White Smoke at the Caisse?

Last Thursday, Denis Lessard and André Dubuc of La Presse reported that CDPQ's Board of Directors is recommending Macky Tall to take over the helm of that organization as Michael Sabia sets to depart. The article is in French so I took the liberty to translate it using Google and edited some passages:
White smoke marking the choice of the new president of the Caisse de depot et placement du Quebec (CDPQ) is about to appear. The committee of the board of directors of the organization responsible for finding the rare pearl recommends the choice of Macky Tall, president of CDPQ Infra and senior manager of the Metropolitan Express Network (REM) project in Montreal, several sources told La Presse.

But Mr. Tall’s candidacy faces obstacles within government. Pierre Fitzgibbon, Minister of the Economy and former member of the Board of Directors of the Caisse de depot, rather promotes André Bourbonnais, who lives in New York. At the helm for a few months of a BlackRock private equity fund, Mr. Bourbonnais was previously the boss of PSP Investments, which, with $ 168 billion in assets under management today, is one of the most important fund managers for pension funds in Canada.

Mr. Bourbonnais also has a strong ally in Charles Sirois, the Montreal businessman who had supported François Legault when the Coalition Avenir Québec (CAQ) was created 10 years ago.

The Legault government hopes to have resolved the issue of Michael Sabia’s succession by the end of January. To conclude the process, the last three candidates approved by the selection committee, Mr.Tall and Mr. Bourbonnais and a rising Caisse star, Charles Émond, are scheduled to meet with Premier Legault. Interview that will take place shortly, told La Presse reliable sources.

Originally, Mr. Sabia planned to remain in office until March, but recently announced that he was leaving in February to accept a position related to the University of Toronto; he will head the Munk School, specializing in international affairs.

The committee of the board of directors charged with identifying candidates, chaired by the chairman of the board Robert Tessier, had mandated the firm Egon Zehnder to identify high caliber financiers, even internationally. But it quickly became clear that the group was leaning towards a bid from within the organization. This is the message conveyed to the Legault government.

The Quebec Premier can choose the candidate he prefers - usually these processes always lead to more than one name - but it is likely that he will approve the proposal in favor of Macky Tall. Québec is also concerned about the political sensitivity of the new president of the Caisse. A helmsman specializing in pension funds arriving from abroad may not have the reflexes to anticipate controversies related to the Caisse's investment choices.

Macky Tall has been at the Caisse for 16 years. He was entrusted with the implementation of the REM, the largest investment in public transportation in Montreal in 50 years.

He contributed to setting up the shift towards investments in ports, toll roads, public transport and energy transport.

Another internal candidate is among the trio of finalists. In February 2019, Michael Sabia went to find Charles Émond, who had worked 18 years at Scotiabank. He was the "global" manager for investment banking. It is he who occupies the position left vacant by Christian Dubé who, after Cascades, had been a member of the Coalition Avenir Québec between 2012 and 2014. Mr. Dubé had returned to political service in the 2018 campaign - he was appointed chairman of the Conseil du trésor. Mr. Émond, chief of investments in Quebec, is clearly seen as the rising star within the Caisse and the stuff of a future president. His responsibilities on the financial side were increased last fall.

However, the Legault government was asked to take into account the future of the organization in its choice. Choosing the young Charles Émond was likely to push Macky Tall to consider offers he would not refuse. On the other hand, by choosing Tall, it was hoped that Mr. Émond had understood that he was the second in the order of accession to the throne, that he would have the position at the next opportunity.

It has been a long time since the management of the Caisse de depot et placement had been subject to a tight selection process. A process had been initiated at the departure of Henri-Paul Rousseau, followed by a brief stint by Richard Guay at the end of 2008, but the process had been suddenly interrupted when the name of Michael Sabia, ex-executive of BCE, fell on the table. Mr. Sabia was appreciated by Jean Charest and his chief of staff Daniel Gagnier, when everyone was in Ottawa, under Brian Mulroney. A senior official at the Privy Council in Ottawa, Mr. Sabia followed the clerk, number one of the federal public servants, Paul Tellier, to the Canadian National afterwards.

