Reguly’s Parting Shot to Corporate Canada
ROB columnist Eric Reguly is off to Europe. I’ve always enjoyed his rather iconoclastic business commentary, and will miss it (far too rare in the Globe.) Today’s parting shot identifies the culture of corporate Canada rather than public policy as the source of our poor performance in terms of global business leadership.
It is Easter. Let us pray for peace and goodwill, but also for a country and an economy in purgatory. The corporate profits, the shareholder returns and the employment figures all suggest we’re riding the up escalator to a state of eternal bliss. And if you believe that, you must believe that miracles really do happen. So let us pray that . . .
Executives grow cojones: There is a rite of passage in Canada. When some management suit uses intelligence, passion, conniving, Grecian Formula and ambition to rise through the ranks to become CEO, he (sometimes she) immediately checks into the clinic to get himself chemically sterilized.
Henceforth, the executive trembles at the sight of hedge funds, bows to so-called investors who demand immediate satisfaction, sell when they should buy, dole out great heaps of capital to the rabble when they should invest said capital, blame others and ignore domestic and international growth opportunities. In short, he generally plays it safe. There are a couple of notable exceptions; the bosses at Manulife and Barrick Gold, two home-grown international champions, come to mind.
The result is a G8 country that acts like a colony, circa 1900, waiting to be plundered by the Americans, the Europeans, even the Latin Americans — Inco went to Brazil’s CVRD. The imperial troops meet little resistance from local CEOs, shareholders, regulators and politicians. Among the 100 top brands on the planet, there is no Canadian name (though you’ve got to think BlackBerry will soon be a contender). The Netherlands, a country you could sink in a northern lake, has no fewer than four: Philips, Shell, ING, Heineken.
Entire industries considered “Canadian” to the core, part of the national fabric and identity, have disappeared. With Molson and Labatt, even little Sleeman, gone, there is no Canadian brewer of any size. With Inco and Falconbridge gone, there is but one Canadian base metals miner left: Teck Cominco. The forest products industry in a land of forests is a mishmash of half-bankrupt zombies. Canada does not even make chainsaws. The steel industry is disappearing. The luxury hotel industry, Four Seasons and Fairmont, are in foreign hands. Hudson’s Bay Co. is owned by a reclusive South Carolinian.
Canadian companies will allege any reason for their lack of global success: excessive taxes and regulation, domestic merger barriers in some industries and the like. Forget it. Feckless CEOs are the main obstacle.
Inside traders get punished: Canada is leaksville. Many, if not most, takeovers and mergers are preceded by unusual trading activity — higher than normal volumes, spiking prices — followed by the non-surprise in the form of a deal announcement. Take Algoma Steel. In February, takeover speculation sent the shares up. Market regulators forced the company to confirm it was in merger talks with an unidentified buyer. Leaks allowed The Globe and Mail to report the suitor was Germany’s Salzgitter. The shares soared to the point that Salzgitter walked away from the deal.
The Germans have no doubt told everyone who will listen that the Canadians aren’t to be trusted. Bloomberg News carried a story about Canada’s sieve-like markets. Bloomberg stories go around the world. Bad rep for Canada? You bet. Does anyone get punished? Almost never, which makes our rep even worse. The lack of a national securities regulator is another embarrassment.
Infrastructure gets built: Canada’s infrastructure deficit is in the hundreds of billions of dollars. Everywhere, roads, bridges, schools, hospitals, sewers, power generation plants, daycares, public transportation and public housing are lacking or falling apart. Toronto’s infrastructure works for a city half its size. The first Royal commission on developing Toronto’s waterfront was in 1911. A century later, it’s still a disgrace.
There is no political will to fix it. Voters say they want it fixed. At the same time, they want lower taxes. You can’t have both. As the infrastructure rots, job creation and competitiveness suffer. International companies will invest elsewhere. London and New York are incredibly expensive. But you can get to the office in those cities without driving because public transportation didn’t drop off the priority list.
Carbon emissions fall: American educator Derek Bok said, “If you think education is expensive, try ignorance.” The same applies to carbon emissions. You can pay a little now or a lot later. This is not a zero sum game — one dollar spent to reduce emissions is not one dollar vaporized. That’s because energy efficiency creates value as costs are saved, as the mining companies found when they finally cleaned up their smelters. Canada can be a leader in creating carbon-reduction technologies and carbon trading systems. Or it can keep listening to the neo-cons and the climate-change deniers and do nothing.
Note to readers: This is my last regular column from Toronto. A new column will launch later this month, when I become The Globe and Mail’s European business correspondent, based in Rome (for my sins). Advice on which team to support, AS Roma or Lazio, would be greatly appreciated.