Canada’s largest companies prioritizing shareholder payouts over pension contributions

November 21, 2017

OTTAWA—Last year, Canada’s largest publicly-traded companies paid out four times more to shareholders than it would have cost to fully fund their defined benefit (DB) pension plans, according to new research released by the Canadian Centre for Policy Alternatives (CCPA).

Thirty-nine companies on the S&P/TSX 60 maintain DB pension plans, amounting to one-third of all private sector pension plan assets in Canada. However, only nine plans were fully funded in 2016.

Together, the 39 companies oversaw a $10.8 billion deficit in their pension plans in 2016, while increasing shareholder payouts from $31.9 billion in 2011 to $46.9 billion last year.

Sears Canada serves as a cautionary example: with all stores winding down operations as a result of insolvency, the company’s DB pension plan has a $267 million funding shortfall. Yet since 2010, Sears paid back $1.5 billion to shareholders in dividends and share buybacks – five-and-a-half times more than it would have cost to erase the deficit in its pension plan.

“For almost all companies, DB plan shortfalls could be rapidly eliminated with little impact on shareholder payments,” said CCPA Senior Economist David Macdonald, who co-authored the report alongside Cole Eisen and Canadian Labour Congress Social and Economic Policy Director Chris Roberts.

“This isn’t a question of capacity, it’s a question of priority,” Macdonald said.

The report’s recommendations include:

  • Limiting shareholder payouts when pension plans are underfunded;
  • For Ontario’s Pension Benefits Guarantee Fund, increase premiums for companies not making up shortfalls;
  • Make disclosure mandatory. Sponsors of severely underfunded pension plans should have to notify and obtain permission from regulators before making shareholder repayments.

“Workplace pensions play an important role in Canada’s retirement security system, but the country’s biggest companies are not making up shortfalls as fast as they could be. That increases risk for plan members and retirees, and could mean extra costs to the public,” added Roberts.

–30–

Download The Lion’s Share: Pension deficits and shareholder payments among Canada’s largest companies at www.policyalternatives.ca.

To arrange interviews, please contact: Alyssa O’Dell,
CCPA Media and Public Relations Officer at (613) 563-1341 x 307, alyssa@policyalternatives.ca or cell (343) 998-7575.

Offices: