Dr. Ian Lee on the near future of Canada Post

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How will Canada Post survive the post-letter era? Dr. Ian Lee took a deep look at the challenges and offers solutions.

Ian Lee is the Assistant Professor at Carleton University’s Sprott School of Business. He published a critique on the future of the Canada Post Corporation entitled, Is the Cheque Still in the Mail? The Internet, E-Commerce, and the future of Canada Post Corporation.

It is a must-read for anyone interested in the business of Canada Post. Canada Post is a Crown corporation under the auspices of the Canadian Government. Because it is a Government entity and has no accountability to shareholders, this corporation has been severely understudied about its business decisions over the last decade.

Dr. Lee is one of the few who has taken considerable time and energy parsing through Canada Post’s financial statements and giving a thorough critique.

His background, education and experience give significant credence to his conclusions. Early on his career, he worked at Canada Post’s head office, corporate finance and banking, from 1982 to 1984. His PhD thesis was on the origins, growth and decline of the Canada Post.[1]

The article published by Dr. Lee along with his interview by Geoff Currier on a Winnipeg radio station, CJOB, outlines a position that Canada Post is dying and needs to be resurrected as a parcel delivery service. He clearly demonstrates the demise of the traditional Post Office and how some necessary adjustments must be made for its immediate survival, but he doesn’t delve any further into the long-term.

I predict within ten years by 2025 there will be no letters mailed in Canada. They will be as obsolete as 78 playing records or 33 and a third, or 8 track cassettes, or disco music.[2]

He highlighted nine recommendations that change the nature and definition of Canada Post.

  • Not to privatize Canada Post
  • Eliminate the Postal Monopoly or exclusive privilege to deliver letters
  • Replace all door-to-door mail delivery with community mailboxes
  • Reduce daily delivery to residential (not business) customers
  • Franchise all corporately-owned Post Offices
  • Consolidate Processing facilities
  • Implement the Canada rural broadband strategy by 2020
  • Deregulate CPC post pricing of letter mail
  • Revise the Canadian Postal Service Charter and the Universal Service Obligation[3]

When it comes to statistics and financial analysis, he carefully substantiates every point. He sets a new standard in the Canada Post debate.

Dr. Lee ordered “Not to privatize Canada Post” first because he wanted to be emphatic about this point. However, this is confusing. He believes his recommendations will lead to reforms in the letter mail service that will allow for privatization of the parcel service. Is he promoting Canada Post being a Crown corporation for the now, and then when Canada Post successfully transforms to a parcel delivery company then privatize? This point needs further clarification.

Neither does he answer the question on the survival rate of going private. Canada Post has a meagre infrastructure and does not have the capital to compete with the likes of UPS. Nor does he refer to the current talks between Canada and other countries discussing the Trans Pacific Partnership deal — an agreement which would require Canada Post to privatize.

He also omitted a serious failure by Canada Post’s management team that cost the company billions of dollars. Canada Post embarked on the transformation in 2008 with the idea of it being entirely self-funded without any debt. However, they were not prepared for the recession and this put them into a serious financial hole — one that they never have recovered from. If Canada Post was a publicly traded company at that time, they would have been close to if not in bankruptcy. Shareholders would have ousted the chairman, board and president. Instead, the blame has shifted to labour costs being too high. In other words, there is no admission to mismanagement. The problem has successfully been placed on employees instead.[4]

As a specialist in the financial sector, he believes that postal banking is not an option for Canada Post. The complexity of banking has increased significantly over the years and Canada Post does not have the ability to cross-over into this realm. Nor do present employees have the necessary transferable skills. The CUPW plan would also be cost-prohibitive:

I will be very blunt with you, I think it is preposterous. Before I worked at Canada Post and I went back to school for my PhD I worked ten years at banking, Bank of Montreal, I was in management lending money. Anybody who knows anything about banking knows that in the last 15, 20, 25 years banking has become very sophisticated. You have to be quite educated to get into a bank. My students are going in there now. You know Bcomms and finance and that sort of thing. More importantly banking is very capital intensive. The CBA, the Canadian Bankers Association, reports that the banks in Canada spends 2 billion a year, to upgrade their hardware, their software, their programmers to guard against fraud and people trying to hack in, and of course the high-speed digital communications. The idea that CUPW, and I am not putting them down, they are good people, but the idea that they could become bankers and that the Government going to spend billions of dollars to wire up all the branches across Canada of the Post Office to turn it into a bank. And the one final point on why it is such a silly idea, banks, deposit to a bank are a cost. You have to pay the depositors money. You have to pay them interest on their accounts and then you the bank, turn-around and make money by lending it out on mortgages. If CUPW is suggesting that they are going to be turned into mortgage lenders, and consumer lenders and credit card lenders, and if they say of course not, well what they are proposing is taking money in on deposit that becomes an expense to Canada Post because they gotta pay interest to the person who has the deposit. Where’s the revenue coming in to cover off the expense of paying interest on the deposit? So it doesn’t make any sense whatsoever.[5]

