Pension360

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

Barbara Shecter of the National Post reports, Canada Pension Plan has no cost advantage over other large public pensions:

Proponents of expanding the Canada Pension Plan, or launching a similar large-scale retirement vehicle in Ontario, often tout the element of lower costs through economies of scale. But a new study from the Fraser Institute says the CPP has no clear cost advantage over other large public sector pensions.

The study by Philip Cross, a former chief economic analyst for Statistics Canada, compared the total costs of CPP and five large public sector pension plans in Ontario.

The author says his study is unique because it looked at a complete picture of both investment and administrative costs.

Economy of scale is often used as a rationale by those who favour CPP expansion, suggesting that the relative cost of plans declines as they grow and accumulate more assets. However, Cross says his study shows such claims “are simply not true.”

The study, to be released publicly on Tuesday, concludes that CPP, the largest plan scrutinized over the period from 2009 to 2014, was in fact the costliest as a percentage of assets.

“Specifically, the CPP with $269 billion in assets had the highest average cost-to-asset ratio at 1.07 per cent during that time,” the Fraser Institute, a research think-tank, said in a statement.

Cross contends that CPP’s reputation for being low cost is “coloured by incomplete comparisons that don’t account for all related costs.”

Furthering the notion that size does not correlate with cost, the study concluded that the Ontario Teachers’ Pension Plan — the second-largest fund, with $154 billion in assets — was only the fourth costliest, with an average cost ratio of 0.63 per cent.

The study looked at and dissected two cost categories: investment and administrative.

The smallest fund in the study, OPTrust — with just $17 billion in assets — was found to have the highest average investment costs as a percentage of assets. This was followed by CPP, with the second-highest investment costs.

Another of the smaller funds scrutinized, the Ontario Pension Board, had one of the lowest average investment costs.

Cross speculated that fund growth through asset accumulation might actually raise costs, since the complexity of implementing investment strategies calls for more — and costly — external expert counsel.

Debate over expansion of the Canada Pension Plan has raged in recent years, with some experts arguing Canadians aren’t saving enough for retirement and need a boost from the national public pension.

Ottawa and the provinces came close to agreeing to enhance CPP a couple of years ago, but fears about the strength of the economy derailed those efforts.

The government of Ontario responded with plans to launch its own provincial pension plan, the Ontario Retirement Pension Plan (ORPP), which could be rolled into an expanded national plan should that be embraced.

The Fraser Institute has weighed in on the CPP and ORPP before. A study published in July suggested that ramping up government-driven mandatory retirement savings programs could lead to less voluntary savings, resulting in no overall impact on how much Canadians have to fund their golden years.

Benefits Canada also reports, CPP more costly than other public sector pensions:

The Canada Pension Plan (CPP) is more costly than five public sector pension plans, according to a new report by the Fraser Institute.

The report compared the total costs, including investment and administrative of the CPP with five large public sector plans based in Ontario, including: the Ontario Teachers’ Pension Plan (OTPP), the Ontario Municipal Employees Retirement System (OMERS), the Healthcare of Ontario Pension Plan (HOOPP), the Ontario Pension Board (OPB), and the OPTrust.

It found that the CPP, which is the largest plan with $269 billion of assets, had the highest expense ratio at 1.07% of its assets on average for the whole period between 2009 and 2014. The OTPP, the next largest plan at $154 billion of assets, had the fourth highest average expense ratio (0.63%).

“In fact, there may be diseconomies of scale for larger public pension plans because of the complexity of implementing their investment strategies, which include contracting out for external experts – a practice that has become increasingly popular, with plans investing more in non-traditional assets such as real estate, infrastructure, and private equity,” said the report.

“These more aggressive investment strategies raise costs. Whether they are justified by higher rates of return will not be known for decades, and depend on whether the assumption that markets have mispriced these assets is borne out.”

The Fraser Institute put out this press release on comparing the costs of the Canada Pension Plan with public pension plans in Ontario. You can read the full report here.

