Chair /
Président
Mr James J. Bradley (St Catharines L)
Vice-Chair / Vice-Président
Mr Bruce Crozier (Essex L)
Mr James J. Bradley (St Catharines L)
Mr Bruce Crozier (Essex L)
Mrs Leona Dombrowsky (Hastings-Frontenac-Lennox and Addington
L)
Mr Bert Johnson (Perth-Middlesex PC)
Mr Morley Kells (Etobicoke-Lakeshore PC)
Mr Tony Martin (Sault Ste Marie ND)
Mr Joseph Spina (Brampton Centre / -Centre PC)
Mr Bob Wood (London West / -Ouest PC)
Substitutions / Membres remplaçants
Mr R. Gary Stewart (Peterborough PC)
Clerk / Greffière
Ms Donna Bryce
Staff / Personnel
Mr David Pond, research officer,
Research and Information Services
The committee met at 1007 in room 228.
The Chair (Mr James J.
Bradley): I'd like to bring the meeting to order. I
think all three parties are represented here and all members of
the committee are present, so it gives us an opportunity to
commence our proceedings.
SUBCOMMITTEE REPORTS
The Chair:
The first item on the agenda is the report of the subcommittee
dated Thursday, November 16, 2000. Would someone like to move the
subcommittee report?
Mr Joseph Spina
(Brampton Centre): So moved.
The Chair:
Mr Spina has moved it. All in favour? Opposed, if any?
Carried.
The report of the
subcommittee dated Thursday, November 23, 2000.
Mr Spina: So
moved, Chair.
The Chair:
Mr Spina again. All in favour? Opposed. The motion is
carried.
We have a problem I will
bring to the attention of the committee. Sometimes people inform
the committee that they are unable to come before us at a
specific time. We have an individual who was asked to appear
before the committee whose name is Mr Richard Brassard. He's an
intended appointee to the Muskoka, Nipissing, Parry Sound and
Timiskaming Grant Review Team.
I want to get the direction
of the committee in this regard. Mr Brassard cannot appear before
the committee on December 6 as he is being sworn in as mayor in
his community. He cannot appear on December 13, and the 30-day
time limit for the committee to interview an intended appointee
expires on December 17. Therefore, the committee can either
provide unanimous consent to extend the deadline until the
intended appointee can appear before the committee or choose to
waive the interview and let the appointment go through. Mr
Brassard has indicated he is unable to appear on December 20 as
well. However, he would be able to appear sometime in January. It
would take the unanimous consent of the committee to extend
it.
As Chair, I find it difficult
to function as a committee if people are able to simply-and I'm
not saying it in this case. He probably has very legitimate
reasons in each case. Being sworn in as mayor is certainly a very
good reason on that occasion. But I think what can happen with
our committee is that people can simply say, "I can't be there; I
can't be there," hoping that somehow the committee will then just
relinquish its prerogative to have the person appear before the
committee. So I look to direction from committee members.
Mr Spina: In
view of the distance, and besides being the mayor, Mr Brassard is
also a school principal, I can understand it being difficult,
particularly at this time of year. I don't have any objection to
his appearing before the committee so, rather than waive, I would
seek unanimous consent to extend to January.
The Chair:
All in favour of that? Shall we say to the end of January so that
it doesn't go on forever-
Mr Spina:
That's fair.
The Chair:
-because the government will want to have him appear at some
time.
Mr Spina: By
January 30, then? Shall we qualify that?
The Chair:
OK. All in favour of that? Carried.
Thank you very much for your
direction on that.
INTENDED APPOINTMENTS
DONALD WEISS
Review of intended
appointment, selected by official opposition party: Donald Weiss,
intended appointee as chair, Ontario Public Service Pension
Board.
The Chair:
We have one appointee before us today. This is a half-hour review
of intended appointments. The certificate was received on
November 3, 2000, a selection of the official opposition party,
Mr Donald Weiss, who is the intended appointee as chair, Ontario
Public Service Pension Board.
Mr Weiss, would you like to
come forward, please. As you have likely been informed, you have
the opportunity to make an initial statement to the committee,
offering any comments you wish. I invite you to do so now.
