The Decibel - The payout and relationship that led to crisis at a pension plan

Episode Date: February 24, 2026

It began with three executives from the CAAT Pension Plan raising concerns over a $1.6-million vacation payout and a relationship between the CEO and an employee. That has now led to a ‘full-blown crisis over governance,’ with nearly all of the senior leadership team changed or gone, including the long-standing CEO who’s on administrative leave. The Globe’s institutional investing reporter James Bradshaw has been covering the turmoil at CAAT. Today, he explains how these issues led to such turbulence and why it’s so important to have steady leadership at one of Canada’s big pension plans. Questions? Comments? Ideas? E-mail us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

There's a crisis happening inside one of Canada's big pension plans, Kat. This is a story about a clash at a large pension fund and some questionable decisions made by the CEO and its board that have spiraled into what I think is a full-blown crisis over governance at the plan. It comes from a large $1.6 million vacation payout that the CEO received. It comes from a personal relationship that he was having with another employee at the plan and how that came out and was disclosed to everybody at the company. And it raises some very serious questions, both about how this plan was being run and overseen.

It manages $23 billion for working in retired pensioners. And also just for the sector for how pension funds of this size, and Canada has some very big ones, are governed and run. Today, I'm talking to James Bradshaw, the Globe's institutional investing reporter. He's been covering the ins and outs of this leadership turmoil. I'm Cheryl Sutherland, and this is the decibel from the Globe and Mail. Hi, James. Thanks so much for being here today. Hi, Cheryl, delighted to join you.

So, James, let's start with the basics of Kat itself. What is this pension plan and how big is it? So Cat is pretty big. It is a pension plan that started out many years ago in 1967. as a pension plan for colleges in Ontario, what were called the Colleges of Applied Arts and Technology, which is where you get the acronym CAT. CAAT. C-A-A-A-T.

But in recent years, it's changed a lot and it's grown very quickly. What started out as being four colleges and their employees changed when the plan made a very deliberate strategy to start reaching out to a wide range of employers in a number of different sectors and bringing on new employers into the plan, broadening the plan, broadening the plan. the membership out. It went from what was a comparatively smaller plan to one that now has more than 800 employers, more than 125,000 pensioners working and retired. One of those is the global mail.

A couple of years ago, we also joined in and merged our pension plan in there. So we're a participating employer in Kat. So it has become, it's not the biggest in Canada, but it's one of them now. Canada has an unusually large number of unusually large pension. funds, the eight biggest ones manage more than $2 trillion collectively. Kat is 11th on the list, but it's still very large. It manages, as I said, $23 billion at the last filing, and it's still growing rapidly. So it's a very significant plan.

So let's get into this crisis that's happening at Kat. So it's now embroiled in this leadership crisis. Where does the story start, James? So the story starts in the sense that it became public in late January. And that's when Kat announced internally, they didn't announce it publicly, that three of the top most senior executives at the plan were leaving. And this was an abrupt announcement. This was not something that had been telegraphed in advance. The three people who left were the chief investment officer, the chief financial officer, and the chief pension officer.

So outside of the CEO, about the three most important people you can have at a plan like this. And the internal note said they were leaving on good terms but didn't give a lot of details. And as you can imagine, we got pretty curious. So we started reporting on it. And what we found was, in fact, what had happened was those three executives had gone to the board of trustees at Kat and had raised a number of concerns about things that had happened and about the way. the plan was being governed that they thought needed to be investigated, needed to be looked into. And that set up a bit of a clash, a bit of a standoff because the board looked at them and decided initially to stand by the CEO whose name is Derek Dobson. And that put the three executives who had

raised these concerns and who had expressed that they had lost a certain amount of faith in the leadership of the plan under this CEO. In a very awkward, position that ultimately became untenable. So they left all at once. And it was then up to the plan to try and stabilize things. Okay. So let's talk through these concerns that these executives raised with the board. Let's start with this big payout the CEO received. Tell me about that. So this is about a payment that the then-CEO Derek Dobson received late last year. It was ostensibly what you would call a vacation payout. It was to compensate him for unused vacation time that he had accrued in his job. But it was very large. It was $1.6 million.