Before I tear this study and its authors to pieces, let me first commend them for at least attempting to shed some light on costs at Ontario’s public pension plans. When it comes to public pensions, I’m all for more transparency on costs, fees, leverage, benchmarks, compensation, diversity, and anything else that Canadians deserve to know about.

In short, I believe that Joe and Jane Maple Leaf deserve to know a lot more about what is going on at Canada’s public pensions, as well as financial markets, which is why I started this blog back in June 2008, much to my personal demise (not that I had much of a choice!).

I have no problem taking on Canada’s Top Ten, shining a light on their activity, but when I read these studies on the CPP from the Fraser Institute, I can’t help but wonder who funds this nonsense and what is their ultimate political goal?

Just so you know, I have experience working as a senior investment analyst at two of the largest Canadian pension funds, the Caisse and PSP Investments, but I’ve also worked as a fixed income analyst at BCA Research, an economist at the National Bank, and as a senior economist at the Business Development Bank of Canada and then Industry Canada.

All this to say, I know the Fraser Institute all too well. It was recently ranked as the top think tank in Canada by the University of Pennsylvania, but it was always a right-wing think tank with an axe to grind against big government or anything else perceived to be big government (like Big CPP even though it’s a Crown corporation that operates at arms-length from the government).

One of the authors of this study, Philip Cross, has extensive experience at Statistics Canada, an organization which I respect, and then worked for the Macdonald-Laurier Institute. He is also a member of the Business Cycle Dating Committee at the CD Howe Institute.

But for all his credentials and experience, Cross has an axe to grind with the Canada Pension Plan and he has even written articles in — you guessed it, the National Post!! — arguing we should forget talk of a pension crisis, Canadians are very well protected in their retirement.

Really? That’s news to me because I’ve been arguing all along that we need real change to Canada’s Pension Plan and that now more than ever, our politicians need to stop dithering and enhance the CPP once and for all. And this despite the crisis in the Canadian economy which will more than likely usher in negative interest rates here just like in Japan and elsewhere.

This is all part of the new negative normal and a period of prolonged ultra low rates which are here to stay as long as the deflation supercycle keeps wreaking havoc on the global economy.  This too is why I want our political leaders to get on to enhancing the CPP as soon as possible and finally realize the brutal truth on defined-contribution plans: they aren’t working and will condemn millions of Canadians to pension poverty.

This is why unlike the Fraser Institute, I welcome Ontario’s “Wynning” pension strategy and think it’s a real shame our political leaders are once more squandering a golden opportunity to enhance the CPP once and for all.

Now that I got that out of the way, let me briefly go over some critical points of the Fraser Institute study comparing the costs of CPP with other Ontario public pension plans. You can click on the table below which summarizes the costs at various Ontario pensions relative to the CPP (click on image):

My first criticism of this study is it’s comparing apples to oranges. Apart from PSP Investments, which is growing fast and has a similar profile to CPPIB (but still a lot smaller), there’s is nothing like our national pension fund in Canada (the Caisse is huge but it manages money of mature Quebec pension plans which pay out more than they receive in contributions).

How can you compare CPPIB, a national pension fund which is growing fast, to smaller Ontario plans which cover only a small subset of the Canadian population? This is just silly and doesn’t take into account CPPIB’s mandate, challenges and advantages which are unique to it.

It’s one thing managing $20 billion, $50 billion or even $150 billion, but when you’re in charge of $270 billion and growing fast, you simply cannot take the same approach that others take and your costs will be relatively higher for all sorts of reasons.

CPPIB is a global powerhouse which is investing in public and private markets all over the world. It has over two dozen distinct investment programs (or “business units”) which are global in scope and competition is very intense among some of the world’s biggest investment institutions — many of which are trillion dollar behemoths.

In other words, because of its sheer size and liquidity advantages, CPPIB is engaging in investments activities that others are not doing either because they don’t need to or because they can’t (too small, too mature, etc). Sure, it’s doling out huge fees in private equity, an activity which it does exclusively through external investment partners (fund investments and co-investments with top private equity funds), but it’s also engaging direct investments in real estate and infrastructure (the latter is all direct investments).

