Rivers rants: Allowing predatory buy-out practices of Canadian enterprises, only to drive them into the ground, is not sustainable.

Rivers 100x100By Ray Rivers

February 19, 2015


Did a Tim Hortons staff member really pour cold water on a couple of homeless folks sleeping outside a Vancouver donut store recently? The fast food chain has had its share of misadventures over the years, but this is disgusting. On the other hand, given where this Canadian icon is heading, it all may be prophetic.

Timmy is Canada’s largest fast food retailer, leaving McDonalds in its dust and Starbucks at the starting gate. And Burger King is just a Tim bit, though it has just swallowed up Tim Hortons, donut hole and all. This is only the second marriage for our Canadian success story, the first one, also to a US burger chain (Wendy), ended in divorce.

But last December, industry minister James Moore, believing success is not enough, allowed Tim Hortons to be eaten up by Burger King’s Brazilian owners, 3G Capital. 3G is one of those funny-numbered buy-out companies – one with a reputation for taking over prosperous companies, cleaning house and running the business into the ground.

Tim Hortons staffer

Are staff pouring water and coffee?

A bizarre stipulation in the takeover agreement allows the new owners to fire up to 20% of the corporate staff. And sure enough, 350 employees were out the door before the ink had even dried on the papers. An independent analysis estimates that as many as 700 jobs will likely have to be cut, some 44% of the total administrative staff, before the knife can be pulled out of the victim. And it is estimated that this buy-out will also reduce federal tax revenues by as much as $700 million dollars a year.

Another win-win for the economy? Isn’t this just so deja vu?  Stelco, another Canadian icon was given license to be rolled-over by US Steel in 2007, with a host of conditions which the new company simply ignored, despite threats of legal action by the government. Two years later the US parent had started wrapping up Canadian operations and today our premier Canadian steel company has gone into receivership. Domestic production has been replaced by imports, the jobs have vaporized and the provincial government is going to have to bail out the pension plan.

Target - sale sign on door - small type

If you wanted to – you could buy the kitchen sink as well.

And then there is Target which bought out the Zellers retail discount store chain (133 stores) only a couple of years ago. The former employees were all fired, the union kicked out and new staff hired to replace them. Then a few months ago, Target announced that it had decided to close all of its Canadian operations and lay off all 17,000 front-line workers, without any severance pay.

But there are some severance payments being made to the corporate staff, though the entire severance package for Target Canada is smaller than the $70 million being paid to Target’s outgoing CEO. After all, he is the man who presided over this cluster-cuss that has led to the closings.

As an aside – US CEOs thirty years ago used to make 46 times the income of their average employee. Today that income gap has grown to 350 times. Canada, being a little behind our American cousins, is only at 200, though that is still one of the largest income gaps in the developed world (UK is 84). Target paid their main man 597 times the pay of the average Target worker. But he didn’t beat his peer at Walmart, whose total annual income package is over a thousand times the average Walmart employee’s salary.

No question about it – Investment Canada has been sleeping at the switch – assuming there actually is a switch and somebody at that agency knows how to work it. We all understand that foreign investment is essential for economic growth in an economy, but allowing predatory buy-out practices of Canadian enterprises, only to drive them into the ground, is not sustainable.

Besides, not all investment needs to be about corporate giants gobbling up our homegrown enterprises. And since competition is a keystone of our business economy, shouldn’t we shun investments which merely increase concentration and reduce competition? And why aren’t we encouraging foreign investment where it is badly needed in new projects, like Ontario’s ‘ring of fire’?

The truth is that Stephen Harper’s record of managing foreign investment is miserable. But there is blood on the hands of all the governments since Mr. Mulroney first scrapped the Foreign Investment Review Agency. Today sadly, there is no coherent foreign investment policy in this country.

A couple of years ago, while the government was snoozing, we almost lost control of our potash industry. Fortunately the premier of Saskatchewan stepped in to save the day. And it was only after the penny dropped – that we were losing control of our oil sands to China – that our PM was forced to hobble together a knee-jerk response.

The reality is that globalization is dead. 9-1-1 was like a bucket of water dousing a campfire, the last smouldering embers of unimpeded free trade squelched by the sanctions on Iran, North Korea and Russia. In fact, the potential nightmare of an untethered global investment policy came to a screeching halt over a decade ago, as the world’s nations firmly rejected something called a Multilateral Agreement on investment (MAI).

The MAI was a naive initiative by the worlds largest transnational corporations trying to wrestle control of the business sector out of the hands of governments – as if borders ceased to exist when it came to investment. Nevertheless, unassailable corporate rights have been embedded in the so-called free-trade agreements which Canada has been only too eager to sign unto, such as NAFTA and the Canada-EU deal.

