Corporate vs Social Bottom Lines September 2019
Over the past thirty years Canada has experienced an exceptionally large number of private sector plant closures and relocations. Often these closures were decided to enhance corporate profits by relocating to low-wage countries such as Mexico, China, Vietnam, India, Pakistan, Bangladesh. This pattern will continue with Free Trade agreements and capital mobility in a globalized corporate economy.
Presently, the decision whether a private sector plant is to be shut down is largely based on a Corporate Bottom Line wherein the profitability of the business or industry is measured by its ability to maximize profit for shareholders and managers. If, by this measure, an enterprise is deemed unprofitable it may well be shut down or relocated with little regard for the workers. Even profitable operations are shut down if greater profits can be made by relocating.
Canadian governments have, more than other countries, stood aside and let private sector shut downs of their Canadian operations take place without any recourse. This practice has cost the country thousands of jobs and resulted in de-industrialization. To curtail this practice our federal government should form a task force to review planned closures and individually determine if the continuing operation of the business or plant is a net benefit to the Canadian economy and society. A cornerstone of such a review could be legislation that states before a corporate enterprise is shut down and stripped, the government will undertake an evaluation of worth based on a Social Bottom Line.
A Social Bottom Line is a more comprehensive assessment which takes into account the profitability, the jobs that are maintained and the tax revenues derived from the enterprise. It would recognize that for each job within the enterprise there are likely three, or more, additional subsidiary jobs generating employment and tax revenue for the government.
A Social Bottom Line would also take into account the benefit to the community and its merchants resulting from the enterprise. It would also weigh the value of product produced which if exported brings foreign revenue into the country impacting positively on our trade balance. And, negatively if the product must now be imported. Add in the retention of management skills, and R&D expertise. Also, we must account for the welfare costs and the negative impacts of unemployed workers that will arise from a shutdown. Now you have a Social Bottom-Line accounting.
Enterprises may well be judged unprofitable based on the Corporate Bottom Line, but profitable to our society and country based on a Social Bottom Line accounting. Clearly, the likely outcome of a Social Bottom Line economic analysis will determine that many plants or businesses should be operationally maintained. But how? In some cases, it may be advisable that the enterprise become a State or Public corporation. Or, it could be financed and run as a joint venture or cooperative with investment money derived from the workers, banks, and government, possibly with the workers taking on management responsibility.
It should be recognized that Public or State enterprises do not move offshore providing far greater security for the workers and assured benefits for the state. We should recognize that public corporations are just as efficient, more stable and generally more beneficial to the workers than private sector corporations. If this is not understood, then a study should be undertaken to verify this truth.
Any public money being invested into a private holding should be made with assurances that the enterprise will be well managed, employs good labour and environmental practices, and maintains itself as a Canadian corporation head quartered in Canada. To provide these assurances the government should have representation on the board of directors in accordance with the size of the financial investment made.
I have presented an economic strategy based on evaluating corporate shutdowns, but the same or a similar wholesome analysis could be applied to determine the economic soundness of producing at home some products presently being imported. This model is known as import replacement or import substitution and is in line with environmental criteria of producing local.
Applying this practical proposal would go a long way in saving jobs and creating new employment opportunities. Government investment in Canada and social programs should not be simply a cost.
Ron Brydges
