits the Alberta Heritage Savings Trust Fund.

It is the Committee’s view that the audit committee and the Canada Pension Plan Investment Board’s auditor each have a role to play in the auditing process, and that the respective roles assigned in the Canada Pension Plan Investment Board Act and draft regulations are appropriate. The Committee recommends that:

the auditor of the Canada Pension Plan Investment Board be chosen by the Minister of Finance.

 

CONFLICTS OF INTEREST

The Canada Pension Plan Investment Board Act requires the Board of directors to establish procedures for the identification of potential conflicts of interest and procedures to resolve these. The Act also requires the Board of directors to designate a committee of the Board of directors to monitor application of the conflict of interest procedures.

Furthermore, every member of the Board is required to disclose the nature and extent of any interest as a party to a transaction or proposed transaction with the Board, or as a director or officer of any entity that is a party to a transaction or proposed transaction with the Board, or as a person who holds a material interest in any such entity. Certain voting restrictions exist.

Conflict of interest was a subject discussed by a number of the Committee’s witnesses. Stanley Hamilton and Robert Heinkel told the Committee that the Act provides comprehensive provisions for conflicts of interest; they saw no major omissions in that regard. However, while William Stanbury noted that the Act provides "extensive rules (for the) disclosure of conflict of interest of directors and officers," he argued that some conflicts of interest, such as insider trading, should simply be prohibited in the Act. Margot Priest took the same position.

The Committee received information detailing the Ontario Municipal Employees Retirement System (OMERS) conflict of interest policy, which applies to every member of the Board and every OMERS employee who is in a position to influence decisions made on behalf of the Fund, and may be extended to agents of or advisors of OMERS. The policy advises the Board to guard against both actual conflicts of interest and the appearance of conflict of interest. Individuals bound by this policy are required to disclose securities held, investment agents with whom they deal, and trades in securities. Disclosure obligations extend to corporate directorships, trusteeships, and any instances of control or involvement in the investment decisions of a corporation or trust. Board members may not take part in any OMERS deliberations, and may not vote on the particular investment or transaction, in which they have an interest. There is an obligation of continuous disclosure: if an interest is acquired in an investment or transaction after it has been made by OMERS, that interest must be declared at the next meeting. Any trades in securities must be pre-cleared with the OMERS compliance officer, and may be prohibited.

Believing that the prevention of conflicts of interest is critical to ensuring public confidence in the Canada Pension Plan, the Committee recommends that:

the Canada Pension Plan Investment Board adopt stringent conflict-of-interest guidelines, and that these follow models such as the Ontario Municipal Employees Retirement System.

 

THE INVESTMENT FUND

The Canada Pension Plan Investment Board Act clearly identifies the objects of the Board. The Board must invest its assets with a view to achieving a maximum rate of return, without undue risk of loss, having regard to the factors that may affect the funding of the Canada Pension Plan and the ability of the Canada Pension Plan to meet its financial obligations. Moreover, subject to the regulations, the Board of directors must establish and the Board must adhere to the investment policies, standards, and procedures that a person of ordinary prudence would exercise in dealing with the property of others.

As well, the board of directors must establish an investment committee. The committee will, among other duties, approve the engagement of investment managers, and meet with the Board's officers and employees to discuss the effectiveness of the Board's investment policies and the achievement of its objects. Moreover, the committee must require management to implement and maintain procedures to monitor the application of the Board's investment policies, standards, and procedures, and ensure that these are complied with; it must also review, evaluate, and approve these procedures.

The draft regulations would require the Board, in selecting investments, to evaluate them with regard to the overall rate of return and risk of loss of the entire investment portfolio held by the Board. They also identify the proposed contents of the Board’s written statement of investment policies, standards, and procedures for its portfolio of investments. Included are: the categories of investments; diversification of the investment portfolio; asset mix and rate of return expectations; policies for the management of credit, market, and other financial risks; and, the retention or delegation of voting rights acquired through investments. The proposed regulations would require the Board to review and confirm or amend the statement at least once in each financial year.

