It has been a miserable year for Quebec's reputation as a place to do business. If the province's intertwined political and business elites are wise, they will seize on the recent barrage of negative news as grounds for sweeping change.
The arrest Wednesday of Pierre Duhaime, former CEO of engineering powerhouse SNC-Lavalin Group Inc., on charges of fraud is one of the most shocking incidents yet. The charges against Mr. Duhaime, which haven't yet been proven in court, stem from a corruption inquiry that has exposed widespread rot at the municipal level and revealed that organized crime has long extracted bribes on local construction contracts.
The weekly revelations of the corruption inquiry have appalled Quebeckers, but those untouched by the inquiry shouldn't pat themselves on the back. From top to bottom, the province's politics are in urgent need of examination.
Neither the Liberals nor the separatist Parti Québécois have been good financial stewards in recent decades. They have left Quebec saddled with net debt that represents half of its GDP, the highest level of any province. Despite high taxes, Quebec can't afford to pay for its own social safety net, but counts on transfer payments from other provinces.
Quebec's cozy business establishment has a lot to answer for as well. Consider the case of Quebec-based Rona Inc., the poorly performing home improvement chain, which this summer had attracted a possible takeover bid from U.S. powerhouse Lowe's Cos. Inc. – one that the board spurned, largely because it didn't want to sell a Quebec business to a foreign interloper.
The board's unwillingness to consider a deal prompted a revolt by the company's largest investor, Toronto-based Invesco Canada. At the very least, Rona's board, which is stacked with Quebec-based executives, demonstrates the insular nature of many of the province's corporations and their reliance on a thin pool of home-grown managerial talent.
For their part, local politicians have shown they would rather protect Rona's right to remain an underperforming, based-in-Quebec laggard than welcome foreign investment and expertise. The same political leaders also suggested fund management giant Caisse de dépôt et placement du Québec should focus its attention on propping up Quebec companies rather than on protecting the needs of pensioners on whose behalf it invests.
A province cannot build a bright future by protecting local laggards and discouraging investment – especially if time and demographics are against it, as they are in the case of Quebec. Power and population are shifting west in Canada and most immigrants have chosen not to settle in Quebec.
Protecting culture is a noble cause, but to build the future it wants, Quebec needs to rethink its protectionist business culture, take strong action against corruption and demonstrate that it is open to business – no matter where the head office may be based.