SUBCOMMITTEE REPORTS

INTENDED APPOINTMENTS
DONALD WEISS

CONTENTS

Wednesday 29 November 2000

Subcommittee reports

Intended appointments
Mr Donald Weiss

STANDING COMMITTEE ON GOVERNMENT AGENCIES

Chair / Président
Mr James J. Bradley (St Catharines L)

Vice-Chair / Vice-Président

Mr Bruce Crozier (Essex L)

Mr James J. Bradley (St Catharines L)
Mr Bruce Crozier (Essex L)
Mrs Leona Dombrowsky (Hastings-Frontenac-Lennox and Addington L)
Mr Bert Johnson (Perth-Middlesex PC)
Mr Morley Kells (Etobicoke-Lakeshore PC)
Mr Tony Martin (Sault Ste Marie ND)
Mr Joseph Spina (Brampton Centre / -Centre PC)
Mr Bob Wood (London West / -Ouest PC)

Substitutions / Membres remplaçants

Mr R. Gary Stewart (Peterborough PC)

Clerk / Greffière

Ms Donna Bryce

Staff / Personnel

Mr David Pond, research officer,
Research and Information Services

The committee met at 1007 in room 228.

The Chair (Mr James J. Bradley): I'd like to bring the meeting to order. I think all three parties are represented here and all members of the committee are present, so it gives us an opportunity to commence our proceedings.

SUBCOMMITTEE REPORTS

The Chair: The first item on the agenda is the report of the subcommittee dated Thursday, November 16, 2000. Would someone like to move the subcommittee report?

Mr Joseph Spina (Brampton Centre): So moved.

The Chair: Mr Spina has moved it. All in favour? Opposed, if any? Carried.

The report of the subcommittee dated Thursday, November 23, 2000.

Mr Spina: So moved, Chair.

The Chair: Mr Spina again. All in favour? Opposed. The motion is carried.

We have a problem I will bring to the attention of the committee. Sometimes people inform the committee that they are unable to come before us at a specific time. We have an individual who was asked to appear before the committee whose name is Mr Richard Brassard. He's an intended appointee to the Muskoka, Nipissing, Parry Sound and Timiskaming Grant Review Team.

I want to get the direction of the committee in this regard. Mr Brassard cannot appear before the committee on December 6 as he is being sworn in as mayor in his community. He cannot appear on December 13, and the 30-day time limit for the committee to interview an intended appointee expires on December 17. Therefore, the committee can either provide unanimous consent to extend the deadline until the intended appointee can appear before the committee or choose to waive the interview and let the appointment go through. Mr Brassard has indicated he is unable to appear on December 20 as well. However, he would be able to appear sometime in January. It would take the unanimous consent of the committee to extend it.

As Chair, I find it difficult to function as a committee if people are able to simply-and I'm not saying it in this case. He probably has very legitimate reasons in each case. Being sworn in as mayor is certainly a very good reason on that occasion. But I think what can happen with our committee is that people can simply say, "I can't be there; I can't be there," hoping that somehow the committee will then just relinquish its prerogative to have the person appear before the committee. So I look to direction from committee members.

Mr Spina: In view of the distance, and besides being the mayor, Mr Brassard is also a school principal, I can understand it being difficult, particularly at this time of year. I don't have any objection to his appearing before the committee so, rather than waive, I would seek unanimous consent to extend to January.

The Chair: All in favour of that? Shall we say to the end of January so that it doesn't go on forever-

Mr Spina: That's fair.

The Chair: -because the government will want to have him appear at some time.

Mr Spina: By January 30, then? Shall we qualify that?

The Chair: OK. All in favour of that? Carried.

Thank you very much for your direction on that.

INTENDED APPOINTMENTS
DONALD WEISS

Review of intended appointment, selected by official opposition party: Donald Weiss, intended appointee as chair, Ontario Public Service Pension Board.

