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View Emmanuella Lambropoulos Profile
Lib. (QC)
Thanks, Madam Chair.
Mr. Schaan, thank you for your responses.
One of the questions I have had since the last meeting, but did not ask until now, is what the major difference is between smaller and bigger businesses. Is there actually a difference when it comes to this bill? How would they be impacted differently, or does it impact everyone pretty much the same?
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:45
There are probably two contemplations of that. One is the small employers that are plan sponsors. Those are increasingly infrequent. Then there are large employers for which we see the vast majority of defined benefit pension plans being the norm. Those, obviously, are on offer for all.
It's worth noting that there are two considerations for a small and medium-sized enterprise that are different from a large employer. Obviously, if a small or medium-sized enterprise was a provider of a service or other economic transaction that was not paid at the time of a restructuring or a liquidation, this would see them moved to become an unsecured creditor and would be behind the superpriority. If there's nothing left by the time we get to unsecured creditors as a function of superpriority, we might see small and medium-sized enterprises significantly asymmetrically impacted as a function of the role that might play within their overall well-being.
The second is that severance, which is the third component of this, is a superpriority regardless of enterprise size. While we might not see small and medium-sized enterprises have a pension, they may have either benefit plans or severance pay. That would now have superpriority over all other unsecured creditors and potentially secured creditors.
That severance or the benefit plans.... If people were being very worrisome, they might say that a small or medium-sized enterprise that was offering something like a health or dental plan, now potentially, knowing that's a superpriority, may see increased cost of credit because lenders will now need to factor that into the considerations they have when lending. There's similar things on the severance side.
In terms of size of firm and the potential impacts, it would vary based on the three categories, which are unfunded pension liabilities, group insurance plans and severance pay. We'd have to think about it from both their role as sponsor and also, potentially, as creditor.
View Emmanuella Lambropoulos Profile
Lib. (QC)
With regard to severance pay, [Technical difficulty—Editor] priority. Obviously, pension plans are different because that has to do with interest. People do receive a severance regardless and this is already being done.
Can you correct me if I'm wrong or if you have anything to say about that?
Mark Schaan
View Mark Schaan Profile
Mark Schaan
2021-06-15 12:47
Unpaid wages are currently a superpriority. Unpaid wages that go essentially up to a maximum are automatically provided a superpriority in both a restructuring and a liquidation context. As I indicated last week, for unfunded wages, in the case of a liquidation or a restructuring, the federal government actually takes the spot of the employee to be able to pay them out immediately and then allow for the restructuring or liquidation to continue. Ultimately, the government would be recouped the portion that's currently a superpriority, which is $2,000.
I'm looking at Mr. Morrison to make sure that I'm correct on that. He's nodding yes. That's excellent.
Under the wage earner protection program, the employee is able to get paid severance up to $7,200. As I said, it's a superpriority.
This would essentially take severance more generally and apply a superpriority to it. Severance goes well beyond unpaid wages. It also includes potential severance payments and things like separation payments. In some cases, as we've indicated, that may actually be subject to that of executives. If the severance is actually a very large portion of the employee pay packet in terms of a separation piece, that would now be subject to a superpriority.
There's no delineation in this piece of legislation between the two. There's no cap on it. There's no discussion of that in severance pay.
Tom Laurie
View Tom Laurie Profile
Tom Laurie
2021-06-08 11:12
Thank you.
GENMO is an organization that advocates on behalf of over 7,000 of GM Canada's salaried retirees, and we thank you for the opportunity to speak to you this morning.
Like most people, we thought government regulations protected pensioners. After all, defined benefit pensions are supposed to be guaranteed for life. Then, in 2008 and 2009, GM Canada came perilously close to bankruptcy. In fact, GM in the U.S. and Nortel both did file for insolvency. A vague potential pension problem became too close to being real for us.
Out of this situation, GENMO was born in May of 2010. We discovered that pension advocates are the only stakeholders making proposals to solve this problem. While other stakeholders all profess to understand that pensioners are unfairly treated and should be better protected, they haven't brought forward a single credible solution. We have to thank Madam Gill and Mr. Duvall for joining with pension advocates to try to correct this inequity.
