These are some of the major stories Report on Business followed this week. Get the top business stories on weekdays on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Obama and taxes President Barack Obama suggested this week that Jesus would support his push for the "Buffett Rule," the idea that the very rich pay something like 30 per cent in taxes, all of which got me wondering about wealth and taxes in biblical times.
At the National Prayer Breakfast, the President noted that families are struggling, while others, himself included, have been "extraordinarily blessed" and could do without some tax breaks. He stressed his Christian beliefs, which he said were in line with the teachings of Jesus, quoting the Gospel of Luke: "For unto whom much is given, much shall be required."
There's not a lot in the Bible about taxes, but I found some intriguing bits at Bible History Online:
"During the time of Jesus in first-century Israel, there were publicans and tax collectors who could walk up to a man and tax him for what he was carrying, and much more." This actually sounds more like a modern-day stick-up, but the group notes that the levies paid for roads, police, self-government, etc.
And then there's this:
"In the eyes of Rome the provinces were to carry the heavy weight of administering the empire. Judea was in the province of Syria and every man was to pay 1 per cent of his annual income for income tax. But that was not all, there were also import and export taxes, crop taxes (1/10 of grain crop and 1/5 of wine, fruit and olive oil), sales tax, property tax, emergency tax, and on and on." We, too, have many of those taxes, and 1 per cent doesn't sound all that bad.
The Acton Institute for the Study of Religion and Liberty warns that economics then and now were completely different, and one should look for "general principles" from scripture rather than direct comparisons. Which I'd argue the President did.
"The pursuit of wealth in the ancient world was fraught with potential problems, which made it easy to view those who possessed wealth with moral and spiritual skepticism," the Acton Institute says.
Actually, it doesn't sound that different from today, and was presumably written before the financial crisis and Occupy movement.
Changing the culture Many women have a flawed definition of power, and thus are less effective in their career goals, a recent study suggests. The answer, say Anne Perschel of Germane Consulting and Jane Perdue of Braithwaite Innovation Group, is to be less Cinderella and more Dorothy.
Dr. Perschel and Ms. Perdue, whose study included hundreds of women, wrote recently at Forbes.com that "the paradox of power is women’s need to gain power in a system whose rules are unknown, unfriendly and sometimes distasteful, so they can change the rules of that system."
Some 46 per cent of those surveyed have "faulty" definitions of power, they said, citing more than 50 per cent at a high level who believe they don't have the power needed to hit their career goals.
"Are you Cinderella or Dorothy?" they asked in the Forbes article, referring, in the latter case, to Dorothy Gale, the Kansas heroine of The Wizard of Oz, who learns she had the power all along and needed no wizard.
"Unlike Cinderella, women cannot passively wait on the business sidelines, hoping business culture will change and hand them the most powerful decision making positions," they added in their study. "Instead, they must seek power, advancing both the change agenda and their careers. As one executive vice-president who heads a $300-million dollar business advised, 'the success police will not come and find you.'"
Here's what they advise:
- "Know power and be powerful," which they define as the ability to effect change and get action.
- "Ditch Cinderella."
- "Show up. Stand Up. Voice Up": Work together, and with men, to change barriers and stereotypes.
- "Forge strategic connections," and build alliances.
- "Unstick thinking," they said, citing the 38 per cent who would rather be well-liked than powerful.
They also urged corporate chiefs to take action, forcing gender balance and developing women as chiefs.
"Reshaping a male-dominated business culture, changing the ratio of women to men, and thereby improving bottom line results, requires a very specific set of actions by those currently in leadership positions as well as by women themselves," they said.
Facebook sets stage for IPO "These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits."
With that, Mark Zuckerberg put Facebook on the path to an initial public offering that many in fact hope is all about maximizing profits.
The regulatory documents filed this week were among the most eagerly awaited papers in years, giving markets a look at the stunning growth of the social media giant in the seven years since it was born in Mr. Zuckerberg's Harvard dorm room.
Here are some of key bits from the documents, which could value Facebook at up to $100-billion (U.S.) when the company goes public in the spring:
- Facebook has 843 million active monthly users. Were it a country, its population would rank behind only China and India.
- Facebook said it hopes to raise up to $5-billion in the IPO, a tiny bit of what the overall company is worth, but that will climb by the time the IPO is launched.
- Revenue climbed to $3.7-billion in 2011 from $777-million in 2009.
- Profit surged to $1-billion from $229-million over the same period.
- Zynga accounted for about 12 per cent of revenue, which helped boost its stock price after it became public.
- Mr. Zuckerberg's holds almost 57 per cent of voting power.
- Mr. Zuckerberg didn't actually make a lot when compared to, say, bankers, with last year's compensation just shy of $1.5-million. And his base salary is going to drop to $1 a year next year. But when you do the math, factoring in a valuation for the company of what it hopes will be about $100-billion, and his stake of just over 28 per cent, the 27-year-old's holdings would be worth some $28-billion.