CPPIB is also doing large deals which will better position itself for the future. For example, the acquisition of GE’s Antares Capital was the biggest deal of 2015 and one which will benefit the Fund over the very long run. But you need to pay the people running this financing arm and they don’t come cheap (still a lot cheaper than doling out huge fees to many private equity funds to do the same activity in the mid market space).

The Fraser Institute study talks about “diseconomies of scale of large public pensions because of the complexity of implementing their investment strategies” but it fails to explain the J-curve effect of private equity investments and how large transactions like the GE deal or other big deals might be expensive at first but over the long run, they will lower costs in significantly.

And just to be clear, when you’re the size of CPPIB, you’re not paying 2 & 20 to private equity funds or hedge funds. You’re paying significantly less than smaller pension funds which can’t use their size as leverage.

The second major criticism I have with the study is that CPPIB is very transparent in terms of all its costs. It is all broken down across operational, transactional and performance fees with driving factors. For example, look at page 53 and 54 of the Fiscal 2015 Annual Report which provides details on all costs and where it’s clearly stated:

As a cost-conscious organization, we take managing costs seriously. We have a long-standing practice of allocating operating expenses to the investment departments to provide a complete view of the costs associated with generating the investment returns and to encourage cost awareness across the organization. This cost transparency promotes constructive conversations between the departments receiving the cost allocations and the departments allocating the costs that are focused on value for spend and accountability for the expenditures.

If CPPIB has high transaction costs compared to other smaller plans in a given year it’s because their multiple businesses have pursued many investments over that period of time, not because it’s hiding anything from the public.

Also, it’s important to note performance fees are driven by high performance and they correlate to strong investment returns for the benefit of contributors and beneficiaries.

This brings me to my third major criticism of the study, the lack of understanding of CPPIB’s mandate. At the end of the study, the authors question CPPIB’s investment strategy, dismissing it as an “unproven experiment” and stating the following:

Of course, the rising expense of the CPP’s investment strategy after 2007 could be justified if the rate of return remains high. The problem is that we will not know for years, or even decades, if the rate of return stays elevated. This is especially true of the CPP’s purchase of illiquid assets such as infrastructure, land, and private equity. This strategy presumes first that these assets are mispriced because they are relatively unknown and infrequently traded, and second that the mispricing of assets is on the low and not the high side. In other words, there is a presumption of market failure in price discovery, which large pension funds can identify and profit from better than other investors such as hedge funds.

This view may be borne out by a higher return to CPP investments over the decades. Or it may be disproven if returns falter. It is important to remind people that this is an experiment in progress, not the execution of a proven strategy. It is worth remembering that The Economist observed recently that hedge funds once “sold themselves as clever and flexible enough to take advantage of opportunities that conventional fund managers neglected,” but this claim has been disproven over time(The Economist, 2015, August 1: 62).

It is also worth noting that high returns earned by the CPPIB’s assets will not benefit its members; the CPP remains largely a pay-as-you-go pension plan, with only 17% funded by CPPIB investments. Since members will not benefit from higher returns, why does management undertake investment strategies that involve more risk? Meanwhile, younger Canadians are already overpaying in terms of the ratio of their contributions to benefits, to compensate for the underfunding before the CPP was overhauled in 1997 (Canada, OSFI, 2013; Godbout, Trudel, and St-Cerny, 2014).

At a minimum, the CPPIB has not done a good job explaining publicly why its strategy justifies the additional expense and risk in its investments. Nor has it been shown that an active investment strategy has not distracted management from maximizing the efficiency of both the administrative and investment arms of the CPP, something it promised to do when it adopted this new strategy in 2006. This reference to improving efficiency seems to have been its last utterance on the subject, making it appear to be an empty slogan when maximum efficiency should be the foundation for the operations of the entire CPP, or indeed of any organization entrusted with the public’s money or supported by taxes (it is telling that the lower cost OPB refers to efficiency in its Annual Report, but the CPPIB does not). Developing intricate investment strategies and opening branches around the world may create a more interesting work environment for managers, but this does not guarantee the rate of return that results from higher efficiency and lower costs.

