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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TELECOMMUNICATIONS
COMMISSION
TRANSCRIPTION
DES AUDIENCES DEVANT
LE
CONSEIL DE LA RADIODIFFUSION
ET
DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
To consider the broadcasting application by BCE Inc. (BCE), on
its behalf and on behalf of certain of its affiliates, licensees
of broadcasting and distribution undertakings /
Afin d'étudier la demande en radiodiffusion présentée par
BCE Inc. (BCE), en son nom et au nom de certaines de ses filiales,
titulaires d'entreprises de radiodiffusion et de distribution
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
March 11, 2008 Le
11 mars 2008
Transcripts
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
Contents.
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Transcription
Afin de rencontrer les exigences de la Loi sur
les langues
officielles, les procès‑verbaux pour le
Conseil seront
bilingues en ce qui a trait à la page
couverture, la liste des
membres et du personnel du CRTC participant à
l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un
compte rendu
textuel des délibérations et, en tant que tel,
est enregistrée
et transcrite dans l'une ou l'autre des deux
langues
officielles, compte tenu de la langue utilisée
par le
participant à l'audience publique.
Canadian
Radio‑television and
Telecommunications
Commission
Conseil
de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
To consider the broadcasting application by BCE Inc. (BCE), on
its behalf and on behalf of certain of its affiliates, licensees
of broadcasting and distribution undertakings /
Afin d'étudier la demande en radiodiffusion présentée par
BCE Inc. (BCE), en son nom et au nom de certaines de ses filiales,
titulaires d'entreprises de
radiodiffusion et de distribution
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Michel Arpin Commissioner
/ Conseiller
Leonard Katz Commissioner
/ Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Cindy Ventura Secretary / Secretaire
Claude Rousseau Hearing Manager /
Gérant de l'audience
Steve Millington Legal Counsel /
Anthony McIntyre Conseillers juridiques
HELD AT: TENUE
À:
Conference Centre Centre de conférences
Outaouais Room Salle
Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
March 11, 2008 Le
11 mars 2008
- iv -
TABLE
DES MATIÈRES / TABLE OF CONTENTS
PAGE
/ PARA
SUBMISSIONS BY / SOUMISSIONS PAR:
BCE Inc. 220
/ 1322
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon
commencing on Tuesday, March 11, 2008
at 0930 /
L'audience débute le mardi 11 mars 2008
à 0930
1192 THE
CHAIRPERSON: Good morning.
1193 Len, can you hear
me?
1194 COMMISSIONER
KATZ: Yes, I can.
1195 Yes, I can hear
you, Konrad.
1196 THE
CHAIRPERSON: As you can see, we are
having our colleague in Thailand. It is
probably midnight there now, but he has kindly gotten up for this hearing.
1197 COMMISSIONER
KATZ: I can hear you loud and clear,
Konrad.
1198 THE
CHAIRPERSON: Wonderful.
1199 All right. Madam Secretary, can you open the meeting?
1200 THE
SECRETARY: Thank you, Mr. Chairman.
1201 Bonjour, et
bienvenue à tous. My name is Cindy Ventura and I am
today's Hearing Secretary.
1202 We are today
resuming the public hearing to consider the application by BCE Inc. on its
behalf and on behalf of certain of its affiliates, licensees of broadcasting
and distribution undertakings, the applicant, seeking authority for the transfer
of effective control of the applicant to a corporation to be incorporated, BCE
Holdco.
1203 Chairing today's
hearing is Chairman Konrad von Finckenstein.
Joining him are: Vice‑Chairman Broadcasting, Michel Arpin; and
Vice‑Chairman Telecom, Leonard Katz, who is joining us via
videoconference from Thailand.
1204 Please note that
there is a small time delay via the videoconference and we would ask that you
please keep this in mind when speaking to Mr. Katz.
1205 Before beginning,
I would ask that when you are in the hearing room you please turn off your cell
phones and blackberries, as they cause interference on the internal
communication systems used by our translators.
We would appreciate your cooperation in this regard throughout the
hearing.
1206 Please note that
Commission Members may ask questions in English or French. You can obtain an interpretation receiver
from the technician sitting across the room from me and to the left.