Welcome to the committee.
Mr Donald
Weiss: First of all I'd like to say that I'm very
pleased and honoured to be here today as intended appointee for
chairman of the Ontario Public Service Pension Board. I fully
recognize the importance of the board's work to Ontarians and I'm
very pleased to be considered for this position here today.
I hope to use this brief
statement to demonstrate that I'm not only qualified for this
position but that I'm ready to bring to it an extra measure of
dedication and skill.
As you will see from my resumé, I have
extensive experience with direct relevance to the pension fund
industry. My 26 years in the financial services field began with
Canada Permanent Mortgage Corp, followed by Morguard Trust Co,
which was owned by five large Canadian pension funds. Morguard
Trust provided origination, underwriting and administration of
mortgage services to the Canadian pension fund industry, as well
as secondary market trading and management of two mortgage
investment corporations which were also owned by Canadian pension
funds.
My tenure there, during which
I rose to the position of president and CEO, was an excellent
training ground for understanding the opportunities and
challenges that are met by the pension fund industry. I was
responsible for the full operations of the trust company and
played a key role in the design and launch of Morguard Bank of
Canada. I managed an organization of 180 employees, with $4
billion in assets under administration, and we achieved up to
about $600 million a year in loans origination along the way.
My work experience also
extended to other areas of investment. For three years I worked
with development concepts for a real estate development
consulting company. We worked with private companies,
institutions and government agencies on assignments ranging from
the transportation industry to tourism, and retail, commercial,
office and warehouse developments.
This position capped more
than a quarter century in the financial services field, and along
the way I learned a tremendous amount about real estate, finance,
investment, the investment industry and the role played by
pension funds in that particular area.
Following this, in 1992 I
became executive director of the PC Ontario Fund. As a result, I
gained significant experience in direct mail marketing,
individual and corporate fundraising, as well as an excellent
insight into the workings of government. In addition, I became a
member of the Ontario Pension Board in March 2000, and I have
served on the investment committee, and on the human resource,
audit and pension policy committees of the board as well.
I've had a varied career and
each position has demanded responsibility, prudent
decision-making and the delivery of services to the highest
quality to customers and clients. I think I've met these
challenges with optimism for the future, tempered with a
realistic attitude about the present and with a knowledge of the
past.
These are the qualities I
bring before the committee today. I see a vibrant economy in
Ontario and across Canada and good opportunities abroad. I'm
optimistic that the Ontario Pension Board can meet its goals by
securing reasonable returns with minimum risk. But I also see the
challenges presented by today's stock markets and by the
constantly changing environment. I know that the Ontario Pension
Board has navigated this environment extensively in the past and
I'm confident it will meet its future challenges with the same
amount of confidence.
I would take it as an honour
to be a leading hand to help ensure that the Ontario Pension
Board continues to meet its objectives and the challenges of the
future. What the board does is serious business and I'm prepared
to offer all my knowledge and skill I have acquired and to
fulfill my responsibilities with dedication to the best interests
of the board, the pensioners, the contributors and the employers
that it serves. Thank you for your consideration.
The Chair:
Thank you very much, sir. We'll start with the official
opposition.
Mrs Leona Dombrowsky
(Hastings-Frontenac-Lennox and Addington): Mr Weiss,
good morning. When I had the opportunity to review the material
that was provided to us, I certainly noted with interest your
involvement with the PC Ontario Fund. You've indicated in your
opening comments that that experience has provided you with
excellent insight into the workings of government. Would you have
an opinion in terms of the advantage that this government has
enjoyed by being able to access the significant number of dollars
that they have from this pension fund?
Mr Weiss:
That the government has accessed?
Mrs
Dombrowsky: That the fund has provided for the province
by way of debenture.
Mr Weiss:
Please, can I have that question again?
Mrs
Dombrowsky: Essentially the government is borrowing from
this fund, is that not the case?
Mr Weiss:
There are existing debentures outstanding, yes, that have existed
for quite a number of years.
Mrs
Dombrowsky: Yes, and continue to exist.
