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Insulators are Among Seven Unions Pulling $1B in Pension Funds from Royal Bank of Canada Over Outsourcing Scandal

Seven unions in Canada have announced that they will pull over $1 billion in pension funds from Royal Bank of Canada Investor Services if their parent company proceeds with a plan to outsource information technology jobs.

In a letter sent to Royal Bank of Canada, representatives of the B.C. Insulators Union announced their intentions. The outsourcing scandal has severely tarnished the reputation of RBC over the past weeks:

Lee Loftus, the business manager for the B.C. Insulators Union and also president of the B.C. Construction Trades Council, said the unions are under no illusions that Canada’s largest bank - with assets of more than $830 billion and $500 billion in deposits - will worry about losing the unions’ business.

“A billion dollars is chump change to them, we understand that, but we certainly think that a billion dollars is a substantial amount of money in the B.C. economy and if they are not going to manage our money right, we will find others that will,” he said.

“This doesn’t jeopardize our fiduciary responsibility on returns, this is about finding partners that are willing to do business that’s acceptable to us.”

The outsourcing scandal has resulted in a public black eye for the Royal Bank of Canada. It has ignited a national conversation about outsourcing and made RBC the posterchild for the negative effects the practice can have on the economy. The outsourcing situation, as explained by the Vancouver Sun:

RBC prompted a storm of controversy earlier this week with its plan to eliminate 45 technological jobs by hiring California-based iGate - which specializes in sending jobs offshore - to handle its technology services. The temporary foreign workers were being trained by RBC employees whose work they would take over.

Recently, RBC Chief Executive Officer Gord Nixon issued a public apology for the incident in which he said:

“The recent debate about an outsourcing arrangement for some technology services has raised important questions,” Nixon writes. “While we are compliant with the regulations, the debate has been about something else. The question for many people is not about doing only what the rules require - it’s about doing what employees, clients, shareholders and Canadians expect of RBC. And that’s something we take very much to heart.

“Despite our best efforts, we don’t always meet everyone’s expectations, and when we get it wrong you are quick to tell us. You have my assurance that I’m listening.”

Other unions may join the anti-RBC parade but it is unlikely that business leaders will do so since RBC’s actions are immoral, not illegal. Pension expert and University of B.C. economics professor Kevin Milligan told the Vancouver Sun,

“(Pension funds) tend to have a hands-off policy for these kinds of political issues, where they say ‘We’re going to invest based on the business merit and not on a political basis,’ ” Milligan said. “The reason is, everyone has their own political views and if you start crossing companies off the list because someone doesn’t like a particular firm, pretty soon you’re left with a pretty small set of investment options.”

RBC says they will find new and comparable positions for the 45 displaced employees.


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