Wow. We don't know exactly what the CEO of CAT or its other senior executives were paid. They're one of the few large pension plans in Canada that doesn't disclose that. But you can safely assume his salary is in the millions of dollars. This was a big chunk of that. And it was a very large amount. And there were a couple of things that made it look odd. One of those was that Kat has a policy internally for employees about how much vacation time they can carry over and how much time they can ask to be paid out for. And basically that policy said they can only carry over vacation until the end of the year after they earned it.

And they can only ask to be paid out up to five days of vacation. So there was first a question of was this policy even applied to the CEO? And if so, how does that work? The other thing was staff knew in the normal course of things that he did take vacations. He took what seemed like a normal amount of vacation for a person in his job. And part of the reason we know that is because when he was going to be away, there would be email sent to staff saying the CEO is going to be away from these dates. Here's what to do if you need something in the meantime. And so there was this question of we have a policy that says you can't carry out over a lot of vacation.

He seems to be taking vacation. How is he getting paid this huge sum? Yeah, also just to point out, James, that it's unusual for a CEO to be paid on vacation, right? Because CEOs is a very difficult job, but that's not something you usually hear about. Yeah, it's an intensely difficult job, but this is why CEOs get paid the big bucks. This is why they're making millions of dollars a year is that they don't typically say, you know, I didn't get every last vacation day because I was working so hard, or I worked a lot of nights and weekends, so you need to pay me back for. that. This isn't usually how those jobs work. And so you can imagine why it raised a lot of eyebrows internally. We also learned through our reporting that this wasn't the first vacation payout the

CEO had received. There were at least two others previously, each of them worth hundreds of thousands of dollars. So this wasn't a one-off. It seems to have been something of a pattern. And also, wasn't he on vacation when the story broke? Yeah. We found out subsequently that when the globe first broke the news of what had really happened and really led to these three executives leaving so abruptly. He was, in fact, on vacation in the Caribbean. He cut that short. He jumped on a flight home when that happened. But I think that added to the unrest about it for sure. I'm curious to understand how something like this could happen, James, because as you mentioned, there's this policy at Kat where you can only carry over five days of vacation and only for one year, right?

So how could this happen? So the only real clue we have is that Kat has said in a statement that he had a contract that governed his compensation and his benefits. So maybe there's a clue there that they felt that this policy for employees somehow didn't apply to him and the contract he had with Kat. Kat did make it clear that that $1.6 million payment he received was for multiple years. It was for vacation time that he had not been able to use over a multi-year period. But again, that still raises questions. He's still the CEO. He's still setting an example for the organization.

And that's still plan members money that he's being paid for the time off. He says he didn't take. So the other concern these executives brought up was a relationship the CEO was having. What should we know about that? So this goes back a little farther. Mr. Dobbson, the CEO at the time, had started having a relationship with another employee at Kat more than a year ago. And he did disclose that to Kat's board, which is what he's supposed to do under their company policies. He disclosed that in November of 2024.

The board looked at it. They decided to allow it to continue. And they put in a series of guardrails effectively that they said would help manage any perceived or real conflicts of interest. And that was things like he didn't have any say over the other employee's performance reviews over. their hiring or promotion or compensation decisions that the employee wouldn't report directly to him and there'd be multiple layers of reporting between him and that employee. And according to CAT, this was in full compliance with company policy. That didn't sit very well internally.

I was going to ask, so he disclosed it to the board, but what about the rest of CAT employees? It was only quite a bit later that he disclosed it to the rest of the employees at CAT. That was done at a sort of company town hall, basically. And from the sources we've spoken to and the reporting we've done, the tone of it was very much that if this came up, it was nobody's business. And everybody could do the organization a favor by reminding people of that. And again, I think that created a lot of unease because when it was disclosed to employees, the identity of the employee was not disclosed. So you can imagine people looking around the workplace saying, is it my boss? Is it someone who reports to me?

It just created a lot of unease internally. And it became a sort of simmering point of tension that when it added to the vacation payment and other things, ended up bubbling over. Yeah, yeah. The optics don't sound great at all. Were people surprised to see behavior like this, you know, the payment and also this relationship from this CEO? Yeah, this was very off brand. So Derek Dobson himself was known to be kind of a nerdy character.

