Can St. Joe’s boss also run mortgage firm?
Queen’s Park finance critic questions Kevin Smith getting it all done
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.