Footnotes

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Back to Work Legislation Ruled Unconstitutional

The back to work legislation imposed by the Federal Government in 2011 was ruled unconstitutional. What does it mean for the 50,000 workers affected? They feel being short changed again.

April 28, 2016. The Canadian Government Act to resume postal services, the Restoring Mail Delivery for Canadians Act, S.C. 2011, c. 17, was ruled unconstitutional by an Ontario Superior Court Judge and further declared having no force or effect.

In layman’s terms, it means the law was struck from the Canadian Government’s legal code. It no longer exists. Too late for those affected. The purpose it was designed for already accomplished.

Mike Palecek, National President of the Canadian Union of Postal Workers (CUPW) believes “This is a win for workers everywhere.”[1]

A closer look at the judgement shows that Mr Palecek took an optimistic look at something that has far-reaching and potentially negative consequences in the greater Canadian mosaic.

The problem is not in defining the infringement as unconstitutional. The difficulty lies in the remedy to the situation. The judged ruled the law was unconstitutional and declaratory relief was a sufficient remedy. In other words, the law was unconstitutional and nothing more. No slap on the hands to the Government. No apology. No compensation for violating a basic right. Nothing. The Federal Government and Canada Post have said nothing in response. They don’t have to. It doesn’t matter.

This is an unfortunate ruling because Restoring Mail Delivery for Canadians Act forced the CUPW members to choose between ratifying an unfavourable new collective agreement proposed by Canada Post or go into Final Offer Selection – a method outlined in the Act that considerably favoured the employer. Given the choice between two bad choices, CUPW members ratified an unfavourable collective agreement rather than gamble on FOS. CUPW and its members liked neither, as both were not the result of the traditional collective bargaining process – a constitutional right the Ontario Superior Court recognised as being denied.

A remedy should have named 2011 collective agreement being null and no effect as well because it is a direct descendant of this Act.

The judge certainly agreed that the Act interfered with CUPW and its members with signing a negotiated collective agreement in 2011. As found at line [194] of the Judge’s ruling;

The Act abrogated the right to strike of CUPW members. The effect of this abrogation was to substantially interfere with – and to disrupt the balance of – a meaningful process of collective bargaining between CUPW and Canada Post. I find accordingly that the Act infringed the s. 2(d) freedom of association of union members and must be justified under. s. 1 of the Charter.[2]

So why didn’t the Judge logically proceed and state, “Yes, the Act substantially interfered with the collective bargaining process, that the Act infringed the s. 2(d) freedom of association of union members, etc., This Act consequently created a forced agreement that would not otherwise have been produced. Since the collective agreement was created out of a framework brought on by unlawful interference, the 2011 collective agreement is of no effect or force. The previous agreement applies until a resolution between Canada Post and CUPW can be properly made within the confines of constitutional guarantees.”

The Judge has the right to impose such a provision in such cases but declined. However, it is known that most section 24(1) remedies are reserved for individual not corporate or collective entities.[3]

J. Firestone took a narrow definition on when a remedy for Section 24(1) would apply:

“. . . a high threshold that applicants must satisfy before a court of competent jurisdiction will award them Charter damages. Something more than gross negligence is required on the part of government actors, although malice is not required to satisfy the threshold. . . [4]
The Supreme Court of Canada has stressed that s. 24(1) remedies exist for the purpose of compensation, vindication, and deterrence in the face of conduct by state actors. There was no conduct on the part of government officials in this case that would warrant an award of Charter damages.”[5]

Firestone believes gross negligence by the Government when violating the Constitution is not considered a trigger for compensation. This only occurs if a Government representative misapplies, misrepresents, or oversteps their boundaries in applying a law. Theoretically then, the Government agent is no longer representing the will of the Government but own self-interests. This is when a remedy then is triggered.[6]

Marilyn L. Pilkington wrote on the topic of damage and remedy when a violation has occurred in La Revue Du Barreau Canadien and concluded that a four step process must occur in determining a remedy and does not dwell on the idea of agent liability:

