Front Burner - Why one MP wants companies like Bell to pay public money back

Episode Date: February 12, 2021

Profitable companies have accessed the Canada Emergency Wage Subsidy while increasing dividend payouts to shareholders. And now both the companies and the program are under fire. Today, CBC’s Jonathan Monpetit explains how CEWS works, and Liberal MP Nathan Erskine-Smith who wants to see some companies pay part of that money back.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hey, I'm Jamie Poisson. So if you were listening to TSN 1040 in Vancouver on Tuesday, you would have heard a commercial, then this. We have some news to share today about changes to our programming.

As of today, CKST will no longer be a sports talk radio station. An oddly robotic voice explaining that the popular sports station would change formats. Then a song that's really popular at graduations and weddings and wakes. Green Day's Good Riddance, Time of Your Life. Another turning point, a fork stuck in the road. of your life. Similar messages were delivered at TSN stations in Winnipeg and Hamilton. These format changes made a lot of people mad at Bell, which owns TSN, and the anger came on the heels of a round of deep job cuts at the company. The week prior, Bell Media laid off a bunch of people at radio stations across the country, as well as CTV and TSN, more than 200 in Toronto alone, according to Unifor.

Bell Media is part of BCE Inc.'s Bell Canada division, the country's largest telecommunications company. It's a company that, over the course of the pandemic, has received more than $120 million worth of federal aid through the Canada Emergency Wage Subsidy, most recently in November. The company says that the subsidy helped keep people on the payroll in 2020. Bell is also a company that has increased its annual dividend payouts to shareholders. Bell is not alone in increasing dividends to shareholders while taking this wage subsidy, and it's raising questions about how this massive federal aid program is designed. In a bit, we're going to talk to a Liberal MP who wants to see some of this money paid back. But first, friend of the pod,

CBC Montreal reporter John Malpatite is here to explain a bit more about this program. He was part of a whole investigation that looked into how it was being used a few months back. Hey, John, thanks so much for joining us. My pleasure, Jamie. Good to be here. So first things first, what is the Canada Emergency Wage Subsidy, or SUES, I think is what we're going to call it. Yeah, the cool kids call it SUES. So basically it is, as the name implies, a wage subsidy program. Basically, it is, as the name implies, a wage subsidy program. So it is meant to help businesses retain employees on their payroll.

And so this program was rolled out. It was part of the suite of programs that were rolled out, you know, after the pandemic really started to hit hard in March. And it will be the most expensive of the pandemic aid programs by the wraps up in June, it will have cost around $100 billion. Right, right. And can you tell me how it's supposed to work? Like essentially, how would you qualify for it as a company? Basically, companies have to show that they've experienced a decline in revenues. And so initially, they had to show that they had a decline in revenue between 15% and 30%. And then as the program went on, the government brought some reforms to it,

and so it made it proportional to your decline in revenue. So the amount of wage subsidies that you would get is decided in function of the percentage decrease in your revenue. in function of the percentage decrease in your revenue. Okay, okay. So in theory, this was supposed to be for companies that are hurting because of the pandemic. Specifically, it's supposed to go to payroll so that people don't get laid off. And I know that the government says that the program

has helped almost 4 million Canadians stay on the payroll. But in practice, I know that you found that actually there was some pretty profitable companies getting this money, companies that could arguably afford to keep their staff on board on their own. And can you give me some examples of that? Yeah, so specifically what we looked at were corporations who have to make public certain financial filings. And so what we found was actually there were a fair number of corporations who were claiming more than $10 million worth of subsidies. And there were these indications that these companies were actually doing quite well.

So one company in particular is a trucking company called TFI International. It's based in Montreal. is a trucking company called TFI International. It's based in Montreal. And up until September, they had claimed $63 million worth of wage subsidies, but they were also paying out dividends. In fact, they had engaged in what's called a share buyback program where the company uses cash on hand to go and buy back shares that are on the market, which helps boost the share price.

And during this period of time, the share price jumped and the CEO, president and CEO of the company sold his own shares and made a profit of about $20 million. So that's kind of one example that really stood out for us as a company that was behaving in a way that indicated it was not hurting badly by the pandemic. And in fact, it was doing quite well. And the other kind of classic example was Leon's. So Leon's had a big hit initially in the pandemic. Its revenues decreased, but sales figures quickly bounced back afterwards, partly because people were at home buying things for their home. So Leon was able to do quite well with its online business.

