REVIEW OF INTENDED APPOINTMENTS SIG WALTER
CONTENTS
Wednesday 16 November 1994
Intended appointments
Sig Walter, Public Service Grievance Board
Roy Steel, Ontario Development Corp.
Patricia Meredith, Financial Disclosure Advisory Board
Committee business
STANDING COMMITTEE ON GOVERNMENT AGENCIES
*Chair / Présidente: Marland, Margaret (Mississauga South/-Sud PC)
*Vice-Chair / Vice-Président: McLean, Allan K. (Simcoe East/-Est PC)
*Carter, Jenny (Peterborough ND)
*Cleary, John C. (Cornwall L)
*Crozier, Bruce (Essex South/-Sud L)
Curling, Alvin (Scarborough North/-Nord L)
*Frankford, Robert (Scarborough East/-Est ND)
*Gigantes, Evelyn, (Ottawa Centre ND)
*Harrington, Margaret H. (Niagara Falls ND)
Malkowski, Gary (York East/-Est ND)
*Waters, Daniel (Muskoka-Georgian Bay/Muskoka-Baie-Georgienne ND)
*Witmer, Elizabeth (Waterloo North/-Nord PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND)
for Mr Malkowski
Also taking part / Autres participants et participantes:
Villeneuve, Noble (S-D-G & East Grenville/S-D-G & Grenville-Est PC)
Clerk pro tem / Greffière par intérim: Bryce, Donna
Staff / Personnel: Pond, David, research officer, Legislative Research Service
The committee met at 1004 in room 228.
REVIEW OF INTENDED APPOINTMENTS SIG WALTER
Review of intended appointment, selected by government party: Sig Walter, intended appointee as member, Public Service Grievance Board.
The Vice-Chair (Mr Allan McLean): This morning we're dealing with intended appointments. Mr Walter, you have the opportunity to make an opening statement, or we can go right into questions, whichever you would like.
Mr Sig Walter: Thank you very much for the opportunity to meet with you. I have not before been before a standing committee, so if I'm a little off procedurally, I'm sure you'll reign me in.
The appointment, as I understand it, is to become a member of the Public Service Grievance Board. My assumption is that this committee would like me to address the skills and competencies I will bring to that position, and if it's all right, I would like to make a brief statement, a summary, as to my background.
The Vice-Chair: As long as it's brief. We have an half-hour review, and we usually split it 10 minutes for each party. Whatever time you use will come off of that.
Mr Walter: I won't be long at all. Central to the committee maybe wanting to know what my background is, specifically in industrial relations and dispute resolution, I headed up the industrial relations division for the province of Saskatchewan with responsibility for the mediation services. I did that over a 10-year period, and in the context of that, was personally involved in approximately 300 labour disputes touching on all sectors of the economy: mining, construction, hospitals, police, fire -- that sort of background.
In addition to conciliation and mediation experience, I've acted as chair of approximately 100 -- it's probably a little bit less than 100 -- rights arbitration boards. I'm proud of the fact that when I did this, all appointments were made by the mutual consent of parties, meaning the employers and the unions involved. I did not at any time accept appointments through government. All of it was done either through collective bargaining or mutual consent of the parties.
I'm familiar with administrative tribunals, procedure, rules of evidence, listening to witnesses and judging cases objectively on their merits.
I think, in a nutshell, that gives you a very brief overview of the kinds of things I bring to the table.
The Vice-Chair: The government party is first.
Ms Jenny Carter (Peterborough): You have touched on the fact that you have considerable experience relevant to this position. Is there anything you would like to add to that? I understand that you have had considerable arbitration experience.
Mr Walter: Yes, I have. As I've indicated, I have done a little bit less than 100 rights arbitrations, again in virtually all sectors of the economy -- construction, hospitals, police, government, public sector, municipalities, this sort of thing -- and in the course of doing that I've had to gain the knowledge of arbitral jurisprudence, procedural matters, as well as the rules of evidence.
Ms Carter: In this position you will have to balance the positions of the management side and employees in order to make appropriate rulings. Could you tell us something about how you would do that?
Mr Walter: As I understand it, and I stand to be corrected, the jurisdiction of the Public Service Grievance Board is derived out of the Public Service Act and the attendant regulations. Certainly that is where the board derives its jurisdiction from. In keeping with that, there are policies within government, and there are also rules of law as they relate to, for example, dismissal or disciplinary matters, that I would hope and believe any board must apply when assessing the evidence that's brought before it and make a ruling that's appropriate, governing all of those factors.
Ms Evelyn Gigantes (Ottawa Centre): There are two areas of your past experience that I'd be curious to know more about. One is your work with the WCB here in Ontario, and also your familiarity with public sector issues generally that would touch on the work you're about to do here in Ontario.
Mr Walter: I think honesty is a good quality and, for those who know me, I'd like to believe I'm a man of integrity and principles and honesty. Having been in Ontario for a period of three years, a little more than two of which were spent at the WCB, I would not want to misrepresent my complete and utter understanding of all of the sensitive issues that may be present in the province of Ontario.
However, I would suggest that, after having done 100 arbitrations and probably 300 sets of negotiations, I'm acutely familiar with contractual obligations and, I would hope, rules of law that govern administrative bodies. This does not suggest that one ought not to be sensitive to the issues in a broader setting in the province. However, I do believe, and I firmly believe, that an adjudicative body such as this board is required to go by legislative base and policy base, as well as legal precedent or precedent that has been set in this province. I would not readily want to make decisions that might be viewed as being solely or even partially sensitive to larger issues if in fact by so doing you're contravening the concept of appropriate adjudication under the law. I hope that wasn't too lengthy an answer.
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Ms Gigantes: That's a very helpful answer. Could you tell us something about your work at the WCB and essentially why you left the WCB.
Mr Walter: I was the senior vice-president in charge of human resources and client appeals, with a number of attendant duties or duties that were added, quality management being one of them, a corporate quality management initiative. I spent two very vigorous years at the WCB. Without my going into all the nuances of that organization, which I'm sure all of the committee members here may have opinions on, I entered into that task I hope as a professional and I believe as a professional.
I felt that the Workers' Compensation Board was in need of intervention. Through my office and certainly my own sense of the situation, I attempted, to the very best of my ability, to initiate changes within the board. I'm speaking directly about the human resources function as well as the client appeals area in particular. I will reserve comment as to how that may or may not have been perceived broadly. Suffice it to say that after approximately two years I made a decision that, as I put it to the board, it was time for me to examine other career opportunities.
