Shaft the worker bees

[Kip Powick]

HAMILTON - When James Alfano quit as Stelco Inc.'s chief executive last August, he left a company that was hemorrhaging money and would soon seek protection from creditors, a move that might foreshadow wage and pension cuts for the steel maker's unionized workers.

Alfano doesn't share that worry. Under Stelco's retirement plan for salaried executives, Alfano stands to make an annual pension of as much as $361,691 a year. Marcel Francoeur, who retired recently as senior vice-president of operations, could get $130,441 a year.

Unlike the steel maker's 6,400 unionized employees, whose salaries, pensions and other post-retirement benefits may come under the axe as Stelco looks to pare its expenses, officials like Alfano and Francoeur have better protection.

Their pensions "are secured through a funded trust," according to a Stelco filing with the Ontario Securities Commission.

"It just adds insult to injury," said Rolf Gerstenberger, president of the United Steelworkers of America Local 1005 in Hamilton. "It's outrageous that they'd get that sort of pension in the first place."

The most a unionized Stelco employee could receive after 40 years service is $33,600, Gerstenberger said.

Stelco spokesperson Timothy Huxley called the imbroglio over executive versus unionized pensions "one of many that has to be dealt with within the framework of the restructuring."

Alfano could not be reached for comment.

According to the company's securities filings, executives stand to collect pensions ranging from $50,515 a year to $874,705. Stelco determines the average of an executive's highest five years remuneration and compares it to their years of service with the steel maker.

Alfano, for instance, made an average $896,160 between 1998 and 2002 and at the end of 2002 had 28.5 years of service. For employees with 25-30 years experience whose five highest annual salaries averaged $800,000-$900,000, the annual pension is set at $361,691.

Senior vice-president William Missen stands to collect a pension of $101,125, based on his average $224,470 salary over the past five years and 31-plus-years of service.

The retirement security enjoyed by executives compared with the uncertainty of their unionized colleagues underscores a challenge for companies that need to convince creditors and unions to endorse their reorganization plans before emerging from bankruptcy. "If the company is asking everyone to cut back, there's an understanding the pain should be shared," said one union lawyer who will work on Stelco's restructuring after spending much of last year working for one of Air Canada's unions.

One major difference between Air Canada and Stelco is that the airline's pension plan falls under the jurisdiction of the federal Office of the Superintendent of Financial Institutions (OSFI). That means the carrier is required to repay any shortfall in the plan within five years, although Air Canada now is negotiating to close the $1.5 billion deficit over twice that amount of time.

Stelco isn't required to close its $1.2 billion pension-plan shortfall because it is governed by the provincial government's pension guarantee fund. Instead of paying down the deficit, Stelco is required merely to pay a monthly premium; if the company winds up its plan or liquidates, the fund covers roughly $1,000 a month of lost benefits.

The securities filings also show that if Stelco undergoes a change in ownership, certain unnamed executives would receive severance payments of as much as three times their annual compensation package.

Union leaders are pushing Queen's park to get involved in Stelco's restructuring but Premier Dalton McGuinty yesterday refused to make any financial commitment to the company.

"We'll follow it very closely and we'll be at the table," McGuinty said before a cabinet meeting.

But when asked if provincial dollars would be available to help Stelco, he said: "We're going to wait and see. We're not going to speculate as to the outcome