So it was collecting sous. It collected several million dollars worth of sous. And then it turned around and increased its dividends. So again, this is kind of another decision that financial experts point to as saying, well, that company has a lot of money on hand if it's able to afford to increase its dividend. And maybe it didn't, it wasn't in the dire straits that people kind of thought it would be at the outset of the pandemic. Can you tell me about GDI? GDI. So GDI is a janitorial company, and GDI is a company that also collected several million dollars worth of sues. Like many companies, revenues decreased drastically at the outset of the pandemic. But it has a business that did quite well because everyone was kind of obsessed with hygiene and cleaning things.

And so it ended up seeing healthy operating revenues, healthy profits after that initial decline. But that didn't prevent it from actually laying off a lot of workers. And so you have this kind of tension between companies who were laying off workers, collecting SUEs, still posting fairly good profit figures. And so this, I think, has helped contribute to some of the questioning about how effective a program SUEs really is. Right. And I want to get to that in one minute. But first, is all of this, you know, the increase in dividend payouts, the laying off of employees, is this a violation of the program in any way? Are these guys breaking the rules? So they're not breaking the rules per se,

but you could say it is a violation of the spirit of the program. This program was created really to encourage corporations to keep employees on the payroll. And it wasn't created as a way of helping investors protect their investments. And so insofar as corporations who are doing well are receiving money, it does suggest there are elements of the program that haven't been quite well, very well designed. And let's talk about the federal government here, because they're the ones administering this program. How do they justify it being used by companies that are actually taking this taxpayer money while still paying out dividends, even increasing dividend payouts to their shareholders. So when people began, you know, asking questions about this

kind of corporate behavior, you know, increases, dividend increases, dividend payouts, share buybacks, and while accepting sues, the finance minister, Chrystia Freeland, came out and said, well, look, you know, I'm warning companies, you're not supposed to do that. You're not supposed to use sues in order to hike dividends. But in a sense, that kind of is not really the criticism that economists and other financial experts are aiming at the program. What they're saying is that the program isn't very well designed. And in fact, corporations who don't need the money are getting the money. And because the program doesn't very well designed. And in fact, corporations who don't need the money are getting the money. And because the program doesn't have very specific guidelines about who qualifies or what you can do with the money, there are some who say, well, it's actually quite an expensive and

inefficient way of saving Canadian jobs as things go forward. So it might have been effective in the short run, but now we're several months into the program and there's no reason why the government could not have kind of added some criteria to make sure only corporations who are really in a tough financial situation would be able to qualify for the money. Right. I imagine for a lot of people listening right now, this probably feels unfair, right? One of the things that's come up a lot in our research is, you know, people pointing out how much backlash was directed at people who received CERB payments who may not have needed CERB payments. And then you, there hasn't been the kind of the similar backlash until recently against corporations who were doing quite well financially and yet still receiving what amounts to corporate welfare. I do understand that other countries that have rolled out similar programs have done stuff to address some of these concerns.

And can you tell me about that? Yeah. So, I mean, there are a whole bunch of very well-known policy options that have been attached to similar programs in the OECD and the G7 countries in order to kind of address public concerns that corporations who don't need the money are getting the money. And one of the kind of the most obvious rules, which is in place in places like Spain and Netherlands, is to basically bar companies from paying dividends while they're receiving, you know, wage subsidies. And so that would be kind of a very, you know, black and white way of signaling to the public that this money isn't going to line shareholders' pockets.

All right, John, thanks so much. My pleasure. In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization. Empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years.

I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo, 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast,

just search for Money for Couples. Now that you're all filled in on what the SUSE is, how it works, and how some companies have been using it, I want to bring in Nathaniel Erskine-Smith. He's a Liberal MP in Toronto, and I asked him what he thought about the fact that all of the big three Canadian telecom companies took money in the form of the wage subsidy while still paying out dividends to their shareholders, in Telus and Bell's case, increasing those payouts.

I think these are healthy companies that in Bell's case was able to pay $3 billion in dividends. Rogers paid $1 billion. Telus paid over $1.5 billion. And let's also not forget that Bell has $5.2 billion in available liquidity cash on hand. They certainly could have weathered this crisis without $123 million in federal support at the same time as they ultimately slash jobs anyway. I should say Bell has said that they have faced extraordinary losses in revenue across their media platforms and other parts of their business. And they say that the sues help minimize the

impact on jobs. They also say that they have not used the program since November. And I know that you actually did have a chance to question Bell's chief legal regulatory officer, Robert Malcolmson, about their decision to access SEWS and pay increased dividends in a committee. And I'm just going to play some of that response for our listeners. No, what we did was we were a participant in a government program that was very well designed and intended to keep Canadians working at a critical time. And we participated in that program commensurate with the impact that the pandemic was having upon our workforce. And, you know, I have to say that, you know,

when you quote our financial results, and I don't do math as quickly as you do, but you do have to remember that in order to build Canada's networks, in order to invest in 5G, in order to have fiber rolled out to 5.6 million households and wireless home internet targeted to reach a million households, you need investment capital. And the only way you get investment capital is from shareholders that are willing to invest their money with your company in order to fund your network expansion. So if we don't have investment capital and if we're not delivering shareholder returns,