The only credible solution on the table today is Bill C-253. It is opposed by some stakeholders. They claim it would put companies with defined benefit pension plans at risk by facing lending premiums that would lead to insolvencies. However, the Ontario Indalex ruling, which made pension deficits a deemed trust, stood for two years without any resulting wave of insolvencies.
Companies will operate within the legislative environment that governments set. Change this environment and companies will change their behaviour. Implementing Bill C-253 will likely have two major impacts on corporate behaviour towards pensions.
First, the pension obligation will be real, not something that disappears during an insolvency. Companies will better fund their pensions to maintain a good standing with all of their creditors. For example, when boards consider dividends, share buybacks and executive bonuses, they will consider their pension obligation more seriously.
Studies have shown that companies with defined benefit pension plans pay out far more out of the company than would be required to address their pension obligations. Sears, as an example, literally took hundreds of millions of dollars out of the company, while leaving behind a pension obligation in the millions.
Secondly, companies would improve their pension fund risk management. Company pension contributions come from two sources: cash from their continuing operations and money earned on the assets within their plan. There is an incentive for companies to take risks with pension assets to try to generate higher returns, thereby reducing the contributions from their operations. If they lose or miscalculate on this bet, what is the downside? They may get five, 10 or 15 years to make it up, and if worse comes to worst and the company goes out of business or fails, the debt literally vanishes.
In my case, in 2009, when GM Canada told salaried employees their pension was 95% funded, the reality was that after the market crashed, the pension fund was probably in about the 50% funded range. Was GM taken by surprise? Certainly. Was GM too heavily invested in higher-returning equities? Absolutely.
Under the tighter controls that followed, GM Canada reduced significantly the risks in its pension fund and actually brought it to over 100% funded. This is possible with the right motivation.
We hear lots of speculative claims about the consequences of superpriority. How would small businesses get financing? Who would be impacted? In fact, very few, if any, small businesses have defined benefit pensions.
What about other stakeholders during insolvency? If businesses make the adjustments I have discussed previously, there should be little impact. In any case, every other stakeholder has negotiated their risk. They have at risk only the unpaid portion of their contract. Pensioners actually have 20, 30 or 40 years on the table.
We also hear about deflection. You will likely hear witnesses say the solution is elsewhere, in tighter solvency regulations, limits on dividends, etc. However, these things are very difficult to deal with. The point is that while some of these ideas sound reasonable, they are a jurisdictional nightmare. They involve three areas of legislation—pension, business and tax—and they cross provincial and federal jurisdictions. It would take a lot of effort to do this.
The single point at which to address protection in Canada is insolvency legislation. Bill C-253 provides a reasonable solution.
Thank you.
Kenneth Eady
View Kenneth Eady Profile
Kenneth Eady
2021-06-08 11:23
Thank you very much.
Good morning, everybody. My name is Ken Eady. I am a Sears retiree and a court-appointed representative for the 17,000 Sears retirees who were affected by the bankruptcy of Sears.
Most of you know the story of Sears, which was a long-time Canadian company, 65 years, and for decades a trusted company in Canada, with employees who worked at Sears for a full career—40 years, sometimes 50 years.
Sears made promises to its employees that, quite frankly, we all believed and accepted as true, that we would have a guaranteed retirement income when we retired, and that we would have health and dental benefits and group life when we retired. That pension was a condition of employment at Sears, and it was a contributory plan. The employees contributed every month to that plan—our money, our wages.
Then, in 2005, the takeover of Sears U.S. threw the control of Sears Canada into the hands of a hedge fund. You've all read the stories of how that unfolded, and it was mentioned here this morning as well. We'll let you draw your own conclusions about the practices that were held there. It's enough to say that in 2017, the company sought creditor protection.
That's when things changed. It changed for everybody who worked at Sears who was a retiree. The pension plan lost 20% of its value right away.
Now, with 20%, people can say, well, maybe that's not so bad, but if you have a small pension and you lose 20%, that can make an enormous difference in how you live. Think about losing 20% of your current income and trying to maintain your lifestyle. Health and dental, group life, all disappeared, and it's hard to replace when you are 85 years old. You can't possibly buy group life, and health and dental are very difficult to replace.
