A July 1 Portrait of Corporate Canada

My copy of the Globe and Mail the other day included the July edition of the Report on Business magazine, featuring its annual ranking of the top 1000 publicly-traded corporations in Canada.  The survey makes for fascinating reading.  In honour of Canada Day, I would like to present a few statistical factoids about these huge institutions that determine the direction of our economy, and increasingly our politics and our society.  This profile provides some fascinating insights about the changing structure of corporate Canada, and the corresponding evolution of Canada.

 I zero in on the biggest of the big: the 50 most profitable public corporations in Canada in 2010, according to the rankings.  These 50 companies raked in $80 billion worth of after-tax net income.  In contrast, the remaining 950 companies on the RoB list received only $20 billion more.  So by focusing on the top 50, we are certainly catching most of the action.

Source: Author’s calculations from Report on Business “The Top 1000,” and Statistics Canada data.

 Indeed, those 50 giant companies accounted for about two-thirds of the after-tax profits generated by all corporations (public or otherwise, foreign or Canadian) in Canada in 2010.  According to Statistics Canada data, total before-tax corporate profits last year equalled some $180 billion, $55 billion (or 30%) of which was paid back in direct taxes to all levels of government, leaving some $125 billion worth of net income.  Almost two-thirds of that was captured by the top 50 corporations.

 2010 was a much better year for corporate Canada.  Before-tax corporate profits in Canada jumped by over 20% in 2010 – rebounding from crisis-ridden 2009.  After-tax profits jumped by over 30% (taxes grew less than before-tax profits partly because of corporate tax cuts, and partly because of timing issues related to the business cycle).  The top 50, however, did even better than that: their total after-tax profits grew 40% in the year.  Just 9 of the 50 experienced a profit decline last year.  The 17 resource companies on the list led the way: their after-tax profits grew by 70%.

 Reflecting the stunted structure of Canada’s private sector, the corporate top 50 listing is dominated by two sectors: finance (12 companies) and resource companies (17).  These sectors took home over $25 billion each in after-tax profit (and together accounted for over two-thirds of the total profits of the top 50).  While the leading role of big finance in corporate Canada has been fairly stable over time (there were 14 financial firms among the RoB’s top 50 a decade ago), the global commodities boom and Canada’s accelerating resource-dependence has almost doubled the number of resource producers represented among the top corporate ranks over the last decade.  Petroleum companies have become especially prominent, now providing 11 of the top 50.

 I was surprised by the huge employment numbers racked up by the big financial firms: 370,000 workers employed by the dozen companies.  (The RoB ranking reports worldwide employment of participating companies, but most of the banks’ employees are in Canada.)  At the other extreme, the resource producers had very modest employment: just 82,000 in total.  This means that the resource industry is the pinnacle of “exploitation” (measured loosely by after-tax profits generated per worker).  On average, each worker at those 17 companies generated a stunning $325,000 in profit for their employers – compared to a comparatively stingy $75,000 per worker in the financial sector.  Of course, it is not just workers that the oil companies and other resource firms are exploiting: it is the planet, too.

Our 50 big corporations reported year-end market capitalization of $1.15 trillion.  Over 70% of that total was claimed by the financial and resource companies.  The big claim to fame of the proposed (and now rejected) merger of Canada’s TMX exchange with the London Stock Exchange was that it would reinforce Canada’s leading role as a place to trade resource stocks.  I dare say that we are already a bit too heavily weighted on that score (and am glad the merger was rejected by TMX shareholders).

The rise of resources among Canada’s corporate titans is paralleled by the corresponding decline of manufacturers – mirroring the similar negative structural trend that has been so visible in Canada’s overall economy since the global commodities boom took off around 2003.  A decade ago there were 9 manufacturing firms among the top 50; this year there are only 4 (RIM, Magna, Bombardier, and Agrium – the last included rather generously on my part as a processor as well as a distributor of fertilizers).  Factory workers bust their butts on the shop floor for increasingly stingy real wages – yet they generate a mere $30,000 per head for their bosses.  This relatively modest rate of exploitation reflects brutal price competition among firms in this globalized, over-capacitized sector.

The least profitable sector (per head) is the retail industry, whose 3 representatives within the top 50 sucked in less than $10,000 in profit per worker.  Of course, the fact that most retail employees work short, irregular hours makes it hard to generate surplus value!

The transportation and utilities sector is another stalwart within Canada’s top corporate echelons.  Nine companies are represented (including fantastically profitable telephone companies), claiming $12 billion in profit, over 175,000 employees, and $160 billion worth of market capitalization.  Profits equalled $65,000 per worker, almost as high as the financial sector.