  • “(1) What are the purposes of the constitutional guarantee?
  • (2) What other remedies are available to redress the infringement of that guarantee? Do they provide an effective means of vindicating the plaintiff’s rights and deterring similar unconstitutional conduct without interfering disproportionately with the implementation of legitimate government policy? Would a remedy in damages achieve these purposes any more effectively, taking into account who will eventually pay?
  • (3) Was the conduct of the defendants so egregious as to warrant punishment through the imposition of damages? Is there any other mechanism available for effective punishment?
  • (4) Has the plaintiff suffered consequential injuries which should be compensated?”[7]

The final ruling fails to answers these questions and falls more on the subjective opinion of the judge.

The reality of this type of application means that the Government can wilfully violate the Constitution with little fear of any consequences, especially as it relates to collective entities such as labour unions, religious organisations, or corporations. When they do violate the Constitution, as per the ruling on Restoring Mail Delivery for Canadians Act, it took almost five years to determine that it was unconstitutional – too late after the damage had been done by the Act. And when it was determined that damage had happened, only a trite recognition was made in a legal sense, but it makes no difference in application to the problem at hand. In the case of the violation to CUPW and its members, there is no apology or compensation to the 50,000 or so people affected.

Not only this, but such a conclusion demonstrates the Government can enact legislation that potentially violates the Constitution and can continue persistently because only those entities that can afford the time, money, or expertise to challenge can bring correction. Even if they do succeed, it may take years to take a violation off the books. And even when that happens, don’t expect the Government to say sorry or compensate for their wrongful actions.

This is a serious weakness in the Canadian system that can lead to an abuse of power, which happened in the Restoring Mail Delivery for Canadians Act. There has to be a better mechanism in place to control and remedy such abuses. This should be a warning for Canadians to close this loophole before something worse does come down the pipeline.

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  • [1]http://www.cupw.ca.c.cupw.ent.platform.sh/en/posties-win-big-tory-back-work-legislation-ruled-unconstitutional
  • [2] Canadian Union of Postal Workers v. Her Majesty in Right of Canada, 2016. Court File No.: CV-11-436848. 20160428. The Judgement can be downloaded from here: https://canadasmodernpost.files.wordpress.com/2016/04/cupw-reasons-for-judgment.pdf
  • [3] See Marilyn L. Pilkington. Damages as a Remedy for Infringement of the Canadian Charter of Rights and Freedoms. Osgoode Hall Law School of York University. As found in La Revue Du Barreau Canadien. Vol. 62. 1984. Pg. 543 “Canadian courts may be prepared to permit such a third party to challenge the validity of legislation under section 52 of the Charter, but the opportunity to apply for a remedy under section 24(1) of the Charter is limited to those whose own constitutional rights have been infringed.”
  • [4] IBID Canadian Union of Postal Workers v. Her Majesty in Right of Canada, 2016. Line [241]
  • [5] IBID Canadian Union of Postal Workers v. Her Majesty in Right of Canada, 2016. Line [244]
  • [6]See David Stratas Heenan Blaikie LLP, Toronto, Remedies for 24(1) Violations. http://www.davidstratas.com/15.pdf
  • [7]IBID Marilyn L. Pilkington. Pg. 541
Posted in Opines

The Community Mailbox Financial Fiasco at Canada Post

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Canada Post announced in 2013 an estimated annual $400 to $500 million in savings by converting door to door to community mailboxes. It was part of their five-point plan to bring Canada Post into an economically stable future.[1]

However, a change in Government in 2015 halted such plans. They were only able to achieve around 20% of this financial goal.

As at the end of October 2015, we have completed community mailbox conversions for approximately 850,000 addresses across Canada. It is expected that these conversions will contribute an estimated $80 million in annual savings to Canada Post. These were the first conversions of households previously receiving mail at the door and were part of a multi-year national initiative that was to involve up to five million addresses. On October 26, 2015, Canada Post announced that it is temporarily suspending future conversions and will work with the Government of Canada to determine the best path forward given the ongoing challenges faced by the Canadian postal system. As a result, all conversions planned for November and December 2015 and those announced for 2016 were placed on hold.[2]

This is a major change in financial plans by Canada Post. If the company was a publicly traded one, business common sense would immediately require the CEO and board to explain to the shareholders how they would adapt. As of late April 2016, there is no indication by the Government nor Canada Post how they are going to alternatively raise the $320 to $420 million lost in anticipated savings.