I'm not here to malign the Workers' Compensation Board or the administration, but I can confirm that I formulated certain opinions as to how things were working at the board. I have an acute sense of professionalism, and I made a determination that for my career path it may be timely for me to examine other opportunities.
Ms Gigantes: When you look at the task in front of you, you'll be dealing not with employees in bargaining units but the non-bargaining-unit employees in whatever appeals come before you. What difference will that make in terms of your approach?
Mr Walter: I don't believe it should make any difference. There will be, I'm sure, some procedural differences. There will be differences in terms of the legislative base versus a collective agreement base. I mean, there are legislative considerations in rights arbitration. In this particular case, I see it as more legislatively based and policy-based within the government. To answer your question directly, I don't foresee a significant difference in terms of arriving at appropriate decisions. Procedurally there may be some difference.
Ms Gigantes: Mr Chair, I understand that the curriculum vitae we've been provided with about Mr Walter indicates you were senior vice-president, human resources and client appeals, at the WCB from October 1992 to October of this year?
Mr Walter: No, that is absolutely incorrect.
Ms Gigantes: Right. That's why I raised it.
Mr Walter: Surely my résumé doesn't reflect that.
Ms Gigantes: Well, what we have before us has that information.
Mr Walter: No. To clarify that, I resigned from the board -- I actually left the board the last day of April of this year.
Mr John C. Cleary (Cornwall): Welcome to the committee. How did you find out about this opening? Were you approached?
Mr Walter: Yes, I was.
Mr Cleary: May we ask by whom?
Mr Walter: It was the public appointments secretariat.
Mr Cleary: What is your understanding of the role you may play when you become a part of that board?
Mr Walter: Frankly, it hasn't been clarified for me, but what research I've been able to do is that I am being appointed as a member of this board and my job will be to sit in hearings and listen to the evidence of people who feel aggrieved and to participate in the decision-making process as to what the final outcome is.
Mr Cleary: So you are comfortable with that? You feel you have a lot to offer.
Mr Walter: It may sound brash to put it to you this way, but I feel very comfortable in terms of the competency that I believe I bring to this particular position.
Mr Cleary: My colleague has a question or two. I wish you well. You have a lot of experience and I'm sure you'll have a lot to offer.
Mr Walter: Thank you very much.
Mr Bruce Crozier (Essex South): Mr Walter. I had several questions which have now been answered, and I appreciate the fact that you are very discreet about how and why you left the Workers' Compensation Board. I'm sure you could add to some of the advice many of us would like to have with respect to it.
I just want to correct what might be the way it's presented, but in your career summary, under areas of employment, there's 1976 to 1982, then 1983 to 1985 and then 1986 to 1992. There are year gaps in there.
Mr Walter: Actually, there are not. A number of these things ended December 31. If I may, I'll give you just a brief update on this.
I left government in I believe it was December 31, 1983. There were a number of reasons why I left government at that time. I had been in the trenches doing an awful lot of labour work, at times handling something like 13 sets of negotiations at one time, and bluntly put, I was actually considering a career change at that point in time.
I left government and suddenly the phone began ringing: Would I be prepared to chair arbitrations, could I do some consulting work, and so on. I began doing that. After doing that for a brief period of time, I received a telephone call from the then owner of a company called Westank/Willock, which is a transportation manufacturing company that had some really quite severe labour problems and asked me if I would consult to the company. It subsequently turned into a vice-president position. I indicated at the outset that I did not want to make that my life's work. I'd like to believe I cleaned up the problem. I then went back to doing arbitration work and some consulting work up until the time that I came to Ontario.
Mr Crozier: Could you just help me a little, define a little more clearly what client appeals is with the WCB?
Mr Walter: Certainly. Client appeals is basically three areas: decision review, the hearings branch and the re-employment branch. This is the arm of the board where if an injured worker felt aggrieved at front-line adjudication -- in other words, that the adjudicator failed to make what they deemed to be an appropriate decision -- the worker, or an employer for that matter, had the right to come before decision review to have their case heard. Failing a satisfactory conclusion at that point, it would go up to the hearings branch and, if there were still no resolution, it would go to WCAT.
Mr Crozier: And you were where in that process?
Mr Walter: I was the vice-president in charge of the appeals area.
Mr Crozier: The adjudication part, not just the employee part?
Mr Walter: No. Just for clarity, there was a vice-president in charge of what is known as client services, which is effectively front-line adjudication. I had responsibility for the human resources end and the client appeals end; that may appear like an odd combination, but it was sort of suggested that this is placing it into somewhat neutral territory, away from the client services area. The directors who were responsible for each of those three components -- decision review, hearings and re-employment hearings -- reported to me.
Mr Crozier: Thank you, sir, and I wish you well.
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Mrs Elizabeth Witmer (Waterloo North): Mr Walter, obviously there are numerous questions I would like to ask you concerning the WCB; however, I shall refrain.
Mr Walter: Thank you very much.
Mrs Witmer: Maybe at another time, another year, we'll have that discussion.
Anyway, I'm quite impressed with the résumé you have presented to us and I have no doubt that you have the competence to serve extremely well on this board.
I just want to take a look at the amendments that were made in 1993 to the Crown Employees Collective Bargaining Act and the Public Service Act. Those changes gave the civil servants the opportunity to engage in political activity. Do you think that as a result of some of those changes there will be some increase in the workload of the board? What impact will those changes have, I guess is what I want to know.
Mr Walter: To give you a very straightforward answer, I really don't know. That's a truthful answer. That it will have no impact I think might be an overstatement. As I look at the situation in Ontario and elsewhere, my best guess is that, given the uncertainty that many people are sensing in the workplace, not only in government but all over, people will potentially be more forthcoming with what they may deem as threats to their employment, whether it's discipline or classification issues. In that context, I would not be surprised if there was an increase. That's a guess.
But in so far as the amendments are concerned, I genuinely don't have a good handle on it. I'd be surprised if there were a lot of grievances arising out of that. Perhaps I don't understand it enough at this point.
Mrs Witmer: And perhaps it's too early to clearly understand the implications.
Do you think the Public Service Act does give adequate protection to the non-unionized employees?