Mr Weiss:
Yes, there's a portfolio of those that still exist.
Mrs
Dombrowsky: Over 30% of-
Mr Weiss: Of
the fund, that's correct.
Mrs
Dombrowsky: Obviously, there is some significant
advantage to the government that it is able to access this fund
at a very reasonable rate of interest.
Mr Weiss: I
don't have the exact date. These bonds were put in place quite a
few years back and they are not currently, I don't think-since
1990 the government has not borrowed essentially from the public
service pension plan. These bonds are slowly being amortized out
and I believe that by 2014 they will be all gone.
Mrs
Dombrowsky: You've indicated in a statement, I believe
it was in March, with regard to the investment policy of this
board, that it has-your words were that "it speaks to a
conservative approach to investment. It's not heavily weighted in
some of what might be considered the higher-risk areas." You
think it meets the needs of the people, yet if you review the
performance, certainly least year, it is significantly lower than
what has been enjoyed in other markets. Would you have a comment
on that? Do you continue to maintain that this conservative
approach is really in the better interests of the people who
participate in the fund?
Mr Weiss:
Yes, the returns in the fund, if you look at it over the last 10
years, are in the range of 11.79%, I believe. The returns are
certainly going to move around with markets. As you're invested in equities and
bonds, your returns are going to move around from year to
year.
The objective of the Ontario
Pension Board to meet its actuarial needs is to achieve a 3.5%
real return. Our objective that we put to our external managers
of our money is set at 4.5% real return. With that, we have been
consistently able to exceed our actuarial needs. By example, in
1990, when the unfunded liability was established for the fund,
which was the responsibility of the government, it was
established at $2.5 billion. The game plan at that time, in 1990,
was to amortize this over 40 years and take this pension fund up
to a funded position over the 40 years. A surplus position of
$335 million was achieved in 1999-it was achieved in the year
2000, as opposed to 2029, which would be 40 years from 1990,
significantly earlier. So the actuarial needs of the fund to meet
the pension benefits that have been put out there are more than
adequately being met.
1020
Mrs
Dombrowsky: Perhaps I was not clear. Do you have any
comment about the fact that the fund performed lower than most
other funds in the market?
Mr Weiss:
The investment policy of the Ontario Pension Board is not going
to be identical to other pension funds. Each pension fund
certainly has its own investment policy. The policy of the
Ontario Pension Board has been for many years to obtain a
reasonable return with a minimum amount of risk. The nature of
the fund itself and the fact that you have 24,000 members
contributing to this plan and 39,000 pensioners create a
different dynamic when you look at the fund. It certainly looks
quite different from many other funds. In fact, it is quite
unique that way.
The approach of establishing
a conservative investment policy as it pertains to this fund is
something that management over the years has adhered to. It is
the policy of the fund today and I think it is a very sound one.
I don't think you can look at the returns in any one particular
year. If you look in 1999, there were some funds that
outperformed the Ontario Pension Board, but I think if you look
at the 10-year returns and compare the fund, you'll find that the
Ontario Pension Board has performed very well relative to what
you may consider the other pension funds in the industry. It's
more than met its objectives in terms of returns and has created
a surplus much ahead of when it was originally anticipated.
Mr Tony Martin (Sault
Ste Marie): Thanks for coming today, Mr Weiss. Now that
you're being appointed to this fund to manage and to chair it-and
there's no doubt that will probably happen here today-have you
severed completely all ties with the PC Ontario Fund?
Mr Weiss: I
will be severing all ties with the PC Ontario Fund on December
31. I am employed there at the present time. I do not have a
position there. I'm just assisting with the new management to
become acquainted with the operations of the fund.
Mr Martin:
Why would you have made this jump from the PC Ontario Fund to the
pension fund?
Mr Weiss: If
you look at my history, I have a keen interest in this particular
industry. I've always enjoyed it; I've always had aspirations to
continue to be involved in the financial services and investment
industry. I have been employed with the PC Ontario Fund for
nearly nine years and this opportunity represents a change for
me. I think it very much meets my particular needs in terms of
what I would like to do and what I would like to contribute to
industry.
