The No. 1 business news story in Canada in 2017 was bad news for retirees
By Katrina Caruso
On the heels of other big-box retailers such as Target and Zellers closing up shop in Canada, Sears Canada recently closed down their last remaining stores across the country.
The controversy surrounding the bankruptcy of Sears has been in the air since the news was announced last year, and it’s been reminiscent of what happened when Nortel closed down. With about 15,000 people out of jobs and approximately 18,000 retirees collecting pensions from the Sears Canada Plan, the company has a lot of Canadians that they’re going to have to answer to.
Sears hasn’t yet answered to anyone save shareholders and some higher level employees, at the price of underfunded pensions. The company paid $1.5 billion to shareholders and managed to pay $6.5 million to 36 head office staff members through retention bonuses, but meanwhile, the pension plan was underfunded $267 million.
Whether the liquidation of assets will make up for this shortfall is unknown, and it’s likely that pensioners and employees will have to wait a while to learn what settlement that they’ll receive.
Gilles LeVasseur, a business professor at the University of Ottawa, told the CBC that it’s probable that “the liquidation will favour key creditors.” He also said, “There won’t be enough assets to cover the obligations for the pension fund.”
When Sears declared bankruptcy, the company announced that 60 stores nationwide were to be closed, hoping that having fewer stores would allow the company to stay afloat. Unfortunately, the retailer wasn’t able to bounce back, and the remaining stores closed earlier this month.
Many people, including LeVasseur, believe that pensioners need more protection through legislation. A report from The Canadian Centre for Policy Alternatives suggested that shareholder payments should be dependent on whether pension plans are adequately funded. However, while federal legislation has been introduced in the past (the NDP introduced the Nortel Act in 2009), no laws have been passed. Responding to the Sears’ situation, the NDP proposed hearings on executive bonuses and severance pay to workers in August, though the proposal has had little impact.
Photo: iStock/yelo34.