Mr Walter: As a potential board member, this is an extremely delicate question for me to answer for you. In reading the Public Service Act, is there possibility for fine-tuning, for doing more? I would suggest, not unlike collective agreements, depending on which side of the fence you sit on, there's always room for improvement. If you ask me specifically where are those areas of improvement, I would suggest that I'd prefer not to answer today. I really haven't formulated that kind of an opinion.
Mrs Witmer: I can appreciate that. That's all I have. I just want to wish you extremely well in this position.
Mr Walter: Thank you very much.
The Chair (Mrs Margaret Marland): I think that completes all the caucus questions. I'd like to thank you very much, Mr Walter, for your appearance before the committee this morning.
Mr Walter: I appreciate the opportunity.
ROY STEEL
Review of intended appointment, selected by official opposition party: Roy Steel, intended appointee as director, Ontario Development Corp.
The Chair: We welcome you to the committee, Mr Steel. This is a selection of the official opposition, the Liberal Party.
Mr Alvin Curling (Scarborough North): It's quite an important corporation you will be serving on, and your qualifications are actually quite befitting to the contribution I think you can give to this corporation.
One of the concerns, as you know, of the public and even of the opposition, to be right up front with you, is the role of the corporation and how effective it could be. Although you're coming into the job pretty new, so to speak, professionally you're not coming into the job new. Do you think the corporation is being effective or could be more effective in its role?
Mr Roy Steel: I would say you're correct that I'm coming into the situation not new but coming into the position on the board new. I haven't had that much of an opportunity to assess the effectiveness of the corporation. However, I do believe it plays a significant role in filling the gap in terms of where the normal private sector banking leaves off and where businesses, particularly small and medium businesses, need additional help.
I see that this is changing, because as businesses structure towards becoming less asset-driven and more knowledge-software-idea-driven, there's less that traditional lenders can find on which to lend money. I think everybody is trying to come to grips with responsible approaches to be able to lend and assist businesses during a period of time when there are very few assets, or no tangible assets, for the business. That's one area where I think the corporation can play a role and can provide a supporting position.
Mr Curling: The role it can play is of course extremely important in regard to small businesses, especially in a time like that just past, a very tough recessional time. But in the meantime, there are complaints that the losses the ODC has encountered, writing off some of the funds it advanced to companies, are quite large. I presume there are many things they can do better; I'm talking about the ODC -- or some policies.
Do you think you'd be in a position while on the board to make recommendations to the government to better serve that community, and especially as there were so many losses that had to be written off with business not responding and paying back some of its contributions. Do you feel you'd be in a position to, or is it your understanding that recommendations could be made to the government on how it could do it better or be more sensitive to that community?
Mr Steel: There are two questions there. The first one is, would I be in a position to make recommendations to the board and the corporation and, presumably through the board, to the government.
I'd say yes. As I get some experience with the board and as I fully understand more of the situation -- right now I'm a newcomer; I'm not there yet -- I would feel confident that, yes, I could probably develop recommendations. What they would be at the moment, I don't know.
The other concern was about the loan-loss ratios, and I don't know yet what the answer to that question would be. The corporation is operating in a higher-risk area. It's an area that advances funds and funding and support to corporations and to small businesses after the traditional lenders have left off.
Consequently, I would expect that it would have a higher loan-loss ratio than, say, one of the banks. Whether it's too high, given the relative risk, I don't really know at this point. The easy way to reduce a loan-loss ratio is to not make the loans, and that may be counter to what you want to accomplish with the corporation. We could get it back to the same loan-loss ratio as some of the other banks.
But let me at the same time comment to you that the banks, in their corporate lending area and medium-size business lending area, have had significant loan-loss ratios in the last 10 years, much to their chagrin. It's all part of the same economic wringer that we've all just gone through together.
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Mr Crozier: Welcome, sir. I note in the information we were given that one of the responsibilities of the board of directors is to review the long-term and annual financial plans of the corporation. Just to expand a bit on what was asked, when it comes to the funding the board has, I notice that since 1991 the ministry funding for operating and capital has decreased substantially, by about a third. Would you feel, as part of your responsibility, the effort to either maintain or increase that funding? If so, how does that relate to your feeling of how the ODC should be involved in development in Ontario?
Mr Steel: The level of funding I think has to take priority with the many other priorities of the government. Consequently, it has suffered a decline, like probably everything else. I guess the purpose is to make the best use of the resources we've got in order to help as many people as possible and to help them responsibly recover the money so we can reuse it again -- those types of things.
It would be hard to make a claim that we ought to double the amount of money coming to the ODC, in my opinion. That has to take priority with many other things, and government has to -- basically, you have to -- make that determination as to where you're going to allocate the funds. It seems to me that we've got to do the best job we can with what we are able to get.
Mr Crozier: Does that mean you wouldn't be an active advocate of more funding if you could see that there was a benefit to be derived from it? Would you simply say, "The government can only give us X number of dollars; therefore I'll keep quiet about it"?
Mr Steel: Would be passive in the matter? No, as you see a number of individual cases, you really have to separate those and start to see where the trends are going and identify whether it makes good economic and political sense for the government to fund additional things. I have no hesitation about being an advocate of additional funding, but I've also got to be realistic to realize that that has to take precedence over many other things. We may not get all we ask for, but that doesn't stop us as a board from going for not only what additional funding we think would assist the aims of the board but also what would be responsible, I think.
Mr Crozier: I appreciate your answer to that.
Mr Allan K. McLean (Simcoe East): Welcome to the committee, Mr Steel. How did you find out about the vacancy? Was it advertised? Did you make application for it?
Mr Steel: I was asked by one of the board members if, now that I was retiring, I would submit my name to be considered, I think with other names, for a position on the board. I did that last April.
Mr McLean: How much time do you think this is going to take? Is it a full-time job, or is it part-time? What is your observation?
Mr Steel: My understanding is that as a board member it's probably equal to about two days a month. If there's involvement in additional committees or additional specific initiatives of the board, sure, that would take additional time. No, it's not full-time. I wouldn't expect it.
Mr McLean: Could I have your assessment of the corporation's write-off of loans? At 5.9%, it seems rather high. Would you deem that to be a high percentage of write-offs? Frances Lankin seemed to think it is.