1207 Le service
d'interprétation simultanée est disponible durant cette audience. L'interprétation anglaise se trouve au canal
5, et l'interprétation française au canal 6.
Vous pourrez consulter les documents qui font partie du dossier public à
l'arrière de la salle d'audience.
1208 Please note that the full transcript
of these proceedings will be made available on the Commission's website shortly
after the conclusion of the hearing.
1209 Now, Mr. Chairman,
we are ready to begin.
1210 THE
CHAIRPERSON: Okay. Thank you.
1211 Good morning, Mr.
Leech and company.
1212 MR. LEECH: Good morning, sir.
1213 THE
CHAIRPERSON: Do you want to say anything
by way of introduction?
1214 When we last
resumed, we put this over so that you could address primarily the issue of the
Ontario pension authorities and their pool of the Morcague arrangement. You have also filed some other documents
since then.
1215 So maybe you can
put things into perspective for us.
1216 MR. LEECH: Certainly, Mr. Chair and Commissioners.
1217 I don't have any
formally prepared remarks. But as you
said, when we adjourned we were asked to provide documentary evidence from the
Financial Services Commission of Ontario that the ownership structure we were
employing to acquire BCE complies with certain provisions of the Pension
Benefits Act.
1218 Second, we were asked
to satisfy certain undertakings made during the course of the hearing and to
respond to a number of questions, particularly surrounding valuations done by
KPMG.
1219 Finally, we were
asked to file amendments to our agreements to reflect the changes that we had
advanced during the second day of hearings in response to the 12 governance
issues raised by the Commission.
1220 With regard to the
first matter, FSCO has provided us with a confidential letter, which we in turn
have provided to the CRTC in confidence, that confirms that the structure to be
employed complies with the relevant provisions of the Pension Benefits Act.
1221 I believe the
Commissioners have a copy of that.
1222 Second, we have
filed with staff the answers to the various undertakings, as well as responses
to the questions, particularly responses from KPMG regarding valuation.
1223 Finally, we have
provided the Commission staff with the amendments to the various governance
agreements which indeed reflect the changes which we had advanced during the
second day of hearing.
1224 We are here to
respond to any questions that those documents might...
1225 THE
CHAIRPERSON: All right. First, valuation questions. Those were mainly posed by Mr. Katz.
1226 I believe you
addressed all our concerns, but, Len, do you want to comment on that?
1227 COMMISSIONER
KATZ: Mr. Chairman, I believe we have
received all the responses to questions sufficient to allow us to proceed with
our analysis and deliberations.
1228 THE
CHAIRPERSON: All right.
1229 Then FSCO. I have here the letter dated March 10th
addressed to you, which you kindly provided to us.
1230 I must say I am
astounded. The interpretation that FSCO
puts on these things is not the one that either I as a lawyer or former judge
would put on that legislation and regulation.
1231 But, be that as it
may, it is their position and we are here to judge whether you are in control
are not. We just wanted to make sure
that what you are doing is in accordance with Ontario pension law, and clearly
the Superintendent feels that it is.
1232 However, I have
some issue as to the confidentiality of this.
This is a huge issue for you and for everyone. We are talking about a large transaction.
1233 I notice that FSCO
in its letter says that this is based on the understanding that Mr. Morgan
McCague and McCague Corporation did not receive any consideration from you and
that the price for the shares was paid for by him and not by Teachers'.
1234 Now, unfortunately
Mr. McCague is not here, but I'm sure we can have an affidavit from
Mr. McCague to that effect, so that in effect all the costs for this
transaction, the acquisition of the shares and the costs of entering this
arrangement, et cetera, are borne by him and not by Teachers'.
1235 MR. LEECH: The acquisition of the shares are borne by
him, sir.
1236 MR. LAMPE: Correct.
There is a provision that is noted in the confirmation agreement and the
term sheet that certain out‑of‑pocket expenses related to legal and
accounting costs in particular he is going to be reimbursed for.
1237 But in terms of an
affidavit confirming the understanding reflected in the fiscal letter, that he
hasn't received anything for the shares, I'm sure we can get that.