The finance, resource, and transport/utilities groupings are thus the major sectors of our economy where large, profitable Canadian-based corporations have developed.  In the case of finance and transport/utilities, the fact that these industries are predominantly Canadian-owned (in large part because of strong regulatory restrictions on foreign ownership) is clearly a factor behind this corporate success.  In manufacturing, on the other hand, where foreign-owned firms capture around half of all profits (according to Statistics Canada data), it has been much harder to build and sustain Canadian-based companies.  The resource sector is a bit of an anomaly: foreign ownership in the sector is high (around 40% of profits), yet a critical mass of Canadian-based companies has been sustained.  It should be noted, however, that those Canadian-based companies have become more concentrated in the pure production end of the resource sector, as former value-added giants (like Alcan, Inco, and Falconbridge) fell under foreign control.

What would happen if the doors were thrown open to foreign investment in these once-protected sectors – as is now contemplated by the Harper government in telecommunications, among other industries?  Most likely we would see a decline in the population of large, successful Canadian-based companies.

There is an increasing consensus among economists (not just lefties, either) that the absence of large Canadian-based corporations is a key structural factor behind the ongoing failure of corporate Canada to undertake innovation and successfully penetrate foreign markets (that is, with anything other than unprocessed resources).  The analysis presented here is largely consistent with that storyline.  Canadian corporations have been successful in largely non-tradeable infrastructure-type industries (finance, utilities, telecommunications, transportation), and also in resource extraction.  Other than that, corporate Canada is underdeveloped and, if anything, atrophying further.  RIM’s coming fall from grace, of course, will only makes matters worse on that score.

Despite this generally gloomy overview, one tidbit in the RoB ranking will bring a glow to any coffee-drinking Canadian’s heart.  Company Number 46 on the RoB listing, reporting 2010 net income of $624 million, is none other than Tim Hortons – named after a Canadian hockey player, and having recently extricated itself from the arms of an American fast food giant.  So while Canadian companies can’t seem to produce and sell high-tech products that the world wants (no wonder our current account deficit last year exceeded $50 billion, by far the biggest ever), they sure as hell know how to brew a good cup of coffee.  Take that with your double-double!


  • I see Nassim Taleb’s concept of antifragility catching on in the aftermath of how “the great moderation” ended. Are we measuring the level of fragility of our Top 50 corporations in the light of Taleb’s warnings?

  • Coming fall from grace? Hasn’t RIM already fallen?

  • Agent Oblivious

    Calling RIM’s fall from grace is a bit much. If anything, it stands to gain more from being viewed as down and out, than competitors like Apple stand to gain from their success.

    In case nobody noticed, Apple stopped making new products when it released the Ipod touch. It seems counter-intuitive to say such a thing, given Apple’s success with the Iphone and the Ipad, but they’re not so much new products as upgraded Ipods.

    In fact, a lot of people are taking this into account when purchasing new smartphones here in North America, opting instead for a blackberry or an android based phone, and then buying an Ipod touch for all the features of the Iphone.

    While RIM has been producing solid new products, only to garner little support for them, should, like what happened to Nintendo, push RIM to change the game, while Apple keeps making Ipods until it finds itself no longer in favour.

    Canada is full of smaller product development companies too, some which hold huge shares of the high end market for CCDs, etc. What is really dragging our corporate development down isn’t the lack of large corporations, its the lack of government support to sell their products abroad, and protect them from patent-hunting takeovers.

  • RIM has fallen, but I do not deny the possibility that it will get up.

  • Thanks for this thoughtful assessment Jim of where things stand.
    Recently, I was struck to find that more men now work in retail than in any other occupation. Retail has been first for women employees, and took over from truck driving for men recently, apparently. From your analysis it looks as though this sector is not going to contribute to reducing inequalities.
    Where are the new good jobs going to come from I ask myself. Maybe we are going to have to think about a world where work and income get more separated. Instead of the Kaleckian full employment world long supported by advocates of government fiscal management on the centre left, can productivity gains be distributed to less work time and more creative time?
    I am also struck reading what Jim has to say, by how we have ended up about where we thought we would end up, if the 1988 Canada U.S. trade deal was implemented. For the U.S. it was an energy pact, and we have become a petro state, with a petro currency and a pipeline crossed territory. The petrochemical boom never happened, so Peter Loughheed was wrong. Instead we export raw bitumen, which even Peter thinks is stupid. Our industrial strategy is military procurement, like the U.S. We have ceded heavy manufacturing under cross border rationalization of branch plant production as predicted. Our research and development policies were crafted with the FTA and Nortel in mind (tax credits not grants with performance criteria attached), and have not been updated so far as I know. Food processing continues, forestry has been devastated.
    The 90’s fix of devaluation is being adopted by the U.S. though without the accompanying 95 budget cuts. We can’t out devalue them.
    We need a multilateral approach to international economic questions, and Canada has helped weaken the multilateral trade and payments system. The WTO works for corporations not full employment (which was the objective of the ITO killed 65 odd years ago by the U.S. Congress). Floating exchange rates have created greater payments imbalances than ever imagined by supporters. The only period of stability occurred under the brief period of Bretton Woods style international finance after the liberalization of European finance (1958), until the collapse of the gold pool (1968) under the weight of U.S. outflows of investment and military expenditure (Vietnam). We need a new international bargain.
    Enough gloom for one holiday. Luckily we have the PEF so can work out what needs to be done to improve our existence here in Canada. Maybe we could start planning some sessions around the theme of industrial policy for the meetings next year. I am sure the official opposition will be looking into the subject, and will want to know what people think needs to be done.

