Carney should focus on saving jobs and Canadian companies
BENJ GALLANDER and BEN STADELMANN
While he has tremendous appreciation for the work and intellect of Bank of Canada governor Mark Carney, Benj has some problems with his recent statements. It has nothing to do with the fact that Carney is an alumnus of Goldman Sachs, an organization for which Gallander has little respect.
But even bigwigs make mistakes, and Carney’s assertion about corporations —"Their job is to put money to work, and if they can’t think what to do with it, they should give it back to their shareholders" —is offside. Referring to these funds as "dead money" also does not ring true.
One of the major problems with both companies and governments throughout the world has been an inadequate regard for taking on too much debt and making certain that funds are available for a rainy day.
This mismanagement is a major reason why the global economy is facing so many difficulties and why many countries and businesses are on financial life support. Indeed, many of the latter have disappeared over the past few years.
Wise is the enterprise that looks forward with supposed "dead money" and plans for the thorny times, having cash available to deploy when others are ailing. Indeed, outfits that pay down their debt and keep tidy balance sheets are those that attract our investment funds.
It appears to Benj that if Carney wants to carp, he should look in other directions. It is important to recognize that it is much more arduous in most circumstances to create jobs, as compared to saving them. Naturally, when people lose their employment and income, their consumption goes down. Keeping people gainfully employed is critical to keeping the economy humming.
One thing that particularly irks Benj is when major Canadian banks lay off employees. These concerns, which earn billions of dollars, could certainly afford not to let people go. They should recognize a corporate responsibility to earn somewhat less, while maintaining staff.
Though the bottom line would be hurt in the short term, and perhaps dividends would not increase quite so quickly, this would ultimately be far better for Canada, while not crippling the banks by any means.
This is not to say that if a catastrophic crisis hits, cutting employees should never occur. But did the Bank of Montreal really need to cut 1,100 employees when quarterly profit dropped 44 percent at the height of the financial crisis in 2009?
Benj thinks not, as the bottom line remained a perky $358 million. This is not to pick on BMO, as there are numerous other cases of the same nature amongst the major banks.
Even Carney’s Bank of Canada was not immune to saying sayonara to employees. This outfit let 33 people go last year. Perhaps with a nominal amount of thinking, the organization could have found a way to keep these people.
While it is important that corporations be efficient, there is also what Benj calls the "advantage of inefficiencies." The goal here is not to become like the old Communist countries and keep people employed no matter what the cost. However, being willing to lower corporate income to some degree to keep people engaged can be a worthwhile move for both the big and small picture. While aiding the economy, this also demonstrates that corporations can be loyal.
The feeling here is that it is important that businesses be persuaded that they have a moral obligation to keep people employed if possible. Perhaps hours have to be cut, or a job-sharing option explored, but ultimately, this is critical to a successful economy.
A second item that Benj feels should be on Carney’s agenda is to convince Prime Minister Stephen Harper and Finance Minister Jim Flaherty that the hollowing-out of Canada’s business sector is dramatically hurting this country.
Numerous major organizations have been purchased over the past number of years. That means that decision-making for these enterprises is no longer in Canadian hands. Our nation’s interest as a branch plant, so to speak, can be of minor importance to our foreign owners.
In addition, it often means that profits that once rested on this soil now go to other nations. That carves our economy into smaller pieces, leaving less for us.
While Rona, currently being courted by Lowe’s Companies, is not a Canadian stalwart like Dofasco, Inco and Stelco were, it does have a key place in the Quebec marketplace. It is understandable at this end why the province wants this company to remain Canadian in order to preserve both decision-making authority and suppliers in that province.
Essentially, Carney is barking up the wrong tree. Encouraging the saving of jobs and keeping corporations Canadian is more critical to our economy than pushing companies to spend their cash.
As an aside, Goldman Sachs at the end of June had almost $283 billion in cash and cash equivalents on the balance sheet. Perhaps Carney should be scolding his old employer.