Not another wimp out [Comparisons to Brazilian Takeover of Inco] – by Martin Goldfarb (Toronto Star-April 18, 2011)

The Toronto Star, which is the largest circulation newspaper in the country, has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion.

Martin Goldfarb is principal at Goldfarb Intelligence Marketing and was official Liberal party pollster from 1972 to 1984.

Inco is an example worth remembering. At one point Inco was
a global leader, dominating a mining category. It was the soul
of the city of Sudbury and added stature to Ontario. It produced
intellectual property in the mining industry that was second to
none and respected globally. It provided work to miners, engineers, lawyers, bankers and others. So much of this was lost. The intellectual property and pride that Inco brought to Canada,
Ontario and Sudbury are all but gone. What happened? Management ceased to lead. In so doing it became vulnerable to takeover. (Martin Goldfarb-April 18, 2011)

Australia said No to Singapore. Australia decided its stock exchange is not for sale. Now we in Canada are thinking about whether or not the Toronto Stock Exchange (TSX) should be taken over by the London Stock Exchange (LSE).

A country is more than a business. There are totems in our country that define our personality, help create our character and engender pride, independence and a sense of our own charisma. Some arise from our geography (the Rockies, the Arctic), some from our natural resources (oil, water, lumber, maple syrup) and some from government (national health care). All help give us a sense of who we are.

But there are other totems in Canada that are not a function of our geography, our geology or our government. These are institutions created by the citizens of our country in business and academia — our universities and our internationally recognized businesses, such as RIM today, and in the past, Inco and Falconbridge. Inco and Falconbridge have disappeared but should never have been allowed to do so. A dose of economic nationalism is good for our soul. In some circumstances, profit should be second to the national interest. National interests help define who we are.

Inco is an example worth remembering. At one point Inco was a global leader, dominating a mining category. It was the soul of the city of Sudbury and added stature to Ontario. It produced intellectual property in the mining industry that was second to none and respected globally. It provided work to miners, engineers, lawyers, bankers and others. So much of this was lost. The intellectual property and pride that Inco brought to Canada, Ontario and Sudbury are all but gone. What happened?

Management ceased to lead. In so doing it became vulnerable to takeover. The board of directors did not identify problems and seek solutions to maintain leadership; rather, it saw a chance to make fast money and caved in. While they made money for shareholders, they also created a void in our national, provincial and local psyche. We lost a Canadian totem, a company we looked to for leadership, innovation and community service.

In my mind, Inco’s board of directors were wimps. They should have found management that could have maintained leadership that would both produce profit and maintain intellectual property in Canada. Selling out made money for shareholders, but we as Canadians lost a lot more. We lost a piece of who we are and who we could be. This was a case where economic nationalism should have trumped.

The same argument, and even more so, could be made for the TSX. The TSX is already the global mining exchange. We are the world leader in this category. Selling the TSX to the LSE has implications deeper than what price shareholders will achieve. There are other stakeholders and considerations: the city of Toronto, the province of Ontario, all the employees and professional services that the TSX currently uses and the intellectual property and leadership it generates in Canada. Intellectual property is key to our future in business.

The TMX Group calls its takeover by the LSE a merger, because it is reluctant to call it what it truly is. Cowardly! They are reluctant to do so because they know the TSX is a Canadian totem, worth more to the country than profit for some shareholders. Just because the U.S. does something does not make it right for Canada. The New York Stock Exchange sale to Deutsche Börse may be right for them, but we are a different country. The TSX is an integral part of our business identity.

In other areas we are moving to adopt American values. This is not always in our best interest. I am proud of the fact that we respect a woman’s right to choose and this is not a contentious issue; that we have lower rates of crime and incarceration; that we have greater commitment to gun control and health care for everyone. What makes what they do right for us? We are different than Americans and have different needs — including different economic needs and paths. Let’s not trade ours for theirs.

The TMX board should not sell for practical reasons of bringing the TSX up to global standards. The board’s responsibility to their shareholders, the city, the province and the nation is to find the right people and talent to make it a global leader. They should not wimp out and sell; they should not run. They should simply say no.

For the rest of this column, please go to the Toronto Star website: http://www.thestar.com/opinion/editorials/article/975792–not-another-wimp-out

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