The C$172.6 billion (US$170.2 billion) Canada Pension Plan Investment Board could appoint non-Canadian residents to the board in a proposal included in the Canadian Department of Finance's 2013 Economic Action Plan.
Currently, only Canadian residents can serve on the 12-member board, based in Toronto.
“At this stage of its evolution, the CPPIB's board of directors might benefit from having access to the international talent pool,” according to the action plan, submitted last month to the Canadian Parliament in Ottawa. “The government will therefore consult provinces on permitting a limited number of qualified persons who are not resident in Canada to serve on the board of directors of the CPPIB, and if there is sufficient support, introduce the necessary changes to the Canada Pension Plan Investment Board Act.”
“CPPIB welcomes the government's initiative to permit the appointment of non-residents of Canada to the board of directors,” the board said in a statement. “CPPIB's governance structure plays a central role in enabling its success as a global investment organization. The policy will enhance CPPIB's global competitiveness, and the additional international insight will only strengthen the board's ability to provide oversight to CPPIB's investment strategy and programs.”
“Changes to the CPPIB Act require the approval of the federal government and at least two-thirds of all the provinces representing at least two-thirds of the population,” Jack Aubry, spokesman for the Canadian Department of Finance, said in an e-mailed response to questions. “This is a proposal of the government of Canada, as are all budget initiatives. In developing the final budget plan, the government of Canada undertakes extensive pre-budget consultations with Canadians.”
Neither the Department of Finance nor the CPPIB would say exactly how many board seats would be open to non-Canadians.
“It is unusual,” Roger Urwin, global head of investment content at Towers Watson Ltd., Reigate, England, said in a telephone interview. “I can't really think of any national pension fund with that configuration.”
Mr. Urwin said such a “progressive” pension fund like the CPPIB recognized it's worth looking outside the country for trustees. He added the board itself might have asked the government to make the move. “It adds diversity and experience,” he said. “CPPIB is seen as a very progressive fund. They're in very close contact with the sponsor (the Finance Department). It feels to me as if this could have been prompted by the board.”
Also, he added, such a move would be “consistent with the best practices of corporate boards.”
Kevin Moriarty, principal at Mercer (Canada) Ltd., Toronto, said in an e-mail that the proposal is a smart move. “I don't think there is data on the prevalence of foreign appointments to national pension plan boards,” he said. “This is a matter of prudently using the best available knowledge and skill. Since the CPPIB has extensive foreign holdings, the addition of a qualified non-Canadian board member would seem reasonable and prudent — particularly since the purpose of the CPPIB is to invest the plan assets, not manage the design and funding of the plan.
“It is worth noting that the not all public sector plan boards are as single purpose as the CPPIB. Some are responsible for funding and administration where domestic considerations are significant,” Mr. Moriarty added.”