The reality is that globalization is dead.In fact, Germany has stated that it will not ratify the draft Canada-EU trade deal unless sections granting the rights of companies to sue governments are removed. Ms. Merkel understands the danger to her ability to govern her people in the face of a trade agreement which allows companies to ignore environmental and other regulations – or to sue the government.

Canada needs a foreign investment policy which serves Canada’s interests. This aspect of managing our economy is too important to be hi-jacked by the ideologically-driven among us. Why would we ever allow a foreign takeover which explicitly sets out to kill jobs, as the Tim Hortons buy-out does? Why would we approve take-overs which serve to increase corporate concentration and reduce competition and efficiency in Canada’s economy?

And why should we allow our homegrown success stories to get usurped by extra-national companies just out to make a quick buck? Call it saving free market competition or call it economic nationalism, it sure beats pouring cold water on our entrepreneurs.

Rivers-direct-into-camera1-173x300Ray Rivers writes weekly on both federal and provincial politics, applying his more than 25 years as a federal bureaucrat to his thinking. Rivers was a candidate for provincial office in Burlington where he ran as a Liberal against Cam Jackson in 1995, the year Mike Harris and the Common Sense Revolution swept the province.

Links to background information:

B.C. Homeless     Tim Hortons     Burger King      Timmy’s Takeover

Tim Hortons Layoffs     Tim’s Losses     Stelco     Stelco Closing

Stelco Pensions      Zellers

Target     Target Takeover

Target Closings      Target Severance      More Target Severance     Investment Canada

Globalization      The End of Globalization      MAI      Germans on Free Trade Deal    Investor Rights

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17 comments to Rivers rants: Allowing predatory buy-out practices of Canadian enterprises, only to drive them into the ground, is not sustainable.

  • Ray Rivers

    Brian – I really try to avoid debating in this section comments because I think that is mainly for the readers – I’ve already had my say.

    However, to your question, Gary made the point effectively that who owns Tims or even Zellers probably doesn’t matter that much in the big scheme of things. The real issue is predatory take-overs which reduce competition and lead to greater monopolization of a Canadian industry and that is less likely to happen in that economic sector. But our resource industries are pretty important ones, which is why the PM reacted to both the potash and oil sands foreign takeovers.

    I look back when Canadian cultural industries were struggling in the early 60’s – getting swamped by our big neighbour to the south. Protectionist laws promoted the development of a Canadian cultural industry that made Canada one of the top music exporters. Toronto became the third largest global centre for theatre and our directors and actors have become an important part of the world stage.

    By the way, my factual references can be found in the links my publisher carefully builds into the end of each column. Thanks for commenting.

  • Brian


    I’m not sure why we should really get any say if a privately owned Canadian Company decides to sell to maximize revenue for it’s shareholders (that’s what companies do). Tim’s isn’t a quasi-governmental organization that owes Canada anything. People like their stuff and buy it. If they aren’t here something else will replace them.

    It’d be nice too if you included actual facts in your article. Although I think Target are morons for the way they came into Canada, they didn’t buy Zellers or fire any of Zellers employees. Zellers was dead as a doornail (and also no longer a Canadian company). Target took over Zeller’s leases (and spent millions redeveloping and building). Although they bungled the whole thing, they also don’t owe Canada anything.

    In a world with little barriers to information exchange, decreasing travel costs, and easier movement of Capital, it’s time to figure out the best way to work within those parameters. Just because you want the Edsel factory to keep chugging doesn’t mean it’s feasible. Some things just change. Certainly Harper doesn’t control that.

    • Carl Stafford

      Where is the Severance Pay Arrangement, Brian?

      Doesn’t Target At Least Owe their Canadian Employees That?

    • henri de beaujolais

      Its a race to the bottom Brian. If the various levels of government had focused on building a knowledge based economy, we would be in a better financial state. Building an economy on commodities (oil, lumber) is not the way to build an advanced society.

      Alberta, with all its oil revenue (which should be greater if the royalties were structured better (ie Norway)) is now faced with creating a Provincial sales tax! A very short 4 months after the oil crash.

      Mismanagement occurs every where, regardless of who is at the helm. Profit drives decision.

      Until we have finances in service of society and NOT society in service of finance, we will continue the race to the bottom. Paraphrased from Matthieu Ricard’s TED Talk: https://bit.ly/1sWAVYk

  • Ray Rivers

    Very well said Gary – I just see the future differently. I believe, given what has been going on in the world that we will be returning back to more nationalist protectionist trade policies. I look to the US with their buy-American focus during the worst of the 2008/09 recession. Perhaps you are just more optimistic than me. That is a good thing. Thanks for commenting.

