Wealth management giant Franklin Templeton Canada has voluntarily paid back money it collected from the federal government’s Canada Emergency Wage Subsidy program, after determining that it did not need the funds any longer.
The mutual fund company was one of thousands of entities – including wealthy hedge funds and large, profitable companies – that received the subsidy when the program launched in March, 2020.
Franklin Templeton spokesperson Sarah Kingdon said the company applied for and received just one tranche of funding from CEWS for the period between mid-March, 2020, and mid-April, 2020, after its revenue had dropped in excess of the amount required to qualify.
“While it was helpful to have access to CEWS funding during a moment of great market uncertainty, we have voluntarily paid back these funds to the federal government,” Ms. Kingdon said in an e-mailed statement to The Globe and Mail.
Franklin Templeton would not disclose how much it received and how much it subsequently paid back to the federal government.
The federal government launched CEWS in the spring of 2020 to incentivize businesses to preserve jobs even in the face of declining revenues. The first iteration of the program – the Temporary Wage Subsidy for Employers – only targeted subsidies to small businesses, covering up to 10 per cent of their payroll. It was condemned by various business lobby groups for being insufficient, prompting the government to set up CEWS, which covered up to 75 per cent of employees’ salaries with a weekly cap of $847 per worker.
At first, companies had to show a revenue decline of 30 per cent to qualify, but that criteria was loosened months later, allowing applicants who charted smaller revenue declines to collect proportionally smaller subsidies.
As of Sept. 30, 2020, Franklin Templeton managed approximately $30-billion in Canadian assets, and $1.9-trillion globally. The company does not break down its revenue by geography, but the total revenue of parent company Franklin Resources Inc. declined by 11 per cent between March 31, 2020, and the end of June, 2020.
By the end of last September, however, Franklin Resources had almost recovered from two previous lacklustre quarters – the company’s revenue for the full fiscal year was almost unchanged compared with 2019. In Canada, Franklin Templeton’s assets under management grew by 3 per cent in the 2020 fiscal year compared with the year prior.
A Globe investigation into Canadian publicly listed companies that obtained CEWS found that a large minority of the 400-odd companies that received the subsidy saw their revenues and profits grow in the second and third quarter of 2020, even as the country was reeling from the impact of the pandemic. For many companies, including wealth management firms and hedge funds, their revenue declines were fleeting, driven by momentary turmoil in markets at the onset of the pandemic before portfolios were quickly recalibrated to adapt to the uncertainty.
According to Ms. Kingdon, Franklin Templeton returned the funding because its business “remains on strong footing.” She added that the company applied for the subsidy to begin with because it saw the funds as a “prudent way to avoid staff reductions during extreme market volatility and a significant drop in revenue” when the pandemic first hit.
To date, the federal government has doled out more than $84-billion in CEWS to 449,250 companies, making it one of the largest relief programs in Canada’s history. But unlike the Paycheck Protection Program in the United States, which is a loan given out by the federal government to companies to subsidize workers’ salaries, CEWS recipients are not obligated to pay back the money collected from the program. They are also not mandated to use that money to subsidize jobs.
David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, believes that all CEWS recipients that ended up being profitable despite the pandemic should pay back the government. “The payback shouldn’t be voluntary based on a company’s public relations policies, it should be mandatory for any big company that turned a profit,” he told The Globe.
The program, which will end up costing taxpayers $110-billion in total, is expected to end on Sept. 25, after an 18-month run.
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