Wow, powerful accusations!! Unfortunately, none based on facts and it proves how utterly ignorant and biased the authors are when it comes to CPPIB, its activities and its mandate. In fact, right on CPPIB’s website, it clearly states: “CPPIB invests the assets of the CPP with a singular objective – to maximize returns without undue risk of loss. Our investment strategy is designed to capitalize on our comparative advantages.”

Unlike all those other public pensions in Ontario which the study alludes to, CPP is not a fully-funded plan and as such it can take risks in public and private markets that these other plans cannot or will not take. Its objective is clearly stated, “to maximize returns without undue risk of loss.” Period. This is their statutory fiduciary responsibility, a point which seems to have been lost by the authors of this study.

Importantly, the notion that higher returns do not benefit members is nonsense. The higher the return, the cheaper the cost of financing the CPP over the long run, which means lower pay-as-you go contributions for Canadians in the future.

And unlike what the authors state, CPPIB has been very clear explaining why its strategy justifies the expenses and risks it takes. Perhaps the authors of this study should take the time to read my public blog comments where I go over in detail CPPIB’s annual results like when it gained a record 18.3% in Fiscal 2015.

What else? Mark Wiseman, CPPIB’s CEO, has repeatedly told media outlets that he expects CPPIB to under-perform its reference (benchmark) portfolio, which is one of the toughest to beat, in periods when markets are roaring and outperform it during bear market cycles. It has delivered a solid 7.3% 10-year annualized rate of return which translates into multi-billions of net investment income over its passive reference (benchmark) portfolio, which is one reason why the Fund is actuarially on solid footing.

As far as shifting assets into private markets, this is the strategy that pretty much every large Canadian pension fund has been doing over the last decade but unlike large U.S. pensions, they’re investing directly whenever they can, significantly lowering the costs. Only in private equity do they do a lot of fund investments but also co-investment with their partners which brings the total fees down considerably.

Also, while shifting assets into private markets isn’t without risks, if you read Leo de Bever’s comments on why Norway’s giant pension fund should invest in unlisted real estate and infrastructure, you would gain a deeper appreciation for this long-term strategy.

Will the next ten years be a lot tougher than the last ten years for CPPIB and others to achieve their target rate of return? You bet they will but if I had a choice of having my retirement money in the CPP and other large well-governed Canadian DB plans or some crappy Canadian mutual fund charging me ridiculous fees or even a low-cost index fund which mimics public markets, there’s no question I’d choose CPP which is more diversified and a lot more secure.

All this to say that this Fraser study comparing the cost of CPP to other Ontario pensions isn’t very good as it’s full of false and grossly biased claims. I suggest Philip Cross and his co-author talk to a real pension experts like Leo de Bever, Jim Leech, Doug Pearce, John Crocker, Claude Lamoureux, Bob Bertram and Neil Petroff before they ever publish such a spurious study on the high costs of CPP.

But let me not be too hard on them, after all, I want to see more studies shining a light on public pensions. And their findings aren’t all terrible. They just need to be put in proper context and they need to be openly discussed by real pension experts who actually know what they’re talking about.

One thing the study demonstrates is why fully-funded HOOPP is one of the best pension plans in the world as it’s delivering stellar results at a fraction of the cost of other smaller and larger plans. But here too, you need to be careful as HOOPP’s approach cannot be replicated by everyone, especially much larger pensions like OTPP (which does everything HOOPP does and invests in external hedge funds and private equity funds) or CPPIB which is way too big to do everything internally.

If anything, this study makes OPTrust look somewhat bad as it has a very expensive cost structure relative to much bigger and smaller pensions but here too, you need to be very careful interpreting costs relative to results. If you look at OPTrust’s Annual Report 2014, the latest one available, you will see the Plan is fully funded and it achieved an investment return of 12%, net of external management fees, outperforming the Plan’s 6.2% composite benchmark portfolio.

Can OPTrust improve its cost structure by doing more internally? It probably can but the bottom line is it’s delivering great results net of all external management fees and it’s fully funded allowing it to increase its inflation protection to its members.

