Ethical performance lacking at bcIMC

Note, I bring this article to the top because it is drawing such heavy traffic.

B.C. freezes salaries, bonuses for Crown executives, CBC News, July 25, 2012

"The B.C. government is freezing the compensation paid to executives at its Crown corporations, Finance Minister Kevin Falcon announced Wednesday morning."

Well, Kevin, maybe it did not.

I haven't gone through BCiMC's 2013 financials in detail but amazing information about executive compensation jumped out. The remuneration of the investment management corporation's five top executives jumped 50% between fiscal 2011 and fiscal 2013. (A commenter below correctly notes that return on investments declined significantly from 2011 to 2013. The corporate officers' take during the year ended March 31, 2013 was up 29%. Imagine if executive compensation levels had not been frozen.

Between 2008 and 2013, compensation of five senior BCiMC executives (they make no reports on salaries for eight additional vice-presidents) rose from an average of $50,000 per month to an average of $83,000 per month. Lincoln Webb, one of twelve VPs, had his remuneration increase from $42,000 a month in 2008 to $86,000 a month in 2013. This does not include expenses or remuneration Webb draws from organizations outside BCiMC.

According to PEI Media, Webb serves,

"on the boards of Open Grid Europe, the Corix Group of companies, and Thames Water Utilities Limited, Britain’s largest water and wastewater company. He is also a past director of Puget Energy in Washington State, DBCT Ports of Australia, Transelec S.A., Chile’s largest transmission utility, and Aquarian Water of Connecticut In addition to these past and present positions Lincoln is also an advisory committee member to a number of private equity funds including Advent International, TPG Asia, and Cinven, a leading European-based private equity manager."

He is a non executive director of Thames Water Utilities, the company that rewarded its CEO with a 2012 bonus of almost $700,000 despite "overseeing a drop in profits and ‘deteriorating’ satisfaction rates among its customers." According to The Guardian in June 2013,

"The UK's largest water company is accused of "ripping off the taxpayer" after revealing it paid no corporation tax and pocketed a £5m credit from the Treasury in a year when it made £550m in profit."

The driving force behind rapidly escalating remuneration for senior officers is this. They collectively hold hands while playing a figurative game of leapfrog. There is almost no one willing to say no, because, if they do, they'll no longer be welcome in the game.

Of course, the austerity discipline was applied a little more strictly for public servants not earning six and seven figure incomes.

The financial statements of BCiMC, audited by KPMP LLP, are not as revealing as they would be if accounting gibberish were eliminated. For example, read this statement from Note 3, Significant Accounting Policies, and then consider what new information you gain :

"The Corporation provides a retention incentive to employees in senior staff positions through a long-term incentive plan (LTIP). Eligible staff are entitled to their first LTIP payment in their fourth year of employment with the Corporation. LTIP is accrued for eligible employees at an amount equal to one quarter of the estimated aggregate pay-out for the current year and each of the following three years. The estimated payments for years beyond the next fiscal year are recorded as a long-term liability."

The following was first published in November 2012. All information gathered from official reports of the BC Investment Management Corporation. You'll find much more about BCiMC HERE.

Following first published November 7, 2012

I've been comparing the British Columbia Investment Management Corporation to the Washington State Investment Board. They're very similar in terms of purpose and goals. Here are a few key stats:

bcIMC

• managed $92 billion as of March 31, 2012;
• earned a return of 10.8% in fiscal 2011;
• paid top five executives $4.1 million in year ended March 2012;
• employed 175 people at a cost of $36.1 million;
• pays (the Jawl Family) about $110,000 a month in office rent.

WSIB

• managed $85 billion as of March 31, 2012;
• earned a return of 21.1% in fiscal 2011;
• paid top five executives $1.2 million in year ended December 2011;
• employed 79 people at a cost of $9.5 million;
• pays about $20,000 a month in office rent.

Management of public pension fund investments is a lucrative situation in British Columbia but the direct financial cost of doing business is only part of the equation used to evaluate work of financial managers in the public sector.

A while back Swiss research firm Covalence released a ranking of twelve corporations rated worst in ethical performance among multinationals. I wondered if bcIMC was supporting any of those companies. Turns out, they were; all twelve of them. Our public pension plans have more than $1 billion dollars invested with the worst companies in the world.

I previously noted that bcIMC is a substantial Enbridge investor ($657 million) and holds major positions in the world's nine largest tobacco sellers ($553 million). Today, I checked bcIMC's investments in arms dealers and determined they have spread over half a billion dollars among almost every one of the top 20 public companies involved in the international arms trade.

BCiMC investments in tobacco companies, including those BC gov't is suing to recover medical damages.

This is not a crown corporation in which I have any pride.

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