Mr Steel: As I mentioned earlier, the corporation is in a higher-risk loan area. It is taking more risk and it is stepping in where other lenders leave off, so I would expect a higher loan-loss ratio. What the percentage should be relative to the risk, I don't know at this point, but it's twice some of the commercial bank rates for commercial lending in this same area. Yes, it's higher, but whether it's too much higher, I don't know.
Mr McLean: Mostly, large companies or large establishments that employ a lot of people are the ones that seem to qualify. However, there are a lot of medium and small businesses out there that feel they should also qualify that appear to have a problem to get the approvals. Most of them have to have a guarantee from a bank to get the ODC loans. I'm wondering what your opinion is about maybe opening it up a bit for the smaller businesses, to make it easier for them to --
Mr Steel: There were about 2,000 direct loans out, plus the guarantees; therefore, I would've thought there was quite a wide dispersion of the loan funds. I don't know the details of the makeup of the loan portfolio. What may be evident is that some of the higher-profile, the Algomas, for instance, which are not in the loan portfolio -- the Algomas are administered separately under four other ministries. If you take those aside, you've got quite a spread of other small businesses.
The ventures fund, which is limited to $15,000 for starting new ventures, is probably a good door opener for people just getting under way in terms of starting a new business. It's basically to contribute towards the seed capital that people need to get going.
Mr McLean: Would you perhaps consider doubling that seed money from $15,000 to $30,000 for a small business? Not many businesses do you start with $15,000. Would that be something you would be willing to discuss, to perhaps double that?
Mr Steel: What the right number is, I'm not sure, but discussing the concept, yes, of course.
Mr McLean: I notice in your résumé that you were the one who kind of established the insurance board and insurance program in British Columbia. Were you ever asked by the government here for your views and observations on what would happen if we did that in Ontario?
Mr Steel: Yes, to this extent: Our firm that was going at the time, a consulting firm, was one of several advisers to the Insurance Corp of British Columbia in getting it started and under way. We were asked to prepare a proposal to assist the proposed corporation here in Ontario in the same way. We did not win that proposal, and I'm not sure how far the work had progressed.
Mr McLean: You're not sure why it didn't proceed either.
Mr Steel: No, I wasn't.
Mr McLean: Anyhow, I wish you the best, and thank you for coming before us today.
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Ms Gigantes: Mr Steel, I think the only person who's sure of any questions of that magnitude is Thomas Walkom. He knows everything.
I'd be fascinated to know, with the kind of rich background you have in financial management and financial consulting, 34 years of that kind of work, what interests you in taking on a post in helping decide where ODC lending should go?
Mr Steel: That's an interesting question. Being in one of the larger professional service corporations or partnerships, we're quite restricted in terms of the activities we can undertake outside of that because of the independence rules. Consequently, with retirement, I'm now much more free to be able to become a board member, be a member of a group of people who have to come together and thrash out the direction these corporations are going, the ODC particularly, and how to operate and how the governance works with the staff and with the various parties who have a stake in the company. It's being part of that that I find quite interesting. It's also a very interesting and exciting board of people. There are a lot of good people on the board, and just being able to work with these people I thought would be quite interesting.
Ms Gigantes: So essentially you're looking for what you think will be a pleasurable and interesting experience?
Mr Steel: Yes, but there are going to be some tough decisions ahead. There's no question about that.
Ms Gigantes: I admire you for being willing to take it on.
I was interested in your opening comments in response to earlier questions about the new ways of assessing the value of companies and the move that needs to take place now in financial thinking as the value of companies relates less to their physical assets and more to their intellectual properties and potential. I wonder if you could tell us a bit more about your thoughts in that area.
Mr Steel: I don't think any of us has a handle as to what the right answer is. Everybody has to steer a line between being able to assist an organization that has no, I guess, seizable assets when things get tough, and being responsible with the supplier of money, whether it's a depositor, whether it's the government or wherever the funds come from, pension funds or whatever. Steering the right line and determining how much risk you can afford to take is an important part of it.
Part of what I think is changing is that because more and more businesses, particularly the successful businesses, the growing businesses, have less and less in the way of hard assets, consequently, I think what we're starting to see is really a shift from loans towards investment. In other words, while you'd like to make a loan because you'd like to get it paid back, what you're really doing is making an investment because you're going to be there a long time.
Consequently, some of the criteria for assessing businesses from an investment point of view may make more sense than from a loan point of view; that is, the quality of the idea, the quality of the market, the characteristics and the capabilities, particularly the commercial capabilities of the management and the individuals who are trying to take an idea, commercialize it and make some money out of it, and consequently the recognition of those people that there is a commercial element to what they must do.
All of those are what used to be referred to as the soft criteria for assessing loans or assessing operations. Really, they are becoming the hard criteria now, and what used to be hard, like real estate, has gone very soft. Our bases of criteria need to shift, but we're not quite sure how we're going to get it right yet. I think we're facing a fundamental shift.
Ms Gigantes: I asked you about intellectual properties, but it is, as you say, even more closely related to the particular capabilities of the people involved in a firm and whether they're going to stay with their capabilities.
Mr Steel: Yes, and whether they have the capability of taking an idea and making a commercial success of it. It may not be high-tech, because as more of the economy moves towards a service sector, even somebody who wants to open a flower shop still needs the same capabilities, and you need to assess that person's capability of making a commercial success of it. As I say, we haven't got it right yet. We're all trying to figure out how to do it.
Ms Gigantes: I wish you well, on our behalf, as you create new rules for this kind of game.
Ms Carter: Thank you and welcome to the committee. I would like to connect what you've just been discussing with the question of banks and their loans, and you've already said that the ODC takes over where the banks leave off. It seems to me, certainly from my own experience as an MPP and seeing what goes on in my own riding, that banks have backed off recently and that part of the recession, the lack of employment and so on, has been due to their unwillingness to grant loans. This may be partly because of what you've been discussing, that we're looking now at more intangible assets than we were in the past.
I'm just wondering whether there's anything we can do to get banks back into the field doing their share so that boundary as to where the ODC would take over would move back perhaps to where it should be rather than leaving the ODC with too much of the field because the banks are unwilling to make loans these days. Maybe the banks need different criteria for assessing who is a good loan risk and who isn't. If so, is there anything we could do about that?
