Archive for the The Chairman’s Corner Category


It has long been apparent that Climate Change and Indigenous Reconciliation will define Justin Trudeau’s legacy.  Little did he or we know that those two issues would converge in a moment of truth just 91 days into the mandate of a perilous Minority government.

The current crisis that has precipitated a full shut down the country’s rail system brings to a head the full complement of thorny questions that surround the task of reconciliation with Canada’s indigenous peoples and our colonial past.  No lasting or even short-term solution to the impasse with the Wet’suwat’en First Nation over the Coastal Gas Link pipeline is possible without a precedent setting resolution of issues relating to land claims, sovereignty and effective self-government.  As if that reality needed complication, all of that must be achieved against a backdrop of intersectionality with critical environmental issues that will dramatically impact national and regional economic concerns.  There is every chance that the next few weeks will be the period in which the Trudeau government defines its place in history.

The facts of this situation are so fraught that is sounds like a Law School exam question.  The land at issue in Northern BC is claimed by the Wet’suwat’en as traditional territory, and is not subject of any treaty, so is properly characterized as “unceded” land.  So what of unceded land?  Does unceded land constitute Crown land, or is it land to which no claim of title stronger than that of the traditional users of that land?  The law is unclear on this point; all that has been conceded to date is that it is territory to which an obligation to consult arises with respect to development plans.  Even this concession seems a little modest in the context of an era of an expressed commitment to reconciliation.  Might this not, in the spirit of reconciliation, be the circumstances in which the obligation is to gain consent rather than just consult?

If only that were the sole question to answer here.  Even if we concede a right to consent, the issues surrounding the Wet’suwat’en and Coastal Gas link would remain unresolved.  The Colonial imposition of electoral democracy on top of a traditional hereditary governance model leaves no clarity as to how or from whom to seek consent.  Most elected Wet’suwat’en leaders have signed on to the development, while most hereditary leaders have not.  Not surprisingly, regulators and Coastal itself have accepted the participation of the elected Wet’suwat’en leaders as determinative of consent, but that can be justified as much to a cultural predisposition to conventional democratic structures as to the obvious preference for a favourable outcome.  That being said, approval of commercial arrangements through democratic institutions is hardly a pre-requisite for doing business with Canadian enterprises; I am pretty sure that the Saudi citizenry were not consulted by referendum before we shipped personnel carriers to the House of Saud.  We are only invoking principle here because we are confronted with two competing claims to representative authority.

And even if the Wet’suwat’en were to be convinced to sign on to Coastal Gas Link with one voice, the project would still face a daunting challenge.  Much of the non-indigenous support for the rail blockades has coalesced around the Wet’suwat’en not as indigenous peoples whose sovereignty and land rights must be respected but in their commonly related but distinct identity as “land defenders”.  It would at this point be naïve to expect that the non-indigenous allies active in the current protest would be any more supportive of the sovereignty of the Wet’suwat’en than they have been to the sovereignty of Canadian courts where that sovereignty is exercised to allow the construction of pipelines.

But first things first: in this fraught situation, what does reconciliation look like?  That part seems fairly straightforward.  In the absence of a treaty with respect to traditional territorial lands, the standard for discharging the recognized obligation to consult with respect to development should require a level of rigour that is effectively one of consent, as has already been demonstrated in practice by Coastal’s laudable choice to enter into benefit agreements with so many affected First Nations.  Notwithstanding Canadian inclinations toward more familiar governance models, the existence and authority of traditional governance structures must be granted equal weight with expressions of representative authority imposed by or otherwise modeled after Canadian structures.  In the face of opposition from any established representative authority, a bona fide commitment to reconciliation dictates that the project not cross the unceded traditional territory.

If this principle is to be retrospectively articulated and applied in the context of the Coastal Gas project, Coastal should be entitled to recover its costs in relying upon the process that it has followed to date.  These costs would include the recovery from the federal government of money expended by it in furtherance of the project since December 31st when the court’s affirmed their right to proceed with the project.  Coastal’s entitlement to recovery of these costs should apply whether they decide to re-route and complete the pipeline or abandon the project altogether.

