Higher, faster, stronger: Our CEOs don’t measure up
Poor performances aren’t limited to our Olympic athletes, says labour economist JIM STANFORD. Canada’s corporate leaders need more strength, strategy and stamina
Globe and Mail
By Jim Stanford
I’m glad the Olympics are over. Many events were painful to watch, but the ads were even worse. Corporations spent more money trumpeting their own logos than supporting the athletes, so we had to spend as much time watching their ads as viewing the actual events.
Worst of all was that pompous spot from the Toronto Stock Exchange, featuring brave athletes carrying stock-ticker flags as they ran across Canada. “In the face of the greatest competition,” the narrator said (over a suitably heroic score), Canada’s corporations “continue to achieve world-class results, break records and raise the bar.”
Ironically, the TSX had to revise its ad after being fingered by the Canadian Olympic Committee for free-riding (they hadn’t paid for any Olympic advertising rights). But they might just as well have been charged with misleading advertising.
And world-class results? Several times during the Olympics I threw down the sports section in disgust, only to pick up the business pages—where I was confronted with still more national failures. And these pinch our pocketbooks, too, not just our pride. Every day brings more evidence that Canadian business is falling further back in the global pack. The mediocrity of Canada’s corporations is starting to make our national swim team look like world champions.
Just pick the subjects of a few recent headlines.
Two more Canadian corporate icons—Molson and The Bay—are selling out to the Americans, following years of ho-hum financial performance.
Nortel, Canada’s great high-tech hope, fired 3,500 workers and announced it was under a criminal investigation. With 65,000 cumulative layoffs and $300-billion in lost market value, Nortel gets a double gold: destroying more jobs and more shareholder value than any other competitor in Canadian history.
One of Canada’s few genuinely successful multinationals, Magna International, will hire an American as its new CEO—and he will work in Detroit. Will Magna’s head office be far behind, joining other expats in the southward pilgrimage?
Another Canadian success story, Bombardier, may see its debt downgraded to junk-bond status.
The problem is not just a few examples of corporate failure, scandal, or infidelity. The problem is a systematic pattern of national corporate underperformance. Our economy needs corporations to invest in advanced products and facilities, crack sophisticated global markets, and push the limits of our productivity and our expertise. I don’t care too much whether they are Canadian-owned or foreign-owned—as long as they are here. But we aren’t getting nearly enough business leadership. And we pay a huge economic price as a result.
The problem is not our government, which is now small by OECD standards. It’s not our taxes, which are in the bottom third globally. It’s not our skills: We have a higher proportion of college and university grads than any other nation. It’s not our attitudes, or our workers, or our unions. It’s certainly not our broader economic fundamentals (inflation and deficits and such), which are “healthier” (by orthodox opinion) than almost anywhere.
Indeed, over two decades, we’ve literally remade our economy to be as attractive as possible to business. But our share of global foreign investment has fallen, and there’s not nearly enough indigenous business development to fill the void. We built our economic Field of Dreams. But business didn’t come.
Other countries do a lot better—even those with much higher taxes and stronger unions. For example, consider three left-wing European countries with a combined population slightly smaller than Canada’s: Sweden, Finland, and the Netherlands. Together, they have nine corporations in Fortune’s list of the biggest 250 firms in the world. Canada has one.
Some of our corporations do very well, of course. Banks are perpetual money-makers. And our booming energy companies prove that Canadian firms are still first-rate at digging stuff out of the ground and shipping it elsewhere. But finance and resources do not make a modern economy. We need high-value manufacturing and tradeable services—and we aren’t getting enough of either, whether foreign-owned, or home-grown.
This recognition that dynamic corporations are the key missing ingredient in our economic recipe is even infiltrating the mainstream business world. One intriguing study by Ontario’s Institute for Competitiveness and Prosperity confirmed that the problem is not our general business environment or infrastructure. The problem, rather, is a lack of specialized supports and discipline—both carrots and sticks, if you like—to push Canadian-based companies to go higher, faster, and stronger. Institute chair Roger Martin hits the nail on the head: “Too few of our firms and industries have developed world-class strategies and operations.”
Forget the national hand-wringing over our athletes. I think we should hold a national summit on the mediocrity of our corporations. The poor performance of business is too important to be left to businesses alone. Companies, universities, governments, and unions should all sit together to find better ways.
We could sweeten the pot for business through specific incentives, tied to concrete performance improvements—like sheltering profits from income tax, but only when they are reinvested in new Canadian projects. We can discipline those who aren’t making the grade—with things like a training tax when companies won’t invest in skills development. When all else fails, we must find other ways to fill the gaps left by private enterprise—through new forms of entrepreneurship, like joint ventures to commercialize innovations within our universities.
Without some serious out-of-the-box thinking, Canada’s business medal count will likely get worse, not better.
I shouldn’t sound too negative. There was some good news in Canada’s business pages this summer—just as a few of our athletes did well in Athens. One headline reported a new label unveiled by Canada’s Scott Paper for its best-selling Cottonelle toilet paper (whose trade-mark is reverting to U.S. giant Kimberly-Clarke). The new brand is called Cashmere.
Our economy may be in the toilet. But we’ve got a great new name for an all-Canadian toilet paper. Our corporations really are raising the bar.
Jim Stanford is an economist with the Canadian Auto Workers union.