The Chair: We have one appointee before us today. This is a half-hour review of intended appointments. The certificate was received on November 3, 2000, a selection of the official opposition party, Mr Donald Weiss, who is the intended appointee as chair, Ontario Public Service Pension Board.

Mr Weiss, would you like to come forward, please. As you have likely been informed, you have the opportunity to make an initial statement to the committee, offering any comments you wish. I invite you to do so now. Welcome to the committee.

Mr Donald Weiss: First of all I'd like to say that I'm very pleased and honoured to be here today as intended appointee for chairman of the Ontario Public Service Pension Board. I fully recognize the importance of the board's work to Ontarians and I'm very pleased to be considered for this position here today.

I hope to use this brief statement to demonstrate that I'm not only qualified for this position but that I'm ready to bring to it an extra measure of dedication and skill.

As you will see from my resumé, I have extensive experience with direct relevance to the pension fund industry. My 26 years in the financial services field began with Canada Permanent Mortgage Corp, followed by Morguard Trust Co, which was owned by five large Canadian pension funds. Morguard Trust provided origination, underwriting and administration of mortgage services to the Canadian pension fund industry, as well as secondary market trading and management of two mortgage investment corporations which were also owned by Canadian pension funds.

My tenure there, during which I rose to the position of president and CEO, was an excellent training ground for understanding the opportunities and challenges that are met by the pension fund industry. I was responsible for the full operations of the trust company and played a key role in the design and launch of Morguard Bank of Canada. I managed an organization of 180 employees, with $4 billion in assets under administration, and we achieved up to about $600 million a year in loans origination along the way.

My work experience also extended to other areas of investment. For three years I worked with development concepts for a real estate development consulting company. We worked with private companies, institutions and government agencies on assignments ranging from the transportation industry to tourism, and retail, commercial, office and warehouse developments.

This position capped more than a quarter century in the financial services field, and along the way I learned a tremendous amount about real estate, finance, investment, the investment industry and the role played by pension funds in that particular area.

Following this, in 1992 I became executive director of the PC Ontario Fund. As a result, I gained significant experience in direct mail marketing, individual and corporate fundraising, as well as an excellent insight into the workings of government. In addition, I became a member of the Ontario Pension Board in March 2000, and I have served on the investment committee, and on the human resource, audit and pension policy committees of the board as well.

I've had a varied career and each position has demanded responsibility, prudent decision-making and the delivery of services to the highest quality to customers and clients. I think I've met these challenges with optimism for the future, tempered with a realistic attitude about the present and with a knowledge of the past.

These are the qualities I bring before the committee today. I see a vibrant economy in Ontario and across Canada and good opportunities abroad. I'm optimistic that the Ontario Pension Board can meet its goals by securing reasonable returns with minimum risk. But I also see the challenges presented by today's stock markets and by the constantly changing environment. I know that the Ontario Pension Board has navigated this environment extensively in the past and I'm confident it will meet its future challenges with the same amount of confidence.

I would take it as an honour to be a leading hand to help ensure that the Ontario Pension Board continues to meet its objectives and the challenges of the future. What the board does is serious business and I'm prepared to offer all my knowledge and skill I have acquired and to fulfill my responsibilities with dedication to the best interests of the board, the pensioners, the contributors and the employers that it serves. Thank you for your consideration.

The Chair: Thank you very much, sir. We'll start with the official opposition.

Mrs Leona Dombrowsky (Hastings-Frontenac-Lennox and Addington): Mr Weiss, good morning. When I had the opportunity to review the material that was provided to us, I certainly noted with interest your involvement with the PC Ontario Fund. You've indicated in your opening comments that that experience has provided you with excellent insight into the workings of government. Would you have an opinion in terms of the advantage that this government has enjoyed by being able to access the significant number of dollars that they have from this pension fund?

Mr Weiss: That the government has accessed?

Mrs Dombrowsky: That the fund has provided for the province by way of debenture.

Mr Weiss: Please, can I have that question again?