This solution will not satisfy everyone, and in fact may satisfy no one.  Opponents of pipelines will perhaps be heartened by the further demonstration of the effectiveness of the obligation of reconciliation as an impediment to resource projects but will also be disappointed that the government has nonetheless reaffirmed its conceptual support for resource development.  The business community and the West will be disappointed to see a higher approval threshold for resource projects but can take solace in the recognition once again of an obligation to compensate project sponsors that proceed in good faith.  Indigenous peoples would seem to be the best served in this solution but might/should perhaps see some cause for concern in the predicament in which it leaves them in moving their communities forward economically without a ready means of resolving the governance ambiguities that they face.  All will be left with work to do, but no one will have been unheard.

What does reconciliation look like?  This.


The whole world is mourning the death of 176 passengers, including 57 Canadians, aboard Ukranian Air Flight 752 that crashed just after takeoff from Tehran on January 8th.  Late last week it appeared that the story would command the world’s attention for some time as it transitioned from one of identifying and grieving the dead to addressing the initially unknown but highly suspicious cause of the disaster.

But three days later, in a dramatic turnaround, the Iranian government admitted to what was increasingly obvious to all; the aircraft was downed by surface-to-air missiles fired by its own Revolutionary Guard when it mistook the aircraft for an American cruise missile.  The mistake was not an unusual one; mistakes like this have happened many times before when armed forces are required to make quick decisions in a state of high alert and readiness.  It happened to Iranian airliner in 1988 over the Persian Gulf during the Iran-Iraq War, and it happened most recently to a Malaysian airliner over Crimea in 2014 during the height of tensions between Ukraine and Russia.

The surprising Iranian admission has taken the wind out of those most angrily demanding transparency, but the Canadian government continues to rightly push for the specifics behind this mishap.  The Iranians have already made some arrests (interestingly including in its first wave the unlucky citizen who filmed and uploaded the missile impacts on his or her cell phone camera!), and, as in the case of the Saudi handling of the assassination of Jamaal Khashoggi, there will undoubtedly be an opaque investigation by the Iranians that will result in one or more officers or foot soldiers being tried and perhaps even executed for this debacle.  Case closed.

But looking beyond human error in the fog of (almost) war, there is a more troubling culpability to consider.  The chain of events that led to the over eager missile finger is the product of some very deliberate actions by entirely responsible parties that have had grave consequences.  No matter how the Americans choose to view this, it does indeed start with the decision to assassinate Revolutionary Guard General Qasem Soleimani on January 3rd.  This was the act that transformed the long simmering proxy war between the US and Iran into a direct confrontation.  The apparent justification for this undeniable provocation was the storming of the US Embassy in Baghdad by Iranian supported Iraqi proxy forces four days earlier.  Although no Americans were killed or hurt, the symbolic reminder of the storming of the US Embassy in Tehran in 1979 that resulted in 52 American hostages being held for 444 days was not something the Americans were prepared to treat as part of the usual exchange of unpleasantries.

What came next was a fascinating and deft dance of de-escalation.  The Iranians fired off a barrage of missiles to strike two Iraqi bases used by the US and its allies that, miraculously, resulted in no deaths or injuries to anyone.  For his part, Donald Trump immediately and uncharacteristically downplayed the significance and malevolence of the Iranian strike, and even confirmed that he expected no further hostile action on the part of the Iranians.  A conspicuously active Iranian General was killed, an obviously orchestrated “attack” was stage-managed to save face for the Iranians, and everyone agreed to stand down.  In terms of their critical strategic actions, Trump and Khamenei look like Kennedy and Khruschev during the Cuban Missile Crisis.

Where both sides were considerably less stateman-like, however, was in their rhetoric.  Trumps’s demonstrably illegal and inflammatory threats to Iranian cultural sites unnecessarily and unhelpfully doubled down on the provocation of the drone killing.  In response, the excesses of the state-organized “Death to America” rallies proved hard to control.  The consequences were grim.  Fifty six irresponsibly-provoked mourners died and a further 213 were injured in a violent stampede at the funeral procession for General Soleimani in his home city of Kerman.  And given the obviously over-anxious trigger finger on the surface to air missiles, it seems clear that the Iranian defence forces might have been insufficiently briefed on the pre-negotiated theatrics of the military response, resulting in another 176 deaths.  A well controlled and responsibly managed exercise in de-escalation held the intentional death toll to a single General.  The excesses of demagoguery engaged in by both sides as part of that exercise, however, resulted in 232 deaths.