- COO Sheryl Sandberg, on the other hand, earned almost $31-million, and CFO David Ebersman $18.7-million.
“We’re going public for our employees and our investors,” Mr. Zuckerberg said. “We made a commitment to them when we gave them equity that we’d work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment.”
- Will the Street like Facebook?
- Graffiti artist took Facebook stock, now multimillionaire
- Omar El Akkad: Five challenges for Facebook - Zuckerberg could be one
- Tim Kiladze's Streetwise: Stay away from Facebook IPO
- Facebook is wildly profitable, but how much is it worth?
- David Milstead's Vox: Why Facebook may not be a growth story
- Mark Zuckerberg's letter
Tale of two countries The fortunes of Canada and the United States are shifting somewhat. To the point where Avery Shenfeld asks whether Canada is losing its bragging rights.
"Since 2007, we’ve been doing a lot of self-congratulatory back-patting, owing to our economy’s better performance through the recession, and the resulting better tone to our jobs market," the chief economist at CIBC World Markets said Friday after both countries reported employment data for January.
"But of late, it’s been three cheers for the red, white and blue, as America’s jobless rate has turned sharply lower, while Canada’s has drifted in the wrong direction."
Canada had been remarkable in the post-recession era for how quickly the labour market bounced back, while the United States was, and remains, in a jobs crisis. But suddenly, at least for a month, America saw a fantastic bounce, while Canada's job market stalled again.
It's to be hoped that Friday's numbers signal a turning point for the U.S. And that Canada's market will pick up steam again, though that's not expected any time soon.
Canada's economy created just a couple of thousand new jobs in January, The Globe and Mail's Tavia Grant reports, and the unemployment rate inched up to 7.6 per cent as more people went looking for work, apparently with little success. The labour market has been slow for a stretch now, and some 10,000 jobs have been lost over the past fourth months.
The picture in the U.S. is more heartening, finally. Employment climbed by 243,000 in January, according to the U.S. Labour Department, for the best showing since last April. The unemployment rate dipped to 8.3 per cent, the lowest since February of 2009, from 8.5 per cent in December.
- Jobless rate hits 9-month high
- U.S. job growth surges, jobless rate drops to 8.3%
- Economy stumbles, reflecting slowdown in oil patch
Ottawa pressures banks Alarm bells are starting to ring in Ottawa over how easy it is for some people to borrow money.
As The Globe and Mail's Jeremy Torobin and Grant Robertson reported, Canada's Finance Department has been telling bankers it's troubled by some lending standards and record low mortgage rates.
The Office of the Superintendent of Financial Institutions, the banking regulator, is also concerned that some people, who haven't had to prove how much they earn, are finding it too easy to get mortgages and home lines of credit.
This comes as debt burdens among Canadian families continue to rise, and after months of warnings from the Bank of Canada and the Finance Department.
It also comes as some worry over rich house prices, particularly in Vancouver, though there's some fretting as well about Toronto's condo market.
Bank of Montreal said in a report this week, though, that it expects no U.S.-style housing market crash
"In our view, the housing boom will more likely cool than correct, even in condo-driven Toronto - the target of many scary headlines," said BMO chief economist Sherry Cooper and senior economist Sal Guatieri.
"The possible exception is pricey Vancouver where the number of unoccupied newly built condos is high owing to the Olympic Village construction in 2010."
- Ottawa leans on banks to tighten lending
- Bank watchdog targets condo speculators
- Low interest rates may shield housing market from bubble
In the markets The S&P 500 climbed by more than 2 per cent this week, and Toronto's S&P/TSX composite by just shy of 1 per cent.
"Market performance was very strong in January across most of the developed world," said Robert Kavcic of BMO Nesbitt Burns.
"In fact, the S&P 500’s 4.4 per cent advance was the best January result since 1997, and if that was a pre-game show for the rest of the year, the bulls are in for a good ride. But, is it true that ‘as goes January, so goes the rests of the year?' The first month has correctly signalled the direction of the rest of the year for the S&P 500 in just five out of the past 10 years, with the same holding true for the TSX. So, the answer is probably a no."
Twelve things 1. Those tied to the ups and downs of the euro crisis, Greek debt negotiations, summits and fiscal compacts had some fun on Twitter with #eurosongs this week. Here are some fun ones:
- A Loan Again (Naturally)
- It Ain't Free, babe
- I Still Haven't Funds, But I'm Looking For
- Every Spread You Take
- Bridge Loan Over Troubled Water
- Should I Stay Or Should I Go
- Song For The Asking
- Take The Money And Run
And some of my own, which I was too shy to tweet:
- You never give me your money, you only give me your funny paper
- We Can Work It Out
- Pick up your crazy heart and give it one more try
- It's been three long years, do you still want me?
2. "I am pleased to see the Attends business perform to expectations," Domtar's CEO John Williams said Friday as the company posted a dip in profit. TMI?