Mr Steel: When I say none of us has found the answer to this dilemma of small businesses with no assets, the banks are searching as much as anyone else, because of course that is the area of growth within the economy: the formation of new businesses and small businesses and medium-sized businesses. Consequently, if the banks are going to survive in the commercial sector in the longer term, they have to be good in that area. While they may be backing off -- I don't really know that from personal experience, but I know in working with some of the banks that they've been really burned with some big loan losses, and in order to get their balance sheets back and keep the stock analysts and the shareholders off their back, they've been more cautious about a lot of lending, large as well as small, I would think.
That is one area where they certainly are looking for the right answers to get back. I shouldn't say "get back," because I'm really not clear that they've all vacated the area, but they are looking there. A lot of the things the ODC is doing, if it does it in partnership or with the banks, dovetail loans or participating in loans of one sort or another, I think there are lots of ways we can help support the proper businesses.
Ms Carter: In particular, the banks do seem to have been shy of small-scale loans. I believe they justify that by saying it's too much administration compared to the amounts of money involved. Yet when we look at, for example, things that happen in Third World countries, sometimes it's very tiny loans that can make all the difference to a society and lead to growth and actually not be a risk to the lender to any significant degree. Do you have any thoughts on that?
Mr Steel: Is your question related to the Third World or is it apropos of --
Ms Carter: Sometimes things that work in the Third World have some lessons for what we should be doing here. Although we see ourselves as very prosperous, we nevertheless have a lot of problems and a lot of people are left out of that prosperity who, if things were organized differently, might be able to come in and make their contribution.
Mr Steel: Sure. In the Third World, many of the massive investments have been less than successful, to be polite about it.
Ms Carter: They've been megaprojects instead of the small ones.
Mr Steel: Yes. Smaller ones can work and can make more of an impact, of course. Should we be doing that? If I went back to the concept of the new ventures fund where you've got a small amount of seed money to get things started, that's in the nature of that concept. There's a concern, of course, that when you do that, you have high loan losses. Again, trying to find the right, appropriate and responsible balance is the sort of thing we really need to do, and I don't know where the numbers should be.
The Chair: We're out of time. Thank you, Mr Steel, for being here this morning and appearing before the committee.
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PATRICIA MEREDITH
Review of intended appointment, selected by government party: Patricia Meredith, intended appointee as member, Financial Disclosure Advisory Board.
The Chair: Our next intended appointment interview this morning is Ms Patricia Meredith.
Mr Daniel Waters (Muskoka-Georgian Bay): Good morning, Ms Meredith. I'm the person who selected you. I'm more curious about the Financial Disclosure Advisory Board than about you. Obviously, you have a set of credentials that no one could argue with in terms of your credibility and being able to do this job. But I understand that there has been a change. The information we got from the public appointments secretariat said you were a senior executive with CIBC, and you have an update on that.
Ms Patricia Meredith: At the time they put my name forward, I was senior adviser, strategic initiatives, and really worked as an adviser primarily to the two presidents. We have a retail bank and a wholesale bank; that's the way that we operate. I was an adviser to the two of them on the development of strategy within the bank. On November 3, I was appointed an executive vice-president of the bank and I now sit on the senior management committee of the bank and am responsible for the overall bank strategy as well as the two business units' strategy.
Mr Waters: Thank you for the update -- very interesting.
In the legislative research document, there is a comment that I find interesting. "It is the commission's practice not to disclose the advice it receives from the board," being the Financial Disclosure Advisory Board, "to the companies under discussion." As a person at this end, I'm looking at, how does the company know that there's been a discussion and indeed that maybe some suggestions have been made about the situation and how they should be dealing with it?
Ms Meredith: My understanding of how the board works is essentially that the board meets twice a year with an agenda of very general disclosure issues that are really discussed by the entire board, and then throughout the year, as disclosure issues arise, they will select from the five members of the board people who really have had involvement in very similar situations, who are very familiar with the topic to be discussed and then communicate directly with those individuals. If something came up that had to do with banks or banking or a known customer of CIBC, my understanding from the OSC is that I simply wouldn't get called. I wouldn't even know that an issue had arisen because I just wouldn't be on the list of people to be called on that particular issue.
The expertise I would bring, that is probably very timely, is the whole area around and discussion around new financial instruments. There are a lot of changes going on in that area, and it's an area I've followed for a long time. It's a very topical area and it's one that, given my background, I think they had a feeling I could certainly make a contribution from a general level.
What I would expect is that in those instances where it is something more than general, something specific about a bank or our bank or any other financial institution, I simply would not be consulted.
Mr Waters: One other question I would have is, does the act, as it now stands, provide sufficient protection to investigating for the public? In other words, is the act sufficient? Does it need to be updated?
Ms Meredith: I'm not sure exactly which act you're referring to.
Mr Waters: It's in the background notes here. It's the act under which the board -- the Securities Act.
Ms Meredith: To be honest, I would need to take a look at specifically that section of it. I'm guessing, and correct me if I'm wrong, but if your question is around conflict of interest and situations like that and does it need to be more clearly articulated, it's maybe something that should be looked at. Personally, I don't see a problem with that, because the matters that generally come before this board, as I understand it, are for the most part general in nature, unless there is a specific violation by a company, and then they can select which members they want to get involved.
Mr Crozier: Under "Responsibilities of the Position," we're told, "The board consults and advises the Ontario Securities Commission on the financial disclosure requirements of the Securities Act." That, on its face, sounds very definite, and also, the board name is the Financial Disclosure Advisory Board. But it goes on to say that "it consults with commission staff on controversial matters requiring resolution." Now, that sounds very broad. What's your sense of your responsibility on the board?
Ms Meredith: Essentially, my understanding of the responsibility, particularly in the last part, which is I think what you were getting at, to consult on specific matters that are controversial, is really to look at the situation, and given the background I have -- the financial services background, the investment analyst background -- really to look at it as a user of financial statements, financial disclosure, a decision-maker around investing in the capital markets: Do we have sufficient information? Is this true, fair and full disclosure of the underlying circumstances? Does it reflect the substance of the transaction in a way that an informed investor can make a good decision?
I think what they are really looking for from someone like myself and from the rest of the board is an assessment as to whether or not those requirements have been met. Quite clearly, full, fair and true disclosure of the underlying substance is essential to the functioning of the capital markets and to the efficiency of the overall Canadian marketplace.