Of all the creditors, the retirees are the ones who have the least likelihood of mitigating their losses. Others can continue to stay in business and can change their business. In fact, the employees can go out and get another job if they are lucky, but the majority of retirees can't mitigate that loss. That money is gone, and gone for good.
The real story here is that Sears broke that promise, a promise that, as a management person, I participated in making to employees, because I believed it was true as well. Sears broke that promise after making it over and over again. As well, after repeatedly being informed—repeatedly told—the federal and provincial institutions that would or should protect vulnerable seniors failed to protect them. They didn't protect them. There was absolutely no protection.
The real story is about the thousands of retirees who lost their pension and lost that income. A guy like Don, retired at 77 years old, has had to go back to work at Home Depot as a greeter so he can afford the medication for his wife's illness and so they can stay in their home. Doris, a 50-year employee of Sears, worked to the last day but lost 20% of her pension. The plans that she and her husband had for retirement changed substantially. Jack is 82, but Jack has to use his line of credit to subsidize his income so that he and his wife can stay in their home.
My colleagues have made a lot of really great points today, with real meaning, but I want to leave you with one important thought: Is it just and is it fair that in Canada, banks receive more protection under bankruptcy laws than seniors? Is it just and is it fair that in Canada, banks receive more protection than vulnerable seniors do? I believe it is not.
You're the ones who can make a difference here, folks. The MPs on this committee can vote in favour of this bill and help protect seniors. I suggest you do.
Thank you very much.
View Pierre Poilievre Profile
CPC (ON)
We've now heard all the arguments for and against the bill. What I need is some technical information. My first question is this: In the event that this bill were to pass, how would it be possible for a business to collateralize assets in order to get loans for expansion and new hiring?
Perhaps Mr. Powell would be the right person to address that technical question.
Michael Powell
View Michael Powell Profile
Michael Powell
2021-06-08 11:29
Yes. I think the answer to that is that if you assume that businesses make no change to their behaviour, then that's going to be a problem, absolutely. However, I see that as a false assumption. Businesses will adapt and adjust, just as they did when Ontario ruled in the Indalex case that the unfunded pension liability was a deemed trust. There was not a wave of insolvency. We did not read in the papers that companies were failing left, right and centre.
As Tom pointed out—
View Pierre Poilievre Profile
CPC (ON)
I'm not so much suggesting that they would fail. I'm just wondering about the legal question: How would you write a collateral agreement that says that the lender will lend money to the business, that the business will expand, and that, in the event of default, then the lender has recourse to the collateral? How would you write that, with this bill in place, which removes collateral primacy and replaces it with pension primacy?
Michael Powell
View Michael Powell Profile
Michael Powell
2021-06-08 11:30
Yes, and pensions become another.... There is superpriority already in insolvency today—
Michael Powell
View Michael Powell Profile
Michael Powell
2021-06-08 11:30
—for things like that. This becomes another one. That would be a risk that would be evaluated as they make those loans, as they do today. Again, I would suggest that businesses would be much more careful about the pension deficits they build up, just as—
View Pierre Poilievre Profile
CPC (ON)
Yes, that's a strong argument for the bill. Many businesses should be forced—in the present tense—to get their pensions in order so that they can raise money in the markets. You make a good point.
I don't want to be convinced anymore on anything. I just want an explanation. Is there anyone else who has technical insight on how that would work: a collateral agreement if this bill is in place? Is there anyone else who can jump in on that narrow question?
It looks like we don't have anyone on that point.
My next question is this: Do we need a transition period for the coming into force of this bill? If the bill just dropped like a brick today, it would reorder the priority of creditors in the event of an insolvency or a bankruptcy. It would do so midstream. Creditors that made loans under the existing regime would suddenly have new rules of the game halfway through it.
I see Laura Tamblyn Watts nodding.
Do you want to jump in on that question?
Laura Tamblyn Watts
View Laura Tamblyn Watts Profile
Laura Tamblyn Watts
2021-06-08 11:32
Thank you.