Mr Martin:
When the fund was changed to its present mandate and direction,
it was done at that time to make sure there was an arm's-length
relationship where government is concerned. Given your obvious
political affiliation and connections and what you've done for
the last few years, do you see any reason why any of us should
worry that now, with a more direct link between the government
and this fund, that arm's-length relationship might change in
some fashion, manner or way?
Mr Weiss:
No, absolutely not. If you look at my track record and my
approach to business and to the responsibilities that I've
undertaken in my history, I've always been able to separate that
kind of issue and I expect to do the same on the Ontario Pension
Board.
Mr Martin:
Along that same line, you'll understand that there may be some
anxiety out there among some of the plan members who happen to be
part of very well-known and large unions whose management is the
Ontario government, and the obvious antipathy that exists there,
the major downsizing that has happened and the contracting out of
a lot of the work that government does now. Do you see any reason
that OPSEU should be concerned that we now have overseeing that
fund that's so important to them in terms of their future
somebody who is so readily connected with a government that is so
ideologically opposed to the very strong presence of organized
labour in the economy of this province, and particularly where
the delivery of government services is concerned?
Mr Weiss:
Again, I would come back to this. If I look at the history of the
Ontario Pension Board, Bill Somerville, who has been chairman for
11 years, was appointed by the Liberal government at the time,
and I think Bill has just done an outstanding job and performed
exceptionally well. Those kinds of concerns that you've
expressed, I suspect, could have been expressed in 1990 at the
time that Bill was appointed, and none of those things have ever
been realized.
Mr Martin:
You'll agree that the environment at that time with that
particular government and the subsequent New Democrat government
was not of the same depth of feeling re the antipathy that exists
between government and organized labour these days.
But going beyond that, as you
indicated earlier, there are now significantly more pensioners
than there are contributors in this plan. The old debate is going
on out there in the private sector around who actually owns the
pension plan and who should the surplus accrue to in terms of
benefits. In this instance so far with this plan, any surplus has
been recognized as needing to accrue to the members because the
contribution has been reduced, and in some public sector pension
scenarios there has actually been a holiday given. What's your
view, personally, given
that you've managed funds before, re the question of who
surpluses in pension plans belong to?
Mr Weiss: As
you know, the public service pension plan was split. There is the
OPSEU pension plan, which the chair of the Ontario Pension Board
has no responsibility for. The deal they have with the
government, as opposed to the Ontario Pension Board, is
different. The government does guarantee the Ontario public
service pension plan 100% and the surpluses accrue to the
government, if they are there. With the OPSEU, it's a 50-50
split. So there's a difference.
Each plan has different
characteristics and has to be looked at individually, depending
on what circumstances surround it. In terms of what should be
done with the surplus, again, what has been agreed upon, of
course, is what should be carried out. In our case, the
government does guarantee it 100% and does receive the surplus as
a result of their guarantee.
1030
Mr Martin:
I'm sorry. The government receives the surplus, is that what
you're saying?
Mr Weiss:
Yes. Now with the creation of the surplus, we've reduced
contributions in the fund to take care of all the surplus, so the
benefit is accruing to members as well as government.
Mr Martin:
You'll understand that the workers, the members of these plans,
see it a little differently in that they feel that any
contribution to a pension plan is deferred wages. They sit down
and they negotiate a package that speaks to direct remuneration
by way of their wages, a benefit package and then a pension plan.
You don't get as much over here because you're putting in over
here. They, I think rightfully, have some concern that any
surpluses that are generated might not accrue to benefit to them
and to members out there who are no longer active in the
workplace but are dependent on this.
Do you see a scenario down
the road, given this government's attitude toward workers, and
particularly workers who belong to organized workplaces, where
that surplus might just totally be taken by government to use as
it wills because it's, on the other hand, giving away a lot of
the money that it's getting by way the taxes that it imposes?
Mr Weiss: I
can't comment on the actions of the government, but I think that
they certainly will look at those issues of surpluses within
pension funds in a very fair and equitable way. I have no reason
to believe otherwise.