1238 THE
CHAIRPERSON: So from that I understand
that you paid the costs for him entering into this arrangement, his legal costs
or accounting costs or whatever there is?
1239 MR. LAMPE: There will be reimbursement for it. He has not been paid at this point, as I
understand it.
1240 THE
CHAIRPERSON: He will be.
1241 MR. LAMPE: Yes.
1242 THE
CHAIRPERSON: All right. Fine.
1243 Let's just clarify
exactly in the affidavit from him what he is being reimbursed for and whatnot.
1244 MR. LAMPE: Certainly.
1245 THE
CHAIRPERSON: Second, the second‑last
paragraph says:
"I am providing this letter in
confidence to Teachers' on the understanding it may be shared with the CRTC and
Industry Canada and used or disclosed as those organizations require."
1246 Both our staff and
we have read carefully through it, and as far as I know everything in that
letter is on the public record except the nominal consideration that Mr.
McCague paid for the shares.
1247 So why do you
claim confidence? What is it in this
letter that is so essential and would amount to business confidential
information that, if disclosed, would be of damage to Teachers'?
1248 It says here:
"The FSCO letter contains
highly competitive, sensitive information regarding Teachers' analysis and
approach with regard to the pension legislation."
1249 As I say, I don't
understand this. Maybe you can explain
it to me.
1250 MR. LEECH: I will endeavour to, Mr. Chair.
1251 I think first of
all, as the letter points out, the Financial Services Commission of Ontario
does not have the authority to issue rulings, advance rulings, et cetera, and
they are not really set up to deal with public hearings, much the same as the
CRTC is.
1252 Their analysis and
the conclusion was provided to us in confidence, with the right to share it
with the Commission, which we have. And
it is our belief that we should respect the request of that regulator.
1253 Second, I think
much of the analysis is based on ‑‑ there is, as you point
out, some parts of the analysis that indeed were provided to the Commission in
other documents to be held in confidence and, in our view, it isn't so much the
analysis that is relevant in this case, rather it is the conclusions that
Teachers' is in compliance with the Pension Benefits Act.
1254 Third, the next
point with regard to proprietary, we do live in a competitive world and there
are a number of pension plans who employ structures similar to this and there
are some that don't. So it is not in our
interest from a competitive perspective to actually have the reasoning in the
analysis that is proprietary to us out in the public domain.
1255 I think an
additional point is there has been a lot of publicity around this point and in
some cases basically ‑‑ and I am speaking from a personal
point of view ‑‑ when editors of newspapers say that Teachers'
are raping people, using expressions like that, I think we have reached a new
low in journalism, and quite frankly I believe that this could possibly fuel
another round of such bad conduct.
1256 I think, finally,
we do have ‑‑ "we" as Teachers' are caught in the
middle between a federal regulator and a provincial regulator and, as I said,
we believe that we should respect the wishes of the provincial regulator who
has asked for it to be held in confidence.
1257 THE
CHAIRPERSON: I am all for protecting
confidentiality for things that are truly confidential, and I certainly don't
want to do any harm to Teachers' either in terms of material or in terms of
reputation. But the entire scheme that
you ‑‑ I'm sorry, I don't mean to target ‑‑
the mechanism that you are employing in order to comply with the Ontario
legislation, which of course incorporates the federal rules, it is open. It's in materials filed in this hearing which
are on the record. It exactly sets this
out and we discussed it, the share structure, who was holding what, et cetera.
1258 We went carefully
through this letter, as I say. The only
thing I couldn't find out was the share price.
1259 I will gladly
block out the share price because that is not relevant. But the rest of it I think we as an agency
which values transparency, we want to show that we did look at it and this is
what ‑‑ this is after all the regulator of Ontario. Even if he doesn't have the formal authority,
he states quite unequivocally that in his view this confirms with ‑‑
what does it say here?
"I can confirm that in closing
the share structure of the proposed acquisition by Teachers' of BCE as set out
in the proposed position will comply with the requirement of section 11(1) of
Schedule 3 of the Pension Interest Legislation."
(As read)
1260 I mean, there is
no qualifier in there, nothing. So I
really don't think I have heard anything why we shouldn't disclose this.