The bottom line is when most Canadian DB and DC plans are reeling because of the turmoil in global markets, all of the DB pensions discussed in this Fraser Institute study are doing just fine and the last thing we need is to spread more disinformation on why there are several reasons to oppose CPP expansion, including its cost structure.

I hope this comment lays all these criticisms to rest but I realize that public pensions, including the CPP and ORPP, are widely politicized and unfortunately, the real pension experts are not the ones being consulted to carry out such studies. Instead, we get academic or quasi-academic hacks publishing spurious studies that are not putting their findings in proper context.

If Philip Cross and Joel Emes or anyone else at the Fraser Institute wants to challenge my views, I’d me more than happy to give them an opportunity to reply to my comments (my email is LKolivakis@gmail.com). I’d be even happier if someone like Leo de Bever wrote a study comparing all of Canada’s large public pensions. When it comes to pensions, I like reading people who actually know what they’re talking about.

 

Photo credit: “Canada blank map” by Lokal_Profil image cut to remove USA by Paul Robinson – Vector map BlankMap-USA-states-Canada-provinces.svg.Modified by Lokal_Profil. Licensed under CC BY-SA 2.5 via Wikimedia Commons

The Multi-employer Pension Reform Act of 2014 allows some underfunded multi-employer plans to cut benefits in certain situations.

The Central States Pension Fund – which covers 400,000 truckers across the U.S. – started the process of enacting benefit cuts last summer.

Now, a coalition of Congressmen and women – 90 lawmakers in all – are asking the U.S. Treasury to reject the benefit-slashing proposal.

From the Detroit Free Press:

U.S. Rep. Debbie Dingell led a coalition of dozens of members of Congress is signing a letter to the U.S. Treasury asking that a proposal to make steep cuts to retiree benefits for truckers under the Central States Pension Fund be rejected.

“This is an issue of fundamental fairness,” Dingell said. “These employees worked a lifetime thinking they would have a pension to retire on, and now they don’t know what they will live on. These cuts would have a devastating impact on workers, retirees, families and whole communities.”

Treasury officials are holding a series of hearings around the nation to consider the proposal, including one set for next Monday, Feb. 8, at 4:30 p.m. at the Wayne State University General Lectures Building, Room 100, 5045 Anthony Wayne, in Detroit.

Nearly 90 members of Congress signed the letter, including U.S. Rep. John Conyers, D-Detroit, which was sent to Kenneth Feinberg, who was appointed in June by Treasury Secretary Jacob Lew to serve as special master to oversee the implementation of the Multi-employer Pension Reform Act of 2014.

The executive director of the Central States fund, Thomas Nyhan, argued over the summer that enacting benefit cuts was the only way to avoid the fund’s complete, eventual collapse.

2015 was a difficult year for the portfolios of public pension funds; the median plan returned just 0.36 percent, according to the Wilshire Trust Universe Comparison Service.

But public pensions still beat out corporate plans and endowments. Those institutions posted negative returns of -0.37 percent and -.045 percent, respectively, according to the Wilshire data.

More from Bloomberg:

Public pensions with more than $5 billion of assets invest less in U.S. stocks and more in alternatives like private-equity and hedge funds, with a median allocation of 16.1 percent to “alternative investments.” Those retirement systems had a median return of 0.54 percent in 2015, little more than the others.

“This is another year where it’s been difficult to sing the praises of diversification — when one of the top asset classes is the one you’re diversifying out of, which is U.S. equities,” said Waid.

“When you start to look at the other asset classes that you diversify into, you didn’t do well,” he said, referring to international and emerging-market stocks and commodities.

[…]

States and cities are slowly lowering their investment-return assumptions. New York Comptroller Thomas DiNapoli lowered the state pension fund’s assumed rate to 7 percent in September. California’s Public Employees’ Retirement System, the largest U.S. pension, is also slowly cutting its investment target, now 7.5 percent.

Public pensions returned a median 7.93 percent for the three years ending in December, 7.37 percent over five years and 5.99 percent over 10 years, according to Wilshire TUCS.

The median plan had a 44 percent allocation in U.S. stocks, according to Wilshire.