Mrs Dombrowsky: Essentially the government is borrowing from this fund, is that not the case?

Mr Weiss: There are existing debentures outstanding, yes, that have existed for quite a number of years.

Mrs Dombrowsky: Yes, and continue to exist.

Mr Weiss: Yes, there's a portfolio of those that still exist.

Mrs Dombrowsky: Over 30% of-

Mr Weiss: Of the fund, that's correct.

Mrs Dombrowsky: Obviously, there is some significant advantage to the government that it is able to access this fund at a very reasonable rate of interest.

Mr Weiss: I don't have the exact date. These bonds were put in place quite a few years back and they are not currently, I don't think-since 1990 the government has not borrowed essentially from the public service pension plan. These bonds are slowly being amortized out and I believe that by 2014 they will be all gone.

Mrs Dombrowsky: You've indicated in a statement, I believe it was in March, with regard to the investment policy of this board, that it has-your words were that "it speaks to a conservative approach to investment. It's not heavily weighted in some of what might be considered the higher-risk areas." You think it meets the needs of the people, yet if you review the performance, certainly least year, it is significantly lower than what has been enjoyed in other markets. Would you have a comment on that? Do you continue to maintain that this conservative approach is really in the better interests of the people who participate in the fund?

Mr Weiss: Yes, the returns in the fund, if you look at it over the last 10 years, are in the range of 11.79%, I believe. The returns are certainly going to move around with markets. As you're invested in equities and bonds, your returns are going to move around from year to year.

The objective of the Ontario Pension Board to meet its actuarial needs is to achieve a 3.5% real return. Our objective that we put to our external managers of our money is set at 4.5% real return. With that, we have been consistently able to exceed our actuarial needs. By example, in 1990, when the unfunded liability was established for the fund, which was the responsibility of the government, it was established at $2.5 billion. The game plan at that time, in 1990, was to amortize this over 40 years and take this pension fund up to a funded position over the 40 years. A surplus position of $335 million was achieved in 1999-it was achieved in the year 2000, as opposed to 2029, which would be 40 years from 1990, significantly earlier. So the actuarial needs of the fund to meet the pension benefits that have been put out there are more than adequately being met.

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Mrs Dombrowsky: Perhaps I was not clear. Do you have any comment about the fact that the fund performed lower than most other funds in the market?

Mr Weiss: The investment policy of the Ontario Pension Board is not going to be identical to other pension funds. Each pension fund certainly has its own investment policy. The policy of the Ontario Pension Board has been for many years to obtain a reasonable return with a minimum amount of risk. The nature of the fund itself and the fact that you have 24,000 members contributing to this plan and 39,000 pensioners create a different dynamic when you look at the fund. It certainly looks quite different from many other funds. In fact, it is quite unique that way.

The approach of establishing a conservative investment policy as it pertains to this fund is something that management over the years has adhered to. It is the policy of the fund today and I think it is a very sound one. I don't think you can look at the returns in any one particular year. If you look in 1999, there were some funds that outperformed the Ontario Pension Board, but I think if you look at the 10-year returns and compare the fund, you'll find that the Ontario Pension Board has performed very well relative to what you may consider the other pension funds in the industry. It's more than met its objectives in terms of returns and has created a surplus much ahead of when it was originally anticipated.

Mr Tony Martin (Sault Ste Marie): Thanks for coming today, Mr Weiss. Now that you're being appointed to this fund to manage and to chair it-and there's no doubt that will probably happen here today-have you severed completely all ties with the PC Ontario Fund?

Mr Weiss: I will be severing all ties with the PC Ontario Fund on December 31. I am employed there at the present time. I do not have a position there. I'm just assisting with the new management to become acquainted with the operations of the fund.

Mr Martin: Why would you have made this jump from the PC Ontario Fund to the pension fund?