    • Gary Scobie

      Oh I’m not optimistic on this front Ray. I agree that we might see more nationalist economic policies, but I’m not sure that that will necessarily be a “good thing”. Protectionism often creates unintended consequences. There is no right answer.

  • Gary Scobie

    I am not in the habit of commenting on partisan articles extolling the virtues or evils of either of our two most prominent federal parties (my apologies to the NDP who have likely seen their pinnacle). However, this time I find myself in almost complete agreement with Mr. Rivers except for one point.

    This is not the end of globalization. These examples point to the power of global capitalism today. There is no room for compassion or morality in global capitalism. It is simply following the tenets of creative destruction that are inherent within unchecked capitalism. When global companies decide to take out viable smaller companies, dismantle them and run them into the ground, it is for short-term shareholder gain only and sometimes to reduce competition in order to create monopolies. It is nothing more and nothing less. There is no noble purpose.

    We live in a changing world where the western democracies that once held the predatory companies are seeing their companies becoming the prey of global companies residing in what we term emerging countries like Brazil, India and China. If we thought we had some moral compass guiding our western companies (and that may be a stretch), make no mistake that the new global companies have any such compass.

    Whether it be a North American oil company, steel company, resource company or coffee and donut company, there is no conscience in today’s global predators. It is about money and power and we will continue to see companies come in to Canada (with great fanfare and often government help) and out (without shedding a tear or paying our loans back).

    Everything is simply “a business decision” and capital will go where the pickings are best and retreat when other places look better. I don’t know what the answer is to try and move back to what we once thought was a positive trait of capitalism – some sense of morality and loyalty to workers, customers and place of residence. Maybe we were just fooling ourselves.

    Certainly there are strategic reasons to protect resource, agriculture and manufacturing companies from foreign predators, but I don’t know how we ever could place a coffee and donut company on the same measurement scale of importance to our country, no matter how much we’d like to.

  • JQ Public

    How about a debate night – Mr. Rivers vs. Mr. Rusin on a wide range of topics? Now that might be fun.

  • Ray Rivers

    (Re: Comment by Peter Rusin) – Ad hominem attacks? Is that the best you can do? I’d be happy to trade resumes anytime.

  • Peter Rusin

    Right, so we continue to have the pleasure of getting a rant from a lifetime government employee now on a government pension giving opinion on economics, capitalism, and corporate business dynamics on an international scale.

    How about buddy Rivers first tries to make a living in the private sector marketplace; try running a business, do something positive instead of promoting the suction of fiscal blood from the real world of work and business; make your own way; pay for your own existence.

    Less government, less government employees, less left wing opinions, and lower taxes. Maybe then, the corporate structure can help preserve and pay for some more jobs. Maybe then, the corporate world could function even better. Even better for guys like Rivers.

    Harper is the only guy who has been able to keep this country’s economy stabilized, and politically appealing on the world stage.

    • New Age Carpetbagger

      Well said Peter! I know that your Public Sector clients will completely understand that your apparent disdain for all things “governmental” is simply a stylistic conceit. After all, if you truly felt the way that you repeatedly present, how could you with any degree of conscience accept commissions for public sector work? I understand the multiple layers within your argument and applaud your complexity – brilliant!

      • Peter Rusin

        Different context in response to the Rivers chronic pro-liberal position. I work for all parties, and get paid for making all levels of government money and saving the government money. I support good governance regardless of party affiliation, unlike Rivers. I also witness a lot of waste in the management of certain types of government business; that is one of the reasons why I offer my services, to try and make things a little bit better; my conscience sleeps well at night.

        It is somewhat loathsome to witness constant attacks against two of the conservative governments who had amazing people work hard for this country, keeping the health of the economy in check, gaining respect internationally, against the contrast of anonymous opinions generally offered up without much merit from the far left wingers who lack in any sense of humour whatsoever.

        It is also tiring to see criminal behaviour at the provincial party level, by the liberal party reps, the same ones supported by Rivers. Bad government has to be kept to accountable.

    • henri de beaujolais

      Don’t read it if you don’t like it Peter.

      Sounds like you need or want your own column to promote your own biases, however inane and ill-conceived they are.

      For someone who wants/wanted to be in office, you sure have a closed mind.

      Keep banging that Harper Fan-boy drum and count the votes slide away forever. Sarah Palin’s style doesn’t sell outside of red-neck USA.

  • John

    Great article Ray.

  • Kurt Koster

    Thanks Ray for telling us how it is. Unfortunately Harper counts on us being asleep, people like you wake us up to the sad truth.

  • Glenda Dodd

    Right on