The Caisse controversy just won't go away

Sabia's appointment still draws fire, and not just because he is a 'Canadian'

CDPQ - Où va Michael Sabia?

It is inaccurate to call the appointment of Michael Sabia as president of the Caisse de dépôt et placement du Québec a political train wreck. At least a wrecked train stops rolling.
Two weeks after the appointment, however, the Sabia controversy rolls on. Yesterday's Quebec papers reported, some on their front pages, that the Caisse president was giving up the $235,000-a-year pension for life he would receive after completing his five-year term, at the age of 61.
In addition, he was giving up his bonuses for his first two years on the job and the severance pay he would receive if he is fired or if his contract is not renewed.
Coincidentally or not, this was announced the day that La Presse disclosed the pension, reporting on its front page that "Sabia hits the jackpot." The bonuses and severance pay had been public knowledge since Sabia's appointment.
The Caisse's chairman, Robert Tessier, told La Presse that Sabia, who is already a millionaire, is motivated by a sense of public service and had offered on Monday to take less money than the Caisse offered him.
But the fact that the Caisse's new president sent a letter to Finance Minister Monique Jérôme-Forget authorizing her to announce his decision was seen as further proof that the public fund manager has lost its independence under the Charest government.
And the fact that Sabia sent the letter the same day that his pension was disclosed made it appear as though the Caisse under its new management was so jumpy it could be stampeded into a hasty response to a headline.
(At this point, we pause to shudder at what might happen if, as opposition leader Pauline Marois and others suggested this week, the Caisse became the owner of the most second-guessed business in Quebec, the Montreal Canadiens.)
It might have been more re-assuring had Sabia responded to the disclosure by saying: "Hell, yes, it's true, and you're getting a bargain, as I will show you over the next five years as the return on the Caisse's investments outperforms the average for Canadian fund managers."
For the Caisse badly needs to restore public confidence, not only because of the recent instability in its senior management and the $40 billion in paper losses it suffered last year, but also for reasons related to Sabia himself.
The explanation for the controversy surrounding him that has been favoured by the English-language press and promoted by his patron, Premier Jean Charest, is that Sabia, an English-Canadian originally from Ontario, is a victim of xenophobia.
Maybe some members of the Québec Inc. club do resent the new Caisse president as an unsympathetic outsider. But the insinuations of Bernard Landry and Jacques Parizeau that Sabia is an English-Canadian fox allowed into the henhouse to make a grab for Quebec's nest egg are not widely credited.
And it is not unreasonable to ask that someone entrusted with managing $120 billion be able to explain himself in the language of most of the depositors at least as well as the coach of the Canadiens, which Sabia has some difficulty doing.
But the most common criticism of Sabia's appointment is based on doubts that he was the most qualified candidate, which are not unfounded. He lacks investment expertise, and a hastily assembled Caisse board chose him without interviewing other candidates after its chairman, Tessier, experienced what he called a "revelation."
Maybe Tessier heard a voice, which came over the phone from the premier's office. Gossip making the rounds in Québec Inc. is that Charest chose Sabia, a fellow member of the Mulroney Conservative old boys' club, a month before the Caisse board did, and imposed him on Jérôme-Forget and the rest of his cabinet.
It begins to remind one of the tragicomic episode the first time Charest had a majority government, when he got caught trying to sneak full public funding to Jewish private schools without anybody else finding out, including his own cabinet.
Charest was the last person in Quebec to realize that that was a mistake, and then only after a cabinet revolt led by Jérôme-Forget.
What will it take this time?

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