Canada will not have the level of investment that's needed to build the networks that we need. So essentially, he's justifying paying increased shareholder payments here. Essentially, what he's saying is that he has to keep the company healthy so that people will invest in it and that investment funds network expansion. And what did you make of his response? It reminded me of when the Bell CEO attended before the CRDC in early 2020 and made it very clear that shareholders always come first. And here we are living through a pandemic. This solidarity of we are all in this together clearly breaks down, where a company that is clearly financially healthy,

not a Main Street business here in Beaches East York or across the country that is being crushed by the economic crisis and the health crisis, but a company that is very healthy and then sees fit to access $123 million. They had no need to access these funds. And we know that because they were actually able to increase dividends in Q4. I think it's also worth noting here, maybe getting you to react, that the latest unemployment numbers that came out last week were pretty awful, more than 200,000 jobs lost in January. And those are concentrated amongst those who can least afford it. Lots of people

who can't even pay their rent forget investing in a stock that might be able to pay them dividends, right? Our focus as a government should unquestionably be to ensure that no one is left behind and we're directing support to those in the greatest need. And that certainly happened through the CERB and there are still people left behind. And I personally think that the federal government should be very squarely focused on that question. And ensuring that we have a federal wage subsidy that is supporting businesses is important too. I have businesses that have, in my community at least, that have certainly benefited and importantly

from the commercial rent subsidy, from the wage subsidy, and they're very thankful for it. It's not enough for them to completely be made whole. And so when you look at a company like Bell, but there are other companies as well that either increased dividends, continued paying dividends, or in the worst case, bought back shares, these companies

clearly aren't in that need. And it is staggering when you look at the total sums that these companies receive. Speaking of your government, you know, I don't mean to be harsh here, but you are part of the governing party. And frankly, like, didn't you guys kind of see this coming? Like, if a government aid program is available to a company, why wouldn't they take it? You know, as far as I can tell, no one is accusing these companies of breaking the rules. They took the money that was made available to them by the government. There are certainly examples of companies that did not access the federal wage subsidy and likely could have because they understood the spirit of the rules. And yes, the rules could have been designed better, no doubt, at the outset. But let's remember,

we were rolling out these programs in the outset of a pandemic, trying to get support to businesses in dire need. And let's also remember that these measures were supported by all parties. Now, with the benefit of additional information, I'm certainly calling on the government to ensure that any company that has bolstered its bottom line with millions of dollars, hundreds of thousands of dollars at a minimum, but in some cases, in the case of Bell, over $100 million, that they are required to return an equal amount that they've either paid in dividends or used to buy back shares. And we can point to other examples where the government has revisited its programs. Most recently, we saw the sickness

benefit, where Canadians were quite outraged, and justifiably so, that travelers, for non-essential reasons, were accessing the sickness benefit. And so I think we could adjust the wage subsidy program as well with the benefit of additional information. And we could get it right. And we should, I think, claw back dollars from companies that weren't in real need and direct it to both individuals and businesses that are in continued need. Right. And this is your private member's motion right now calling on the government to call

on these companies to repay some of this money. Have you talked to Finance Minister Christopher Freeland about this? I have raised it with Finance. I've raised it in caucus with colleagues. And I think it's the right thing to do. I don't yet know. I think it's an active conversation with Finance. I don't yet know where they will land on this.

They may land on some solution that isn't exactly what I'm calling for. I think there are probably a range of reasonable solutions to this problem. At a minimum, on a going forward basis, this problem should be cured. I would argue on a retrospective basis it should be cured as well. But I do think it's an active conversation with finance, but I don't yet know where it will all land. I should take a step back. This isn't the only concern that finance is dealing with right now. So I've corresponded as it relates to the upcoming budget. I've corresponded as it relates to new businesses that

aren't eligible for existing supports because when they were first rolled out, there was no one, I think, that realized this would last quite as long as it has. And so there are businesses that have been caught in the middle of this that haven't been able to access support. So there are a number of active conversations underway at finance, and I would say this is one of them. So I'm hopeful that there will be a resolution. I'm certainly trying to be public in my call to ensure that there's a greater emphasis that there needs to be a resolution. And I think, especially as it relates to Bell, where the job losses at the same time that we saw significant support from the federal government

