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December 1, 2005
Who woulda thought Actuaries are the problem?, Thur., Dec. 1, 2005, 3:16 PM
Yesterday I received a call from a well known Globe & Mail investment pages editor, re Stelco, and I mentioned that one of the big problems with Stelco is the phoney pension liability, which has been set up by the pension fund manager that management selected and the discount rates permitted by the Actuaries.
Interesting that not a day went by before I get the following letter from a reader. Note that I am quoting the reader who is quoting a legal expert in these matters:
Bill: I read an article in Investment Executive ( Oct 2005 ) headed Low Rate & Losses put Defined Benefit Pension Plans at Risk" and liked the quotes from Murray Gold at Koskie Minsky LLP in Toronto. He, incidentally, is on the Stelco CCAA service list as representing the Salaried Retirees. I quote:
Murray Gold;..says actuaries are the weak link in the system. They are to pension plans what accountants were to corporations before Sarbanes-Oxley ( the 2002 act that changed U.S. securities laws following a series of scandals)" . He points out that the actuarial houses now provide a range of human resources consulting services to companies, among them pension actuarial services to the pension fund. They are under an enormous amount of financial pressure from their clients to act only in the corporate sponsor's interest and not (to) be giving advice that's in the plan's interest", he says. We have to come to terms with the actuarial professional crisis facing pension funds in a way that's quite similar to the way the accounting crisis faced the corporate world before Enron (Corp)," Gold says."
In the case of Stelco, such a conflicts of interest could explain why the actuaries used rates of return assumptions ( i.e. assumed lower anticipated rates of return than peer companies ) which afforded the dire straights" scenario as presented by Hap Stephen in CCAA petitions. It's like the corporate exec or board chairman who says to the consultant Here's what I want to do;.give me a consulting report that comes to that conclusion." I know from having been told so by one who is at the top of this profession" that this goes on all the time and it is why I hold the management consulting industry in such low regard."
This Stelco situation is truly a case study for any business school. Unfortunately that does not include my alma mater MBA School (McMaster U) located in the Stelco/Dofasco home city of Hamilton.
The problem there of course is that the Dean is also a commissioner of the Ontario Securities Commission, so I trust he's got his eyes closed to what's going on in his city.
Posted by Posted by Bill Cara on December 1, 2005 03:15:42 PM | Category: Canada