First appointed in 2009, Mr. Sabia had his mandate renewed for four years, until 2021 theoretically. He was expected to be there for the inauguration of the REM's project ambition. However, it now seems clear that the network cannot be in service, even partially, in 2021.

For the Caisse's partners abroad, it is clear that the choice of the President of the Caisse should theoretically be above political intervention. But the crowning of a candidate has long been guided by the premier of Quebec or the minister of finance.

Who is Macky Tall?

Born in Bamako, Mali in 1968, the current head of the liquid markets of the Caisse de depot and big boss of the Réseau express métropolitain (REM) came to the country at the age of 17 to study.

After considering entering Polytechnique, Macky Tall enrolled at HEC Montréal, where he obtained a baccalaureate in business administration with finance option. He later completed his university education with an MBA (Finance) from the University of Ottawa and an undergraduate degree in economics from the University of Montreal.

Joining the Caisse de depot in 2004, Mr. Tall became known for the boom in the infrastructure portfolio under his reign, which now exceeds $20 billion. As the head of this division, he accelerated the implementation of the business model focused on partnerships with major infrastructure operators: electricity production and distribution, airports, ports and highways.

In 2015, he created the subsidiary CDPQ Infra, of which he is still the CEO. This subsidiary implements the REM, this 67 km automated electric train network.

A discreet man, more at ease with figures than in the limelight, Mr. Tall became head of liquid markets (stock markets and fixed income) in March 2018. This appointment is not surprising because of the '' professional inexperience in managing the securities portfolio.

Before the Caisse, Mr. Tall worked mainly in the resources and energy sector at Probyn & Company, Novergaz, MRG international and Hydro-Québec.

As an aside, his passage at Hydro-Québec was not an easy one, since he was the man of the unloved Suroît project. Mr. Tall was the project manager for the natural gas thermal power plant, which was never built due to public opposition. The La Presse editions of September 10 and 11, 2002 reported on his hesitant responses to the Bureau d’audiences publiques sur l’environnement (BAPE). It says that Hydro-Québec even delegated Thierry Vandal, then president of the Production subsidiary, to answer questions from BAPE in his place.
I don't particularly like the way this article ends as discussion of the Suroît project and how Macky Tall supposedly responded to the Bureau d’audiences publiques sur l’environnement (BAPE) back in 2002 is totally irrelevant. Thierry Vandal was more of a politician and always appreciated the limelight so it was right to ask him to appear before that regulatory body to take the heat (Vandal was later appointed CEO of Hydro-Québec).

Anyway, the Caisse's Board of Directors has come to a decision to appoint an experienced internal candidate to succeed Michael Sabia.

I can't say I'm surprised as I think this is a very logical and excellent decision, one I publicly supported. Also, I ran into Michael Sabia over the holidays at an event we were both invited to and he told me even though he didn't know who the Board will choose, he was certain “it would look at all external and internal candidates”.

Read between the lines. There's no doubt in my mind Sabia recommended Macky Tall to Robert Tessier and the Board knew him well so they chose "continuation" rather than risk bringing in someone new from the outside.

Sabia has been carefully grooming Macky for this position and I'm sure his position was transmitted to board members even if he wasn't part of the selection process. He might have also leaked this story to the media to get public opinion on Macky Tall's side, and if that's the case, it seems to be working.

This whole charade of mandating Egon Zehnder to find high-caliber candidates with international experience was all part of the process but it didn't take a genius to figure out who the possible candidates are.