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Footnotes:

Posted in Financial

The Call for the Resignation of Canada Post’s President

The Canadian Broadcasting Corporation has posted in-depth coverage of the battle between the new Liberal Government and the previous Conservative appointed President of Canada Post, Deepak Chopra. Sian Matthews, chair at Canada Post, has written a strongly worded defense for keeping Mr. Chopra at the helm. The response strengthens the present Government’s accusation of their predecessor stocking government boards with party insiders. Matthews was once Stephen Harper’s official agent back in 1993. For more info, click on the following link Canada Post Chair Delivers Sharp Rebuke.

Posted in Opines

Where is Canada Post headed under a Liberal Government?

There is angst among postal workers on what the future looks like under the auspices of a Liberal Government. Nobody knows where Canada Post is heading now that the Conservative vision of community mailboxes has been nixed.

A recent article by Don Pittis posted on the Canadian Broadcasting Corporation’s website, Canadians must say if Canada Post is more precious than junk mail [ Oct 29, 2015] suggests that Canada Post is once again under analysis and a different set of changes could potentially be forthcoming. There is a brief open window, according to Pittis, to consult the Canadian people on what the future of Canada Post should be.

Pittis makes some very good points that the public needs to discuss.

Flyers and admail subsidize a portion of mail delivery. The removal of this medium would increase the cost of delivery to each household. It would be necessary to increase the cost of postage or the corporation to take a loss without flyers or admail.

The idea of alternate day delivery is up for discussion as well. This is not an easy task to fulfill. Canada Post presently does not have the extra room to store any mail in any of their centres for more than a day. Alternate day delivery requires Canada Post to increase their warehouse and logistic facilities all across Canada which could be very costly.

There are three big points that Mr. Pittis overlooked.

The first one is the potential sale of Canada Post. This was not a discussion point during the elections either. It was the previous Liberal Government that had begun prepping Canada Post for privatization and clearly demonstrated at their hiring of Moya Greene as the president. However, her business plan, combined with the 2008 recession, slowed down rather than accelerate privatization. Stephen Harper and his Conservative Government had proceeded with plans for privatization. One of the biggest hurdles he had to overcome was the problematic Canada Post pension plan. It had significant losses from the 2008 recession. This loss combined with the strategy to almost halve the workforce would devastate the defined pension plan. Future employee contributions would not be able to sustain pension obligations. The solution was to change it. Discussions were in the beginning stages on revising the pension plan when the Conservative Government was outed.

Will the Liberal Government stop the restructure of the defined pension plan? It is not known.

Another problem that the Liberal Government has to face is that of the proposed Trans Pacific Partnership deal. The deal severely limits Government state owned enterprises because TPP believes it gives them too great an advantage against private entities. Although the wording of the TPP is not clear and the details are not known, it points to the notion that Canada Post would have to be privatized.

Last of all, the collective agreement between the Canadian Union of Postal Workers and Canada Post expires January 31st, 2016. Will the Liberal Government fulfill its promise of better relations with employees, or will it legislate workers back to work imposing a new deal?

What is the future of Canada Post? The next six months to a year are going to be interesting.

Posted in Opines

The Future of Canada Post… Parcels

Where is Canada Post heading? Another report about the transformation of Canada Post. This time by By Sean Davidson, CBC News, October 17th, 2015. It is a start but does not go deep enough into the history, politics, or economics behind the decision making. He does suggest that if the Liberals win the election, it may be status quo with the modern post blueprint of cutting jobs and converting to Community Mail Boxes from home delivery. A coalition with the NDP could upset the current direction. http://www.cbc.ca/news/canada/canada-post-election-1.3274346

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Canada Post President Defends Blueprint

In December, 2013, Canada Post’s President and CEO, Deepak Chopra appeared before a Canadian Parliamentary committee to defend his blueprint for Canada Post’s future. The blueprint is naturally supported by the ruling Conservative Government, and criticized by the NDP opposition. Paul Dewar, an NDP MP, spent 5 minutes questioning Mr. Chopra on the changes. Mr. Chopra refused to engage in answering any of the questions and instead chose to forward his vision of Canada Post through short quotes. The following is the actual exchange captured on television and re-transmitted on YouTube. Mr. Dewar comes across as a person with his own personal axe to grind. However, the response by Mr. Chopra is very indicative of the business model he employs, secrecy. He, as modeled by the majority Conservative Government, do not feel it is the duty of a public servant to be clear and transparent with the citizens on any major decision making.

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