(Bloomberg) — Mark Machin quit as head of Canada Pension Plan Investment Board after he went to the United Arab Emirates and received a Covid-19 vaccine, defying guidance from Justin Trudeau’s government to avoid international travel.
Machin resigned as chief executive officer after discussions with the board on Thursday evening, the C$476 billion ($377 billion) pension fund said in a statement Friday morning. John Graham, the fund’s global head of credit investments, was named to replace him as CEO.
Canada’s largest pension fund was thrown into crisis mode Thursday evening when the Wall Street Journal reported Machin’s travel to Dubai. He earned a rebuke from the office of Finance Minister Chrystia Freeland, who rarely comments on CPPIB matters in order to protect the fund’s political independence.
Although leaving the country isn’t illegal, Trudeau and his ministers have repeatedly warned residents not to do it and imposed strict rules to discourage international trips.
It isn’t clear how Machin, a former Goldman Sachs executive who’s in his mid-50s, could have arranged to receive the vaccine developed by Pfizer Inc. and BioNTech SE in Dubai, where officially it’s available only to people over 60, as well as those with chronic diseases or disabilities and front-line workers.
Impatient for Vaccines
Machin’s resignation spares Trudeau a political headache. CPPIB’s top executive reports to a government-appointed board, but the directors are businesspeople including Nutrien Ltd. Chief Executive Officer Chuck Magro and Royal Bank of Canada Chairwoman Kathleen Taylor, not political figures.
Government policy is to avoid interfering in CPPIB’s affairs. But under the circumstances, Freeland may have had little choice but to speak out. Canadians are growing impatient with the pace of the vaccine rollout, which has been the slowest among Group of Seven countries except Japan. There’s not much public tolerance in Canada for officials who are caught jumping the vaccine queue or taking discretionary trips abroad.
“It’s not so much that he took a trip to the UAE, it’s that he is perceived to have used his influence as the CEO of one of the largest sovereign pension funds in the world to get a vaccination,” former Finance Minister Joe Oliver said in an interview with BNN Bloomberg Television.
“He is supposed to act in a way which reflects Canadian values and respects Canadian laws, and by using his influence to get himself inoculated he crossed a line and I think it’s right that the board acted swiftly,” Oliver said.
In selecting Graham to replace Machin, the board has chosen a low-profile CPPIB veteran who joined the fund in 2008 after a stint at Xerox. He has worked in its total portfolio management and private investment groups before taking charge of a team responsible for credit investments.
CPPIB has pushed deeper into private assets — including infrastructure, real estate, private equity and credit — in the belief that they’re a better bet for the long run.
”When you look at his CV, you see credit, private markets — that is a significant part of the future as to where that retirement-savings investment process needs to go, in order to be successful and generate net real rates of return that are high enough,” said Keith Ambachtsheer, a pension adviser who has provided strategic advice on governance, finance and investment issues to Canadian pension funds, including CPPIB.
Freeland spoke with CPPIB Chairwoman Heather Munroe-Blum Friday morning “and made clear that Canadians place their trust in the CPPIB and expect it to be held to a higher standard,” Katherine Cuplinskas, a spokeswoman for the finance minister, said by email.
“While the CPPIB is an independent organization, we are very disappointed by this troubling situation, and we support the swift action taken by the Board of Directors,” Cuplinskas said.
The finance department was unaware of Machin’s trip, she said, referring further questions to the CPPIB. Munroe-Blum declined to comment through the fund’s press office.
Despite securing more shots per capita than any other nation, Canada has administered just 4.5 doses per 100 people, compared with 29 in the U.K. and 20.6 in the U.S., according to Bloomberg’s vaccine tracker. Just 1.3% of the Canadian population has received two doses.
That’s because Canada has to import the vaccines, and shipments have lagged. With vaccine deliveries now accelerating after delays caused in part by export controls in the European Union, Trudeau maintains that every Canadian who wants the vaccine will have the chance to get it by the end of September.
While many governments kept borders shut for big chunks of last year, Dubai — which relies on international tourism for nearly a third of its gross domestic product — reopened in July.
Tourists and celebrities, particularly from the U.K., have flocked to the UAE to escape the lockdown back home, prompting the British government to halt flights from the UAE to prevent the spread of Covid-19 variant originally identified in South Africa.
In Canada, fleeing the lockdown can be a career-damaging. Rod Phillips, Ontario’s finance minister, was forced to resign on Dec. 31 after it he caused an outcry by taking a Caribbean vacation at a time when many businesses in the province were ordered to shut their doors to contain the virus. A cabinet minister in Alberta, Tracy Allard, also quit her post after she went to Hawaii.
(Adds timing of board discussion in second paragraph, more information on new CEO, investment strategy and other changes)
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