$1\mathrm{.}1$ SEARS CANADA'S BANKRUPTCY AND PENSIONERS Most Canadians expect employers to pronide pensions as one benefit of the employment contract. The expectations include not only coverage but also adequate funds to maintain a desired retirement lifestyle and security for the longevity of the pension. Government otticials and financial industry spokespersons are warning of a crisis in the pension system, especially pensions in the private or business sector. Some claim that the crisis in pensions will have a negative impact on overall economic efticiency. The two most common types of pension plans are defined benefit and defined contribution. Defined benefit plans guarantee a retirement payment based on income level and years of service. The risk of return and longevity is assumed by the employer; that is$,$ the employer is responsible for deficits in the plan. The defined benefit type is the most common, but this type is experieneing a major problem: there are insufficient assets to support the payment of pension obligations to retired employees. The deficits in the plans have resulted from lower interest rates reducing earnings, stricter standards imposed by government regulations, and hieher costs or payouts. In defined contribution plans, employees and employer make contributions in registered retirement savings plan $($RRSP$)-$type accumulation accounts, with employees allocating the funds among imestment alternatives. The risk of return and longevity is transferred to individuals, something with which Adam Smith would most likely agree. The difficulty is that individuals are less able to bear the risk of failures and they are less knowledgeable of imestment opportunities and dangers. Also, there is a possibility they will pay financial advisers too much to guide them in the imestment process. Defined benefit plans are particularly problematic when a business goes bankrupt, as Sears Canada did in January $2018.$ The $18,000$ pensioners learnt that their pension plan was underfunded by $$270$ million. This meant that their pension payments would be reduced by $20$ percent. In August $2018,$ the payments were actually reduced to $30$ percent. The questions became about what Sears' pensioners could do$.$ The peasioners argue that bankruptey laws favour corporations and management. In most jurisdictions, creditors have priority over pension funds, so any remaining funds could not be accessed to fund the $$270$ million shortall. For years, governments have discussed the possibility of changing laws to give pensions a priority over creditors, referred to as super priority ranking. The argument against this is that it would upset the delicate financial balance that protects bankers and other creditors. As a result, companies may have less credit available to survive and grow, as lenders would hecome more reluctant to lend. Another proposal is to have governments buck the pensions in case of bankruptey. The Ontario government has proposed that some minimum be paid to pensioners when a corporation declares bankruptey. Other governments are considering it$.$ It is argued that governments sbould sot bail oet irresponsible employers and it would not be fair to other taxpayers. The Sears pensioners have formed Sears Canada Retiree Grocp $($SCRG$),$ "a not$-$foeprofit volunteer organization committed to the protection of the company pensions and benefits of all Sears Canada retirees and their surviving beneflciaries. $"$SCRG has pointed out that Sears Canada's board has received over $$600,000$ in poy and ancther $$600,000$ in professions fees. In addition, financial advisers and lawyers are being paid. Alsa, $$3$ billion in dividends was paid to investors between $2005$ and $2013$ while the company was experiencing problems. SCRG argues that such extraondinary dividends and any funds generated by asset stripping should be returned. There appears to be no easy solutions and SCRG continues with various legal actions. Questions $1.$ How is the integrity of business illustrated, or not illustrated, with Sears Canada and its pensioners? $2.$ Which approach to ethical thinking would aid decision making regarding this issue? $3.$ How do the difficulties and changes being experienced by pension plans influence society's attitudes toward business? $4.$ What responsibility do corporations have to prowide pension plans? $5.$ What responsibility and capability do emplojees have to manage their own pension plans?