Single board of directors paid 2 stipends to run NB Liquor and Cannabis NB

The financially struggling Crown corporation Cannabis NB is likely to be billed in excess of  $50,000 in directors’ fees and expenses from its seven-member board this year, nearly doubling amounts the same directors are to be paid by the New Brunswick Liquor Corporation.

Cannabis NB is a subsidiary of NB Liquor, and although the two are run by a single board and generally share expenses to save money, that does not extend to politically appointed board members who have been getting two stipends each since last year — one from each company.

“There are two payments,” NB Liquor’s vice-president of communications, Nicole Picot, confirmed in an email to CBC News

“Board members are remunerated for their time committed to performing the duties required of both boards.”  

Picot says it’s not double dipping because the work board members do for each company is distinct.

Crown corporations linked 

Many issues facing NB Liquor and Cannabis NB are unique, but the two companies are also tightly intertwined structurally and financially. They share senior management and a number of head office and administrative expenses, and the board of directors often makes decisions for both at the same time.

An example of that came in July, when the board met and approved Patrick Parent as the new president of both companies.  

“Patrick’s leadership, extensive experience in the beverage industry, and commitment to New Brunswick will help drive further growth and success at ANBL and CNB,” said Rachelle Gagnon, the chair of the board of directors for both NB Liquor and Cannabis NB, in a news release July 31.

Cannabis NB had a dismal first year, losing more than $12 million. Instead of sharing board of directors’ fees with NB Liquor, it was required to match them, doubling salary payments to board members. (Shane Fowler/CBC)

Gagnon was appointed to the board of NB Liquor by the Progressive Conservative government of David Alward in 2013, and elevated to the position of chair in 2017 by the Liberal government of Brian Gallant.

The position of chair of NB Liquor paid $3,750 per quarter ($15,000 per year) plus expenses, but last year that doubled to $7,500 per quarter when Cannabis NB was created and made to pay duplicate directors’ fees.

The board has six other directors. Their stipend went from $2,750 per year to $5,500 per year. Those board members are also paid attendance fees to go to board meetings and other expenses.

Payments jumped nearly 50%

Last year, total payments to board members, including all stipends, fees and expenses, jumped nearly 50 per cent from the year before, to just below $98,000. Cannabis NB was operational for only about six months during that fiscal year.

Not every board of directors is paid multiple fees for looking after parent and subsidiary companies. 

More than a decade ago, NB Power operated as five separate companies with one board and a single president serving all five, but directors were paid only once.

“Do they get the one stipend or do they get multiple stipends?” asked then-Public Utilities Board chairman David Nicholson during a hearing in February 2006

“One stipend,” he was told.

Errol Mendes teaches law at the University of Ottawa and is an expert on corporate governance. He says Cannabis NB should have its own independent board of directors, not a clone of NB Liquor’s board. (University of Ottawa)

University of Ottawa law professor Errol Mendes, an expert in corporate governance, said he is not bothered by Cannabis NB paying fees to its own board of directors, but he does question the wisdom of having a single CEO and identical directors overseeing companies that sell products that may compete with one another for consumers.

“That could be regarded as a conflict of interest for the same directors and officers to promote both the alcohol part of the business and the pot part of the business to some extent, because they are a form of competition.”

Cannabis NB had a difficult first year, losing $12.5 million on sales of just $18.6 million, while NB Liquor, by contrast, made $169 million on sales of $433 million.    

Included in those numbers were a series of transactions approved by the board where NB Liquor billed Cannabis NB in excess of $4 million for salaries, rent, startup costs and a variety of asset transfers.   

Mendes says the smaller company should have a board that can oversee transactions like that with more independence.

“Good corporate practice would be if you are going to have a subsidiary with some of the same directors, at least have some independent directors.”