Instead of paying Egon Zehnder big bucks, CDPQ's Board of Directors should have come to me and I would have given them my list of internal and external candidates:
  1. Internal candidates: From the internal candidates, Macky Tall and Claude Bergeron would have placed at the top of my list because of their experience and leadership but there are also excellent female candidates like Nathalie Palladitcheff who is the CEO of Ivanhoé Cambridge, Rana Ghorayeb who is the CEO of Otéra Capital and Kim Thomassin, the EVP Legal Affairs who heads the Compliance and Stewardship Investing teams.These are very impressive women but they are probably best suited for the roles they currently occupy. There is another impressive internal candidate I would have put forth, Maxime Aucoin, EVP and Head of Investment Strategies and Innovation. Stephane Etroy, the former head of Global Private Equity would have also been a great internal candidate but he recently left CDPQ and joined Ares Management as a Partner and Head of European Private Equity. As far as Charles Émond, the Head of Quebec and Global Private Equity, I'm sure he's highly qualified but in my opinion, he has to be there at least ten years before he can assume the role of President & CEO. Nobody likes when "superstars" who haven't earned their stripes are parachuted in and quickly catapulted to the top job, it's simply not right and sends the wrong signal to employees at the Caisse.
  2. External candidates: Let's be brutally honest, it came down to two men: Louis Vachon, CEO of the National Bank and André Bourbonnais, the former CEO of PSP Investments. Vachon was a strong contender for this job and if he didn't (wisely) bow out early, I believe he would have been the next CEO. Bourbonnais has tremendous experience in Private Markets, great connections and can easily run the Caisse but I'm not sure how it would have been perceived internally if the Board recommended him. My sources tell me it would have been perceived "badly and destabilizing" given the shakeup that occured at PSP under his watch. The only other external candidate I would have recommended is Jean-René Halde, the former CEO of the BDC who I worked for and can attest to his leadership, knowledge and ability to rally the troops when the going gets tough (and it will).
That's about it. I wouldn't recommend anyone else for this thankless and tough job because let's face it, being President & CEO of the Caisse is no picnic, it's the toughest pension CEO job in Canada, akin to being the coach or general manager of the now lousy Montreal Canadiens.

If Macky Tall is nominated to this position, he will have to polish his PR game, get more comfortable under the limelight and accept a lot of political nonsense which will come his way. Quebec's media are ruthless and always have an angle to play. A guy like Louis Vachon would decapitate journalists who report nonsense and ask irritating questions. Like Sabia, he doesn't put up with nonsense. Macky Tall is more reserved and soft-spoken but he needs to be tough when the media aren't reporting the facts accurately (which happens often when it comes to the Caisse).

Now, as the article above mentions, this isn't a done deal. Quebec's Premier and Minister of Finance will need to sign off on it which they should do. Going against the board of directors to place someone else would be a disastrous decision and make the governance of the Caisse the laughingstock of the international financial community.

But this is Quebec and Quebec is fraught with terrible political decisions so it ain't over until the fat lady (or fat premier) sings.

One thing I know is that while Pierre Fitzgibbon, Minister of the Economy and former member of the Board of Directors of the Caisse de depot, would rather promote André Bourbonnais, Eric Girard, the Minister of Finance, will recommend to the premier to respect the governance process and appoint Macky Tall.

This isn't 2009. There was a reason as to why Michael Sabia was brought in to the Caisse back then to a) clean up house and b) build something new focusing on Real Assets. It can be argued that Sabia has left the Caisse in great shape and it's best to continue on this path rather than rocking the boat.

That, in a nutshell, is why the Board is recommending that Macky Tall be the next President & CEO of the Caisse. Now is not the time to rock the boat and destabilize an organization that is running on all cylinders and performing very well. It's time to build on Sabia's success and Macky is the right person to lead this organization over the next decade which will undoubtedly present serious challenges.

Lastly, it is Martin Luther King Jr. Day and it goes without saying that we should be honoring his legacy by focusing on diversity and unity. Appointing a black man who was born in Mali to the top job at the Caisse might have been unheard of back in the 1960s but we are 2020 and it's high time Quebec jumps on the diversity and inclusion bandwagon and realize that its diverse population is the ultimate strength and future of this province (those who think otherwise are only fooling themselves).

Below, a portrait of the humble, reserved, hard-working and soft-spoken Macky Tall (in French). I also embedded an older (2011) interview where Macky spoke with Clive Condie, Chief Executive at Churchill Airports Ltd at the Global Airport Development 2011 conference.

And a beautiful tribute to Martin Luther King Jr. which shows you not to be cynical about the future.