Workarounds for Oligopoly

Despite the fact that the acquiring companies were generally from jurisdictions that would not have tolerated a comparable takeover by a Canadian company, the Canadian government, the corporate establishment, and the public have hardly raised a peep about this massive sell-off.

Until Tuesday, that is, when Thomas Caldwell, the combative head of a large Canadian securities firm, took out full-page ‘open letter’ ads in the business section of Canada’s three largest newspapers headed “The Sellout of Corporate Canada”.

His outrage was directed at the executives and ‘managers’ who pocketed millions of dollars in ‘compensation’ for these sell-offs, generous even compared to the high salaries they were earning.

The motivation of the buyers was simple: They wanted the land and natural resources, finite, non-renewable resources poised to soar in price as they become scarce. They wanted the other companies for brand, market, and the elimination of competition in their respective oligopolies.

The victims are the Canadian environment and the (non-executive) Canadian workers. Both are expendable externalities that are not factored into the purchase equation. To the corporatists, they have no value. The payments to the Canadian executives, people paid to steward their corporations, in Caldwell’s opinion, bordered on legal bribes. He claims it is wrong for executives to benefit from the sell-off of organizations they are supposed to be managing.

The problem with this logic is that, if Canada made it illegal for Canadian executives and managers to be compensated for the sale of their companies, the buyers would simply repackage the deals as ‘long-term management agreements’ under which the executives would stay on at their hefty salaries but essentially do nothing to ‘earn’ them. There is a long tradition of doing this in takeovers, a kind of extended early retirement that makes the deal look somehow more ethical.

Anti-combines law has essentially not been enforced in Canada for over thirty years, because it became too political to try to decide how many companies might be needed in an industry (in Canada? Globally?) to ensure competition. It was easier to say “the world is going global and size and consolidation is needed for any company to compete in a global marketplace”. This is nonsense, but it has been said often and long enough that most people now accept it. It is also true that there are basically no Canadian-owned or Canadian-controlled companies in any of the global oligopolies. 

The real obscenity, I think, is the sale of our land and scarce resources to indifferent rapacious foreigners, and the utter lack of effective anti-pollution and anti-waste regulations to prevent foreign and Canadian companies from fouling our land, air, soil, water, and ultimately our food with toxins and garbage. And our willingness, once hoodwinked by NAFTA and the WTO, to allow junky foreign goods (often made from Canadian materials sold raw and cheap) to be dumped in our country without recognition of their damage to Canadian enterprises who cannot compete because we require them to pay decent wages and to maintain a modest level of social and environmental responsibility. And the salaries and benefits some executives receive that are out of proportion to the value they provide (since, as James Surowiecki has explained, the distorted ‘market’ is the sole determinant of this remuneration).

So the answer, in my opinion, is not to demand ethical stewardship behaviour of Canadian managers, or to resurrect politically paralyzed anti-competition review boards.

A better answer is to require owners of land and natural resources to live in the community where that land and those resources are located. And to tax ‘bads’ (pollution, waste, use of non-renewable resources, to discourage their use, and imports, to level the playing field for domestic producers) and excessive wealth (to redistribute it, to eliminate poverty and the inequity that underlies a host of social problems, and stop rewarding greed) — and cancel grievous ‘free’ trade agreements and taxes on employment and clean, responsible business. And to teach and encourage entrepreneurship, so we have better choices than the crap produced by most multinational oligopolies.

These answers would be simple to enact and straightforward to administer. No subjective debate over the morality of particular transactions required. Rather than just trying to prevent corporatist oligopolies from doing their worst, we should make it easy for people who care todo better.