1261 Unfortunately, you
are quite right, the press may put some wrong interpretation on it, but they
may do it on my words and your words, et cetera. That is part of living in a free society.
1262 So I just want to
put you on notice it is our intention to make that letter public, with the
share price blacked out.
1263 Second, I have
looked ‑‑ Michel, please.
1264 COMMISSIONER
ARPIN: I could emphasize that, I think,
you said, Mr. Leech, that there has been a lot of talk in the media regarding
the arrangement with Mr. McCague, but the very fact that we were ‑‑
this letter was to be held in confidence will make much more noise than if it
is released.
1265 At least, that is
my view.
1266 THE
CHAIRPERSON: All right.
1267 You filed all
sorts of documents in response to our request to ensure that control is in the
hands ‑‑ and I appreciate that, and I think by and large they
have been resolved.
1268 There are a couple
of items that I wanted to confirm with you, but I want to put them on the table
and give you some time to reflect on it and then we will resume.
1269 Number one is the
size of the Board.
1270 I understand right
now it is 13. What I want to know: Is this frozen or is there a possibility of
increasing it?
1271 I can tell you,
the way everything is ‑‑ if it is frozen, it makes it a lot
easier because then we know how things are working out, who has control,
et cetera.
1272 Second the
selection of the Chairman.
1273 Is the Chairman
being selected from the Board Members or can he be a non‑Board
Member? The agreement is not clear on
that.
1274 Third, you have
very clearly answered the whole issue of who is a Canadian for counting, for
voting, et cetera, and we accept what you have put forward. But the agreement is not clear as to what
happened when Teachers' reduces its share beneath the two thresholds that you
suggested.
1275 Who gets the vote
that Teachers' had there beforehand?
1276 What happens then
to the Executive Committee?
1277 What happens to
the Nominating Committee for independence when Teachers' reduces its shares or
that they lose either one or two of the Directors?
1278 Last, I don't
think the agreement is clear as to what happens to the CEO. You have right now suggested that the CEO be
Mr. Cope. If, for argument's sake, Mr.
Cope gets a wonderful offer from down south and leaves, then as far as I know
you have this Board of 12 people, six and six.
There is a possibility of a tie.
How would such a tie be resolved?
1279 I presume the
logical answer would be to give Teachers' a second vote, but I leave that to
you.
1280 Last, most
importantly there is this whole concept of the second independent director
being subject to veto right by Teachers'.
1281 Frankly, to us
that doesn't make sense. We don't know
what an independent subject to veto right is.
Thinking back and forth ‑‑ and that is one of the
reasons I asked you to be here, Mr. Masiello ‑‑ it strikes us
the logical thing is having one independent and having six Teachers'
votes. Then everything works and we can
be assured at any point in time, under whatever scenario you make, that in
effect Canadians are in control.
1282 On the other hand,
you as the principal investor from the States, with your colleagues, the CEO
and the independent, if you feel very strongly on one issue you can outvote
Teachers' and therefore can protect your investment which presumably is your
primary interest.
1283 So trying to
balance the interests that we have to see that Canadians are in control against
your very legitimate interest of ensuring that the investors' interest is
protected strikes me that the Solomonic balance would be that way.
1284 So I wanted to put
that on the table and wanted to hear your comments on it.
1285 Mr. Katz, I
believe you had one more issue that you wanted to raise.
1286 COMMISSIONER
KATZ: I hope it's just a cosmetic one,
but if I ask you to take a look at Appendix B, the first paragraph below
section 1 where it reads "For greater certainty...", the next
sentence:
"When financial advisory
services are requested to be provided by the advisers pursuant to this
agreement..."
1287 I am just
wondering what the significance of the three words "requested to be"
are, because my understanding is it is the advisers that are actually
undertaking the financial advisory services.
1288 So I think it
reads better if the words "requested to be" are removed from that
sentence, unless there is some significance to those words, Mr. Leech.
1289 MR. LAMPE: There is no difficulty taking out those words
if that clarifies things.
1290 THE
CHAIRPERSON: One last point of
clarification, more than a question, is for the veto events you have raised the
ceiling to $110 million. I think that is
absolutely the right number for the broadcast assets.
