Scotiabank CEO calls for federal commission to study long-term economic growth issues

In written remarks he was unable to deliver in person at the annual shareholder meeting, Bank of Nova Scotia CEO Brian Porter took aim at a proposed surtax on large banks and insurers with profits over $1-billion, as well as a temporary levy against those same companies.Chris Wattie/Reuters

Bank of Nova Scotia BNS-T chief executive Brian Porter is calling for a federal commission to set a long-term economic road map to help boost living standards and craft an industrial policy for Canada.

Mr. Porter was set to deliver his call for action at the bank’s annual shareholders’ meeting on Tuesday, but missed the gathering after he contracted COVID-19. Instead, chief financial officer Raj Viswanathan gave an abridged version of Mr. Porter’s remarks. He said Mr. Porter is triple vaccinated and “we expect a full and quick recovery.”

In a full copy of Mr. Porter’s prepared remarks provided to reporters, the CEO said developed countries like Canada are grappling with immediate problems such as rising inflation and the threat of sluggish economic growth. Two days before Ottawa is set to deliver a pivotal federal budget that has business leaders calling for a more focused economic plan, he planned to say that policy makers need to set aside short-term thinking in favor of “longer-term vision and discipline, “and to aggressively tackle obstacles to prosperity.

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His remarks call for a “modern Macdonald Commission,” in reference to a landmark Royal Commission on economic policy appointed in 1982 by then-prime minister Pierre Trudeau. It was struck at a moment when Canada faced an array of economic challenges that resonate today such as high inflation, sluggish growth and rising protectionism. The commission’s chair, Donald Macdonald, was also a Scotiabank director.

“The Commission was successful, in part, because it took a longer-term view,” Mr. Porter planned to say.

A modern equivalent created by Prime Minister Justin Trudeau could help develop industrial policy, “to build new economic scaffolding to support and guide us for years to come,” the remarks say. It could also set an agenda to boost innovation, competitiveness and productivity, and to shape an energy transition strategy for the country, he suggests.

In the written remarks, Mr. Porter also takes aim at a proposed surtax on large banks and insurers with profits over $1-billion, accompanied by a temporary levy against those same companies. Both measures are expected to be outlined in Thursday’s budget.

He calls the so-called bank tax “a knee-jerk reaction that sends the wrong message to the global investment community,” and says it ultimately taxes shareholders who broadly own bank stocks, including through mutual funds and index funds.

Another key issue, raised by shareholders, was the bank’s performance on reducing its carbon footprint, which is expected to be a prominent theme as other banks hold annual meetings over the coming weeks. Shareholders pressed Scotiabank on interim net zero targets to reduce the intensity of carbon emissions from clients it finances in oil and gas, power and utilities by 2030, urging the bank to focus on reducing overall emissions levels, and not simply intensity.

In response, Meigan Terry, the bank’s chief social impact, sustainability and communications officer, said at Tuesday’s meeting that Scotiabank uses intensity targets partly because it is easier to measure clients against their peers: “We can see where companies are performing well, and where there may be some laggards.”

The meeting also provided a first test of a series of proposals submitted to major Canadian banks, urging financial institutions to adopt annual shareholder votes on their strategies for dealing with climate-related risks. Banks have opposed such say-on-climate votes, which would be similar to existing, non-binding shareholder votes on executive compensation. At Tuesday’s meeting, a preliminary tally showed 79 per cent of shareholders voted against adopting a say-on-climate vote.

Scotiabank also won strong support for its executive pay practices, with 94 per cent of votes in favor after the bank had weak support from shareholders at last year’s meeting. At the 2021 meeting, only 60.8 per cent of votes supported the bank’s compensation practices after advise influential shareholder Institutional Shareholder Services Inc. recommended voting against the resolution. This year, ISS restored its support despite continued concerns about a lack of alignment between pay and the bank’s relative performance.

That was mitigated by the bank’s “enhanced disclosure” regarding the CEO’s incentive compensation program, “its shareholder engagement efforts and overall improved performance,” the ISS report said. “On balance, the bank has demonstrated adequate stewardship of investor’s interests regarding executive compensation.”

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