Furthermore, the draft regulations would subject the Board to broadly the same investment rules as other Canadian pension funds; most of the investment parameters to which the Board would be subject would be taken from the regulations under the Pension Benefits Standards Act, 1985, modified to some extent to recognize the circumstances of the Canada Pension Plan.

The draft regulations also provide that, the Board’s domestic equity investments would be chosen passively and would mirror one or more broad market indices, rather than selecting individual securities. These draft regulations, which may be changed after the first triennial review, have the intent of ensuring the fund’s smooth entry into the equity market.

The Board would be required to invest according to the "prudent portfolio" standard, which has become the normal standard for pension fund investments. The decision about asset allocation would be left entirely to the Investment Board.

 

A. The Number of Funds

The Committee received divergent opinions on whether the Canada Pension Plan fund should be one fund or a number of funds. In particular, Phil Heimbecker of the Alberta District Council of the Investment Dealers Association of Canada argued that "a single, centralized investment fund will not be in the interest of all Canadians" and that "[w]hile very large funds have cost efficiencies resulting from economies of scale, ... a more suitable structure ... would be multiple funds, managed by experienced regional investment managers, who are accountable to the ... Board." In his view, a highly centralized investment structure is unlikely to satisfy regional investment opportunities or to take advantage of regional expertise.

Herb Grubel suggested the creation of three to five separate funds, each operating independently in their efforts to maximize rates of return; he stated that the resulting competition would increase performance and provide benchmarks by which the performance of individual funds and their managers could be evaluated.

Arguing that economies of scale are, in fact, not often realized, William Stanbury also argued for the creation of a number of funds, with competing teams of investment advisors. He stressed the importance of contact and familiarity with regional circumstances and opportunities, and argued that the administrative costs of operating multiple plans must be weighed against the advantages of greater competition among funds with resulting higher rates of return. The largest number of funds was advocated by Michael Walker of the Fraser Institute, who told the Committee that ten funds should be created, one for each province; in his view, after a five-year period, Canadians should be permitted to choose the fund in which they wish to invest. Similarly, Randall Morck argued that competition should be allowed between different pools of money, with Plan contributors deciding where to invest their money.

At the other extreme, a number of witnesses argued that large funds perform better than small funds. For example, Keith Ambachtsheer cited research indicating that "bigger is better" in pension fund management both because it leads to increased economies of scale, and thus lower unit operating costs, and because it permits establishment of a full-time professional management team dedicated to producing positive risk-adjusted net value added. Michael Goldberg suggested that splitting the fund into three parts would be destabilizing, with the funds competing for scarce funds.

The Committee believes that, at least in the early years as the fund is growing, only one investment fund should exist. Each triennial review should re-visit the issue to determine if the interests of the Canada Pension Plan’s beneficiaries and contributors are better served by a single or by multiple funds. From this perspective, the Committee recommends that:

at this point in time, there should be only one Canada Pension Plan investment fund. The Committee believes, however, that the creation of multiple funds should be considered during each triennial review, particularly in the future when the size of the fund is larger.

 

B. Passive Versus Active Investment

As noted above, the proposed regulations would require the Board, in acquiring securities other than debt obligations, substantially to replicate the composition of one or more widely recognized broad market indices of securities traded on a Canadian public exchange. This passive domestic equity requirement would continue for at least the initial three-year period but would be examined in three years.

The Committee received mixed testimony on whether the fund should be actively or passively invested. For example, Keith Ambachtsheer cited research suggesting that active management can be successfully applied only at the margin. In his view, a relatively high proportion of assets passively managed leads to positive returns. Malcolm Hamilton expressed the view that the entire fund should be passively invested, and advised a broad index. The Ontario Teachers’ Pension Plan Board also noted that the fund will have to invest broadly, and that this invariably results in owning investments that may be high profile or controversial; according to this witness, the Board must withstand pressures from groups that lobby it to divest itself of, or support, particular holdings for social, political, and environmental reasons. Moreover, it must be realized that, from time to time, the fund will underperform and that there will be investments in "losers." Stanley Hamilton and Robert Heinkel suggested that perhaps 80% passive and 20% active investment would be the appropriate mix. Connor, Clark & Lunn Investment Management Ltd. also suggested that a large portion of the fund, perhaps 80%, must be indexed; however, the question is which index or indices. Finally, the C.D Howe Institute also supported the concept of passive investment, telling the Committee that, "[i]n general, the requirement to replicate indexes looks sensible. It responds to concerns about politically driven or otherwise imprudent investment practices, and also reflects a realistic assessment of active management’s limited ability to get consistently better returns."