1291 I think, as you
know, you also need approval from Industry Canada and whether the
$110 million is the right number for the overall transaction, i.e., for
the non‑broadcast assets, obviously is something that Industry Canada has
to decide.
1292 I just wanted to
make sure that you understand that by us excepting the $110 million, that is
for the broadcast assets. It has nothing
to do with the rest of the transaction.
1293 Those are really
the issues that we wanted to clarify with you.
1294 If my questions
are not clear, please ask me now and I will clarify, otherwise I would suggest
that we break for however long you need and give you time to consider those.
‑‑‑ Pause
1295 MR. LEECH: Mr. Chair, if we could ask for a little more
clarification on the last point about the independent director?
1296 THE
CHAIRPERSON: Yes
1297 MR. LEECH: As we have contemplated, there would be five
directors appointed by Teachers'. There
is the CEO who is a Canadian, and then the mechanism we set up is that one of
the independent directors would indeed require the approval of Teachers' to in
fact be appointed.
1298 Our understanding
was that the concern or the issue raised by the Commission was that a Teachers'
representative could be outvoted on that in the appointment of that
person. So we have set it up so that
Teachers' had to be deferred to on that matter.
1299 What we have been
endeavouring to do is strike that balance between governance in a scenario that
ensures that Canadians are in control as opposed to Teachers' in control
because, as we have said, Teachers' may not end up always being the controlling
shareholder. So we wanted to make sure
that the situation was such that the majority of the Board was, at all times,
Canadian, and we believed that we had hit that balance appropriately.
1300 So if we could
address the nuance.
1301 THE
CHAIRPERSON: I appreciate that. Frankly, we looked at it and we tried to
think. I think it was the classical
situation of trying to be half pregnant.
1302 I don't know what
an independent is who is dependent on a veto right of Teachers', you know, and
so that doesn't make sense.
1303 So let's be clear
what we are doing.
1304 I understand Mr.
Masiello's need to protect his investors and, as I pointed out, I think he can
do that. He has to sway the
independent. Let's assume he has a
difference of view between Teachers'. He
persuades the CEO and the one independent, he can clearly outvote Teachers'.
1305 But other than
that I think, you know, Teachers' as the Canadian owner, is an equity majority
holder, is controlling the votes, which it does via McCague, should be the one
that holds. I think this halfway house
frankly doesn't cut it for us.
1306 So I just wanted
to leave that with you and let you comment on it and we will obviously
see. Maybe we missed something, and I
wanted to give you the opportunity to put your views on the table.
1307 MR. LEECH: All right.
1308 THE
CHAIRPERSON: So if that's the only one,
it is now 10:00. Why don't we resume at
11 o'clock.
1309 That is enough
time for you? If you want to, we can
make it in the afternoon. I leave it up
to you.
1310 MR. LEECH: I think 60 minutes should be sufficient for
us to be able to respond, sir.
1311 THE CHAIRPERSON: All right.
1312 Then let's resume
at 11 o'clock. Thank you very much.
1313 MR. LEECH: Thank you.
‑‑‑ Upon recessing
at 0953 / Suspension à 0953
‑‑‑ Upon resuming
at 1100 / Reprise à 1100
1314 THE
CHAIRPERSON: They want more time to
think about it, so we will have to wait a bit more.
1315 MR. KATZ: Thank you.
‑‑‑ Upon recessing
at 1102 / Suspension à 1102
‑‑‑ Upon resuming
at 1104 / Reprise à 1104
1316 THE
CHAIRPERSON: Okay, Madam Secretary.
1317 THE
SECRETARY: Thank you, Mr. Chairman.
1318 Just a quick
announcement. For the record, we wish to
inform you that an abridged version of the letters submitted by the Applicant
from the Financial Services Commission of Ontario, dated March 10th, 2008, has
been added to the public file of BCE's application.
1319 Copies are
available at the public examination table at the back of the room.
1320 Thank you, Mr.
Chairman.
1321 THE
CHAIRPERSON: Mr. Leech.
