Unpublished letter submitted to the Toronto Star

Re: Canadian-led thinking filters through at Davos index launch, Business, January 23, 2016.

Jennifer Wells offers an incisive critique of short-term, short-sighted “quarterly capitalism” – as coined by Canadian economist Dominic Barton in her article while presenting some crucial changes that must take place to produce a socially responsible and just economic system in the future. Don’t hold your breath. There is little to no appetite for simply critiquing capitalism let alone altering its fundamentally destructive dynamics. The fact that 10% of the world’s adult population owns a staggering 88% of the world’s assets according the Credit Suisse Policy Institute’s 2015 Global Wealth Report receives only a passing notice in financial and public news media. We have long ago accepted gross inequality as the hallmark of capitalist economics. As long as unbridled greed drives free enterprise nothing will change. As Barton notes the deep reform required is to change how we view business’s value and its role in society. Currently, the private sector perceives their role as creating individual not social wealth. This is done by publicly socializing risk and privatizing wealth.

Wells provides an example of this methodology in her description of Chainsaw Al and his deceptive, corrupt and fraudulent leadership practices that left investors, employees and public taxpayers holding the bag for his incompetence and mismanagement. Regrettably, this not unique to free enterprise and is in fact all too common. It is a cautionary tale for those who laud such leaders as change agents and assertive decision makers rather than assertive disaster makers. Canadian tech darling Nortel is another case in point. Wall Street high-flyers were viewed in the same light until they blew up the financial system in 2008. Some may still remember the Bre-X mining fraud. Not a single individual has ever been prosecuted or convicted of a crime for their roles in the financial disaster that brought the world to its knees and from which we still have not recovered. Highly touted current CEOs like Hunter Harrison of CP Rail continue to practice Al’s slash and burn management ethos of cut costs, cut staff and then cut out. Harrison has chopped 7,000 jobs since becoming CEO of CP in an ongoing blood-letting of the company’s staff in the name of “efficiencies.” These job cuts are solely intended to boost the share price of CP that has risen dramatically since he was appointed. The most recent job cuts announced come as the company reports record profits.  This is a common strategy of CEOs today whose performance bonuses are directly tied to stock options. The CEO of Blackberry, John Chen is yet another example who makes a salary of just under $350K but banked $89.7 million in 2015 based on stock options as reported by the Canadian Centre for Policy Alternatives’ Hugh McKenzie despite the flagging fortunes of his company and massive job cuts to the former RIM.  Unfortunately, in too many cases the company subsequently falters from this brain drain and the CEOs conveniently cut out with hefty severance packages leaving the organizations they once ran in ruins. In the case of Hunter Harrison, CP will soon be left an empty shell to be picked over at some point in the future by vulture hedge funds in bankruptcy courts much like Sunbeam. The Lac Megantic disaster was the result of similar mismanagement style of the company responsible. As Wells and Barton point out, CEOs are rewarded whether they succeed or fail instead of having their salaries linked to innovation and efficiency and with clear penalties for failure. The new S&P Long-Term Value Creation Global Index to track long-term growth of companies is a promising initiative.

This is the real and ugly face of modern corporate capitalism where value is not built by organic growth but by ‘controlled destruction.’ It is a predatory and parasitic process that is destabilizing the world’s economy on a massive scale driven by amoral greed and by “management without conscience.” We need a system of “fair market” economics that structures the role of business as one of collective socially responsible value-creation for all in society through wealth distribution and progressive taxation, economic mutuality and non-authoritarianism based on fairness and freedom for all. We need to abandon the view that leaders make companies succeed when in reality it is every employee who does and all deserve a share of the rewards. It the company fails – all should suffer equally – including the CEO and shareholders. A level playing field will lead to a levelling of the playing field for everybody.