Question Period Note: BUSINESS DEVELOPMENT BANK OF CANADA (BDC) COMPENSATION POLICIES

Can the government change BDC’s compensation policies, particularly with respect to bonuses?

• The Business Development Bank of Canada (BDC) is an arms-length Crown corporation governed by an independent Board of Directors, appointed through an open and transparent process.

• BDC is Canada’s only bank dedicated to providing investment capital as well as financing and advisory services to Canadian entrepreneurs.

• The Governor in Council fixes remuneration for the CEO and the Board of Directors of the BDC. The Board sets the strategic direction and oversees the day-to-day operations of the BDC, including setting the compensation policies staff.

• The BDC is self-sustaining and has returned significant dividends to the Government of Canada.

Headquartered in Montreal, the BDC has 2,900 employees working at over 110 BDC business centres located across Canada. The BDC has committed approximately $52.1 billion to small and medium-sized enterprises and works with more than 100,000 entrepreneurs across Canada as of March 31, 2023. The organization plays an important role in supporting entrepreneurs, offering financing solutions and investment capital to companies, as well as a range of advisory services. The BDC’s services are focused on small- and medium-sized enterprises (SMEs) and are available to all entrepreneurs, operating in all sectors, across all regions, and at all business development stages.

The BDC is a financial Crown corporation wholly owned by the Government of Canada. While it has a public policy role, it also has a commercial requirement to be financially self-sustaining and does not receive appropriations. Over the past five years, the BDC has returned over $1 billion to the Government of Canada through dividends.

As set out under the BDC Act, BDC is mandated to support Canadian entrepreneurship with a particular focus on SMEs. It is also mandated to be complementary, meaning that its offerings should augment existing services available in the private sector. BDC is also mandated to perform a counter-cyclical role, increasing its activities during times of economic turmoil. BDC has three primary lines of business: BDC Financing, BDC Capital, and BDC Advisory Services.

BDC is governed under the Business Development Bank of Canada Act (BDC Act) and the Financial Administration Act (FAA). It reports to Parliament through its Designated Minister, currently the Minister of Small Business.

Budget 2024 outlined a series of changes for financial Crown corporations to help support economic growth. One of the proposed measures is that performance incentives for senior leaders in financial Crowns are expected to align with their organizations taking on increased risk appetite in support of economic growth objectives (Page 202 of the Budget plan).

Article on the bonuses of BDC employees
On April 20, 2024, the National Post published an article on the size of BDC employee bonuses. It reported that BDC employees received a total of roughly $250 million in bonuses to employees since 2019. The article goes on to quote Senator Don Plett, who had initially requested this compensation information, who states that the BDC “bonuses have nothing to do with the performance of the organization. Sadly, the government refuses to answer the simple question: what are the criteria for these payments? And how did the organization and the managers meet these criteria?” The BDC responded by stating that performance awards are based on a formula similar to those of other large organizations, that it is based on annual results, individual performance, and variable pay targets.

The Business Development Bank of Canada Act
The Business Development Bank of Canada Act section 13 outlines that the Bank is responsible for their remuneration and benefit policies of BDC employees. In particular, section 13(4) states that employees are “entitled to be paid by the Bank the remuneration, expenses and benefits that the Bank may determine.”

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