SUBMISSIONS / SOUMISSIONS
1322 MR. LEECH: Thank you, Mr. Chairman.
1323 You asked us
before the break to address five issues:
the size of the Board; the second being the Chairman of the Board; the
third being mechanisms with regard to Board member selection as Teachers
divests some of its positions in the future, possibly; the fourth being matters
around the selection of the CEO; and the fifth being matters around the
independent director.
1324 I will handle them
in that order, sir.
1325 THE
CHAIRPERSON: Okay.
1326 MR. LEECH: With regard to the size of the Board, it was
always our intention ‑‑ and we will undertake to put it into
the agreements ‑‑ that the Board be frozen at 13 until such
time as the Company goes public. At that
time, I think, we may want to increase the Board for independents, or whatever,
but we have no difficulty in making that change.
1327 With regard to the
Chairman of the Board, we have always agreed that he or she would be Canadian,
and not designated by Providence, Madison Dearborn or Merrill Lynch.
1328 And we will answer
the question: Yes, the Chairman will be
somebody who will be selected from the 13 members of the Board.
1329 With regard to the
mechanism with respect to Teachers reducing its investments, the mechanism
right now, and which we propose, is that the designated directors, or the
former designated directors' positions that Teachers held would become
independent members of the Board, subject to Teachers' final approval.
1330 If you go through
the mechanics, Teachers will always have two designees on the Board until such
time as its investment is reduced below $225 million. So from $4 billion all the way down to $225
million it will always have two members on the Board, that it is designating.
1331 That will give it
sufficient membership to be able to man the Executive Committee, where there
are two nominees, and also the Nominating Committee with its one nominee.
1332 THE
CHAIRPERSON: I'm sorry, I am not sure I
understand.
1333 Teachers will
always have two members, so the two Teachers' members will always be on the
Executive Committee, if I understood it, and they also will be part of the
Nominating Committee for independents.
1334 Is that what you
said?
1335 MR. LEECH: Correct, sir.
1336 THE
CHAIRPERSON: What about when Teachers
goes ‑‑
1337 I guess you are
going to come to it, are you?
1338 What happens to
the Teachers' nominee that they will lose, because they will decrease the
percentage over time?
1339 MR. LEECH: We start with five, and as we reduce our
interest, those nominees go into the ‑‑
1340 THE
CHAIRPERSON: Independent group.
1341 MR. LEECH: Yes, they become independent directors,
subject to Teachers' final approval.
1342 So that, at the
end of the day, Teachers will always have two designees on the Board, until
such time as its investment goes below $225 million.
1343 The practicality
of that is that either Teachers has sold its position to somebody else, and it
will likely be in front of the Commission, or it is in the situation of a
public offering and Teachers has reduced its position in the company.
1344 With regard to the
Chief Executive Officer, the mechanism is that the CEO is chosen by the
Board. He or she is not chosen by any
one shareholder.
1345 Our belief is that
the Board would always act ‑‑ and we believe in fostering
consensus, et cetera, moving forward.
However, in the very unlikely eventuality that, due to the absence of
the CEO, you have a tie vote so to speak ‑‑ and it could be a
tie vote of Canadians versus non‑Canadians, or it could be just a tie
vote of six versus six ‑‑ it doesn't matter whether they are
Canadian or not ‑‑ in that rare circumstance, we would vest
with the Chairman of the Board the right to cast a casting vote to break that,
as I say, rare eventuality.
1346 THE
CHAIRPERSON: Just to cover all
eventualities, what if the CEO and the Chairman are one and the same person,
and they leave and you still have your tie?
1347 MR. LEECH: Teachers fought that war in Canadian
governance, sir, why the Chairman and the CEO should be very different people.
1348 That will not
happen as long as we are there.
1349 THE CHAIRPERSON: Still, I think you should have a prohibition.
1350 Are you going to
put into the agreement that the CEO can't be the Chairman?
1351 MR. LEECH: Yes.
We will put into the agreement that the office of the Chairman and the
office of the CEO will be different people.
1352 We would like to
put that in every bank board, as well as all other companies.
1353 With regard to the
final matter, I would like to review where we came from, where we are, et
cetera.