Mr Crozier: If we can get a little more to the point, if I interpret what you said correctly, this question of "controversial matters" may go beyond the bounds of just strictly financial, broader than just the balance sheet.
Ms Meredith: You can have some very controversial financial statement disclosures. For example, the whole area of financial instruments and the way in which you account for new financial transactions, derivative transactions in particular, is still a very grey area. It's an area that CICA is working on establishing standards for, but it's one in which the products evolve almost weekly, and because you have new products coming up on a regular basis and there are no clearly delineated rules for those transactions at this time, there is a lot of room for interpretation. I think the role of the board is really to look at the interpretation the company has taken and assess whether or not it does describe clearly the underlying substance of the transaction so that an informed investor can make a good decision.
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Mr Crozier: Certainly we in this room are painfully aware of how methods of disclosure of financial information can certainly confuse the public in Ontario.
Are you aware that there has been a considerable amount of discussion recently on changes to the Securities Act and are you aware of what some of those changes are?
Ms Meredith: I'm aware of the discussions, but I'm not all that aware of the substance of them.
Mr Crozier: I might point out that one of the controversial things, as far as the investing public is concerned, is protecting the investing public when it comes to these various kinds of issues, namely, the penny stocks. Where do you see the commission's role when it comes to the penny stocks as opposed to the other stock issues?
Ms Meredith: I don't think the fundamental role is all that different. Essentially, in both cases what you really are looking for is efficiency in the marketplace, that people are given good information in order to make an informed decision.
The underlying accounting principles, the fundamental principles that are applied, should be no different for similar transactions whether that transaction is carried out by a large company or a small company. The underlying principles are very much the same: that the required level of disclosure and the kind of disclosure that is necessary from a smaller company or a bigger company is disclosure that gives you, as an investor, the information you need in order to make an informed decision.
The principles are the same, but some of the issues are different, because many of the smaller companies in the marketplace today are in newer industries, industries the public may not be as aware of and understand as well, and consequently there is a need for education in some instances as well as a need for underlying financial disclosure.
Mr Crozier: Again with regard to this consultation on "controversial matters," there has been some criticism that this proposed legislation -- and granted, it's only in draft form -- sets the commission more or less as the rule maker, the judge, the jury and the prosecution when it comes to the powers it may have. Do you think there should be that kind of power vested in a commission, outside the legislative power that some would say should be the ultimate authority?
Ms Meredith: Again, I have not seen the specifics of the legislation or the way in which it is worded.
Mr Crozier: I'm not trying to put you on the spot. If that's not a fair question, you're not informed, we'll talk about it another day.
Ms Meredith: Probably that would be my preference. Clearly, there is a need on the part of the OSC to be very informed and very involved in the efficient functioning of capital markets. Whether the ultimate authority should rest with them or with the Legislature I think is a matter of broader debate.
Mr Crozier: I think you're eminently qualified, and I wish you well.
Mr Noble Villeneuve (S-D-G & East Grenville): You have a very impressive CV. In your capacity on the advisory board, do you feel that methods of accounting, and that's been kind of controversial with the Provincial Auditor, would be part of your responsibility, investigating or standardizing the method of reporting?
Ms Meredith: That's really, I believe, the responsibility of the Canadian Institute of Chartered Accountants. Setting the underlying accounting policies and principles is a function that CICA, maybe in some slightly expanded or broadened form -- but again that's another issue -- should be primarily responsible for.
The role of this group should really be more to look at the general areas that have not yet got standards, or areas where the standards are subject to much more interpretation and that interpretation could cause confusion in the marketplace; to make sure that the underlying information being disclosed gives you or me, as an investor, the true story, that what we've got -- assuming we put some effort into understanding those numbers -- is information that will allow us to make a good decision.
Mr Villeneuve: Would you see your responsibility as putting a caution on certain things that you don't feel are quite according to the norm?
Ms Meredith: Yes. I think the board does have a responsibility to raise red flags and to bring to light those instances that are questionable.
Mr Villeneuve: In your opinion, as you visualize a job that's still kind of theoretical, conflicts of interest are always first and foremost in the eyes, and perception sometimes becomes reality, but do you see your job as to ferret out any possible conflicts as they come before you or the board?
Ms Meredith: I believe personally that I have a responsibility, in any instance where there could be a perceived conflict, especially given my role in the bank, to bring those to light and make sure that either I am not included in those discussions or that the board is given the choice. If they don't feel it is a conflict because it's too far removed, that I would see as their choice. But clearly the onus is on me to make sure that any of those potential conflicts, or potentially perceived conflicts, are raised.
Mr Villeneuve: And addressed, and you would be quite prepared to say, "This appears this way"?
Ms Meredith: Yes. I believe it is part of true, full and plain disclosure, and that's really what we're talking about.
Mr Villeneuve: From your CV, you're eminently qualified, as was said before. I wish you well. You have experience and you certainly have the academic background. You're a natural for the job.
The Chair: We have a number of really important business matters that the committee has to address this morning, but first I'd like a motion to approve this morning's appointments, either collectively or individually, however the committee wishes to.
Mr Waters: I so move, collectively.
The Chair: That's a good word, eh, Dan?
Mr Waters: It was your word. I just gave it back to you.
The Chair: That's right; I know.
The motion has been moved to appoint Mr Sig Walter as a member of the Public Service Grievance Board, Mr Roy Steel as a member of the Ontario Development Corp, and Ms Patricia Meredith as a member of the Financial Disclosure Advisory Board. All in favour of that motion? That is carried unanimously.
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COMMITTEE BUSINESS
The Chair: Mr McLean has advised us that he would still like the interview of Mr Gallant and Mr West -- I think it might be Dr West -- to be scheduled before this committee.
Mr Gallant's interview was deferred because he was running in an election for rector of Queen's University. We deferred his interview because Mr Gallant had suggested to us in a letter that if he were elected, he wouldn't be able to serve in the proposed appointment to the Ontario Council on University Affairs. Mr Gallant is elected so he now is rector of Queen's University, but he has learned that he can also serve on the board, so we could have gone ahead with his interview in either case. We will schedule his appointment as Mr McLean would like that interview to proceed.
Mr West indicated that he was unable to be present for an interview today because he had to attend a continuation of a refugee hearing; I guess Mr West sits on an immigration appeal board. That will be scheduled for Mr West as soon as his hearing is complete, hopefully for November 23.