 

Photo by www.SeniorLiving.Org via Flickr CC License

Chicago Mayor Rahm Emanuel is promising to raise the city’s property taxes – possibly by $170 million annually – to help fund teacher pensions.

The plan has been in the works for months, but there was an added twist this week: now, Emanuel plans to move forward with the tax hike even before state government decides whether to get involved in the school system’s finances.

The proposed hike comes just months after another big property tax increase.

From the Chicago Sun-Times:

[Emanuel is] promising to forge ahead with the school property tax increase even before Springfield does its part.

And he’s vowing to deliver the 26 votes needed for City Council approval of that increase, even though aldermen voted four months ago to raise property taxes by $588 million for police and fire pensions and school construction.

[…]

A top mayoral aide said Tuesday that a City Council vote may not be required after all. It all depends on how state legislation reinstating the teacher pension levy is worded.

If the language is the same as it was before the teacher pension levy was abolished in 1995, the City Council would be off the hook. The appointed Chicago Board of Education could wear the jacket.

As for Emanuel’s promise to forge ahead with the school property tax increase even before the state holds up its end of the so-called “grand bargain,” City Hall pointed to the commitment made by Senate President John Cullerton (D-Chicago) to revise the state school aid formula in a way that delivers $200 million in “pension parity” to Chicago Public Schools. In his State of the State address, Rauner promised to work with Cullerton.

“The state is working on it. The governor is working on it. The speaker is not opposed. The pieces don’t line up in order the way you want them to. But it’s part of an agreement being negotiated with the teachers,” the Emanuel aide said.

Several alderman quotes by the Sun-Times were starkly opposed to approving another property tax increase.

 

Photo by bitsorf via Flickr CC License

Pennsylvania Gov. Tom Wolf is looking to dismantle the state’s Public Employee Retirement Commission (PERC), a state-run group that provided review and analysis of municipal pension systems and pension-related legislation.

The Commission’s fate was all but sealed back in December, when Wolf cut its funding out of the state budget.

Wolf believes the Commission – which has 4 full-time employees – is not worth the cost because its work is redundant.

More from the Pittsburgh Post-Gazette:

“We are moving forward with the process of shutting down PERC,” Jeffrey Sheridan, spokesman for Mr. Wolf, said in an email Monday.

In a phone interview, Mr. Sheridan said the administration believes the State Employees’ Retirement System and Public School Employees’ Retirement System already provide thorough and independent analysis of pension legislation.

“The actuarial analysis provided by PERC is redundant and unnecessary and an expense the commonwealth does not need,” he said.

The commission has four employees and one temporary employee, said executive director James McAneny.

Mr. Sheridan said the Office of Administration is working to help employees who want to continue working for the state find other jobs.

Mr. McAneny said he had not been advised of a plan to close the commission, but noting the line-item veto, he said such a move did not come as a surprise. He said he would be concerned about the work the commission does in reviewing the thousands of municipal pension plans in the state.

Mr. Sheridan said the administration believes those functions can be performed by the Pennsylvania Municipal Retirement System.

The Commission’s website can be viewed here.

 

Photo by jypsygen via Flickr CC License

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

CPPIB has a message to all women in finance, it’s actively looking for you:

At CPPIB, our goal is to have an employee population that reflects the communities in which we operate. This is because we believe that diversity – of insights, backgrounds and experiences – leads to better decisions and business outcomes. Attracting, developing and retaining talented women is particularly important to our success as a high-performing global organization. By 2020, our goal is to have half of all of our new hires be women.

To help us achieve these goals, we have a variety of programs and resources ­ including coaching, mentoring, sponsorships, and internships ­ that help attract women early in their careers and then provide them with ongoing development and growth opportunities so they can enjoy the most challenging and fulfilling careers possible.

As part of our commitment to supporting the development of women, we recently established a partnership with Women in Capital Markets, the largest network of professional women in the Canadian financial sector and voice of advocacy for women in our industry. An element of this partnership is a new women’s internship program designed specifically for women in undergraduate programs who are curious about business and interested in exploring and being mentored in the world of finance and investments. This four month summer internship teaches technical skills used in the financial and investment industries, enables participants to engage in meaningful work and activities designed to develop business acumen, and provides opportunities to collaborate with colleagues, leaders and industry experts.

