Can St. Joe’s boss also run mort­gage firm?

Queen’s Park fi­nance critic ques­tions Kevin Smith get­ting it all done

The Hamilton Spectator - - FRONT PAGE - JOANNA FRKETICH

Ques­tions are mount­ing about how Kevin Smith has the time to lead two ma­jor health sys­tems while chair­ing the board of a floun­der­ing mort­gage com­pany.

Con­ser­va­tive fi­nance critic Vic Fedeli pointed out in the On­tario leg­is­la­ture Wed­nes­day for the third day in a row that Smith is paid $726,315 a year as CEO of St. Joseph’s Health Sys­tem and Ni­a­gara Health Sys­tem.

At the same time, he makes $357,500 an­nu­ally to chair Home Cap­i­tal, which is un­der in­ves­ti­ga­tion by the On­tario Se­cu­ri­ties Com­mis­sion, prompt­ing about $1 bil­lion in with­drawals in the last week alone.

“You have to ask, how could he pos­si­bly run St. Joseph’s, while head­ing up a multi­bil­lion-dol­lar com­pany?” Fedeli asked Fi­nance Min­is­ter Charles Sousa. “Is it right that a hos­pi­tal CEO, who should be fo­cused on health care, should have an­other full-time job, where he earned over $1.5 mil­lion?”

Home Cap­i­tal pays Smith in de­ferred stock units, which in De­cem­ber had amassed nearly $1.6 mil­lion, as he has been a di­rec­tor since 2007. The shares are now worth just over $340,000, as the stock has plum­meted.

“Mr. Smith takes care to en­sure he prop­erly bal­ances his role at Home Cap­i­tal with his job as CEO of St. Joseph’s,” Home Cap­i­tal spokesper­son Boyd Er­man wrote in an email to The

Spec­ta­tor on Wed­nes­day.

Smith’s full-time job is CEO of the two health net­works, for which he is re­spon­si­ble for strate­gic and op­er­a­tional man­age­ment.

Home Cap­i­tal is a part-time job with Smith man­ag­ing and lead­ing the board, which en­hances gov­er­nance pro­cesses and strength­ens risk and con­trol in­fra­struc­ture to en­able the com­pany to grow and meet strate­gic ob­jec­tives.

Smith has not com­mented since The Spec­ta­tor first con­tacted him on Fri­day. Instead, Er­man has re­sponded to in­ter­view re­quests.

St. Joseph’s said in a state­ment that its board sup­ports Smith’s role at Canada’s largest al­ter­na­tive mort­gage lender.

“It’s stan­dard prac­tice for CEOs to take up lead­er­ship roles in other or­ga­ni­za­tions, and Kevin Smith par­tic­i­pates in the gov­er­nance of a num­ber of or­ga­ni­za­tions re­lated to health care and re­search.”

In ad­di­tion to Home Cap­i­tal, Smith chairs the Canada Foun­da­tion for In­no­va­tion and the Car­diac Care Net­work of On­tario. He sits on three ma­jor groups for the Min­istry of Health.

“He is well re­spected and is fre­quently called upon based on his ex­pe­ri­ence,” said St. Joseph’s. “In the case of Home Cap­i­tal, the days re­quired to do this were taken as va­ca­tion days from the Health Sys­tem.”

Smith gets six weeks of hol­i­days in his con­tract with St. Joseph’s.

Fedeli ques­tioned how he chairs Home Cap­i­tal in that amount of time in an in­ter­view with The Spec­ta­tor: “Does he do all the think­ing” about the mort­gage com­pany in his time off ?

Smith at­tended 31 Home Cap­i­tal meet­ings in 2016, shows the com­pany’s man­age­ment in­for­ma­tion cir­cu­lar. He chairs the hu­man resources and com­pen­sa­tion com­mit­tee for Home Cap­i­tal and sits on the gov­er­nance, nom­i­nat­ing and con­duct re­view com­mit­tee.

“I’ve never heard of a CEO of a hos­pi­tal chair­ing the board of a mort­gage com­pany,” said Richard Leblanc, as­so­ciate pro­fes­sor of law, gov­er­nance and ethics, at

York Univer­sity. “It’s too oner­ous.”