Mr Waters: Madam Chair, when would we be doing these? I believe we've already said that we've booked November 23 for the Council of Regents, for COR. The next two meetings are actually booked for COR, I believe, to try to finish the report. I'm respectfully asking when we would be doing this.
The Chair: December 7 is open. Actually, I think we should get into our discussion to order all our business, because it's related to the point you're raising now about when these two gentlemen would be scheduled.
The legislative calendar has us having to rise on December 8, which means we have three more Wednesday mornings to sit. We have two major reports that we would like to have completed; one is the Council of Regents, and obviously the other is the St Lawrence Parks Commission. We also will have more certificates of appointments to review in the next week or two. We have a lot of work to do, and I would like to receive some direction from the committee about how you would like to order your business.
But I think it's also important for us to look at the material that has been circulated to you either this morning or in your package yesterday.
You asked me to write to Brian Charlton, which we did on November 2, and his reply dated November 9 is before you where he outlines that the St Lawrence Parks Commission has retained two lawyers from Management Board to investigate those labour relations concerns that came before the committee in Cornwall. He also says in his letter, "I must emphasize this is not an investigation requested by the secretariat, but one requested by the commission." Remember, we asked him to give us the parameters and the time for the investigation. He confirms that the only thing that will be investigated by the secretariat will be those matters before the committee that were labour relations concerns. He also says the investigation will be concluded by mid-December.
If you go to the memorandum from Frank Shaw -- it's dated November 10, but it was only faxed to us yesterday -- attached to Frank Shaw's memorandum are his terms of reference. You will notice in those terms of reference, right at the very end there are three items under "Report," and the final one says, "Submit a comprehensive report on all of the above matters directly to the commission chairman and general manager on or about December 12, 1994, for their discussion and review with the board of commissioners and with the standing committee on government agencies."
Here we're going to get the report of the investigation "on or about December 12," so you're going to have this report possibly after the House has risen.
Then the final part of this discussion is another fax that we got yesterday from Mr Shaw enclosing a letter from the staff representative for OPSEU, Don Stewart, Region 4, Brockville. Mr Stewart is saying in the letter to Mr Shaw:
"This letter is in response to your memorandum of November 3, 1994. The union recognizes and appreciates the need for your communicating to all employees your decision to fully investigate these allegations and to inform them of the process that will be used. However, the union questions your judgement when you express bias with respect to employees exercising rights with provocative language, which in effect tarnishes the investigation, in our view irrevocably.
"The union reiterates its request for an independent investigation, the findings of which will be delivered to the standing committee on government agencies for action."
This is an OPSEU letter expressing, I would suggest, a concern.
I'd like the committee to decide how we're going to order the business etc.
Mr Cleary: Backing up a little bit, each party had the opportunity to pick the boards or commissions we wanted to review and we agreed on those, and the St Lawrence Parks Commission was one of them. What I can't understand is that what this committee agreed on, under your directive, was that you were to write the letter to Brian Charlton that we wanted someone to review the individuals who made presentations to the committee. Am I correct on that?
The Chair: Not exactly, no. There is something I would like to tell the committee members, and that is that my office, because I'm Chair of the committee, receives phone calls from all parties to this issue: the staff, Mr Shaw etc. I have not spoken to anyone since we left Cornwall, and I think you need to know that. When my staff get calls from anyone, and sometimes it's just a call to say they're faxing something but Mrs Marland should know this, da da, da da, my staff refers everything to Lynn Mellor, the clerk of the committee. So I have not been involved in any aspect of this.
The only letter I've written is the letter you requested me to write at the last meeting. The letter, John, is the letter you have before you dated November 2. Actually, we're not asking them to investigate it. We're saying:
"The committee takes its terms of reference to `review and report to the House its observations, opinions and recommendations on the operation of all agencies, boards and commissions...' seriously, and feels it has a responsibility to follow up on these allegations.
"It is the understanding of this committee that an investigator from Management Board Secretariat is undertaking a review of these allegations...."
So we didn't ask for the investigation, we already knew an investigation was going on, and you as members said, let's find out what kind of investigation, how long, who's doing it and when they would report.
Mr Cleary: But they were going to report back to this committee, am I correct?
The Chair: No, because the investigation was asked for by the commission. Mr Charlton makes that very clear in his letter. Mr Charlton says, and I read this a few minutes ago, "I must emphasize this is not an investigation requested by the secretariat, but one requested by the commission." Then he goes on to say, "The legal branch of the secretariat, given their expertise in these matters, routinely provides advice and support to ministries and government agencies, when requested, on labour and employment matters."
What the commission has done is that it has reached out to an independent body to conduct an investigation. Obviously, the two parties, OPSEU and the commission, are not doing the investigation.
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Mr Cleary: It has gone around eastern Ontario that this gentleman who was doing the investigation was hired by the St Lawrence Parks Commission, was working for the St Lawrence Parks Commission, and I don't think that's what we wanted. That is the rumour around eastern Ontario.
The Chair: I guess, as they say, when the rooming-house burned down the roomers flew. The point is that I don't think any committee can control rumours, and I think what we need to do -- if the committee wants to issue a press release stating what the committee asked for and what the committee involvement has been, maybe that would clarify exactly what the situation is. The person doing the investigation is a civil servant working for that secretariat.
Mr Cleary: This is Kramer, eh?
The Chair: That's the name on Mr Shaw's memo: "to Richard Kramer." I don't know if Mr Kramer is doing the investigation or whether --
Mr Cleary: He was down there.
The Chair: Okay. I don't know whether he's head of the legal services branch. I just see that the terms of reference were sent to him.
Mr Waters: In my opinion, what we should be looking at is that we knew there was going to be an inquiry; we'd heard there was going to be an inquiry by somebody from Management Board. We have the parameters under which that inquiry is to be held, very clear guidelines, and we have a time frame in which the answer is expected. I know the House will be down, but it means we haven't finished this and we should pick it up in the intersession. But I think we have to allow the inquiry to take place, and then definitely we should want to know what the outcome of that inquiry is and look at that.
The Chair: Would you think the committee could ask, as Mr Shaw is the one who has requested the legal services of the secretariat -- the terms of reference were sent on November 10. Do you think Mr Shaw could ask them to have a report back in time for the committee to look at it on the seventh?
