It is the country’s eighth-largest financial institution—and it is worth almost twice as much as the renowned $12.6 billion Alberta Heritage Savings Trust Fund. Virtually unknown to most Canadians, the Caisse de dépôt et placement du Québec is the agency that administers Quebec’s pension and insurance plans. But unlike most of Canada’s conservatively managed pension funds, the Caisse has pursued a controversial strategy—aggressively seeking out high profits and entry into corporate boardrooms. Last month the government organization reported an impressive 24-per-cent return on assets of $25.2 billion in 1985. Said Donald Coxe, research director at the brokerage firm of Gordon Capital Corp. in Toronto: “Theirs is a vision that should be shared by other pension plans.”
Despite its impressive performance, the Caisse is facing a major political
battle. The 177-employee agency has been led since 1980 by chairman and general manager Jean Campeau, a bespectacled 54-year-old former public administrator who was appointed to the job by former Parti Québécois finance minister Jacques Parizeau. Campeau, who was Parizeau’s deputy finance minister, developed the Caisse’s activist investment style. During the Parti Québécois era, the Caisse used the pension fund to invest heavily in some of the province’s large companies. But its critics argued that the Caisse should not use pension money to pursue the economic development policies of the provincial government. And now, some members of the new Liberal government of Premier Robert Bourassa say that the Caisse’s style still reflects the interventionist policies of the former government. Said Reed Scowen, a provincial Liberal member of the national assembly and the principal economic adviser to
Bourassa: “The Caisse was being
turned from a pension fund into a permanent government holding fund.” Founded 20 years ago by the government of then-Quebec premier Jean Lesage at the same time as the Canada Pension Plan (CPP), the Caisse has consistently outperformed its federal counterpart. Ottawa’s pension fund is restricted by law to buying government bonds that pay low rates of interest. The Caisse is allowed to purchase bonds as well: as a provincial agency, it is the major buyer of Quebec government and Hydro-Québec bonds. But under Campeau, the agency began investing heavily in the stock markets. The proportion of stocks in its portfolio increased to 27.5 per cent last year from 21 per cent in 1980. And the Caisse has consistently averaged three per cent higher rates of return than the CPP. Said Coxe, a former member of the Royal Commission on the Status of Pensions in Ontario: “The Quebec
plan is an example of what should have been done with the CPP.”
The Caisse’s rapid growth has clearly benefited Quebec’s business community. The agency has a policy of dealing mainly with Quebec brokerage firms. And its heavy trading on the Montreal Exchange, which on some days accounts for up to 25 per cent of all activity, has been largely responsible for keeping Montreal alive as a financial centre. The Caisse has also trained a generation of money managers, many of whom have left to fill executive positions in major Quebec companies. Said Coxe: “There is clearly favoritism toward the home town.”
The Caisse’s growing influence has led to a heated debate about the role that a government agency should play in the affairs of private companies. The Caisse is now the largest single shareholder of some of Quebec’s leading industrial companies—Alcan Aluminium Ltd., Canadian Pacific Ltd. and Bell Canada Enterprises Inc. And the Caisse has not been a passive investor. Although it is restricted by law from owning more than 30 per cent of any company, the Caisse’s executives acknowledge that they have attempted to influence corporations in which their agency holds a large stake. A key tactic: attempting to gain representation on the board of directors. Among the companies that the Caisse has succeeded in penetrating are Domtar Inc. and Provigo Inc., both based in Montreal.
But in many other instances, the Caisse’s attempts to gain boardroom seats and influence corporate decisionmaking have encountered strong resistance from corporate management. The agency has been consistently refused a place on the board of Canadian Pacific Ltd. even though it holds eight per cent of CP’s shares—the single largest holding.
A contest for the top executive position at giant grocery distributor Provigo Inc. illustrates some of the Caisse’s current political troubles. With its determination to take a role in private companies, the agency may come under attack from Paul Gobeil, president of the Quebec Treasury Board. Gobeil left his position as vicepresident of finance at Provigo last year to run for the Liberals after a boardroom struggle that led to the appointment of former Montreal Exchange president Pierre Lortie as the company’s chairman. Lortie won the job over Gobeil’s boss and mentor, Pierre Lessard, who was the company’s president.
The Caisse actively promoted Lortie for the job. As the company’s largest shareholder, it had earlier
gained representation on the Provigo board. Said Marcel Bélanger, a Quebec City economist and a Provigo director: “The Caisse is eager to exercise its role as a majority shareholder, but it is not the role of a government pension fund to take control of private companies.”
There is growing pressure on Bourassa from both politicians and the business community to keep the agency out of the boardrooms. Said Scowen: “It seems unwise for an agency which controls a pension fund to sacrifice liquidity by tying up huge blocks of stock in long-term investments.” Bourassa himself has told friends that he finds Campeau “pretentious.”
The government will likely ensure that the Caisse remain as the key source of government financing through the purchase of Quebec’s bonds. But some analysts say Bourassa may restrict the fast-paced investment style that the Caisse developed under the Péquistes. The new government is, in fact, discussing the possibility of splitting it into two separate pension funds to compete with one another. Bourassa’s Liberals have also criticized the Caisse for its strategy, begun in 1983, of investing in the U.S., European and Japanese equity markets. The Caisse’s executives say that the agency had little choice but to seek out foreign investments because it had exhausted domestic opportunities. As a result, the volume of its foreign holdings has increased to $410 million from
$148 million in the past year. And Campeau has pledged to increase that total this year. Said Jean-Claude Scraire, the Caisse’s senior vice-president of corporate and legal affairs: “When you get as big as we are, there are fewer and fewer places to invest your money.”
Despite his freewheeling style, Campeau, a former stockbroker before becoming a civil servant in 1971, has maintained a low public profile since becoming chairman of the Caisse. Known for his no-nonsense business style, he rarely gives interviews. Under his leadership, the Caisse has been a leading champion of shareholders’ rights. Last May the Caisse was among the opponents to a share reorganization by Montreal-based Seagram Co. Ltd., a liquor producer controlled by billionaire brothers Edgar and Charles Bronfman. The Bronfmans planned to create a new type of share that would have increased the brothers’ voting control of the company without increasing their actual shareholding. The Caisse, which owned about 6.5 per cent of Seagram, joined with other shareholders to fight the plan because it ignored the impact the move would have on minority shareholders — and the Bronfmans eventually withdrew it. Said Montreal investjf ment counsellor Stephen Jarislowsky, who also i opposed the plan: “The Caisse is also fed up with schemes that would take away its voting rights.” Campeau may eventually have to mesh his activist style with the more conservative approach favored by government and business. But his job seems secure—if he wants to keep it. He still has four years remaining in a 10-year contract which can only be overturned by a vote of the national assembly. And his $131,000-ayear salary is far lower than those earned by his counterparts who manage private investment funds. But some observers say that the new pressures on Campeau may result in his resignation. Said one high-ranking provincial Liberal: “Bourassa may get the Caisse out of the boardrooms, but it may be at the expense of losing Campeau.”
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