Quebec Ink: Can Michael Sabia bend Ottawa to his will?

MONTREAL — Ottawa is on Michael Sabia watch.

When the noted mandarin and serial executive was named the next deputy finance minister, an appointment effective Monday, exactly how he will fare in the straitjacket of the country’s civil service has been the subject of speculation and “Who-shot-J.R.”-level conjecture.

At the root of this very nerdy parlour game is Sabia’s ego and temper. He has plenty of both, and, along with a ruthless work ethic, they have arguably served him well throughout his decades-long career, which began in the federal service, reached the peaks of corporate Canada and Quebec, Inc. and now deposits him in the No. 2 job at a ministry that directly oversaw $98.8 billion in annual spending in 2019–20.

Prime Minister Justin Trudeau handpicked Sabia from a list of roughly 30 people, according to a Liberal source I spoke with who requested anonymity because they aren’t supposed to talk about such things. I’m told it took a few months and some doing to get Sabia to say yes.

Sabia replaces Paul Rochon, whose 20-year-plus career in the civil service was relatively roadbump-free until Trudeau punted him to the Privy Council Office. Sabia’s job, according to sources I spoke with, will be to mold the Department of Finance to fit the priorities of Finance Minister Chrystia Freeland—not the other way around, as was the case under Rochon. Doing so will require corralling 802 civil servants in the midst of a pandemic and the resulting hemorrhage of government cash pushed out to contain its effects. 

In a telephone conversation over the weekend, Sabia sounded jazzed at the prospect of overseeing those 802 bureaucrats, saying the people he’s met so far are “highly motivated, smart and ready to go.” He was bullish on the new Liberal climate plan, which will see the carbon levy reach $170 per tonne by 2030, calling it “the kind of economic transition that our country and every other country is going to have to go through.”

Most importantly, he said he and Freeland “share a pretty good common wavelength” on the issue of targeting spending to spur green economic growth. “My view is that this is not a period of time in the country’s history to be wasted. And I think the minister shares it,” he said. 

That relationship will be key. While Sabia becomes Freeland’s No. 2 Monday, he is used to being No. 1. He was CEO at both BCE and the Caisse de dépôt et placement du Québec, leaving the latter job in February of this year for a brief stint as director of the Munk School of Global Affairs & Public Policy at the University of Toronto. In April, the government appointed him chair of the Canada Infrastructure Bank. (He’s giving up both the Munk and Infrastructure Bank jobs for the civil service life.) By many accounts, he has the personality of someone accustomed to being in charge. 

Robert Dutton said he was on the receiving end of Sabia’s furious hubris in 2012, when the former Rona CEO had the displeasure of going to Sabia’s office to explain some impending subpar earnings. (The Caisse was an investor in the Quebec-born hardware chain.) 

According to an anecdote Dutton committed to print in a 2018 book, Sabia greeted him by notably not shaking his hand, before things really went pear-shaped. “You don’t know how to manage the business. You don’t know how to create growth. You do not know how to make a profit. You are not capable,” Sabia told Dutton, whose 20-year Rona tenure as CEO saw exponential growth. 

Sabia then informed Dutton that he was “taking” Rona out of his hands and instituting his own recovery plan. Dutton stepped down three days later—forced out, he said, in large part because of Sabia.

In our phone call, Sabia categorically denied Dutton’s version of events, saying he “may have recreated things in his mind.” I put that to Dutton, who said everything he wrote “is the truth. The evidence is well documented.”

While Sabia disputes the story, it and others like it have established a reputation that precedes his arrival in Ottawa, and that has some Liberals eager to see the result of dropping him into the public service.

“We all wonder how he’s going to do, actually,” said this Liberal. “He represents the first real test of someone who isn’t going to accept being subordinated given licence and power. I think he’s going to have a lot of trouble with the department.”

If there is a rough parallel to Sabia’s current high-pressure challenge, it was in 2009, when he became CEO of the Caisse. Long a beacon of Quebec’s economic might, the public pension fund manager was at a nadir. The former CEO, Henri-Paul Rousseau, bit hard on commercial paper, just before the highly complex financial product became the butt of a financial joke in its own right. Rousseau’s gambit helped net the Caisse a $40-billion loss.

