Sears Retirees Demand $3 Billion Dividend Review

On Thrusday, Sears Canada retirees asked the Ontario Superior Court to appoint a judicial trustee to review dividends paid to shareholders between 2005 and 2013. However, the process may be long and uncertain, says a Professor of Law, in particular because there is no provincial standard of accountability for corporate accountability.

The parties have entered a closed media room to try to reach an agreement on Thursday, but the deal could be postponed until next week.

On the retiree side, there is disappointment, says Larry Moore, a Sears retiree. “We had proposed a name for the trustee, the company made a counter-proposal, but both were rejected by the judge,” he says.

According to him, there is a loss of confidence in the government, which does not act to protect employees in retirement.

In their motion, retirees also say that Sears owes them $ 400 million for unpaid health and life insurance benefits.

The Sears Canada Retirees Group is hoping to recover approximately $ 270 million to help offset their pension reductions. They estimate that these dividends total nearly $ 3 billion, which should be reviewed by a trustee of litigation.

“What they will try to do is to get those dividends paid to the shareholders that have not been paid to the company, especially to pay the pension fund,” says the law professor and of Management at the University of Ottawa, Gilles Levasseur.

During this period, the retailer’s sales and profits were already declining and the pension fund was starting to show a deficit.

A long procedure

The procedure to recover this amount will however be tedious, according to the professor.

It will first be necessary to show that the dividends were paid illegally, or contrary to the law.

The law provides that one can only pay a dividend when the company can pay its debts in the short term. There is also the fact that the organization can operate in the short term and meet its financial deadlines. Finally, was the procedure respected at board level?

Gilles Levasseur, Professor of Law and Management at the University of Ottawa

This approach could therefore take from two to four years, minimum.

“Once we have the decision proving that the dividend was not paid correctly, we have to go and seize the money from the shareholders or the directors … And not sure that the money will still be available. If you paid a dividend, it may have been spent, “he adds.

A new approach

In the past, employees often accepted this kind of situation, according to Gilles Levasseur, because there was no precedent. The fact that former employees are trying to claim their rights is new.

We see the steps of groups of people who say: it’s our life, it’s our salary, it’s our retirement … We lose everything! These people have no other way out, because that is the only solution they have under the law.

Gilles Levasseur, Professor of Law and Management, University of Ottawa

Absence of provincial standards

Retirees are also asking the Ontario government to respond. According to Gilles Levasseur, the problem is that there are no specific provincial standards for the management of these private funds.

One of the solutions would be to make directors accountable personally for failures in the pension fund.

Creating a pension plan compensation fund to pay for default is not the best solution, he adds. “The problem is that it always happens after the event has taken place. If we know that the directors are personally responsible when they decide, we will be sure to meet the deadlines under the act. ”

This is where the shoe pinches, according to him: the weakness of the system does not make these decision-makers accountable.

We must impose a minimum of responsibilities on the directors, enforce minimum capitalization ratios of the pension plan, much like we do for condominiums.

Gilles Levasseur, Professor of Law and Management, University of Ottawa
Despite the cost, it helps to ensure that debts can be paid, he recalls.

Since there is no obligation under the law, it is impossible to ask the government to be responsible.

“You need an independent monitoring system so that it does not happen in other companies. Especially when they go bankrupt, “he concludes.

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