Like selling off the family [Canada corporate] jewels – by Diane Francis (National Post – March 17, 2012)

The National Post is Canada’s second largest national paper.

News that foreigners are circling around another important Canadian company, Viterra Inc., is upsetting and again raises the question as to what is in Canada’s “national interest.”

The question of national interest is what Investment Canada must evaluate if foreigners win the bid for Viterra or any Canadian company. But the question is easily answered. Losing any sizable head office to a foreigner is never in the national interest.

And legislation to that effect should be passed immediately. To use a military metaphor, Canada is at war with the world for living standards. Its head offices are its beachheads, and strategic institutes. Its CEOs are its generals and are answerable, and often helpful policywise, to governments. They are responsible for making their operations profitable but they must also uphold Canada’s laws.

But if head offices are moved to another jurisdiction, the loyalty, and respect for laws, moves with them. Foreign CEOs, or generals, can move Canadian operations, patents, research, employees and tax expenditures around the world to suit their purpose and to suit the purpose of the jurisdiction in which they operate.

They have no allegiance. They usually offer only lower-or middle-management jobs. They support no ballet companies, clinics for kids, theatre troupes, work support programs for disabled Canadians, hospital wings for the cities in which they operate. They do not confer at think tanks or with politicians to improve their knowledge of the world of business.

Put another way, allowing a large head office to be acquired allows foreigners to acquire pieces of the country’s upside, its living standards, reputation, opportunity, tax base, intellectual property and networks. This is like selling the family jewels.

Those who would defend unfettered buyouts argue that restrictions are contrary to market rules and efficiencies. Others may argue that restrictions are unfair considering that Canadian corporations go all over the place snapping up other countries’ head offices.

But markets are not an entity with a vote or a soul. They do not operate in a vacuum and operate in a context at the pleasure of the jurisdiction they occupy. The context in this case is Canada, where too many head offices have been allowed to disappear and no branch plants have ever grown into a world-beating head office.

The logical extension of the efficiency is the race to the bottom with no controls over labour standards, taxation, environmental practice and so on.

As for the argument that Canada cannot prohibit head office buyouts when its corporations are doing the same, I would counter that this is totally irrelevant.

For the rest of this column, please go to the National Post website: http://www.nationalpost.com/Like+selling+family+jewels/6317607/story.html

Comments are closed.