Mr Waters: And indeed it would be nice if we could have even an interim report to get some idea, if the final report wasn't ready on the seventh, as to where this report might be going and what recommendations might be coming out of it, but I would hate to rush the report and not have a thorough job done.
For Mr Cleary and all of us who sat through the committee hearings, the allegations primarily were labour-related that would be covered by this inquiry. I don't know whether it's proper for us to ask that person to come before the committee at the end of their report and report to us as well, whether we have the right to do that. If we do, maybe that would be the route to follow.
The Chair: Mr Waters, they're not only primarily labour-related; Mr Charlton, the Chair of Management Board, is telling us that the investigation is only labour-related.
Mr Waters: I guess I didn't make myself clear. What I was getting at was that pretty much every one of the allegations we heard as a committee from the people who came before us were labour-related allegations. Even those who were not past employees or present employees were people saying there were things happening within the labour relations aspect of the St Lawrence Parks Commission that should be looked at.
The Chair: There were other subjects raised as well, but that last day with those particular deputations, those were the serious matters that were brought before us.
Mr Cleary: Until this is over -- I don't know who's right and who's wrong in this, but it's not a healthy situation at the moment. I'm all for getting to the bottom of the issue and to get it in report form. I'm not sure that the St Lawrence Parks Commission doing the investigation is the right way to go.
The Chair: They're not doing it. It's very clear that the investigation is being done by the Management Board Secretariat's legal branch. That's one thing.
Mr Cleary: Requested by the commission.
The Chair: Yes, requested by the commission. If you have concerns about the terms of reference that the commission has given to the Management Board, because the committee is investigating the St Lawrence Parks Commission there wouldn't be any reason why you couldn't make a suggestion to the St Lawrence Parks Commission about the terms of reference. The terms of reference have been approved by the St Lawrence Parks Commission, so it obviously hasn't come from Mr Shaw only.
Mr McLean: What can you do until we get the report of the investigation? We can't do anything. I don't know what decision you can make until you get that report. If we don't get it before the House adjourns, there's nothing you can do about that. So what's all the discussion about now, when you can't do anything until you see what the report is?
The Chair: I think the discussion is about the fact that we have either to do an interim report or complete our report before the House rises. If you decide you don't wish to do anything more on the St Lawrence Parks Commission until you get that report, that's an option. Another option, which we've discussed before, is to have the St Lawrence Parks Commission come back. Remember? We discussed whether you might want the parks commission to come back before the committee.
Mr Villeneuve: I certainly think it would be premature to have any sort of report before we see what Mr Richard Kramer, the investigator, comes up with.
I too have been getting many phone calls on both sides of the issue. On one side, we have a very small group of people who are complaining and really have no reason to complain, and then we have the people who have come before the committee with the allegations that to me were very serious and must be investigated.
I don't see how we can come up with a report prior to Mr Kramer's investigation, at which time we may well want to look at whether we feel the investigation has been biased, and that's being suggested right now, that there is some bias. Whether there is or not, I am certainly not in a position to evaluate that. We could question Mr Kramer as to how he arrived at his conclusions, whatever they are. At that point I think the committee then could decide its next step, be it a report to the Legislature or a further investigation.
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Mr Waters: I concur wholeheartedly with both Mr McLean and Mr Villeneuve. Through our hearings, we have set some wheels in motion, and you have to let those wheels go through the motions in their own time frame. If that means that during the intersession, instead of going on with the Ontario Securities Commission, which I think was the next on the list, we're back to the St Lawrence Parks Commission, either finishing it off and accepting those reports as matters finish, or indeed requiring the parks commission, Mr Shaw or anyone who came before us before, or maybe people who didn't come before us, in order to bring this thing to its final conclusion, then we do that during the intersession.
Yes, the time will run out, but the time hasn't run out for this review to be completed. I think we have time to finish this review and do it in a proper, timely fashion to make sure that indeed we effect the change, if need be, that is requested by people.
The Chair: I don't know if I'm hearing a consensus, but what I hear, I think in the majority, is that you do not wish anything to happen until the investigation by the Management Board Secretariat is complete. Bear in mind that that report, according to Mr Shaw, is going to go to the board of commissioners first and then to us, so you understand the time frame being around the middle of December. You don't wish to schedule anybody, you just want to wait till the report comes forward.
Is there any other discussion on this? Okay. Those comments are all recorded on Hansard, so we don't need a resolution. I perhaps would like to ask you, though, is there agreement with my summary? Okay. There is agreement recorded by the committee members.
To get back to scheduling our business, next week on November 23 we will be having the witness from Parks Canada and we will also be looking at the first draft on the Council of Regents report.
Mr David Pond: Even before the first draft, you have to have a brainstorming session on what you want to see in the report. To that end, as you requested, I've prepared a summary of recommendations that we heard from the witnesses, which you already have, and then three short papers which address specific concerns raised by individual members in September, which I gather you either have or you will shortly get. I guess the first step there is to have a brainstorming session about what you want to see in a draft report about the Council of Regents.
Mr Waters: I believe, if I remember correctly, the subcommittee report said we would give direction to Mr Pond next week and then that the following week Mr Pond would come back with some draft material for us to work on, and hopefully either that week or, if we can leave a bit of time, the next week, we would be able to adopt a report, because I don't see that there'd be a lot coming out of the Council of Regents hearings. I would hope we could have the Council of Regents completed by the time the House goes down, Madam Chair, would be my wish.
The Chair: Well, it would be kind of encouraging if this committee could complete at least one report.
Could I suggest, respectfully, that we might not need all of the time on November 30 to review the draft report and we might be able to schedule Mr West and Mr Gallant?
Mr Waters: I'd move that, Madam Chair, if you need a motion to that effect. I would say we split the two hours. I don't think it would take any more than an hour to go over Mr Pond's draft report, and that the other hour be used indeed to wind up, once again bringing things to a conclusion with these two gentlemen.
The Chair: There is a motion that that will be our schedule for November 30, that we will book Mr Gallant and Mr West at 10 o'clock and 10:30, and then at 11 o'clock go over with Mr Pond the draft report on the Council of Regents. All in favour of that motion? That is carried.
I don't think we have any other business. We will adjourn the committee and have a subcommittee decide whether it wishes to make selections for interviews for December 7. Thank you very much.
The committee adjourned at 1136.