  • Great article Jim. Lots to think about. Canada is obviously in a fairly good position relative to many other OECD countries these days. We benefited from a unique situation at the start of the global crisis for a variety of reasons familiar to many of the regulars to this site – and we continue to benefit for some of the same plus other reasons.

    But looking at things from a global perspective perhaps the system simply cannot generate a lot of “good jobs” anymore and maybe that’s a good thing from an environmental perspective. I like the work the left is doing in places like Venezuela to mobilize large numbers of people for meaningful volunteer work (like PDVSA’s home building projects) while ensuring everyone has the same basic good quality decommodified social benefits like housing, social media, health care, education, culture, etc…mass volunteer work also helps to give people a sense belonging and purpose and encourages solidarity.

  • I still believe very much in a planned industrial strategy to take hold of our many positive attributes within our economy and build a unique value adding that leads the world into the next phase of economic stability.

    However a nation needs building blocks to create that value adding, from the national to the regional right on down to the community level, there are several important pieces in place and several that are missing. The current trajectory seemingly is back towards somekind of Innis like staples economy.

    It truly is strange seeing our resources raked out of our hands, naked and raw, and be returned to us dancing a value added ballet of function and form with ribbons and lace flowing across the boundary from inanimate inputs to market exchanged high value added.

    Truly there is black gold in them there hills, and if we let those markets based ideologues hunt and gather for us, it will be all that leaves the country.

    We need to develop some innovative solutions that can bring back manufacturing. All forms of value adding are related to building and servicing the manufacturing and making of exchangeable things, that is what our economic heartland had been building towards, low dollar or whatever- it had an asset base that was most likely the largest accumulation of living and dead labour in the history of Canada, and since 2003 its loss has been remarkably depressing.

    We need a pathway to renewal and I believe only progressives can build foundation out of this recession and decline.

    I would hate to pass the message to the generation behind me, that the golden age of the post war era was truly just a fleeting moment in history, merely a lapse in the wealth’s attack on class caused by two of the worst conflicts ever. So much destruction to gain a mere 30 years from the mid 40s to the mid 70s of a virtuous cycle. Then 30 years of decline to economic Armageddon of the great recession- where you could walk into a casino with a nickel and your pocket and play at the million dollar minimum bet table with a triple A stamped on your money printing press wallet (all wrapped up with the fate of the nations homeowners riding on the deal of the cards)

    No- I believe there is so much more we could build in this world and truly it does start with the political.

    It starts with the decision making center to be infiltrated with progressive ideas. I don’t care if it is the current regime that steals the ideas or the regime is replaced, it is the ideas that matter.

    I hate seeing how every other nation in the world is talking about rebuilding their manufacturing centers, yet here in Canada the only mention from our leaders is resources and how to get them to the borders for export.

    And by the way RIM is toast! They should have went with Android, any idiot could have seen that except, I guess the moths near the light. It is one thing to lead with hardware and have some simplistic software functionality for first generation smart phone, but to build new hardware and decide you can also build your own software within such infant markets was a highly risky strategy move and that was has been the critique of RIMS new products, they are seemingly only half way developed because of software issues. Should have hitched the wagon to android. I think it is too late now as they paid a steep price for the software company they bought up.


  • Hey all,

    Thanks to Jim for this commentary. I thought readers of PEF would also be interested in this:


    The report shows that corporations in US have reaped 88% of income growth since recession.


  • http://www.economist.com/debate/days/view/714

    I did not think there was an argument against expanding the manufacturing sector (outside of Harper’s inner big oil circle that is).

  • http://www.nytimes.com/2011/07/04/opinion/04krugman.html?src=ISMR_AP_LO_MST_FB

    Seems like krugman is giving a similar whomping as Jimbo did on Canada day.

    He sure is getting pretty loud for a liberal, I wonder if his days are numbered at the times?

  • “Canadian corporations have been successful in largely non-tradeable infrastructure-type industries (finance, utilities, telecommunications, transportation), and also in resource extraction. ”

    So its back to the staples model once again !

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