1354 When our
governance structure, or the structure that we proposed was negotiated over the
past 12 months, we believed, and we still believe that the original proposal in
our original application in front of the Commission ensures that a majority of
the Board is always Canadian, and that the Board is Canadian controlled.
1355 As I said, it was
highly negotiated over the past 12 months and, in our view, it complies with
the requirements of the directive, and, also, it struck the appropriate balance
from a governance perspective amongst shareholders who are investing
substantial sums of money.
1356 To review what
that was, there was a Board of 13, and there were 10 directors who were
"designated". Fifty percent
were designated by the Canadian shareholders, and 50 percent were designated by
the non‑Canadian shareholders, which roughly equalled their proportionate
equity investment.
1357 The 11th member
was the Chief Executive Officer, who was Canadian.
1358 Then we provided
for two independents, who would be selected by a committee of three, the
majority of whom were ‑‑ are Canadian, and, as we testified at
the time, we always intended that at least one of those independents would be
Canadian.
1359 So the original
structure we brought forward contemplated seven out of 13 always being
Canadian.
1360 In response to
questions and issues raised two weeks ago, we re‑caucused with our
partners, and after extensive negotiations, which went through the night, and a
careful examination of the impact that modifying any of the governance
structures and rights would have on our agreements, we agreed that one of the
independents would always be Canadian, and not only would they continue to be
picked by a committee of three, two of whom would be Canadian, Teachers would
have the final say on that individual.
1361 The effect of all
of that is that, at most, only five out of 13 directors are in fact designated
by non‑Canadians, and we believe that reinforces the Canadianness of the
structure.
1362 So in Teachers'
view, and in the Consortium's view, requiring that Teachers has a sixth
designate, we believe, would destroy the governance balance which we have
achieved and which was carefully constructed over the last 12 months.
1363 We also don't
think it would stand the test of time, as Teachers took the opportunity to
reduce its position in the future.
1364 In summary, we
believe that we were in compliance with our original application, and we
believe that we have modified it to reinforce the Canadianness, and that at all
times seven out of 13 directors will be Canadian.
1365 THE CHAIRPERSON: So, basically, you are not prepared to move
on that point.
1366 MR. LEECH: We believe, as I said, Mr. Chair, that the
Consortium, and Teachers, on its own, have looked at it. We looked at the construct that we came up
with over the last 12 months, and we believe that we pushed it very hard and
have landed where we are landed, yes.
1367 THE
CHAIRPERSON: Okay. I presume you will furnish us with a written
version of the four points that you mentioned just now.
1368 MR. LEECH: Yes.
1369 THE CHAIRPERSON: All right.
1370 I believe, Mr.
Katz, that you had another question.
1371 We were speaking
during the break.
1372 MR. KATZ: No, I think it was answered, Mr. Chairman.
1373 THE
CHAIRPERSON: Okay. Then we will have to look at the totality of what
you have proposed, look at the valuation answers you have given us, and, as I
mentioned to you earlier, we will endeavour to render a decision before the end
of the month.
1374 MR. LEECH: Thank you, sir.
1375 THE
CHAIRPERSON: Commissioner Arpin, is there
anything you want to add?
1376 COMMISSIONER
ARPIN: Yes, Mr. Chairman.
1377 In the eventuality
that the Commission were to deny your application, what would be the
implication for BCE of a denial by the Commission?
1378 A denial will only
touch the broadcasting assets, so what will be the implication?
1379 MR. LEECH: It would basically mean that one of the
conditions of the Consortium's agreement with BCE would not be achieved ‑‑
would not be met.
1380 COMMISSIONER
ARPIN: So, then, the transaction could
not occur.
1381 MR. LEECH: I think I will repeat the same thing. One of the conditions of the agreement will
not be met, sir.
1382 COMMISSIONER
ARPIN: Okay.
1383 THE
CHAIRPERSON: You appreciate, of course,
that our approval can be subject to conditions, and that is one of the things
that we have to take into consideration.
1384 I think we have
covered everything that we needed to.
Thank you very much.
1385 Madam Secretary?
1386 MR. McINTYRE: I would like to read into the record the
undertakings.
