Takeover of Canadian companies all too easy

June 30, 2008

Globalization, it might be thought, has run its course. The worst free marketeer of them all, George W. Bush, is isolated in the White House, watching the American economy recede, financial chaos spread, and the world slowly burn. His odds-on successor, Barack Obama, is pro-business but chary of a globalization that has devastated the American middle class. Meanwhile, here in Canada, our man of the right, Stephen Harper, is Prime Minister by pretending he is a centrist.

All the more puzzling, even pointless, then that the Competition Policy Review Panel, appointed in the aftermath of a wave of takeovers of Canadian companies last year, lays out in detail a dream vision for business liberalization and deregulation while advocating putting more Canadian companies up for sale to the takeover artists.

It’s bizarre when you think about it. Over the last two decades thousands of foreign takeovers have been proposed and only one – you read that right, one – has been blocked by Investment Canada but this panel insists Canada is too restrictive of foreign capital, frightening it off, and wants the takeover process made smoother and more welcoming. It makes you wonder about the numeracy skills of the members of this panel.

How could this have happened? The answer is that they, all five of the panelists, live in the business world, and the world of big business at that, and I suppose it must just seem sensible to them to draw up the ultimate wish list of the CEOs.

Is it really the case that the ownership of a country’s companies is simply a business matter? Might there not be issues of sovereignty involved? The panel flew about, presumably in business class, meeting with business people and their lawyers in closed sessions. An occasional dissenter with claims to expertise on foreign ownership, like myself, was allowed in but the unwashed were scrupulously excluded. The entire exercise had about as much democracy as your average shareholders’ meeting.

Perhaps, I thought, the panelists would, nevertheless, realize they were actually citizens themselves and rise to the occasion. At my age I should have known better. This they have failed abysmally to do.

I see by the paper that business confidence is at a new low. Well, so is my confidence in business.

As my grandchildren would say, this report is so yesterday. It calls on Canadian business to be more innovative while itself peddling every stale idea around. It is one long eye-glazing mind-numbing cliché.

Its title, Compete to Win, makes me think it was written by Don Cherry, who at least has the good sense to put on that garish dress so we’ll know he’s not to be taken seriously.

It’s all too easy to dismiss this report. What could it have said that would have made it relevant and useful for these troubled times?

Here’s an example. Instead of advocating tearing down the rules and regulations limiting foreign ownership that we have for certain sectors we deem of particular public interest - like banking, telecommunications, transport – the report could have advocated adding resources in general, and oil and gas in particular, to the list.

If a country has the good luck, as Canada has, to be well endowed with resources, it should see itself as having an obligation to develop those resource for the particular benefit of its own citizens, by having companies Canadian-owned, and in some cases publically-owned, and for the general benefit of the people of the rest of the world by proper stewardship, which does not mean letting a dwindling number of monster corporations have control.

It would have taken guts and imagination to put that forward and these are, on the basis of this report, in short supply in the Canadian business community.

To read only the business press is to know that the biggest issues these days with respect to the nationality of corporate ownership is national security in the post 9/11 world, and what to do about the proliferation of state-owned enterprises and sovereign wealth funds. The Harper government decided to preempt these issues for itself and the panel was so docile and lazy as to accept this.

More than anything else, that makes this report mostly just plain irrelevant. It deserves to have about the same shelf life as this column.

Mel Watkins is Professor Emeritus of Economics and Political Science at the University of Toronto and a Research Associate with the Canadian Centre for Policy Alternatives.