Much high dudgeon has been displayed about travelling during the pandemic. Public backlash against the practice took down a dozen or so politicians, and then the finger pointing moved in a different direction.
The news hounds uncovered yet another loophole in the federal government’s pandemic relief program, one that would allow returning travellers to claim $500 a week while quarantining for 14 days following forbidden getaways. The Prime Minister and the Minister of Employment were quick to say that was not what the benefit was for, but were unclear about how they would put a stop to the practice.
Also vague was whether anyone was actually taking advantage of the program glitch, in contrast to the Canada Emergency Wage Subsidy (CEWS) whose cracks and crevices continue to be exploited without causing nearly the political fuss.
The latest bit of intriguing CEWS news is that an undisclosed amount of wage subsidy has been paid to Harper and Associates, the consulting company run by the former Prime Minister. There was a time – say back when a $16 glass of orange juice cost a minister her job – when that revelation would have raised a few eyebrows.
Did Stephen Harper’s company lose revenue because COVID-19 restrictions reduced demand for his services “providing advice and counsel to business leaders”? Certainly, working from home should be no problem for an outfit that, judging by its website, has social distancing figured out. But who knows? When it comes to CEWS, Omertà seems to be the rule. Unchallenged nest feathering, such as that by the Royal Ottawa Golf Club, described here remains par for the course.
The brief Harper at the trough story was preceded by the discovery that, even as Canadian airlines cancel routes and lay off more employees, CEWS has delivered assistance to Canadian employees of a dozen foreign-owned airlines. Beneficiaries include three Chinese state-owned carriers and nine others, including United, Lufthansa and KLM, all of which also received assistance from their own governments.
“This is ridiculous,” said Unifor’s Jerry Dias, whose union represents 15,000 Canadian airline workers. “You have Canada creating an even bigger economic disadvantage for Canadian airlines by subsidizing their workers in Canada when their parent companies are also giving them billions of dollars.” Even the university-based expert who defended the handouts to a Globe and Mail reporter agreed the “the optics are a little strange.”
CEWS meets CEOs
Word of the Harper and foreign airline follies resulted from reporters searching the often-dysfunctional CEWS Registry where you may find whether a particular company is one of more than 330,000 firms availing of the wage subsidy. David Macdonald of the Canadian Centre for Policy Alternatives (CCPA) linked firms on that registry with his 2020 list of top paid CEOs, discovering that the firms employing 36 of those 100 CEO’s were benefitting from the subsidy program.
The CCPA report identified Jose Cil of Restaurant Brands International (RBI) – the outfit that took over Tim Horton’s – as the top dog for 2020. His total compensation was $27.5 million, while his RBI colleague Alexandre Macedo raked in $12.7 million. RBI received the wage subsidy, but we don’t know how much, which is the case with most of the 36 CEWS-receiving firms on the CCPA list because the registry does not provide that information.
The little that the public do know about CEWs payouts to individual firms is a result of digging by journalists from the Financial Post, CBC and the Toronto Star who went through regulatory filings by public companies. They were able to identify subsidy amounts for some firms, and also establish that 68 companies continued to pay dividends of more than $5 billion while receiving at least $1.03 billion in CEWS.
As previously reported, the runaway subsidy winner was Air Canada at $492 million to the end of June. The airline’s CEO, Calin Rovinescu, was 23rd on the CCPA’s Top 100 at $12.9 million. Air Canada has not reported dividend payments, which is not the case for the number two CEWS recipient. Imperial Oil received $120 million from CEWS and paid out $320 million in dividends. Imperial’s CEO, R.M. Kruger was 69th on the CCPA pay parade at $8.1 million.
Thanks to the combined work of the journalists and the CCPA we can also report other dubious highlights.
- Linamar, a Guelph, Ontario-based car parts maker, doubled its dividend payouts effective Oct. 1, 2020 while collecting $108 million from CEWS and placing three executives making a combined $31.6 million in the top 50 on the CCPA list.
- Caterpillar tractor giant Finning International collected $95 million from CEWS while paying out $68 million in dividends and $13.9 million compensation to CEO L. Scott Thompson.
Super rich benefit
Michael Smart, the University of Toronto economist who has been calling for changes to the wage subsidy program has taken a different approach to introducing more transparency. By correlating the registry with Statistics Canada’s Inter-Corporate Ownership (ICO) database, Smart and researcher Nick Mahoney tore away another of the veils that shroud the CEWS. Their key finding, reported here, is that 4,170 CEWS CEWSrecipients are part of large corporate groups with at least $600 million in assets.“By definition, CEWS recipients linked to the ICO have ready access to capital markets to deal with capital needs and buffer against revenue shocks,” Smart notes. “Owners of some of those companies are also rich.”
Yes, indeed. Included in that group were at least 190 companies owned by individuals who made Canadian Business magazine’s 2017 billionaires list.
It’s a photo finish to determine which corporation to put at the top of the CEWS/Canadian Business list. The Thomson Family Group, with net worth of $41.4 billion is by far the richest. But only 12 Thomson companies (including the Globe and Mail) benefitted from the program. The runaway leader in beneficiary companies is the Irving Family. Although their net worth is only $7.38 billion, they managed to claim CEWS for 23 of their firms. Nonetheless, Irving reportedly cut 250 jobs last summer, most of them in Saint John, blaming the pandemic.
The Irvings were only fourth in the net worth ranking of CEWS recipient, behind media giants Rogers Communications ($11.57 net worth, three recipient companies) and the Desmarais Family (net worth $8.38 billion for two companies).
The methodology employed by the University of Toronto duo was not perfect. Because company names don’t necessarily include owner’s name, the list of billionaire-owned CEWS recipient companies missed a couple of Nova Scotia’s corporate heavyweights. Ken Rowe, 79th on the billionaire list in 2017, benefitted from CEWS through his I.M.P. Group. Number 88 John Risley’s Clearwater Seafoods is on the list of recipients as well.
Michael Smart’s research also found that nearly half of the ICO-linked recipients were controlled by foreign-resident companies, including 11 owned by Warren Buffet’s Berkshire Hathaway, while 893 CEWS recipients have affiliates in tax havens. But unless the corporations release the information or the federal government changes the rules we may never get a full picture of how much CEWS money is going to these corporate giants.
Small business has been most vocal in support of the wage subsidy, and the majority of recipients have been firms with fewer than 25 employees. But it is already clear that the lion’s share of the money is going to medium and large firms. To the end of October, 35 per cent of wage subsidies went to large firms with 250 employees or more. The money flows based on a drop in revenue, with no regard to whether the company needs it, and no commitment to foreswear job cuts. And there’s mounting evidence that it’s being used to boost the bottom line.
The payout to large corporation is $18 billion so far, on a path to as much as $35 billion by the time CEWS expires in June. That’s money that will not be available to government to rebuild post-pandemic. That’s why I keep harping on CEWS. The poorly-targeted program is adding to Canada’s deficit and debt. And those deficit and debt numbers will likely be trotted out by mouthpieces for many corporate recipients to justify post-pandemic government belt tightening. Just watch.
 Linda Hasenfratz was 26th at $12.4 million followed by Frank Hasenfratz 39th at $9.9 million and Jim Jarrell 48th at $9.3 million. Nice work if you can get it.