Calling Michael Sabia a workaholic is a little bit like calling former NBA star Yao Ming tall or Britney Spears peculiar. Or Mother Teresa nice.
Just prior to our lunch he took a Porter Airlines flight from Montreal to Toronto in what had to be one of the biggest rainstorms so far this year. The plane bounced and bobbed, but he continued to do his work until the turbulence actually forced him to hold on to his seat.
This is not a man who is overly concerned with work-life balance. When I ask him what his hobbies are, he pauses, looks at me, and doesn’t come up with any. “I’m fundamentally not very interesting,” he says.
That’s not quite true. Granted, he’s not 7’6”, he has never shaved his head after checking out of rehab, and he hasn’t won the Nobel Peace Prize. But the last decade of his career has all the ingredients of a riveting business drama – one that has seen him rewrite Canada’s tax system, play a pivotal role in one of the biggest takeover attempts in the country’s history, and become the first anglophone to run Quebec’s beloved pension fund manager.
In the fall of 2006, when Mr. Sabia was the chief executive officer of BCE Inc., he called Finance Minister Jim Flaherty to let him know the telecom company, a Canadian icon, planned to turn into an income trust. Not coincidentally, Mr. Flaherty shut the income trust sector down shortly after that. That spurred a takeover battle for BCE, a lengthy drama starring Mr. Sabia that was set to become the world’s biggest leveraged buyout.
In the summer of 2007, BCE agreed to be bought for $35-billion by a group of private investors. Mr. Sabia announced that he was leaving the company. That deal wound up collapsing in late 2008, a victim of the financial crisis. At that point Mr. Sabia was already looking to his new challenge, and in March, 2009, he was parachuted in to take over the Caisse de dépôt et placement du Québec, the province’s storied pension fund manager . One of the largest institutional investors in North America, it had just bled a whopping $40-billion (one-quarter of its assets) in the wake of the stock market crash of 2008.
After stepping in, Mr. Sabia – who takes long pauses before speaking and often repeats phrases for emphasis – embarked on a methodical reduction of the Caisse’s risks, for instance by selling riskier investment positions.
Now, having revived a fund that had bled one quarter of it’s value – an astronomical hit – he is delving into the second half of his strategy: finding less-risky areas to invest in. It’s a mission that he expects will take a few years, and one that will see the pension plan favour private-market investments, such as real estate and infrastructure, over stocks and bonds. The Caisse will also be beefing up its expertise in the sectors it invests in. “We need to have people who understand the operations of pipelines, the operations of telecom companies, the operations of transportation companies, we need geologists, we need mining engineers,” he says. “We have to move away from pure financial analysis to build depth.”
A few months ago, the Caisse reported that its net assets, at $159-billion, have now rebounded to above the level they were before the financial crisis. That marked a big turning point for the Caisse – and for Mr. Sabia, who has confronted tough critics in Quebec’s political and media circles.
The Montreal Gazette recently ran an editorial suggesting that, thanks to Mr. Sabia’s prudence and conservatism, the pensions of his vocal critics are more secure.
[The Gazette editorial said: “There were those who said Michael Sabia was an inappropriate person to head up Quebec’s giant pension-fund manager … Former premier Bernard Landry said a “Canadian” like Sabia (not to mention anglophone) wasn’t the right person … But now it seems that good old-fashioned Canadian conservatism, the same kind of prudent stewardship that the world likes in Canadian banks, has turned Quebec’s pension investments around …What this means is a more secure pension outlook for all Quebecers, including Landry.”]
But that’s not to say that Mr. Sabia is no longer controversial. A report that he spent three days at the Desmarais family estate last August prompted Quebec’s lobbying commissioner to sniff around to see if the family was inappropriately trying to influence Mr. Sabia’s decisions. And a report that two of the Caisse’s executives spoke minimal French set off a firestorm last fall.
As Mr. Sabia orders spaghettini with “very, very light sauce, very light … I find that people who haven’t grown up with Italian food as I did tend to just say ‘there’s three pieces of pasta, now let’s just add some sauce’ ” – he says he understands the climate he’s in and does not feel unfairly targeted.
“I think a lot of those reactions were pretty understandable in that the roots of La Caisse, it’s just way more than a financial institution, it’s way more than a pension fund,” he says. “I mean, I have enormous respect for [outgoing Canada Pension Plan Investment Board CEO] David Denison and [incoming CPPIB CEO] Mark Wiseman and Jim Leech at Teachers, but La Caisse, its history is part of the modernization of Quebec and the change in the balance of power between anglophones and francophones … Symbolically, to take an institution, part of whose mandate was in those days – and in some ways still is – the creation of a financial class that spoke French … and having an anglophone lead that institution, that’s a big thing.”
Indeed, he says he feels that some of the criticism is justified.
“Did we do the right thing when we put someone who is … not as comfortable in French in a human resources job where the employees to whom he’s going to be providing services, their language is French? … Frankly, I don’t think so.”
He adds that he doesn’t feel restricted in his hiring. “We have people in New York who don’t speak French. A guy we just brought in who is going to help us with sort of real estate investments in Asia, he’s Chinese. What I want him to speak is Chinese.”
Unlike his pension plan peers, Mr. Sabia has a dual mandate – he’s not only tasked with building the funds the Caisse manages, but also with contributing to Quebec’s economic development.
“There’s this big Jesuitical debate that goes on in Quebec: ‘Is it returns that matter or is it really economic development?’ ” he says in a mockingly grave voice. “It’s crazy. And I’ve said this in the Assemblée nationale, I said ‘If you folks want to have this Jesuitical debate go ahead. I’m not interested. Because to me, it comes back to a deep conviction I have, which is where do you find comparative advantage in our business?’ ”
Yes, he wants to expand further into emerging markets and find the world’s most profitable opportunities. But “we’ve got this institution, order of magnitude $150- $160-billion, that sits right in the middle of the Quebec economy. And I say nobody knows what’s going on in Quebec as well as we do. So why wouldn’t I want to seize that comparative advantage?
“And I don’t think I’m choosing between returns and economic development. I think I’m doing both … We are not in the subsidy business. If somebody wants to subsidize something, go see someone else.”
An example of what he thinks would be a very profitable opportunity in Quebec (one of a long list he begins to rattle off) is the Champlain Bridge, which connects Montreal to the South Shore and needs an overhaul. (It’s “literally falling into the St. Lawrence River. I don’t like driving across it. Every time I do, I do my little ‘Okay, I was in church on Sunday, let’s just get across this …”).
“I’m saying ‘Don’t worry, we’ll finance it,’ ” he says. “Just let us put up a little toll thing and every morning and every evening when people go to work and go home and trucks go across, everyone can make a little contribution to their pension plan.
“This is what I’d like to do,” Mr. Sabia says. “I’ve got to get the federal government to get on with it. Admittedly, in fairness, there are some pretty complicated engineering issues associated with it.”