On the other hand, Randall Morck noted that professional fund managers criticize indexed investing, arguing that it is impossible to index a fund as large as the proposed Canada Pension Plan fund. In his view, the indexing option is "perhaps unviable, and certainly unwise." Herb Grubel also made the point that passive investment "is not a workable operating principle." In addition, Peter Van Loon expressed his support for active management, suggesting that it is possible to beat the index on a consistent basis. The Ontario Teachers' Pension Plan Board told the Committee that defining index investing is not easy, and that full replication of an index at all times is an unrealistic goal; the investment strategy would be better directed by the Board, with the assistance of management. Jean-Claude Cyr, of the Caisse de dépôt et de placement du Québec, told the Committee that active management of the indexing process will be needed, as will be adjustment when the index changes. The Ontario Municipal Employees Retirement Board expressed the view that indexing does not work.

The Committee believes that passive investment will be a good strategy in the early years, but that more active investment will be needed later in order to maximize returns for Plan contributors and beneficiaries. Consequently, the Committee recommends that:

after the initial two-year period, the fund be more actively managed.

The Committee believes that, though much would be gained from active investment, passive investment is acceptable for the first two years when the regime is being established, when the Investment Board is developing its expertise and hiring investment managers, and when the amount of money in the fund is relatively small. In the longer term, however, the Committee is confident that the rate of return can be increased through active investment. The witness for the Nova Scotia Association of Health Organizations Pension Plan expressed the Committee’s point of view well when he observed that "it is usually safer to learn to walk first and run later."

 

C. The Objective of The Investment Policy

Finally, witnesses expressed divergent views on whether the fund should be invested with a view to such secondary objectives as economic development and/or social policy. The question of ethical investments was also raised. The Canadian Labour Congress argued that the Board should consider ethical investing, as well as investing to further economic development and job creation. On balance, however, witnesses did not support the pursuit of these secondary objectives. Herb Grubel, among others, indicated that the funds should "be free from requirements to subsidize regional, industrial or government projects ... ."

The Committee supports the objective as currently stated in the Canada Pension Plan Investment Board Act and from this perspective recommends that:

the objective of the Canada Pension Plan Investment Board, as currently articulated in the Canada Pension Plan Investment Board Act, remain unchanged.

In the Committee's view, the Board's clear objective of maximizing the rate of return without undue risk of loss is best achieved by giving the Board full flexibility to invest as it sees appropriate, without having to consider such secondary investment objectives as economic development or social policy priorities. As mentioned earlier, Canadians must be assured that the Canada Pension Plan Investment Board is fulfilling its duty to maximize return without undue risk of loss. The Committee is convinced that using the fund for economic or social reasons would compromise that objective.

There was limited testimony with respect to asset mix, despite the fact that this policy is probably one of the Board's most important decisions. This issue was, however, addressed by Malcolm Hamilton, who told the Committee that, as the longest-term investor in Canada, the fund should be predominantly invested in equities, with the objective of being no better and no worse than the market, which in his view is very difficult to beat. Cortex Applied Research Inc. also told the Committee that it is unrealistic to expect the Investment Board to do better than the market. Venture West argued that provision should be made for venture capital investing, totalling 1 to 2% of the fund’s assets over time, a suggestion that was supported by Peter Van Loon. Some witnesses argued for a long-term investment approach, recognizing the Canada Pension Plan liability structure.

