Posted here rather than in the Flexity thread, it pertains generically.
The issue is the length of time between when the TTC knows something is wrong and when they tell us.
In the private sector, there are laws requiring management to disclose bad news promptly in financial statements. The Sarbanes Oxley Act (US, but a lead followed in Canada) is a longstanding example. Obviously, where stock is being traded daily, investors have the right to know about problems that might impact earnings, dividends, and stock price. We have seen what happens when this principle is ignored.... Enron, Nortel, 2008, etc.
The more egregious example of this was when the TYSSE went over budget. There was a day of reckoning... but only when the overspend hit $400M. That didn’t happen overnight, so there must have been a point where the project was known to be $100M in the hole, then $200M, then $300M.... but TTC management kept quiet.... and continued to issue auditor-approved reporting that said everything was fine. In the private sector, this silence would get the CFO, and the Board, and the auditor, in hot water. I have not done any detailed research to find whether any specific TTC issued documents might be criticised in this way, but more generally, the principle of “no surprises” was clearly violated for a time, until TTC was ready to fess up.
Any organization, public or private, will carefully time when bad news is released, sure. I just wonder if TTC is accustomed to playing faster and looser than they ought to. The same applies to Metrolinx, frankly. As public sector entities, they are exempt from securities law, but most high performing public agencies apply the same processes as a matter of earning public trust by holding themselves to an equal standard. In my view, knowing for 9 months that a key capital program (the Flexity order) had a known quality issue, and saying nothing publicly, borders on egregious.
Without a regulator monitoring things, it’s up to us in the bleachers to speak up to keep these agencies honest.
Anyways, I tweeted this question to Brad Ross. I will be interested to see his reply.
- Paul