Canada’s unhealthy corporate welfare culture



Commentary

If the state actually has to pay subsidies to private companies, it is when those companies are damaged by the intervention of the state.

The restrictions enforced to combat the COVID-19 pandemic have shocked many industries and put hundreds of thousands of jobs at potential risk. The government created the Canada Emergency Wage Subsidy (CEWS) and provided many remedies to large corporations in the hope of reducing employment losses.

The aviation industry has been particularly affected, and it was not surprising that Air Canada needed help. It was surprising that Air Canada received a $ 10 million executive bonus while dismissing 20,000 employees, receiving government bailouts and wage subsidies, but it’s also surprising. There was not.

What was the purpose of the bailout if jobs weren’t saved, and how could executives deserve millions of dollars in bonuses at these times?

The average Canadian suffering from a pandemic sees this kind of bonus as a slap, but Air Canada’s senior executives don’t, and don’t even understand what went wrong.

Through decades of corporate welfare for selected businesses, Canada has created a culture of empowerment during its executive class. Subsidies and remedies should be reluctantly accepted only when very necessary, but many companies consider such revenue to be part of their business. Lobbying for government money is an industry in itself.

Air Canada executives will receive a $ 554 million wage subsidy in 2020 and will continue to use the CEWS program in 2021 before negotiating a $ 5.4 billion low-interest loan from taxpayers in April Succeeded in. Work and worthy bonuses. Why not? That’s the way it’s done in Canada.

Management bonuses are, in principle, exhausted, but it should also be concerned that Air Canada is being financed hugely on the pretext of pandemic support. Ottawa has a history of allowing some of this type of loan. In 2009, the Harper government financed Canadian automakers billions of dollars under the pretext of protecting jobs. In 2018, the government quietly canceled $ 2.6 billion of its loans to Chrysler. Air Canada executives may be shameless to seek government help, but they’re never stupid. They know that repayment terms may be renegotiated in the future, and perhaps renegotiated. This is a learned behavior.

In addition to providing Air Canada with a low-interest loan worth about $ 5.4 billion, the government bought a $ 500 million stake in the company. Finance Minister Christia Freeland said taxpayers would be able to recover the company again. Claimed to help ensure profits.

Investing taxpayer money in the private industry rarely pays off. The federal government is not the only one participating in the game. Alberta’s Prime Minister Jason Kenny has invested $ 1.5 billion in the currently canceled Keystone XL pipeline project. State taxpayers are unlikely to see the money again. Companies have learned that lobbying for investment in the government is more profitable than trying to sell stock to individual investors who conduct careful research before funding the company.

A culture in which businesses rely on government subsidies encourages poor business management. Why should chronic corporate welfare recipients like Bombardier strive to make a profit when they know that the government will never refuse when they plead for another bailout? Why companies need to approach financial institutions that expect welfare, recurring payments, and interest payments on loans, even though effective lobbying activities allow them to receive interest-free loans from governments that may never pay off. Is there?

A system that rewards poor performance and losses discourages a company from pursuing efficiency and profitability.

Companies that do not belong to government-sponsored circles are also adversely affected by corporate benefits. It is difficult to compete with companies that are not afraid of financial loss. It’s morale that executives and small business owners struggle to maintain financial viability while seeing other companies take relief and neglect to manage. It’s a mortal thing. Why work hard and try to grow?

As we enter the period of recovery and rebuilding of COVID-19 from the pandemic, we need to make our business department as motivated and rationalized as possible. It will be a highly competitive global market for products, services and talent. Unless Canada addresses the unhealthy corporate culture it has nurtured through decades of corporate welfare, it will not be able to compete effectively in the increasingly competitive global market.

Don’t be surprised to see the misuse of relief funds by Air Canada executives. We too should not accept such behavior easily. We need to break the corporate culture of this dependency. Officer bonuses given to Air Canada officers during these times were far greater and only a clear sign of deep-seated national illness.

Cory Morgan is a Calgary-based columnist and business owner.

The views expressed in this article are those of the author and do not necessarily reflect the views of The Epoch Times.

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