Mr Weiss: If you look at my history, I have a keen interest in this particular industry. I've always enjoyed it; I've always had aspirations to continue to be involved in the financial services and investment industry. I have been employed with the PC Ontario Fund for nearly nine years and this opportunity represents a change for me. I think it very much meets my particular needs in terms of what I would like to do and what I would like to contribute to industry.

Mr Martin: When the fund was changed to its present mandate and direction, it was done at that time to make sure there was an arm's-length relationship where government is concerned. Given your obvious political affiliation and connections and what you've done for the last few years, do you see any reason why any of us should worry that now, with a more direct link between the government and this fund, that arm's-length relationship might change in some fashion, manner or way?

Mr Weiss: No, absolutely not. If you look at my track record and my approach to business and to the responsibilities that I've undertaken in my history, I've always been able to separate that kind of issue and I expect to do the same on the Ontario Pension Board.

Mr Martin: Along that same line, you'll understand that there may be some anxiety out there among some of the plan members who happen to be part of very well-known and large unions whose management is the Ontario government, and the obvious antipathy that exists there, the major downsizing that has happened and the contracting out of a lot of the work that government does now. Do you see any reason that OPSEU should be concerned that we now have overseeing that fund that's so important to them in terms of their future somebody who is so readily connected with a government that is so ideologically opposed to the very strong presence of organized labour in the economy of this province, and particularly where the delivery of government services is concerned?

Mr Weiss: Again, I would come back to this. If I look at the history of the Ontario Pension Board, Bill Somerville, who has been chairman for 11 years, was appointed by the Liberal government at the time, and I think Bill has just done an outstanding job and performed exceptionally well. Those kinds of concerns that you've expressed, I suspect, could have been expressed in 1990 at the time that Bill was appointed, and none of those things have ever been realized.

Mr Martin: You'll agree that the environment at that time with that particular government and the subsequent New Democrat government was not of the same depth of feeling re the antipathy that exists between government and organized labour these days.

But going beyond that, as you indicated earlier, there are now significantly more pensioners than there are contributors in this plan. The old debate is going on out there in the private sector around who actually owns the pension plan and who should the surplus accrue to in terms of benefits. In this instance so far with this plan, any surplus has been recognized as needing to accrue to the members because the contribution has been reduced, and in some public sector pension scenarios there has actually been a holiday given. What's your view, personally, given that you've managed funds before, re the question of who surpluses in pension plans belong to?

Mr Weiss: As you know, the public service pension plan was split. There is the OPSEU pension plan, which the chair of the Ontario Pension Board has no responsibility for. The deal they have with the government, as opposed to the Ontario Pension Board, is different. The government does guarantee the Ontario public service pension plan 100% and the surpluses accrue to the government, if they are there. With the OPSEU, it's a 50-50 split. So there's a difference.

Each plan has different characteristics and has to be looked at individually, depending on what circumstances surround it. In terms of what should be done with the surplus, again, what has been agreed upon, of course, is what should be carried out. In our case, the government does guarantee it 100% and does receive the surplus as a result of their guarantee.

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Mr Martin: I'm sorry. The government receives the surplus, is that what you're saying?

Mr Weiss: Yes. Now with the creation of the surplus, we've reduced contributions in the fund to take care of all the surplus, so the benefit is accruing to members as well as government.

Mr Martin: You'll understand that the workers, the members of these plans, see it a little differently in that they feel that any contribution to a pension plan is deferred wages. They sit down and they negotiate a package that speaks to direct remuneration by way of their wages, a benefit package and then a pension plan. You don't get as much over here because you're putting in over here. They, I think rightfully, have some concern that any surpluses that are generated might not accrue to benefit to them and to members out there who are no longer active in the workplace but are dependent on this.

Do you see a scenario down the road, given this government's attitude toward workers, and particularly workers who belong to organized workplaces, where that surplus might just totally be taken by government to use as it wills because it's, on the other hand, giving away a lot of the money that it's getting by way the taxes that it imposes?

Mr Weiss: I can't comment on the actions of the government, but I think that they certainly will look at those issues of surpluses within pension funds in a very fair and equitable way. I have no reason to believe otherwise.

