‘Cold comfort’: Ottawa’s plans to protect pensions not good enough, say critics
‘Is it pension protection? It certainly isn’t,’ says retiree group spokesperson
The federal government’s latest proposed measures to protect pensions don’t actually accomplish much, according to pensioner groups disappointed with the policy outlined in the Trudeau government’s omnibus budget bill.
In the wake of high-profile bankruptcies at Sears and Nortel that left former employees with greatly reduced pensions, the Liberal government promised action.
It undertook consultations last fall with stakeholders and looked at several options to protect unfunded defined benefit plan pensions.
In the March federal budget, the Trudeau government committed to strengthening various laws to better protect Canadians’ pensions following a bankruptcy.
But what the government is offering now falls well short of what pensioner groups want.
“It feels like very first, tenuous steps towards positive reform. Is it enough? Is it pension protection? It certainly isn’t,” said Laura Tamblyn Watts, chief of public policy for CARP, formerly the Canadian Association of Retired Persons. “It’s a profoundly missed opportunity.”
The 392-page omnibus Budget Implementation Act, which will be debated and eventually voted on when the House of Commons returns April 29, outlines a number of proposed legislative changes to the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Canada Business Corporation Act.
Justifying C-suite bonuses
Prominent among those proposed changes is one that would make the directors of a corporation liable for any bonuses, incentive benefits or severance pay issued to executives, managers or directors during the year prior to a bankruptcy.
In practical terms, that means a judge in a bankruptcy proceeding could compel company executives to prove the bonuses were justified. If the judge finds that they were not, says the federal Department of Innovation, Science and Economic Development, “directors found liable for such payments may decide to seek recovery from the recipients of excessive compensation payments.”
“Directors have the ultimate responsibility and powers to act in the best interest of the company,” says the department. “With these amendments, we are encouraging increased vigilance if a company is in financial difficulty and approaching insolvency.”
News reports about executives awarding themselves big bonuses as their companies spiralled downward have triggered widespread outrage among Canadians. The aim of this proposed measure is to stop senior executives from paying themselves exorbitant sums just before a company fails.
“I think it will certainly give directors … pause and may make them look more closely at decisions at a more micro level than they otherwise may have in the past, because of the potential risk of liability that this provision would impose on them,” said pension lawyer Jana Steele, a partner at Osler, Hoskin and Harcourt in Toronto.
That could mean more money remaining in the pot for creditors if a business does go under — which, in theory, could be used to top up an underfunded pension plan.
But since pensioners tend to be just one in a long list of creditors in a bankruptcy proceeding, and are never at the head of the line for repayment, the rule change might not be that useful.
“If there’s no money left over in the end for pensioners, it’s cold comfort indeed,” said Tamblyn Watts.
Bankruptcy is not a problem for defined benefit pension plans when the pensions are fully funded — but often it’s companies with pension deficits that run into financial trouble.
'Cold comfort': Ottawa's plans to protect pensions not good enough, Canadian conservatives, Canadian news, Canadian politics, Conservative Canadians, conservatives, pipelines, right for Canada, say critics
Categorised in: Canadian News