He had kind of an awshuck's persona. He had an actuary's background. You know, he was somebody who did not project the kind of, you know, Bay Street, corporate, hard-charging CEO kind of vibe. He was a different kind of character. And Kat's leadership and employee base was like that too. They were a group of people that had kind of been built in that same image. And so I think that made this especially jarring because it felt at odds with what Cat was supposed to be all about. Employees at Cat sort of cheerily called themselves catsters.

They got a nickname for themselves. And you could see that kind of culture and team spirit and morale, which has taken a big hit over the last couple of months. I can imagine for sure. I feel like everything seems like it's imploding. So that must be a shock for people that are working there right now. Yeah. And the good news, if there is some good news in all of this, is that the plan is very well funded. It's got a 124% funded ratio, which basically means they've got $1.24 for every dollar they expect to need to pay out in pensions in the future.

And there's no sense at this point that there was financial impropriety, you know, that the money wasn't being invested or managed properly. So for pensioners who are listening, who are members of Kat, as far as anybody can tell, the money is still there, it's sound, it's being managed well, and that part of the plan is stable. But in terms of leadership, the way it's governed, who's in charge, the oversight, right now there's still a ton of upheaval and a real need for them to move to stabilize things. We'll be right back. You mentioned this clash between, you know, the CEO and these executives that left. What's the relationship like between these execs and the CEO? Were they trying to get rid of the CEO? There are different rationalizations for how we got here and what has happened.

There is definitely a narrative where these three people were doing a principled thing and standing up for the plan and doing what they thought was right because they felt they couldn't stand by any longer and allow these things to continue. There are people who looked at this as something of an attempt. coup, that people in the leadership did not want the CEO to be the CEO anymore. And we're trying to find a way to bring that to a head. I should say those three executives have not spoken publicly. We've tried to reach them a number of times.

They have not responded. So we don't have a direct account from them yet. Okay. What about the CEO, Derek Dobson? Have we heard from him at all? Like, what's he said about all of this? We have not heard from him. He has not spoken out.

What happened was, as I said, initially the board stood. by him. By early February, when we were reporting details of what had happened, the board was saying in statements sent to the globe that they continued to have confidence in him as CEO and as the leader of the plan. In fairly short order, that changed. The board of Kat decided, came to a realization maybe that they weren't going to be able to move forward without significant change. And Mr. Dobson was placed on administrative leave. Kat has put an acting CEO in place named Kevin Fahy. He's a real veteran of Kat. He's been there about 16 years, but he's also been thrown into a very tough spot here. It was only about three weeks earlier

that he was promoted to chief investment officer when the previous CIO left as part of this wave of departures. And then within weeks, he was thrust into the acting CEO role. So he's got a lot on his shoulders right now. Move jobs twice from CIA to CEO very quickly. Yeah, that must be a lot for him. I don't envy the responsibilities he's got right now. For Derek Dobson, you mentioned he's on administrative leave. What does that mean exactly?

Is he getting paid? Do we know anything about that? They haven't released details of it. But the fact that they've put an acting CEO in would raise questions about whether he's expected to come back at this point. Okay. So it sounds like a lot of people have left. There's a lot of turmoil happening at the company. what kind of state is a leadership team in right now?

Like how does a company function like this? There's not a lot of it left, to be honest. The leadership team has been really hollowed out. And keep in mind, there are still several layers of management and leadership below that very top senior executive team. But in terms of that team, you now have the acting CEO. The chief strategy officer, Jillian Kennedy, is still in place. But the rest of the team that existed in mid-January is gone.

There was a new executive put in place when the three other executives left named Scott Blakey. We understand that Mr. Blakey has now resigned as well. He's been removed from the company website and I heard over the weekend from sources that he did in fact resign. So there are a lot of gaps on this executive team that need to be filled. And that's just the executive team. There's also been turnover in the board's leadership. Not long after this all came to light, the union that appointed the board chair suspended him and then ultimately a few days later formally removed him from the board. And then when Kat's board met and made the decision that they needed to have bigger change and put the CEO on administrative leave, the vice chair of the board also resigned.

So they need to find a way to stabilize this soon so that the business plan and the operations that manage this money for members can move forward. Why is it so important to have steady leadership at a pension plan? Pension plans are so much about trust. You have to believe as a member of them that this money you're paying in is going to be there and that you're going to get paid and it's going to last through the rest of your lifetime. The whole promise of a pension plan is that security. And when you're dealing with billions of dollars, you're planning decades into the future. Stability and trust are really paramount.