3. Protest slogans sure seem catchier than corporate ones. First, there was "we are the 99 per cent." Now, courtesy of half-naked Ukrainian feminists protesting outside the Davos forum last weekend, there's "we came, we undressed, we conquered."
4. "Steve Jobs was a pioneer of digital music. His legacy is tremendous. But when he went home, he listened to vinyl." So said Canadian legend Neil Young this week as he spoke at a conference in California.
5. Pizza Hut seems more than prepared for Super Bowl Sunday. The chain has more than 1,000 tons of dough and 90,000 gallons of marinara sauce, NBC San Diego reports.
6. "As a result of this packaging error, the daily regimen for these oral contraceptives may be incorrect and could leave women without adequate contraception, and at risk for unintended pregnancy," Pfizer Inc. announced in the United States this week as it recalled about one million packages.
7. Many people in China are making a big deal over the fact that Canada's ambassador drives a modest car, a Camry hybrid. So I have to point out that I knew him when he took rides from me before he even owned a car. And before I married his kid sister.
8. AMR Corp. CEO Tom Horton said in a letter to American Airlines employees this week that "from my travels around the system and talking with so many of our folks, I know the fierce commitment we all share to making America a winner again." Then later down in the letter he added that "competing and winning requires a financial improvement of more than $3-billion, and that, in turn, requires significant savings in employee-related costs - of more than $1.25-billion per year ... All work groups will have total costs reduced by 20 per cent, including management." Got the message, folks?
9. "In the laboratory, I'm able to make machines so incredibly small it kind of boggles my mind. Where we're headed, we're going to be limited only by our imagination." A better dialysis process? A breakthrough for a more fuel-efficienct car? Nope. The comment came in an Associated Press interview with Red Jones, a Sandia National Laboratories researcher who helped develop a laser-guided .50-calibre bullet.
10. Canada's competition watchdogs could have it worse. They could live in Mexico, where, The Associated Press reports, a Federal Competition Commission notice-server was shoved and blocked from going into an office when trying to tell companies their deal was a no-go.
11. There were several corporate announcements this week related to Valentine's Day, from charge card companies to gum manufacturers. Here's the best I've seen: "A recent national survey commissioned by Jackson-Triggs found 95 per cent of participants - women between the ages of 25-54 - would feel annoyed if their date repeatedly or unnecessarily used their smartphone." Presumably, the other 5 per cent are repeatedly or unnecessarily using their smartphones.
12. Did these guys have the same lawyers? Here's what John Stroup, CEO of Belden Inc. , said Monday as he dropped his hostile bid for Canada's RuggedCom Inc. : "Guided by our disciplined M&A strategy, we will pursue other opportunities that we believe can create greater value for our shareholders and support the continued growth, success and market leadership of our industrial networking business."
And here's what Michael Pearson, CEO of Canada's Valeant Pharmaceuticals International Inc. , said as he dropped his bid for ISTA Pharmaceuticals Inc. , also on Monday: "We continue to be disciplined on our M&A strategy and we are actively working on other opportunities that we believe can create value for our shareholders."
Required reading this week Germans are feeling less then favourable toward the euro and the EU, and believe the bad news will continue, Catherine McLean reports from Constance, Germany. But when it comes to their own country, they're more optimistic.
Britain's decision to strip former Royal Bank of Scotland CEO Fred Goodwin of his knighthood is a sign of how low the reputation of bankers has sunk around the world, Grant Robertson writes.
Just three months after its triumphant launch, India’s $49 tablet computer is mired in an ugly public relations war, Stephanie Nolen reports from New Delhi.
Some of Canada's biggest banks are taking a hard look at their operations for ways to cut back on expenses in an era of historically low interest rates, Grant Robertson reports.
Advertisers shell out on huge production budgets to make eye-catching ads and pay millions more to air them on the U.S. Super Bowl broadcast. But because of TV rights issues, the Canadian broadcast is full of the same ads you might see any night of the week. Susan Krashinsky examines the issue.
What to watch for next week Three major central banks meet next week amid the muddied economic picture, including the Reserve Bank of Australia on Tuesday, the Bank of England on Wednesday and Thursday, and the European Central Bank on Thursday. Economists believe the Australian central bank will cut its benchmark rate, for a third time, by one-quarter of a percentage point, while British policy makers hold the line, and ECB officials probably stand pat as well.
There is, however, the chance of another rate cut by the ECB.
"Despite recent signs of stabilization in Europe and better U.S. data, central banks will likely remain proactive and provide further stimulus and overall activity remains subdued," said Benjamin Reitzes of BMO Nesbitt Burns.
In the markets, several major companies are on tap to report quarterly results, including BCE Inc. and its rival Telus Corp., Agrium Inc., Husky Energy Inc., Manulife Financial Corp., Teck Resources Ltd., Thomson Reuters Corp., Precision Drilling Corp. and the two big airlines, Air Canada and WestJet.