Malcolm Hamilton noted the benefits of getting savings into the economy and turning it into productive investment. According to him, greater savings, and thereby greater investment, will result in a lower cost of capital, with spin-offs in terms of growth and an increase in the earnings base to which the contribution rate will be applied. The Ontario Teachers’ Pension Plan Board also noted that increased savings should create jobs in the long run and lead to investment in productive organizations. Finally, in the context of switching from a pay-as-you-go system to a funded system, Randall Morck noted the "need for more savings so Canadian businesses can get cheaper financing for expansion ... ."

As a final point, it should be noted that the focus is on investments. A number of witnesses told the Committee that, in fact, investments represent only one-half of the ledger. For example, the Ontario Teachers’ Pension Plan Board recommended that the Board think of matching Plan assets with Plan liabilities, since "if assets are rising, but liabilities are rising faster, then the plan will eventually encounter difficulties. ... The CPP Investment Board must always remember that (it is) working to pay the pensions promised. This is why maximizing long-term results is more important that quarterly or annual ones." Similarly, the primary investment objective of the Ontario Municipal Employees Retirement System Fund is to "ensure that the assets held in the Fund grow to meet the needs of the pension plan." The group believes that plan liabilities can best be met with long-term investment returns, diversification and prudent management of investment risks, and the investment of the Ontario Municipal Employees Retirement System Fund aims to achieve the best possible return within acceptable risk parameters. Finally, Stanley Hamilton and Robert Heinkel told the Committee that "[h]ow the plan’s assets are managed depends importantly on the plan’s liability." In their view, "it is not clear what percentage of the ... liabilities are to be funded, and by what date. Hence the required rate of return for the fund is not well defined. ... The Investment Committee uses this required growth rate of the assets to choose an asset mix that provides the desired expected return at the lowest possible level of risk. ... Optimal asset management requires knowledge of the structure of the liability."

 

D. Provincial Debt Obligations

According to the draft regulations, for the initial three-year period, provinces would have access to 50% of new Canada Pension Plan funds that the Board chooses to invest in bonds; after this time, new Plan funds invested in provincial securities would be limited to the proportion of provincial bonds held by Canadian trusteed pension funds in general. As well, outstanding provincial bonds could be rolled over for one additional 20-year term. In either case, provincial borrowings would be at market rates of interest. Recognizing the historical arrangements, under which provinces have had full access to Canada Pension Plan funds at preferential rates, this proposal would allow for a transition for provincial access.

While the Committee does not make any recommendation with respect to the extent to which the fund would hold provincial bonds, it must be pointed out that a number of witnesses claimed that loans to the provinces had led to the current financial state of the Plan. Nevertheless, the proposed regime would significantly alter the extent to which provincial bonds will be held.

 

THE FOREIGN PROPERTY RULE

The legislation governing the Board establishes a limit on the percentage of foreign property in which the board may invest. This limit is set by reference to a foreign property rule contained in the Income Tax Act. Under the Income Tax Act, the tax-exempt foreign property held by pension funds is limited to 20% of the total book value of assets; holdings beyond this limit are subject to tax.

A number of the Committee’s witnesses commented that the Canada Pension Plan Investment Board should be permitted complete freedom to operate without restrictions. The Atlantic Institute of Market Studies told the Committee that "decisions on how to invest Canada Pension (Plan) funds should be unfettered by artificial constraints - by the obligation to invest portions of the fund in each of the various regions of Canada, for example, or by limits on foreign investment." The Ontario Teachers’ Pension Plan Board argued that the Board should not be "handcuffed" by having unnecessary restrictions placed on its investment activities. Certainly, this freedom would be enhanced by the Committee’s recommendation for active investment in the longer term; however, it could be further enhanced by the elimination of the foreign property rule.

There was near unanimous support among witnesses for a change to this rule. Although the Canadian Labour Congress opposed changing it, most witnesses advocated no limits on foreign investment. The Investment Dealers Association of Canada argued that the limit "unnecessarily inhibits fund performance, restricts the flow of capital and restrains the development of a Canadian international investment capability." Moreover, the Association argued that some large funds allocate their foreign investment component to offshore advisors, and that this loss of foreign investment intelligence may impair merger and acquisition opportunities for Canadians, impede the adoption of foreign-based technological advancements and ultimately impair our global competitiveness. Herb Grubel argued that "[b]y having to forgo the opportunities for portfolio diversification offered by foreign asset holdings, investors are forced to accept either a lower return with the same risk or higher risk with the same rate of return." Finally, in the view of Robert McKim and Tom MacLaren of Seamark Asset Management Ltd., "[w]ithin the international investment community, (the foreign property limit) colours the Canadian financial system as weak, and in need of protection."