And you want to know not only that the plan is being run well by its management and its senior leadership, you also want to know that there is oversight of that from a board, from independent people who can step back when something isn't right and say, this can't be, and step in and make sure that it gets dealt with swiftly, so that it doesn't spiral into a situation like this. So you don't get this kind of instability, upheaval uncertainty that really puts people on edge. And that is why the broader sector of pension,

plans is looking at this as well and saying, A, this doesn't reflect well on us, even if we haven't done anything wrong. And B, we better have a close look at our policies, procedures, oversight, governance, make sure we're doing everything absolutely the right way and everything's as tight as it can be so that we don't have a repeat of this. And hopefully that is something good that comes out of this very difficult situation. There are a few investigations going on here as well. Can you tell me about those? Yeah. So Kat itself, decided to do a governance review. And in December, they hired a sort of external expert. We haven't seen the results of that. They were expecting to have it completed in February.

And that was going to go to the board with some recommendations for what could be done better or differently. As you can imagine, the regulator in Ontario that oversees pension plans, which is the Financial Services Regulatory Authority of Ontario, has taken quite an interest in this. Our reporting indicates that they are now examining what has happened at CAT. And even one of the unions that is really prominent amongst the membership of CAT, which is OPSU, the Ontario Public Service Employees Union, they have also said they're investigating what happened because they play a huge role in this. They represent a lot of the employees at Ontario colleges who make up a large part of the membership of this plan. And they also get to appoint some of the board members, including in some years the board chair.

So they have a huge role to play and they've also been taking a hard look at this. And just so we're clear, though, that there's no evidence of any illegal activity, right? We've not seen any evidence of illegal activity of even really sort of outright misconduct. What we have seen is potential failures of oversight and governance processes. And when that happens, what it does is it forces everybody to ask the question of if those things are slipping through the cracks and are not being. properly overseen, what else is not being overseen properly? And that's where that real crisis comes from because it starts to erode the trust that people have in the plan. And that's why they need to turn this around as quickly as possible. Well, as you mentioned, though, that the pension

itself is still well funded. And so there aren't concerns about members being paid out. But do we have a sense of what the situation may be costing cat members? We don't know. It's one of the questions I would love to answer at some point, but it's safe to assume that the price tag is not negligible. We've seen multiple executives, not just those three, a couple of others, depart without a lot of explanation. And it is typical in those situations for those executives to receive a severance package, you know, a payout of some kind. And these were highly paid executives.

So you could imagine that severance could be not inconsiderable. you've also got Kat commissioning this governance review and hiring outside experts to do that. They're going to submit a bill. Anytime you have this kind of upheaval, they're going to be lawyers involved. They're going to submit their hourly rate. So we are in a situation where it's not hard to imagine that this has cost Kat millions of dollars at this point. And to be clear, in a $23 billion fund, again, that's not going to jeopardize their ability to pay pensions. But there's a price to it.

Just lastly, James, what does a scandal mean for the future of Kat's success? In the near term, I think it puts at risk that expansion plan that I mentioned earlier, that push that drive to continue bringing on new employers, new members, because you have to think that anybody who was considering joining the plan or on the cusp of joining the plan wants to ask a few questions before they sign on the dotted line now. I think one of the dangers is that if they don't get the leadership situation sorted, if they can't show credibility in the leadership of the plan and the board of the plan, then there is a risk of losing talent. There is a risk that good people who work there who are doing this work for plan members will say, I'm not sure this is where I want to be. And we'll look at other opportunities elsewhere.

It's a competitive sector. There's a lot of competition for talent. So I think that would be one of the other near-term risks. James, thanks so much for coming on. It's been a real pleasure being here. Thanks. That was James Bradshaw, the Globe's Institutional Investing Reporter. That's it for today. I'm Cheryl Sutherland. Bianca Thompson joins us from the Canadian Journalism Foundation's Black Fellowship Program

and is our associate producer. Our producers are Madeline White, Rachel Levy McLaughlin and Mikhail Stein. Our editor is David Crosby. Adrian Chung is our senior producer. and Angela Pichenza is our executive editor. Thanks so much for listening.