Our focus on gender diversity was recently underscored when our President and CEO, Mark Wiseman, was honoured with a “WCM” Leadership Award. This annual award recognizes members of the financial community who have demonstrated a commitment to advancing and supporting women working in capital markets.

In receiving this award, Mark commented that “we have made a commitment to advancing the role of women at our firm and in our industry…No organization can achieve the best business results when they restrict themselves to half the population in recruiting, developing and retaining talent. This Leadership Award truly recognizes the efforts of our entire organization to advance and support the careers of women in capital markets.”

Learn more about CPPIB career opportunities and our commitment to diversity by visiting our Careers page.

Diversity, or lack of diversity, is a hot topic these days, especially in Hollywood where Viola Davis had her say on the debate at the SAG Awards over the weekend. I’m not going to get into the whole Hollywood diversity debate except to say that my favorite movie of all-time remains The Shawshank Redemption (1994) featuring one of my favorite actors, the great Morgan Freeman.

When you are a great actor, you’ll be recognized by your peers. Period. Having said this, there undoubtedly is a lack of diversity in Hollywood and more importantly, lack of diverse, original ideas which explains the crappy movies that have been coming out in the last decade.

In fact, I had an email exchange with a friend of mine who is an entertainment lawyer bemoaning all this:

In my humble opinion, Hollywood has been in a recession for over a decade, and the main reason is deflation of original ideas, not piracy!

I was watching a classic comedy, Sideways (2004), with Paul Giamatti. When is the last time Hollywood came up with a script that compares to this???

Forget it, as long as Hollywood remains oblivious to people’s reality, I’m not going to shed a tear for these jerks!

To which my friend replied:

I didn’t want to shed any tears for them either, but I couldn’t help it when they announced that Star Wars VII had earned a billion dollars faster than any other movie in history and would shatter Avatar and Titanic worldwide box office records within a month. Disney is a money-printing machine.

However, only two companies account for nearly all of Hollywood’s profits this year (Disney and Universal), while others were suffering layoffs (Paramount, Weinstein Co., and Relativity).

I found his reply very interesting and think it explains why Disney’s shares (DIS) have done well over the last five years and it may be time to buy the recent dip. If you’re looking for a recession-proof industry, this is it, but make sure you’re investing in the right company, one that reflects real diversity and has original content.

Anyways, enough on Hollywood, let’s get back to the real world and CPPIB’s push for more gender diversity. I’ve been an outspoken critic of the lack of diversity in the workplace at Canada’s Top Ten so I welcome all these initiatives to introduce a more diverse workforce.

In my opinion, it’s simply indefensible for any public pension fund, government organization, Crown corporation or even large private sector employer like a federally regulated bank not to have a truly diverse workforce. 

So, in that regard, I applaud CPPIB’s push for more gender diversity. Mark Wiseman may be a creature of habit but he comes from a family with diverse interests and his partner of more than 22 years, Marcia Moffat, was a vice-president at the Royal Bank of Canada before joining Blackrock as head of the Canadian business (a little conflict of interest there but I’m sure it’s all kosher).

According to the Globe and Mail article,  they met on his first day at the University of Toronto. “I am, I think, the world’s greatest Jewish Christmas tree cutter,” Wiseman said. “My kids get all the holidays.”

The chair of the Board at CPPIB,  Dr. Heather Munroe-Blum, might have gotten in a bit of hot water over her own pension benefits, but there’s no denying she’s an extremely accomplished lady, receiving many accolades from the academic community including honorary degrees from various universities and the Order of Canada.

According to Wikipedia, Dr. Munroe-Blum trained as an epidemiologist and has led large-scale epidemiological investigations related to psychiatric disorders.  She is the author or co-author of over 60 scholarly publications, including four books. She has served on the board of directors of the Medical Research Council of Canada (now the Canadian Institutes of Health Research) as well as on international reviews of the German Academic Exchange Service (DAAD), the Swiss National Science Foundation, and the National Institute of Mental Health (USA).