It actually folds into the last question as well. In order to ensure that the books are in the proper order and that risk mitigation and management are able to be overseen by corporate governance, in my respectful view, we need a roll-in period. That can start with companies that are starting up now starting with the new rules and with having a roll-in period of approximately three years. That's enough time for foresight of corporate governance to make sure that they are able to change the contractual obligations, that the pension funds are more fully funded, and that on external loan guarantees these new particulars are put in.
View Pierre Poilievre Profile
CPC (ON)
You said three years. Is that for existing businesses, and then it would be immediate for new businesses?
View Sébastien Lemire Profile
BQ (QC)
Thank you, Madam Chair.
Thank you for your statements. Thank you very much, Mr. Eady, for your very compelling testimony. I understand the emotional charge associated with this issue.
I also thank my colleagues for reflecting on these concerns and doing so outside the box. Refocusing the issue of fairness is important to me.
Maybe we could take a cue from White Birch Paper, for example.
Mr. L'Italien, you have studied this particular case. What can we learn from this saga?
François L'Italien
View François L'Italien Profile
François L'Italien
2021-06-08 11:42
Thank you for your question.
In fact, we did a thorough economic analysis based on the documents that were made available by the financial comptroller Ernst & Young at the time of the restructuring, in 2010. We were able to reconstruct the owner's financial strategy by getting hold of the annual reports, as well as reports produced by independent auditors.
We should have investigated further, but due to lack of resources and time, we were unable to pursue this avenue. However, we came to the conclusion that behind the exorbitant indebtedness of the Stadacona plant in Quebec City there was a corporate scheme. Given the maturity of the defined benefit plan for the plant's employees, given also that the bulk of the management costs and all the variable capital, i.e. the expenses associated with salaries and the pension plan related to this plant, were disproportionate in the eyes of the owner, there was a strategy of excessive indebtedness; this led the owner to place himself under the Companies' Creditors Arrangement Act, the CCAA.
In our view, what emerges from this case is that, while the CCAA was originally intended to enable companies in real financial difficulty to get back on their feet, over time it has enabled some employers to develop stratagems.
There really should be thorough economic investigations. We know that the case of Sears Canada in Ontario pointed in the direction of improper payment of certain revenues to the company's shareholders at a time when it was known that the company was in financial difficulty. So we see that the argument in the CCAA that creditors must be protected from default or business risk does not hold up in a systematic way. We need to look at these cases. We have been seeing repeated restructurings for several years now, and we think the time has come to at least take stock of the restructuring cases and adjust the focus.
In our view, raising the level of protection for pension plans is a step in the right direction to take stock and improve pension protection.
View Michael Chong Profile
CPC (ON)
Canada has been listed in the State Department's reports, as well as in other reports, as being a laggard on money laundering, and has also been criticized for its opacity around beneficial ownership.
What measures should be put in place by the Government of Canada and the provinces to move us from being laggards in this area to being world leaders?
Peter M. German, Q.C.
View Peter M. German, Q.C. Profile
Peter M. German, Q.C.
2021-06-07 20:51
I'll deal with the second part of it first.
In terms of beneficial ownership, we always have to keep in mind that there are two aspects to it. There's beneficial ownership of corporations and there's beneficial ownership of land. Land being a provincial responsibility, it falls to the provinces to deal with that. British Columbia now is the first province to create a beneficial ownership registry for land. We will hopefully find the ultimate beneficial owner of all the land in our province.
Unfortunately, or fortunately, if we are looking at beneficial ownership of corporations, that has to come from the federal government. We know the federal government has made an announcement that it's looking at a federal beneficial ownership registry for corporations, I believe, in 2025, simply because you can incorporate both provincially and nationally.
Somehow you have to bring this together. I certainly favour beneficial ownership registries for both land and corporations. The important thing, however, is.... There are a number of factors, but without belabouring it, there are two important factors that I see. The first is “garbage in, garbage out”. You have to make sure there is some verification of what is going in or else it's worthless. There has to be a bit of a checking process—
View Shannon Stubbs Profile
CPC (AB)
View Shannon Stubbs Profile
2021-06-07 11:14
Do you also believe that companies must be more responsible for ensuring that the content they are publishing does not contain minors and has the express and explicit consent of the individuals depicted?
View Steven Guilbeault Profile
Lib. (QC)
Companies should abide by Canadian laws. Whether they're online companies or physical companies, there should be no distinction. As I said earlier, the challenge we face now is that the tools we have to deal with these online harms just aren't adapted to the virtual world.
