We live in a land of economic democracy. If someone wants to put up the money to buy a company and the shareholders want to take that price, then the company will be sold.
That's the way it should be. Or is it?
What happens when companies headquartered in Canada increasingly are being sold to foreign head office buyers?
For one thing, the ambition of Canada's young business people is stopped dead in its tracks. They have to move to other countries, usually the United States, to achieve their dreams.
Aspiring Canadians want to be part of a head office atmosphere. That's where the decisions get made, that's where the good jobs are and that's where the intellectual stimulation is.
In fact, it's more than that. Or, you might say, worse than that. When a head office leaves Canada, so do all the support positions at accounting firms, law firms, recruiters and other key suppliers of head office intellectual capital. Just watch the corporate donations budget decline when a Canadian company gets taken over by a foreigner. The first inclination of the acquirer is to cut costs and what's easier to cut than donations in a town or country that they don't live in and hardly ever need to visit?
So what do we do? Just stand by while Canada's opportunity for leadership is being frittered away? What can we do? What should we do?
This is one issue in which government can and should play an important role. But yesterday's strategies are not the answer. We don't need a new FIRA (the defunct Foreign Investment Review Agency), nor regulations to limit foreign ownership, nor interference with shareholder democracy.
However, there is a big role for government. We should have incentives that help Canadian businesses grow, expand their worldwide leadership, keep the best and most creative young Canadians here and give Canadian companies a set of tax and other laws that don't put them at a disadvantage to foreign competitors.
Two quick examples. The federal government recently announced a plan to disallow interest deductibility on foreign acquisitions, the so-called double dip. And yet, the U.S. tax law allows U.S. companies to double dip on their foreign acquisitions. As do most European countries. The effect of this will be that it is far more tax efficient for a U.S. company to buy a Canadian corporation than it is for a Canadian to buy a U.S. headquartered company. Let's stop trying to fight the battle for worldwide corporate leadership with one hand tied behind our back. Let's stop the proposed tax legislation that makes it even tougher for a Canadian headquartered company to compete for foreign acquisitions. Instead, let's make sure that our tax laws are at least on a level playing field with foreign jurisdictions.
A second example is bank mergers. We are seeing bank mergers throughout the United States and now throughout Europe. And yet, the government stands in the way of bank mergers - denying them the opportunity to achieve the scale required to compete internationally. What's the big advantage for Canadians of having banks that are pipsqueaks on a world scale?
When Canadian companies succeed, Canadians succeed. Let's help to make that happen. Let's not bemoan our fate as Canada's corporate heritage quickly swims offshore.
