The Canadian Medical Association is still lobbying to force the Canada Pension Plan Investment Board (CPPIB) to drop all cigarette stocks from its portfolio. Better that the CMA should butt out and leave the business of managing our pension money to the folks who know how to do it.
Recently, the CMA released a glossy 16-page report in which it reiterates the huge medical costs associated with tobacco use and argues that the financial health of the CPP equity portfolio would not be affected if the Board were to divest itself of the $100 million in tobacco stocks it owns. Moreover, tobacco companies face the escalating danger of class action suits, which could seriously jeopardize the market value of the stocks.
If the CPPIB refuses to act voluntarily, the report contains suggested wording for a motion to be introduced into the House of Commons that would require the Board “to divest itself of existing tobacco holdings” and prohibit all future investments in the sector.
The document can be viewed in its entirety here.
I’ve writteabout this subject before but now that the CMA is escalating its pressure campaign I feel it is important to return to it because there is an important principle at stake. It’s this: will the people who manage the public’s money be free to do so without constraint or are they to become the targets of every special interest group in the country?
That’s what this issue comes down to. Our doctors are well-meaning people who are concerned about the national health. And to keep the record straight, I personally have no love for the tobacco industry. I find smoking to be both dangerous and offensive, as do many Canadians.
However, neither my personal biases nor the health views of the CMA should have anything to do with how the CPPIB invests public pension money. Just think of what might happen if the CMA succeeds in its lobby efforts. We all know that cholesterol can be a killer. Is the next step to seek a ban on meat packing stocks or on companies that produce and distribute food products that are choked with cholesterol and/or trans-fat? Absurd? Of course, but if the CMA can get a tobacco knock-out why shouldn’t it take the next step?
I’m sure there are groups out there that would like to see the CPPIB prevented from investing in beverage alcohol stocks. There are people who dislike companies that manufacture munitions or those in the nuclear industry. Environmental groups might go after companies involved in transporting hazardous products (think CN Rail and the Lake Wabamun derailment) or that engage in clear-cutting. The list is endless.
This Pandora’s Box should remain tightly shut. Let’s hope our Parliamentarians don’t succumb to the temptation to score some political points at the expense of the independence of the CPPIB.
While we’re on the subject, it’s worth noting that the financial health of the Canada Pension Plan is just fine, thanks in large part to the efforts of the CPPIB. Recently, the Board released its fiscal 2006 first-quarter results which showed its investments earned 3.6 per cent in the three months to June 30. If that pace were maintained over a full year, the annualized gain would be close to 15 per cent.
Over the past five years, the CPP reserve fund has earned a real, inflation-adjusted annualized return of 4.6 per cent, well in excess of the 4.1 per cent that Canada’s Chief Actuary calculates is needed to sustain the plan over the long term.
Why should anyone want to meddle with success like this?