“People who worked at the Caisse wouldn’t tell people they worked at the Caisse at family dinners,” said Roland Lescure, the Frenchman whom Sabia appointed in 2009 as his No. 2.

As an Anglo from Ontario who quoted Austrian economist Joseph Schumpeter’s “creative destruction” mantra in meetings, and whose mentors and role models tended to be alpha male rail barons (Paul Tellier, Hunter Harrison), Sabia was an anomaly on the 11th floor of the Caisse’s headquarters. I spoke to former Caisse employees who didn’t particularly like the man, his management style or what they said were his not-infrequent freakouts behind closed doors. Yet even they admit that Sabia fixed—if not saved—the Caisse. 

With Lescure and Claude Bergeron, then the Caisse’s senior VP for legal affairs, Sabia went about disassembling the Caisse’s corporate structure—which under Rousseau had become siloed—effectively putting its various departments into competition with one another. “The Caisse was within days of an insolvency problem, which would have had massive ripple consequences across the Canadian financial system,” Sabia told me. “So, you know, a lot of stuff needed to be done.”

Doing this stuff was a slog, and many people didn’t appreciate Sabia’s efforts. “Within the first few years, I think half the staff had left, and we’d hired new blood,” Lescure, now an MP in France, told me. “It’s hard to work with Michael, because he is demanding, but it’s also rewarding.” (A Caisse spokesperson said “a large part of the Executive Committee was renewed” in the wake of Sabia’s arrival.) 

Crucially—and this is at least a hint about his priorities as deputy minister—Sabia liked stuff that could be bought, installed or otherwise physically possessed. He fused the traditionally opposing concepts of economic development and environmentalism into a mantra of what he’s called “durable, sustainable, inclusive growth.” He also thinks governments move too slowly to meet the challenges of a growing and warming world.  

Perhaps the most tangible example of these beliefs is Montreal’s Réseau express métropolitain (REM), the 67-kilometre light-rail project that Sabia willed onto the city’s landscape in a remarkably short amount of time—despite, ironically enough, howls from the province’s environmental authority. “Michael stepped on some people who wanted to protect their territory,” former Liberal MP Denis Coderre, who was Montreal’s mayor during the initial REM rollout, told me. “But sometimes if you want to get the apple, you need to shake the tree.”

There were missteps. Two independent sources—one Liberal, one former Caisse—told me that Sabia almost singularly championed the Caisse’s investment in Element AI, as convinced as its co-founders including Jean-François Gagné and Yoshua Bengio that high-minded artificial intelligence technology could be developed and commercialized in Montreal. “I thought something interesting could be done” with Element, Sabia told me. “I thought it could be good for Quebec and for Canada.”

Element AI raised a total of US$257 million, according to Pitchbook data, including a significant (though undisclosed) Series B injection in 2019 from the Caisse for Element’s “deployment and commercialization of solutions that meet customer needs for the operationalization of AI.”

Instead, the company stumbled along—a source told me that it had all of $25 million in revenues in 2019—before being bought up earlier this month by California-based ServiceNow for US$200 million, according to Quebec Economy and Innovation Minister Pierre Fitzgibbon—“an unfortunate turn of events,” as Sabia puts it today.

Still, in nearly tripling the Caisse’s assets to $326.7 billion and stoking a 9.9 per cent return over his 10 years, the hard math is nevertheless kind to Sabia’s tenure at the Caisse.

Back to that parlour game. Certain people in the Liberal Party and beyond see in Sabia a frightfully ambitious man who has made oodles of money and who has done it all—except run for office. The current Liberal flight of fancy is this: things go gangbusters for Sabia, both in the stewardship of the economy and in his relation with Freeland. Freeland, in turn, takes over the party leadership and becomes prime minister after Trudeau. Sabia runs somewhere to become the next finance minister.

Except this flight of fancy, loaded as it is with wishful thinking and plenty of conjecture, would again put Michael Sabia in an uncomfortable position. He’d still be No. 2, after all. 

Martin Patriquin is The Logic’s Quebec correspondent. He joined in 2019 after 10 years as Quebec bureau chief for Maclean’s. A National Magazine Award winner, he has written for The New York Times, The Guardian, The Walrus, Vice, BuzzFeed and The Globe and Mail, among others. He is also a panelist on CBC’s “Power & Politics.” @MartinPatriquin