Mr Martin: You don't think that the relationship they have had with you over the last few years in your role as head of the PC fund would influence you in any way, that they would have any control over you in decisions that you might make or drive through the board around the question of where those surpluses go?

Mr Weiss: Again, my own personal perspective, if you're asking me that question, leans toward a fair and equitable treatment of surpluses. I don't really have a strong opinion one way or the other or a defined position on that issue.

The Chair: Thank you very much. Your time has expired, Mr Martin. We now have the government caucus.

Mr R. Gary Stewart (Peterborough): Just a couple of comments. I would like clarification, if you could. Did you say there had been nothing borrowed from that fund by government since 1990?

Mr Weiss: To my knowledge, they haven't been purchased since 1990, but I'm not 100% certain of that. In recent years, there has been no active purchase of government bonds by the pension board, at least to my knowledge and to the information that I have seen up to this point in time, as a member of the board. There is no anticipation of acquiring future bonds in the investment approach and plan used by the fund at present.

Mr Stewart: Had it been used by previous governments fairly regularly?

Mr Weiss: Again, if you go back to the fund, which had its origination in 1920, I don't have a history of what acquisitions of government bonds were made by the fund historically. I really don't have the information.

Mr Stewart: It was just kind of interesting to see when there seems to be some concern from the opposition parties that we would have to be concerned about this government and the relationship with you.

I just want to make one comment. Certainly when I look at your credentials, whether it be through the Morguard Trust or the Canada Permanent Mortgage Corp, I think they are impeccable for this particular job. I look at what you've done to manage the funds of the PC Ontario fund and I think it stands you in great stead to do this job. Yes, there are lots of investments out there that you could make a few more dollars at. We all know that and I think we've all been burned a little bit by them at one time or another. I think the people you represent, the workers who have been referred to, are those who want confidence that you are getting a good return with relatively minimum risk. I think that's what they want. Money says a lot of things these days. I think the workers who, it's been suggested, may not support your appointment know their money's being invested well and looked after in a fair and equitable fashion.

Certainly myself and most of the members of our party are more than pleased to support this appointment for you, and I wish you the very best.

Mr Spina: Just one short comment, Mr Weiss. Thank you for coming forward. On the record, I want to thank you for the work you did in taking a party fund that was in a deficit situation right through to the current status that it is today.

The Chair: Do you have any knowledge of the status you would like to share with the committee, Mr Spina?

Mr Spina: Clearly it's in the black, but it allowed us as a party to do what we were able to do in terms of governing. If that is a small demonstration of a turnaround, then certainly with a good, solid fund I have no qualms about your being able to steer that ship well into the future.

There is one other little crossover I'm going to relate to. We both worked for a man named Harold Deason. Anybody who has the integrity and the knowledge of Harold Deason in the financial world I certainly have a great deal of respect for, and I certainly will be supporting your appointment.

The Chair: Are there any other members of the government caucus who wish to direct questions? If not, we will terminate this portion. Thank you very much, Mr Weiss, for appearing before the committee.

We will now deal with the intended appointment. Is there a motion you wish to make, Mr Spina?

Mr Spina: I move concurrence in the appointment of Mr Weiss.

The Chair: Any discussion? We have a motion. Mr Martin, you wished to speak?

Mr Martin: Regardless of the credentials and the long and successful career of Mr Weiss, I will not be able to support this appointment, given that this pension fund, when it was changed over by the Peterson government, was very definitely seen to need to have an arm's-length relationship with government.

Given the reality of surpluses in pension funds that we've seen over the last five to 10 years and the very difficult discussion that ensues around who in fact owns those surpluses and how those surpluses should be used, I think it's imperative that we have somebody at the head of this board who is totally and completely neutral where the government is concerned and where the members are concerned, so that good decisions are made and driven that recognize the fairness and the equity in all of this. I don't think appointing somebody who is so obviously connected to the governing party at this time is going to do that for us.

