Simon Archer comments on government pension consultation
The Canadian Investment Review talks to Simon Archer about the federal government’s pension consultation
The Canadian Investment Review reports on the federal government’s public consultation on pressing pension issues relating to underfunding and employer insolvency. One topic open for submissions is whether dividend payments, share redemptions and executive compensation packages should be restricted if a company has a large pension deficit.
Simon Archer addressed that topic in his conversation with the Canadian Investment Review:
Simon Archer, partner at Goldblatt Partners LLP, says this is a welcome consultation paper raising long-standing issues that need to be addressed.
“The big case that’s on everyone’s mind this year is the Sears case, which is a great example of that dividend issue problem. But of course there are many others that we don’t read about,” he says.
He highlights that when Sears was paying out dividends it could have been paying off its pension obligations. “In the end, of course, the company filed for bankruptcy with a big pension deficit and pensioners will be bearing the brunt of that even though during the 10 years prior to it there was lots of money and that deficit could have been paid off,” says Archer.
Archer says when there’s a big underfunded portion in the plan and its persistent for some time, it’s reasonable for a regulator to be given some degree of power to monitor, to request information and to even require a company to justify certain transactions.
“Sears made it really clear that those powers are needed here — and how exactly they’re developed and what criteria are used are always up for fair and open debate — but it seems to me quite reasonable and even imperative that regulators be given the power to do that and be given the resources to do it effectively.”