Melissa Lukings
View Melissa Lukings Profile
Melissa Lukings
2021-06-07 12:25
No worries.
The committee is dealing with a Canadian-controlled private corporation, a CCPC, which is a private commercial organization based in and operating with headquarters located in Canada. It is a Canadian company. We know this, and that's fine. Commercial organizations in Canada are bound by the Personal Information Protection and Electronic Documents Act. PIPEDA outlines the rules and remedies, including the fines and other penalties, for corporations that fail to abide by the provisions specified in the act.
Beyond the corporate level, we also have the Criminal Code of Canada, which outlines the criminal offences and punishments for committing such offences. We have these. We need to apply them. Everyone is bound by the Criminal Code of Canada.
Why, then, do we need additional regulations? Why do we need more oversight when we have not yet tried to simply apply the law we already have? We have these laws. We can use them, so let's use them. That's what they're for. What's the point in even having these statutes if you're not going to apply them when they're needed? What are we doing here?
We're here because a portion of those involved have decided to conflate the issue of corporate negligence with highly sexualized and emotive criminal activity—read again, child rape porn testimony. It elicits an emotional response—the sympathetic nervous system and all of that. It doesn't matter. This is about a corporation and user-generated content. It does not matter what is depicted in the content as much as it matters that the content, whatever it may be, should not have gotten past the corporation's screening system before being made live on the site. When the issue was brought to its attention, the corporation responded inadequately at first, so we need corporate law. We need to look at liability and feasibility standards.
Why has this become a forum for grandstanding religious ideologies? I'm sure you've all heard about Exodus Cry in the news, if you've been following it. Exodus Cry is a fundamental Christian organization founded on religious ideologies stemming from the United States. Why is it relevant to a question of corporate liability in Canada? It isn't. It doesn't make any sense.
Why are we arguing about exploitation? Why are we discussing mass censorship? Is that not a massive overreaction to a simple corporate negligence question? It seems glaringly obvious to me, so why are we not discussing reasonable options for encouraging corporations to better serve their users?
Also, I have some opinions about the genderedness of this. You can read about it in my notes.
When it comes down to it, you can't eliminate sex. We're humans, and there is always going to be a demand for sex. You can't eliminate sex work because the demand exists. You can't eliminate extramarital sex or porn or masturbation or demand for sexual services, but sexual assault is illegal, even when that person is your spouse. We need it to be that way. We want to protect people. If you're saying you can do certain things only within the context of marriage, you're setting yourself up for failure. It's true.
Yes, I said “masturbation” in a hearing. Oh my God.
You cannot eliminate base human desires, so you can't eliminate sex. That would be silly. It's okay to not like these things, and just because you don't like a thing or you feel that a thing is not for you, it doesn't mean it's inherently evil and should be eliminated. It doesn't work that way. It's not about and should not be about pornography or the actual content of online material here. This is about creating reasonable laws that work for Canada, Canadian corporations and everyone residing within Canada. We don't need new regulations; we don't need a new regulator, and we don't need online censorship. We need to use the tools we already have, which were designed for a reason. Why be redundant?
That is my diatribe.
Thank you for having me. I will take any questions you throw at me.
View Shannon Stubbs Profile
CPC (AB)
View Shannon Stubbs Profile
2021-06-07 12:30
Thanks, Chair.
Melissa, thanks for your testimony and for being here today.
I share your perspective that it is crucial to distinguish between the hosting and distribution of child sexual abuse material and of material and images that don't have the explicit consent of the people depicted in them.
I think you'd agree—or let me know if you do—that people have a right to own their own images and content that include them, and also the right to withdraw that if they so choose. This is the thing that I think all of us are grappling with—your very strong point about the Criminal Code already being in place and the laws and the regulations that already exist to provide these protections for children and for others who do not give their consent.
What do you make of what the actual problem is, then? What is the enforcement issue, the lack of enforcement and the lack of application of the existing law?