for a company that is healthy, both as it relates to cash on hand, but also dividends. I think there is a growing demand across the country that some action be taken. And I guess I'm just wondering, you know, why we haven't heard more then from the prime minister and the finance minister on this issue. It's such a massive program, right? Like we're talking about so much money that has been spent on this program here. And, you know, I take your point that you've put forward this private members motion. But, you know, when I think about a private members motion, I'm not immediately thinking to myself, like, government priority here. Like, this is what they're going after right now. In a perfect world, I think we would, as we have recently addressed CERB repayment relief to help those, as you've described, people in greater need at the margins. I think just as

we've addressed that issue, and I had raised that previously, as many colleagues of mine did as well, I hope that the government listens on this issue as well, and that we respond. As I say, we've adjusted other programs. I think we ought to adjust this one. I can't speak to exactly where things are at in finance and where they will land in the end. I can speak as a member for Beaches East York that I certainly think this is an important issue that needs to be addressed, just as I thought that when the grocery stores cut pandemic pay while increasing dividends, I thought that was an important issue to address, that we see real unfairness, that many companies, as I say, have fallen on really hard times in the course of this crisis. And the government needs to be there to support those companies. of our government, which I think certainly has happened in the course of the wage subsidy,

or where they have abused the goodwill of Canadians, as the national grocers have, as the telecoms have, as any number of companies have, where they've accessed either cut pandemic pay in the case of the grocers while increasing dividends, or in the case of the telecoms and many other companies, it's not only the telecoms, Leon's and many other companies that bought back shares or increased dividends or maintained dividends, that we should claw back those taxpayer funds and we should use them to support people and individuals and businesses in the greatest need. You know, I wonder that frustration that you talk about, who do you think is going to wear it in the end, you know, if anyone, the companies or the liberal government who, you know, arguably left this program running with so few conditions for so long.

We're many, many, many months on here. I think it's not just the Liberal government, of course, because we're talking about, as I say, all parties that have supported these programs and have not pushed in any public-facing way to adjust these programs with any seriousness. So I think Parliament as a whole will wear it if we don't fix these programs, as we should. To some extent, the liberal government potentially will feel some impact if it doesn't address a real demand and a real call and understanding of unfairness in this situation and respond in some way. I think, though, when we take a step back and we look at what kind of society we want to build going forward and a fair society and address inequality, both income and wealth inequality, I think instances like this reinforce the need for addressing that kind of inequality. And I hope mobilize and motivate citizens and also elected officials to take those issues more seriously and ultimately to realize greater fairness through policy going forward.

So I hope that this issue, the groceries issue, but the fact that Canada's billionaires are so much better off in the course of this pandemic than they were even before, that that notion of fairness has much greater emphasis going forward. I understand you plan to bring your motion forward in Parliament next week. And do you expect wide enough support for it to pass? I don't expect just the arcane rules of parliament that the private members motion will pass as far as the timeline is concerned. The focus of this motion is to call public attention to this issue, just as I use the industry committee to call attention to this issue. And I should pause. I was not the only one drawing attention to this issue. There was a conservative member, there was an NDP member that were drawing attention to this issue as well. And so I hope, just as all parties have supported these emergency response initiatives in their creation and their continuation, I hope that there's all party support to adjust them and to address the obvious

unfairness. And I know that you want the companies to give some of that money back, but I guess even if the government decided that that was something that they wanted to do, could they do it practically if the rules weren't clearly written in the first place? There is nothing that stops Parliament from acting to ensure that these companies pay back funds that we don't think were properly paid out in the first place as a matter of the spirit of the rules. So we have the authority to do so as Parliament. And while the rules may have been unclear in some ways in terms of the letter of the law to these companies or clear enough that they saw fit to take advantage of them, that nothing prevents us from going back and changing those rules retrospectively, retroactively. We look at one example,

but an excess profits tax from World War II that wasn't levied at the outset of the war by any means, but was levied after some of these profits had already been earned. And it is clearly within the authority of Parliament to take action to address fairness in this circumstance and to retroactively adjust the rules as a matter of fairness. OK, Mr. Erskine-Smith, thank you so much. Thank you. All right, that is all for this week. FrontBurner is brought to you by CBC News and CBC Podcasts. The show is produced this week by Imogen Burchard, Elaine Chao, Shannon Higgins, and Ali James.

Our sound design was by Derek Vanderwyk and Mackenzie Cameron. Our music is by Joseph Chabison of Boombox Sound. The executive producer of FrontBurner is Nick McCabe-Locos, and I'm Jamie Poisson. Thanks so much for listening, and we'll talk to you on Monday.