He es­ti­mates it takes roughly 300 hours of work a year to sit on the board of a com­pany as large as Home Cap­i­tal. For chairs, he says it can be as high as 600 hours.

While the com­pany is in cri­sis, Leblanc es­ti­mates it would be five to seven hours of work a day. “Right now, it is all hands on deck,” he said. “There is noth­ing more se­ri­ous from a gov­er­nance point of view than what is hap­pen­ing to Home Cap­i­tal Group. Home Cap­i­tal is hem­or­rhag­ing mil­lions of dol­lars.”

The Toronto-based lender gives mort­gages to those who don’t qual­ify with the big banks.

The com­pany is get­ting a $2-bil­lion bailout from the Health­care of On­tario Pen­sion Plan. Smith sat on the board of HOOPP but re­signed after the cash in­fu­sion was an­nounced.

The pen­sion plan’s CEO, Jim Keo­hane, said the board was not in­volved in the in­vest­ment de­ci­sion. And Er­man says Smith didn’t vote on the bailout at Home Cap­i­tal.

Keo­hane him­self was on the Home Cap­i­tal board and re­signed after the deal was made, say­ing he didn’t take part in the dis­cus­sions.

The deal has also raised flags with Fedeli, Con­ser­va­tive MPP for Nipiss­ing.

“You’ve got the same play­ers be­ing in­volved in the lender and the bor­rower,” he said. “Is there any per­ceived con­flict of in­ter­est here? Has the gov­ern­ment seen any­thing that they believe should be in­ves­ti­gated?”

Mean­while, a hear­ing into al­le­ga­tions that three Home Cap­i­tal ex­ec­u­tives mis­led in­vestors about un­der­writ­ing ir­reg­u­lar­i­ties is sched­uled to take place Thurs­day at 1 p.m. in Toronto. Smith is not one of the ex­ec­u­tives im­pli­cated.

Two York Univer­sity gov­er­nance ex­perts say the in­ves­ti­ga­tion shows there are po­ten­tially gaps in over­sight.

“The buck starts and stops with the Home Cap­i­tal board,” LeBlanc said.

“It is 100 per cent the board’s re­spon­si­bil­ity,” agreed Hari Pan­day, ad­junct pro­fes­sor of cor­po­rate gov­er­nance and CEO of in­vest­ment bank­ing firm PanVest Cap­i­tal “The board is sup­posed to pro­vide the over­sight.”

Smith is among the most high-pro­file hos­pi­tal CEOs in On­tario with a stel­lar rep­u­ta­tion.

The 54-year-old health-care leader was the ninth-high­est-paid public-sec­tor earner in 2016.

He was named CEO of St. Joseph’s Health­care in 2001 and CEO of the over­ar­ch­ing St. Joseph’s Health Sys­tem in 2009. The sys­tem con­sists of three hos­pi­tals, an ur­gent care cen­tre, three longterm-care cen­tres, a home-care agency and in­ter­na­tional out­reach pro­grams.

In 2014, Smith took on lead­er­ship of the Ni­a­gara Health Sys­tem, which has six sites.

The sys­tem has a man­age­ment ser­vices agree­ment with St. Joseph’s so its ap­proval is not re­quired for Smith to sit on other boards. “We have been very pleased with the per­for­mance out­comes re­sult­ing from this agree­ment,” says a state­ment from Ni­a­gara Health Sys­tem.

At the same time Smith was St. Joseph’s CEO and a di­rec­tor at Home Cap­i­tal, he was also on the board Glen­dale In­ter­na­tional Corp., which man­u­fac­tured and sold re­cre­ational ve­hi­cles. Smith re­signed from the board in April 2009 and the com­pany filed for bank­ruptcy in Jan­uary 2010.

In ad­di­tion, he was on the board of the On­tario Hos­pi­tal As­so­ci­a­tion from 2002 to 2011 and chair from 2009 to 2010.

Dr. Kevin Smith: Peers hold him in high re­gard.

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