My father and brother are psychiatrists at McGill and I think very highly of doctors, especially those on the front lines fighting mental illness in our society.

Was CPPIB’s focus on more gender diversity pushed from the top? I don’t know but knowing a bit about Heather Munroe-Blum (never met the lady), I can guarantee you she’s definitely no pushover and had something to do with it.

And again, while I applaud all these initiatives on introducing more diversity at the workplace, the sad reality is that a lot more needs to be done. When I look at CPPIB’s board of directors or it senior management team, I see a lot of white Anglo-Saxon Canadians, but I definitely don’t see a snapshot of Canada’s diverse population. 

I’m not going to sugarcoat it. Diversity initiatives are all great but when you dig a little deeper at CPPIB or the rest of Canada’s Top Ten, you’ll see how pathetically diverse they are at the board or senior management level. And while women are properly represented at the board level (by law, they have to be!), we have yet to have a woman nominated to the position of CEO of a major Canadian pension fund (hopefully that will change with Ontario’s new ORPP).

What else? I challenge all of Canada’s Top Ten to take a page from the Royal Bank of Canada and publish their own Diversity Blueprint and provide their own vision and priorities for diversity and inclusion and back it up with hard statistics that are readily available on their website.

For example, the Royal Bank publishes a Diversity and Inclusion Report as well as an Employment Equity Report and a diversity report card setting out initiatives and whether they were met.

Now, the Royal Bank isn’t exactly a paradigm of diversity, especially in upper management and a lot of this stuff is corporate marketing fluff, but it has done more than any other organization to promote diversity at all levels and unlike other organizations, it has a recruitment program specifically designed for people with disabilities.

On page 5 of its Diversity and Inclusion Report, the bank provides us with hard numbers (click on image):

You might be wondering why don’t all of Canada’s big banks, large public pension funds, Crown corporations and government organizations follow the Royal Bank and publish their own diversity reports reflecting objectives and a scoreboard (it would be nice if they published statistics on pay equity too).

The answer is pure laziness and nobody really wants to report on diversity at all levels of their organization because if they did, most Canadians would be appalled.

When I privately confront the leaders of Canada’s Top Ten pensions on diversity in the workplace, especially in regard to persons with disabilities, they either dismiss me or state some generic statement like “we take employment equity very seriously.”

Really? Where are the statistics in your annual report or on your website? Worse still, when applying to jobs at Canada’s Top Ten pensions, some of them don’t even ask you to self-identify your gender or whether you’re a visible minority, aboriginal or person with a disability.

My favorite is when I confront leaders and they assure me “they take diversity seriously” but always make sure they hire the “best and brightest” no matter their gender, sexual orientation, ethnicity or disability.

Of course, this is all nonsense as the unemployment rate for people with disabilities is running close to 75% and it’s not because they lack competence or skills for jobs (the unemployment rate for aboriginals is equally appalling). In most cases, they’re more skilled and a lot more competent than people with no disability but our society systematically discriminates against people with disabilities and so do our public and private organizations.

All this to say I welcome any initiative which focuses on diversity but there’s a lot more that needs to be done on this front at all of Canada’s Top Ten public pensions.

And just so you know, while CPPIB is publicly discussing gender diversity, others like the Caisse have made significant improvements in terms of diversity in the workplace under Michael Sabia’s watch. But you won’t hear of this push for diversity at the Caisse which is one of the few public pensions that asks candidates to self-identify when applying to positions.

Still, the Caisse also needs to hire more people with disabilities and allow them to access that bloody elevator at the main entrance on Jean-Paul Riopelle which is only reserved for big shots like Sabia.

Let me stop right there because this is a topic that makes my blood boil for a lot of personal reasons and the leaders at Canada’s Top Ten all know exactly what I’m talking about. While they quietly make off like bandits in what is essentially a rigged system, Canada’s best senior pension and investment analyst has been relegated to the blogosphere, in large part because he suffers from Multiple Sclerosis (and is doing just fine, knock on wood!).

 

Photo by Nick Wheeler via Flickr CC License