1387 The first is an
affidavit of Mr. McCague setting out any compensation received.
1388 The second is to
make the change to the Advisory Services Agreement.
1389 And the third is
to amend the agreements to provide that the Board will be frozen at 13, to
provide a casting vote to the Chair, and to provide that the CEO cannot be the
Chair.
1390 We would like
those undertakings by Friday, March 14th, at noon. That's all.
1391 THE
SECRETARY: This completes the agenda of
this Public Hearing.
1392 Thank you, Mr.
Chairman.
1393 THE
CHAIRPERSON: I see someone standing,
Madam Secretary.
1394 MR. FULLARD: (Speaking off microphone.)
1395 THE
CHAIRPERSON: Go to a microphone,
identify yourself, and tell us what point you want to raise.
1396 MR. FULLARD: My name is Brent Fullard, and I am with
Catalyst Asset Management. We intervened
before the CRTC on the 25th, and we also intervened before the Financial
Services Commission of Ontario by way of letter dated March 8th.
1397 I would like to
raise two points. One is your response,
Mr. Chairman, that you were astounded by their approval. I share that level of astoundment.
1398 Also, I would like
to make a comment. I don't want to
unfairly quote him here, but Mr. Leech this morning said that the FSCO doesn't
have the authority to grant these types of approvals.
1399 THE
CHAIRPERSON: But we are dealing here
with approval under the Broadcasting Act.
1400 I have asked
Teachers for the recommendation from the FSCO and they have given that. So that issue, as far as I am concerned, is
not my issue, it is their issue, and they have spoken.
1401 Are you making a
submission on the Broadcasting Act?
1402 MR. FULLARD: Yes, I am, insofar as the point is that you,
as a regulatory body, are deferring to the FSCO on a critical issue, on which
it is acknowledged that they don't have the authority to bind.
1403 I am simply saying
that the letter that was submitted dated March 10th makes reference to the
Catalyst submission to the FSCO, and given that the FSCO approval is a complete
black box exercise, and the result is one that many find astounding, I am
asking the CRTC to make our submission to the FSCO something which is on the
public record, so that the contravening point can be made known to the broader
public.
1404 THE CHAIRPERSON: But that is not before me. Before me is Teachers and whether Teachers
will be in control of BCE.
1405 The point was
raised that Teachers may or may not be in compliance with the Ontario
legislation. The Ontario pension
authorities have spoken. In their view,
this is in compliance. It is their call,
not mine.
1406 So I am not going
to second‑guess them. I wanted to
have assurance from them. I pointed out
to you that I found the assurance astounding, but I am not a pension expert and
they are. If they feel that it is in
compliance with their legislation, it's their call. If they feel that they should step ‑‑
1407 They are now aware
of the issue. It has been put to them,
and they have spoken on it. So, as far
as I am concerned, that is not before me.
Before me is the control of BCE by Teachers.
1408 MR. FULLARD: However, you are deferring to a body that, by
their own acknowledgement, and by the Applicant's acknowledgement, doesn't have
the authority to make these kinds of statements.
1409 THE
CHAIRPERSON: You can make your idea
public. That is up to you, but it is not
going to be part of this record, because you didn't make it to me, and it isn't
relevant to me.
1410 What I asked
Teachers to do was to present evidence from the Ontario pension authority that
they are aware of it and that they are in compliance, and they said that they
are.
1411 MR. FULLARD: Right, and the evidence they are submitting
makes reference, by incorporation, to Catalyst, and I don't want the ‑‑
1412 THE CHAIRPERSON: You are talking about a third party, and I
don't know who the third party is.
1413 You are telling me
that you are with Catalyst ‑‑
1414 MR. FULLARD: Yes, I am.
1415 THE
CHAIRPERSON: Still, it is irrelevant to
our proceedings. I am sorry, I am not going
to continue.
1416 Thank you.
‑‑‑ Whereupon the
hearing concluded at 1122 /
L'audience se termine à 1122
REPORTERS
____________________ ____________________
Ada DeGeer-Simpson Jean Desaulniers
____________________ ____________________
Fiona Potvin Sue Villeneuve
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