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Just a couple of other points to let you know why I am concerned re the question of the surplus. It's because of the drive by this government to turn everything into, if not a private sector operation, then something that models on the private sector.

My experience dealing with a number of older workers in my own community who have been restructured in non-organized workplaces and the question of what their severance package should be or could be or is leaves me very troubled. In most instances, workers who are let go at an older age usually get whatever they're legally entitled to by way of the legislation and the severance package. In most instances they get what they've contributed to the fund over the years. In some instances they get what the company itself has contributed; oftentimes not the whole lump. But very, very seldom-as a matter of fact, I haven't seen yet in terms of people who have presented in my office a situation where any recognition at all was given to the very generous interest that was earned over the years of the investment of that money, the surplus.

They're taken in in a very sort of clandestine way. They have no idea that this layoff is coming. They're brought into an office. They're told, "Here's the package." It's explained in a very quick and curt fashion. This person, who was initially shocked to begin with, doesn't really have the background or the expertise to question the portions of that package and whether at the end of the day there is any recognition of the interest that's been accrued over the years or the surplus that's been generated by way of that pension fund. They're told, "This is it." If they question or decide they'd like to go back and get some further advice from perhaps a family member or another colleague or even a financial adviser or lawyer, they're told that that package shrinks significantly. "It's here today. If you wait a week, it will be here, and if you wait three weeks, it'll be here. If you give us any real trouble-for example, bring a lawyer to the table-we'll see you in court and chances are you won't see this payout for quite some time."

I guess it's that attitude working its way into these other pension funds that up until now have been dealing, yes, in a fair and equitable fashion with their members and their retired members in terms of the fixed amount they get-and every now and again there's a recognition that there's a need to index for inflation. But if we go slowly but surely, by stealth, by way of appointment of somebody who shares your ideology, which is that everything private sector is good and everything public sector is bad, eventually this attitude will present itself. I would suggest that there are some people perhaps around this table here today who belong to OPSEU who should be very nervous about this appointment and what it indicates and signals by way of, down the line, what may turn out to be the case.

This government is going to be desperate for money in the next two or three or four years as it continues to give away taxes to people who we suggest, as you know, really don't need it. The term "fair and equitable" was used here this morning on a couple of occasions. We understand, particularly those of us on the opposition benches, what this government means when it says "fair and equitable." We saw that when it came to how they've dealt with, and continue to deal with, those who are our most marginalized and vulnerable out there. One of the first decisions made by this government was to take 22% out of the income of those folks, seemingly not recognizing that the money that goes to people on assistance in this province primarily works its way into food and clothing and shelter for children, not to speak of the contribution it makes to local economies as these people spend that money in small and medium-sized corner stores and clothing stores and grocery stores.

With that, I am saying that this morning I will very definitely not be supporting this appointment and I will be speaking on behalf of my caucus as I do that.

Mrs Dombrowsky: I will not be able to support this appointment either. It has been indicated very clearly that the candidate brings some qualities to this role that I'm sure would be of great value. However, as my colleague has indicated earlier, this board was established as an arm's-length agency. I think optics are very important. I think for those members of this board to understand that an individual who has had such close ties to the party that is now the government-I would be very concerned that this appointment would prevent the membership from viewing this board as an arm's-length agency, but very definitely as a very connected arm of the government. So for that reason I will not be able to support this appointment either.

The Chair: Any other comments? If not, I'll put the motion.

Mr Bert Johnson (Perth-Middlesex): Mr Chair, I wonder if I could request a recorded vote.

The Chair: Yes, you certainly may. We'll have a recorded vote.

AYES

Johnson, Kells, Spina, Stewart.

NAYS

Dombrowsky, Martin.

The Chair: The motion is carried.

There is no further business for the committee, so I'll be needing-

Mr Spina: I move adjournment.

The Chair: All in favour? Carried.

The committee adjourned at 1046.