This perspective is supported by Committee members, who have long argued for a change to the foreign investment rule. The Committee recommends that:

the Minister of Finance immediately introduce amendments to the Canada Pension Plan Investment Board Act to increase the foreign content limit from the current 20% to 30%, two percent per year over a five-year period. In the longer term, the Minister of Finance should remove the limit for the Canada Pension Plan investment fund, and more generally for all investments.

Given the importance of maximizing return on the fund without undue risk of loss, the Committee feels that the 20% rule unnecessarily limits this return, and could lead to domestic investments that might not be considered in the absence of the 20% limit.

 

THE TRIENNIAL REVIEW

Once every three years, the Minister of Finance and ministers from participating provinces must review the financial state of the Canada Pension Plan, and may make recommendations as to changes in benefits or contribution rates or both. If possible, the review must be completed in time to allow the Minister of Finance to make recommendations to the Governor in Council before the end of the second year of the three-year period.

The Committee received very limited testimony from witnesses with regard to the triennial review. Committee members, however, are concerned about certain aspects of the Act's provisions. For example, the legislation requires that the financial state of the Plan be reviewed; however, no specific mention is made of whether recommendations may be made to aspects of the "financial state" of the Plan such as the Board’s objective, structure, policies, and procedures. Committee members believe these aspects should be reviewed. Therefore, the Committee recommends that:

all triennial reviews should encompass all aspects of the new investment regime being created by the Canada Pension Plan Investment Board Act and Regulations. In particular, the Committee believes that consideration must be given to: mechanisms to ensure transparency and accountability, and the extent to which they are easily understood by and accessible to the public; the contents of the Canada Pension Plan Investment Board's Annual Report; the term and qualifications of directors; the auditing requirements; whether there should be one or more funds; and, the extent to which the fund should be passively managed.

Although the Canadian Labour Congress suggested that the triennial review should include a review of the retirement income needs of Canadians, the Committee believes that the triennial review is not an appropriate forum for a discussion of that issue. Instead, the review should focus on relevant aspects of the Canada Pension Plan and, particularly in the early years, the new investment regime.

 

SCRUTINY OF REGULATIONS

While the draft regulations to the Canada Pension Plan Investment Board were given to the Committee for scrutiny, time has not permitted us to examine them in detail. However, the Committee believes that future regulations made in relation to the Board should be carefully and thoroughly reviewed by a committee of Parliament. In the normal legislative timetable, regulations do not come before the Joint Committee for the Scrutiny of Regulations for review until sometime after they are in full force and effect. The Committee believes that a different and more effective procedure should apply to the regulations made pursuant to the Canada Pension Plan Investment Board Act. Consequently, the Committee recommends that:

a copy of each regulation that is proposed pursuant to section 53 of the Canada Pension Plan Investment Board Act shall be deposited with the Clerks of both the Senate and the House of Commons at least 30 days before the day on which the regulation is proposed to be made.

A regulation deposited with the Clerks of the Senate and House of Commons stands referred to such committees of the Senate and the House as are designated or established, prior to the deposit, to review the regulation. It is the Committee’s intent, through these recommendations, to establish a procedure whereby these regulations may not come into full force and effect until such time as they have been either affirmed by Parliament or the 30 day period after deposit has lapsed.

 

CONCLUSION

The Committee recognizes that some of these recommendations and observations relate to the Canada Pension Plan Investment Board Act, while others are comments on the draft regulations. While legislative changes will not be made at this time, the Committee believes that these issues should be discussed in the context of the next triennial review. In the interim, consideration should be given to whether or not some of the proposals could be achieved, for the short term, through regulation. Moreover, the Committee, believing that much is gained by parliamentary review of proposed regulations and regulatory changes, recommends that any contemplated changes to these regulations be referred to the Standing Senate Committee on Banking, Trade and Commerce for study.