Mr Martin:
You don't think that the relationship they have had with you over
the last few years in your role as head of the PC fund would
influence you in any way, that they would have any control over
you in decisions that you might make or drive through the board
around the question of where those surpluses go?
Mr Weiss:
Again, my own personal perspective, if you're asking me that
question, leans toward a fair and equitable treatment of
surpluses. I don't really have a strong opinion one way or the
other or a defined position on that issue.
The Chair:
Thank you very much. Your time has expired, Mr Martin. We now
have the government caucus.
Mr R. Gary Stewart
(Peterborough): Just a couple of comments. I would like
clarification, if you could. Did you say there had been nothing
borrowed from that fund by government since 1990?
Mr Weiss: To
my knowledge, they haven't been purchased since 1990, but I'm not
100% certain of that. In recent years, there has been no active
purchase of government bonds by the pension board, at least to my
knowledge and to the information that I have seen up to this
point in time, as a member of the board. There is no anticipation
of acquiring future bonds in the investment approach and plan
used by the fund at present.
Mr Stewart:
Had it been used by previous governments fairly regularly?
Mr Weiss:
Again, if you go back to the fund, which had its origination in
1920, I don't have a history of what acquisitions of government
bonds were made by the fund historically. I really don't have the
information.
Mr Stewart:
It was just kind of interesting to see when there seems to be
some concern from the opposition parties that we would have to be
concerned about this government and the relationship with
you.
I just want to make one
comment. Certainly when I look at your credentials, whether it be
through the Morguard Trust or the Canada Permanent Mortgage Corp,
I think they are impeccable for this particular job. I look at
what you've done to manage the funds of the PC Ontario fund and I
think it stands you in great stead to do this job. Yes, there are
lots of investments out there that you could make a few more
dollars at. We all know that and I think we've all been burned a
little bit by them at one time or another. I think the people you
represent, the workers who have been referred to, are those who
want confidence that you are getting a good return with
relatively minimum risk. I think that's what they want. Money
says a lot of things these days. I think the workers who, it's
been suggested, may not support your appointment know their
money's being invested well and looked after in a fair and
equitable fashion.
Certainly myself and most of
the members of our party are more than pleased to support this
appointment for you, and I wish you the very best.
Mr Spina:
Just one short comment, Mr Weiss. Thank you for coming forward.
On the record, I want to thank you for the work you did in taking
a party fund that was in a deficit situation right through to the
current status that it is today.
The Chair:
Do you have any knowledge of the status you would like to share
with the committee, Mr Spina?
Mr Spina:
Clearly it's in the black, but it allowed us as a party to do
what we were able to do in terms of governing. If that is a small
demonstration of a turnaround, then certainly with a good, solid
fund I have no qualms about your being able to steer that ship
well into the future.
There is one other little
crossover I'm going to relate to. We both worked for a man named
Harold Deason. Anybody who
has the integrity and the knowledge of Harold Deason in the
financial world I certainly have a great deal of respect for, and
I certainly will be supporting your appointment.
The Chair:
Are there any other members of the government caucus who wish to
direct questions? If not, we will terminate this portion. Thank
you very much, Mr Weiss, for appearing before the committee.
We will now deal with the
intended appointment. Is there a motion you wish to make, Mr
Spina?
Mr Spina: I
move concurrence in the appointment of Mr Weiss.
The Chair:
Any discussion? We have a motion. Mr Martin, you wished to
speak?
Mr Martin:
Regardless of the credentials and the long and successful career
of Mr Weiss, I will not be able to support this appointment,
given that this pension fund, when it was changed over by the
Peterson government, was very definitely seen to need to have an
arm's-length relationship with government.
Given the reality of
surpluses in pension funds that we've seen over the last five to
10 years and the very difficult discussion that ensues around who
in fact owns those surpluses and how those surpluses should be
used, I think it's imperative that we have somebody at the head
of this board who is totally and completely neutral where the
government is concerned and where the members are concerned, so
that good decisions are made and driven that recognize the
fairness and the equity in all of this. I don't think appointing
somebody who is so obviously connected to the governing party at
this time is going to do that for us.