In debating the performance and legacy of Donald Trump, many believe that his style can and should be ignored.  It is inarguable that no matter how one views the substance of his actions, his manner of conducting himself and his relationships with domestic and international counterparties is far worse.  America bears the burden of global leadership, and particularly so in the context of aggressive actions taken by its forces in foreign territories.  American leaders will always be judged on both the style and substance of their actions.  Barack Obama has been subject to much criticism for his use of extra-territorial drone killings as an instrument of US defence policy during his presidency.  However, in doing so, Obama was always careful to avoid escalating those actions with provocative rhetoric.

Rhetoric can have consequences independent of the substantive actions it serves.  Both Donald Trump and his supporters seem to be unaware of this reality.  The results, both domestically and internationally, are always damaging and sometimes deadly.


Formal education is a funny thing.  When you are young, a good education seems extraordinarily important, admittedly to no small extent because everyone tells you that.  But it also seems important in and of itself at the time because it is during the formal part of your education that you are learning in a very deliberate fashion, complete with exams and grading to tell you how well or badly you are doing at it.  You are learning for the sake of learning, and you and others are measuring your progress.

Once you have demonstrated enough capability in your selected field of study, they give you a degree or some other sort of certification, and you are off to start a career.  And for the first few years of that career, it is often just the nuggets of knowledge that you managed to retain from your formal education that anchors you sufficiently to begin to be able to stand fast in the face of the whirlwind of demands placed upon you by whatever role it is that you have chosen.

But after a very few years, a funny thing happens.  The on-the-job experiences and learning that you have accumulated become far more relevant to your ability to contribute and lead in your chosen work.  And twenty years out, it is rare if ever that one consciously retrieves anything that they learned in their years of formal education in any kind of instrumental fashion to execute or even frame your thoughts about, well, anything, which is why it is both surprising and heartening when that does happen.

My wife is a Social Worker who worked for the Children’s Aid Society for over 30 years.  My daughter is A Ph. D. candidate at U of T in Social Work as well, so it is not surprising that Child Welfare is a more common topic for family discussions than Structured Finance.  As you can imagine, I am at a severe disadvantage in terms of the requisite educational qualification to have anything of value to say in discussions around Child Welfare policy, but I do my best not to let that dissuade me from participating.  And just the other day, I recalled a nugget of learning from my first year MBA courses of nearly 40 years ago that was very helpful in framing the challenges that confound any society in establishing sound Child Welfare policy.

It was, of all things, something that I recalled from the inventory management module of my Operations Management course, the part about optimizing “Stock Out” risk.  Stock out risk is the risk that a vendor loses a sale because of insufficient inventory.  When the topic is first raised with first year MBAs, the initial thought is that you simply devise a model for demand based on historical sales figures for a particular product and ensure that the business maintains sufficient inventory so that in all of the modeled scenarios there is never a “Stock Out”.  However, young MBAs are quickly taught that it is not so simple.  It is profitability that managers are seeking to maximize, not sales.  Unsold inventory represents an investment of capital, and capital has a cost, either in the form of an interest rate for borrowed capital or a required return in case of equity capital.  It is entirely possible, and indeed most likely, that the inventory level required to ensure zero Stock Out risk is not the profitability-maximizing strategy given the cost of capital.  Optimizing inventory management in order to maximize profitability will almost invariably require accepting some level of Stock Out risk and thereby foregoing potential sales to avoid over-stocking.

So why was I thinking about Stock Out risk in a discussion of Child Welfare policy?  Because the topic was the historical high rates of apprehension of children at risk that separates them from birth families, both temporarily and too often permanently, that is increasingly recognized as having devastating long term impacts on birth families and apprehended children.  And how are apprehension polices determined?  To a large extent by applying a zero-tolerance standard with respect to the likelihood of serious harm to or even death of a child left in the care of challenged caregiver.  We understandably impose a standard that lowers “Stock Out” risk with respect to any single child to zero, ignoring the social cost to thousands of children and families of disrupting family relationships, however fraught they might be.

It is of course a much different consideration to countenance a lost sale than it is to losing even one child.  But it is important to understand what it is we are doing in the context of Child Welfare policies.  Zero risk tolerance policies provide protection against the risk of a small number of catastrophic outcomes in return for the certainty of very large number of disrupted families and personal traumas.  Sadly, there is no simple formula for optimizing this trade-off; there is no social accounting “bottom line” calculation that we can point to.  But at the very least all engaged in the debate must acknowledge and accept the trade-off, even if we cannot quantify offsetting social costs as easily as we can the cost of capital in over-stocking a business’ inventory.

I now await a no less appropriate Social Work theory-based perspective on residential mortgage expected loss-given-default calculations from my wife and daughter.