As a final note, the Committee believes that the time must now be taken and the effort made to "get it right." William Robson told the Committee that "[t]he conduct of the CPP Investment Board will be a key determinant of public confidence in the plan." The Committee has stressed that public confidence must be restored, and views the establishment, operations, and policies of the Canada Pension Plan Investment Board as key to achieving this goal. The appointment of Canada Pension Plan Investment Board directors, establishing transparency and accountability, and selecting the proper investment strategy, among other issues, are critically important as we try to "get it right."


APPENDIX A

WITNESSES

ISSUE

NO.

DATE

WITNESSES

8

Toronto,

February 17, 1998

From the Department of Finance:

Mr. Bob Hamilton, Assistant Deputy Minister, Financial Sector Policy Branch;

Mr. Wayne Foster, Chief, Financial Sector Policy Branch;

Ms. Tara Gray, Economist, Financial Sector Policy Branch; and

Mr. Doug Wyatt, General Counsel, General Legal Services.

From Keith P. Ambachtsheer & Associates Inc.:

Mr. Keith Ambachtsheer, President.

From Cortex Applied Research Inc.:

Mr. John Por, President.

From William M. Mercer Limited:

Mr. Malcolm Hamilton, Principal.

From the Ontario Teachers’ Pension Plan Board:

Mr. Claude Lamoureux, President and Chief Executive Officer.

From the Ontario Municipal Employees Retirement Board:

Mr. Dale Richmond, President & Chief Executive Officer; and

Mr. G. Tom Gunn, Chief Investment Officer.

 

9

Calgary,

February 18, 1998

From the Canadian Taxpayers Federation:

Mr. Mark Milke, Provincial Director for the Alberta Division.

From Investment Dealers Association of Canada:

Mr. Philip Heimbecker, Past Chair, Alberta District Council.

From the University of British Columbia, Faculty of Commerce & Business Administration:

Professor Stanley Hamilton, Associate Dean; and

Professor Robert Heinkel, Vice-chairman, Faculty Pension Plan.

From the University of Alberta:

Professor Randall Morck, Faculty of Commerce; and

Professor Allan Tupper, Department of Political Science.

 

10

Vancouver,

February 19, 1998

From Simon Fraser University:

Professor Herbert Grubel, Economics Department.

From the University of British Columbia:

Professor W.T. Stanbury, Faculty of Commerce & Business Administration.

From Connor, Clark & Lunn Investment Management Ltd:

Mr. Gordon H. MacDougall, Partner.

From Ventures West:

Mr. Michael Brown, President.

From The Fraser Institute:

Dr. Michael Walker, Executive Director.

 

12

February 26, 1998

From the Canadian Labour Congress:

Mr. Richard A. (Dick) Martin, Secretary-Treasurer; and

Mr. Robert D. Baldwin, Director of the Social and Economic Policy Department.

 

13

March 17, 1998

From the University of British Columbia:

Mr. Michael Goldberg, Dean of Business School.

 

 

From the C.D. Howe Institute:

Mr. William B.P. Robson, Senior Policy Analyst.

 

14

Halifax,

March 18, 1998

From the Department of Finance, Government of Nova Scotia:

Mr. Peter Van Loon, Director of Investments.

From the Atlantic Institute of Market Studies:

Mr. Don Cayo, President.

From the Nova Scotia Association of Health Organizations Pension Plan:

Mr. Richard W. McAloney, Chief Executive Officer.

From Seamark Asset Management Ltd.:

Mr. Robert G. McKim, President and Chief Operating Officer; and

Mr. Tom MacLaren, Vice-President.

 

15

March 19, 1998

From The Regulatory Consulting Group, Inc:

Ms. Margot D. Priest, Partner.

From the Caisse de dépôt et de placement du Québec:

Mr. Jean-Claude Cyr, Vice-President, Development and Planning, and Coordinator for Quebec economic matters.

 


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