1040
Just a couple of other points
to let you know why I am concerned re the question of the
surplus. It's because of the drive by this government to turn
everything into, if not a private sector operation, then
something that models on the private sector.
My experience dealing with
a number of older workers in my own community who have been
restructured in non-organized workplaces and the question of what
their severance package should be or could be or is leaves me
very troubled. In most instances, workers who are let go at an
older age usually get whatever they're legally entitled to by way
of the legislation and the severance package. In most instances
they get what they've contributed to the fund over the years. In
some instances they get what the company itself has contributed;
oftentimes not the whole lump. But very, very seldom-as a matter
of fact, I haven't seen yet in terms of people who have presented
in my office a situation where any recognition at all was given
to the very generous interest that was earned over the years of
the investment of that money, the surplus.
They're taken in in a very
sort of clandestine way. They have no idea that this layoff is
coming. They're brought into an office. They're told, "Here's the
package." It's explained in a very quick and curt fashion. This
person, who was initially shocked to begin with, doesn't really
have the background or the expertise to question the portions of
that package and whether at the end of the day there is any
recognition of the interest that's been accrued over the years or
the surplus that's been generated by way of that pension fund.
They're told, "This is it." If they question or decide they'd
like to go back and get some further advice from perhaps a family
member or another colleague or even a financial adviser or
lawyer, they're told that that package shrinks significantly.
"It's here today. If you wait a week, it will be here, and if you
wait three weeks, it'll be here. If you give us any real
trouble-for example, bring a lawyer to the table-we'll see you in
court and chances are you won't see this payout for quite some
time."
I guess it's that attitude
working its way into these other pension funds that up until now
have been dealing, yes, in a fair and equitable fashion with
their members and their retired members in terms of the fixed
amount they get-and every now and again there's a recognition
that there's a need to index for inflation. But if we go slowly
but surely, by stealth, by way of appointment of somebody who
shares your ideology, which is that everything private sector is
good and everything public sector is bad, eventually this
attitude will present itself. I would suggest that there are some
people perhaps around this table here today who belong to OPSEU
who should be very nervous about this appointment and what it
indicates and signals by way of, down the line, what may turn out
to be the case.
This government is going to
be desperate for money in the next two or three or four years as
it continues to give away taxes to people who we suggest, as you
know, really don't need it. The term "fair and equitable" was
used here this morning on a couple of occasions. We understand,
particularly those of us on the opposition benches, what this
government means when it says "fair and equitable." We saw that
when it came to how they've dealt with, and continue to deal
with, those who are our most marginalized and vulnerable out
there. One of the first decisions made by this government was to
take 22% out of the income of those folks, seemingly not
recognizing that the money that goes to people on assistance in
this province primarily works its way into food and clothing and
shelter for children, not to speak of the contribution it makes
to local economies as these people spend that money in small and
medium-sized corner stores and clothing stores and grocery
stores.
With that, I am saying that
this morning I will very definitely not be supporting this
appointment and I will be speaking on behalf of my caucus as I do
that.
Mrs
Dombrowsky: I will not be able to support this
appointment either. It has been indicated very clearly that the
candidate brings some qualities to this role that I'm sure would
be of great value. However, as my colleague has indicated
earlier, this board was established as an arm's-length agency. I
think optics are very important. I think for those members of
this board to understand that an individual who has had such
close ties to the party that is now the government-I would be
very concerned that this appointment would prevent the membership
from viewing this board as an arm's-length agency, but very
definitely as a very
connected arm of the government. So for that reason I will not be
able to support this appointment either.
The Chair:
Any other comments? If not, I'll put the motion.
Mr Bert Johnson
(Perth-Middlesex): Mr Chair, I wonder if I could request
a recorded vote.
The Chair:
Yes, you certainly may. We'll have a recorded vote.
AYES
Johnson, Kells, Spina,
Stewart.
NAYS
Dombrowsky, Martin.
The Chair:
The motion is carried.
There is no further
business for the committee, so I'll be needing-
