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The chief executive officer of a major player in Canada’s wealth management industry says he was “disappointed” to find out that some hedge funds and wealth management firms collected the Canada Emergency Wage Subsidy, despite their companies performing exceptionally well in the pandemic.

George Mavroudis, CEO of Guardian Capital Group, a global wealth management company headquartered in Toronto with almost $50-billion in assets under management, said his company chose not to participate in the government relief program because “it was the right thing to do.”

“Corporations should have some sense of responsibility to the societies they operate in,” Mr. Mavroudis told The Globe and Mail in an interview. “In this particular case with the subsidy program, it wasn’t something that we needed even though we were also affected by the pandemic in the beginning. We felt it was better that it went to those who needed it more,” he added.

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An extensive Globe investigation into the federal government’s $110-billion wage subsidy program found that hundreds of large corporations, wealthy hedge funds, asset managers and even companies going through bankruptcy proceedings collected CEWS because of broad-based eligibility rules that require companies to show any amount of a decline in revenue in a four-week period to qualify.

The program was designed with jobs in mind – the government would help cover the payroll of businesses affected by the pandemic, in the hopes that would encourage companies to keep their staff employed.

But The Globe found that many CEWS recipients had growing revenue and profit over the course of the year, despite one of the worst economic recessions in history.

In some cases, companies still laid off workers, increased shareholder dividends and doled out bonuses despite collecting hundreds of millions in government money. In the wealth management sector, The Globe found that at least 80 asset managers, including some of the top performing hedge funds of 2020, received the subsidy.

Mr. Mavroudis characterized the program as one that was not “well thought out enough” with “all kinds of weaknesses in it.” But, he added, it is exactly in situations like this where a corporation’s moral compass is really put to the test.

Guardian Capital reported a net loss of $136-million in the first quarter of 2020, which Mr. Mavroudis attributed to a huge drawdown from investors when the pandemic first hit Canada. The company’s quarterly revenue, however, was unchanged, meaning that Guardian might not have qualified for CEWS.

“I’m not sure if we qualified. We did not check, because from the start we committed to not furloughing employees and not taking government help,” he said.

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As the CEWS program rolled out, a number of corporations, like Restaurant Brands International and the Big Six Canadian banks, also chose to not participate in the subsidy program, as a show of solidarity of sorts toward smaller businesses that were more in need of government assistance to keep their businesses afloat.

Restaurant Brands spokesperson Leslie Walsh told The Globe that while the company technically qualified for the program, it chose to use its own corporate resources to keep workers employed. Many of its franchisees, however, were eligible for and collected the subsidy.

A handful of well-performing asset managers that collected CEWS, including PenderFund Capital Management Ltd. and Montreal-based Fiera Capital Corp., were also signatories of the Principles for Responsible Investment, or PRI, a United Nations-supported network of global investors committed to environmental, social and governance, or ESG, principles.

Fiera collected $2.9-million in CEWS while revenue improved by 17 per cent between March and December, 2020, according to filings. It also continued paying out dividends to shareholders and bonuses to executives, which totalled more than $100-million in 2020. PenderFund, too, had a strong 2020. The asset manager launched a new $100-million tech fund, and recorded a 40-per-cent return between April, 2020, and April, 2021, for its flagship Pender Growth Fund.

The Globe reached out to the network to ask if signatories of the PRI were in violation of those principles by collecting government relief while performing well during the pandemic. Duncan Smith, a spokesperson of the UN PRI, did not directly respond to the query but pointed The Globe to a section on the website dedicated to how responsible investors should act during the pandemic.

One of the “actions” signatories committed to at the start of the pandemic was to “support companies, debtors and governments with flexibility in financial arrangements and with more direct support when feasible.” The bulletin also stated that any investors that have opportunities to “support governments” in funding a pandemic response are “encouraged” to do so.

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There was, however, no specific language around whether companies should be taking government relief, even if they qualified for it.

Fiera did not respond to The Globe about whether collecting CEWS in a banner year for their companies in any way compromised their ESG commitments. David Barr, the president and CEO of PenderFund, told The Globe via e-mail that while the company accessed the CEWS program when it was first introduced, the company’s recovery was “quicker than expected” and PenderFund “withdrew” from CEWS after six months.

Guardian Capital too, is a UN PRI signatory. “I think ultimately, companies need to go beyond ticking boxes when it comes to ESG principles. Stakeholders measure us on substance,” said Mr. Mavroudis.

He noted that when The Globe first published its CEWS investigation, he was inundated with calls from high-profile clients asking if Guardian participated in the program. “We said no. I think they would have been very disappointed in us if we were doing things that, as a corporation, they did not deem responsible.”

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