Melissa Lukings
View Melissa Lukings Profile
Melissa Lukings
2021-06-07 12:31
I think the current issue is that perhaps the penalties that currently exist in PIPEDA are not strong enough to deter corporations. I'm not saying to put in new regulations—I'm not saying that—but when you're going to do the digital charter implementation act and you're discussing things like Bill C-10 and Bill C-11, it's important to remember that.
I think there is room for improvement. Because we've found that financial penalties don't really seem to impact companies that make a lot of money, fines could instead be based on percentages. The key here is that we need to not have increased regulation. If what we're trying to do is in fact what we say we're trying to do, which is to reduce human trafficking and harm to young people, additional regulations are not going to help that.
Did I answer your question?
View Shannon Stubbs Profile
CPC (AB)
View Shannon Stubbs Profile
2021-06-07 12:32
Yes.
On April 19 you mentioned a couple of possibilities related to the digital charter implementation act. You touched on the possibility of fines for companies that host and distribute already illegal content. The Minister of Heritage was just here, as you know, so I just wonder if there is.... I understand that you got cut off in your testimony last time, so I just want to see if there are any other details or recommendations you wanted to add in terms of that work.
Melissa Lukings
View Melissa Lukings Profile
Melissa Lukings
2021-06-07 12:33
In terms of the digital charter implementation act?
Melissa Lukings
View Melissa Lukings Profile
Melissa Lukings
2021-06-07 12:33
For corporations the question here is, how much responsibility do they have to have in order to cover their own selves from liability for negligence? That needs to be specified. It needs to be put in words.
Other than that, we really need to work on applying the laws that we have, so if there's something standing in the way of that and that can be remedied through the new digital charter implementation act, that should be discussed, absolutely. That is my recommendation.
Cody Cooper
View Cody Cooper Profile
Cody Cooper
2021-06-03 11:16
Thank you.
I'm the president and chair of the CCRetirees organization for the non-represented salaried retirees of the former Chrysler Canada. As well, I'm the vice-president of the Canadian Federation of Pensioners.
The 23 member groups of the Canadian Federation of Pensioners total over 300,000 individuals, and with our alliances with CARP, CanAge and the National Pensioners Federation, we represent the voice of millions of Canadian pensioners.
The two decades of this century have been notable, with the carnage inflicted on pensioners and the ongoing lack of meaningful measures taken to protect the income security of those who have retired with a defined benefit pension.
In the press these pensions are often referred to as “guaranteed”. That would be news to those from Nortel, Sears and others, who have seen their retirement security eroded as they were left unprotected because of the legislative scheme.
Pensions are deferred wages, earned while working and payable upon retirement. The scope and the terms of the pensions are within the realm of the employer. No one forced the employer to make such arrangements.
Pensioners deserve the pension promised by their employer. Unlike others involved in bankruptcy, pensioners' loss is forever, as opposed to a note or a supplier credit from a contractor or plumber.
The responsibility to ensure pension protection falls upon the government. Pensioners have no control, input or approval over changes to their pensions. Several countries do a better job of protecting pensions than Canada—the United States, the United Kingdom and Germany come to mind—and somehow their economic activity continues.
There have been numerous consultations and submissions, including a request from the Canadian Federation of Pensioners, to study the best solution to ensuring full protection of pensioners in insolvency. To the best of my knowledge, there has been no response from government.
The current government touts its whole-of-government approach, issued after the latest consultations. This is the equivalent of rearranging deck chairs on the Titanic.
Bill C-253 represents the only credible solution on the table. This is a solution with zero cost to the taxpayer. There will be, and always has been, those who claim such measures would lead to more liquidations instead of restructuring. That Indalex was the law of the land and the business world continued indicates that this is just spin at best. Many of these opponents issued recent profit statements which belie the need to protect their interests at the expense of pensioners. Their assumption seems to imply that management would not alter its behaviour and treat seriously pension obligations and deficits.
Corporations make decisions and act within the law. The law enacted by government has generated ongoing hardship on pensioners and their families. It's your role to address the problems which have arisen from your legislative scheme. Please, no more studies, consultations or promises. A transition period is inevitable, but make sure it's not undue.
This is Seniors Month. Do something real, and do it now. Failure to act in a timely manner is the equivalent of senior financial abuse.
Please support and enact Bill C-253. Thank you.
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