In 1996, the Canada Pension Plan(CPP)took in $11 billion and paid out $17 billion. But today, those numbers aren’t as bleak thanks to the creation of the Canada Pension Plan Investment Board (CPPIB), Gail Cook-Bennett, the board’s chair, said in Toronto on Monday.
In a speech at the C.D. Howe Institute’s policy conference, The Canada Pension Plan Reforms Ten Years After: Lessons and Prospects, she looked back at the creation of the board and its mission, which was “to implement a world-class governance model and a world-class investment organization.”
From the outset, integrity was key for the CPPIB; the governance model had to be one that would avoid potential political interference. The board determined that three factors were needed for success, said Cook-Bennett. One, the CPPIB had to have an independent relationship with governments. Two, the pension plan should be professionally managed with a mandate to maximize returns. And three, the board should be transparent in its operations and governance structure to ensure accountability.
The board also set up a code of conduct for directors, management and employees. The reason behind this was conflict of interest, as many board members are drawn from the business and finance worlds.
A conduct review advisor position was created, too. “The conduct review advisor offers confidential consultations to any board member, employee or supplier of the CPPIB who may find themselves with questions about a potential conflict of interest,” she said.
A second focus in those early days was transparency. “Operating behind a veil of secrecy was just not acceptable,” said Cook-Bennett. In order to earn the trust and confidence of the public, the board implemented a formal disclosure policy.
Up for a challenge…or two
Fast-forward 10 years later. The CPP now has more than $120 billion in assets. And, she added, Canada’s chief actuary estimates it will be sustainable for the next 75 years.
However, Cook-Bennett also acknowledged two prominent challenges that the CPPIB will face in the coming years. One, the “overseeing of a more active investment strategy.” She said this strategy will certainly attract more attention and possible criticism in the future.
Two, the CPPIB must maintain independence from governments. Cook-Bennett reiterated what she said in her speech at the Organisation for Economic Co-operation and Development conference in Paris last week: the CPP is not a sovereign wealth fund (SWF) and should not be subject to the restrictions for SWFs.
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