If growing public opinion on the subject of 'foreign domination' is anywhere near correct then Canadian management, as a definable segment of Canadian society, has been guilty of gross neglect of duty. It has connived in a vast 'give-away' of Canadian industry and the nation's economic resources. For this it must bear full responsibility. Is there any truth to the charge? Guilty or not guilty?

With notable exceptions, Canadian managers have remained silent on the subject. One cannot help wondering why they make no effort to defend themselves because, let there be no mistake, the finger of blame is pointed at those who manage Canadian industry and enterprise. If the nation's industry increasingly lands in the hands of foreign corporations, as our politicians and the academics claim, they must have had inside help. This is the implied accusation of everything we read. So one must again pose the question, why does Canadian management, in a collective sense, remain silent?

Is it that managers are fearful of losing their jobs? It seems so, yet to accept this as a reason would be to admit a contradiction. The contraction is that, as the leaders in our system of free enterprise, managers occupy management positions because they are not afraid to express opinions. They are the people who, by their efforts, talents and abilities, make foreign domination work is, to repeat the charge of collusion, there is any truth to the charge. It would be unfair to attempt answering the accusation without first reconciling two diametrically-opposed view points.

On the one hand, there are the 'economic nationalists' who clamour to nationalize everything in sight and, on the other, the seekers-of –foreign-capital who would welcome foreign capital with open arms. The Premier of Quebec, Robert Bourassa (in 1971) returned from a trip to Europe where he went to encourage new investment; Ontario Hydro has just floated a hundred million dollar bond issue on the U.S. money market; and thousands of municipal councils across the country are continuously going out of Canada after bond issues for lesser amounts.

THE CASE FOR NATIONALISM

Very roughly, the stand of the economic nationalists – who view the whole concept of foreign domination with revulsion – is this. Our resources are our own, to do with as we like. Everyone else – hands off. The U. S. A. has created a monstrous industrial production machine, which needs three things to keep it going. It must have a constant supply of raw material to feed it, people to operate it, and markets to consume its output.

Canada happens to be a vast storehouse of natural resources - water, timber, minerals, gas, electrical power and oil. Foreign industrialists would dearly like to get their hands on the material and, in large measure, they have succeeded. Our industry is only of secondary importance, but it is the key to our raw materials and resources. We abhor the 'big brother' attitude of American big business. Furthermore, we resent the fact that our economy is controlled by policies of remote and distant boards of directors which, in turn, are controlled by the economic policies of the United States Government.

Consider the trade embargoes imposed on Canadian subsidiaries operations by parent corporations. Is this not an utterly objectionable state of affairs? When it comes to developing our natural resources to their advantage big guns are brought to bear. Not only is political pressure applied, there is the threat of economic sanctions to coerce and cajole and twist our arms. Anyone but the blind can see and understand what the U. S. leaders mean when they speak of 'continental resources'. As to operating profits, Canada doesn't get a look in. Reflect on these examples.

A mining company in Quebec makes 400 per cent profit on the ore it ships out of the country, a coaling operation in B.C. yields the owners 300 per cent profit; gas is piped and exported out of Alberta at equally enormous profit to the owners and, of which, little finds its way back to Canada. All this profit the foreign owners get in return for providing a few jobs to Canadians. In addition, so much information on the country's natural resources is fed into computer banks south of the border that the U.S. corporations know more about Canada than we know about ourselves. Such is the case of the nationalists.

THE COUNTER-CHARGE

The reasoning of those in the opposite camp is easily summed up. Canadians enjoy one of the highest standards of living in the world yet, compared with other western nations, we are a growing country in need of development capital. Our friends to the south have, by and large, provided the development capital so far - as theirs was in turn provided by European financiers in the 18th and 19th centuries. They will continue investing in Canada provided they can be assured of political stability and a fair return on their investment.

The American businessman has taught his Canadian counterpart a great deal in production know-how, industrial engineering, plant management, corporate planning and control, management-labour relations, and the value of standardization. There are those who will dispute these claims, but we have the facts to prove it. American business methods are dynamic, forward-looking and, what is more, they work. The U.S. businessman has proved he can succeed where others fail; he produces results and makes a profit which, after all, is what free enterprise is about. Our economy has developed hand in glove with that of the U.S. There is nothing wrong with that. It is true we have raw materials and natural resources to spare.

The United States is a natural market and the obvious place for us to export our raw materials and goods. The U.S. is still our best trading partner. If foreign capital is needed to develop our resources, why shouldn't foreign corporations providing that capital also share in the enterprises they finance? We think it petty and unworthy of those who would destroy the special relationship we enjoy with the United States to talk of taking what is not theirs to take. If Canadians will not invest in their own economic development - and this seems to us to be the crux of the argument - they have no cause for complaint."

People who argue that Canadian managers have sold out to foreign corporations simply don't understand the way the system operates; they only show their appallingly ignorance of free market forces. In the case of public companies, one company only takes over another company with the majority consent of the shareholders. It is a matter of votes and nothing else. A company executive management may solicit stockholders for their votes when takeovers or mergers are contemplated; indeed, it frequently does. However, this is a commonly accepted practice that is hard to challenge. It is the democratic way of doing business. In short, those who oppose 'foreign domination' have no basis for argument and talk a lot of hot air."

Here, simply put, are the arguments of the two sides. The pro-foreign investment group contend, by implication, that managers at all levels are as much employees as clerical and blue-collar workers.

WHERE DO THE MANAGERS STAND?

Managers as a group are more partisan than they would have the rest of society believe. They may deny responsibility for presiding over the 'takeover' of Canadian industry, and they may debate the extent to which the economy as a whole is foreign controlled, but they are at least aware of what has been going on and have been for a long time, even before it became a subject of public debate. Denying responsibility is one thing. Admitting knowledge of it is another and, if Canadian managers are truthful enough to admit to that knowledge, they should say so. The reason they remain silent is easily explained. It is reason to be found in the abstract principles of attitude, loyalty and allegiance.

Managers will be the first to admit they have a responsibility to society, but they also belong to the managerial class. Whether they are first-line supervisors, department managers, or senior executives they owe the allegiance of paid servants to the organization to which they belong.. As W. H. Whyte, Jnr. ('The Organization Man') noted, allegiance to the company or corporation takes precedence over almost everything else. Fundamentally, this dictates their attitude toward the rest of society, shapes their consciences and provides them with a ready-made ethic, trusted, tried and true as I. D. Ketchum ridiculed in his 'Hymn to the Glory of Free Enterprise'.

Of freedom this and freedom that, the drooling leftist chatters,
But freedom for free enterprise is all that really matters.
This freedom was ordained by God. Upon it rests all others,
For man's divinest impulse is to over-reach his brothers.

To investigate the question of foreign domination a poll of 47 Canadian managers of diverse business backgrounds, including foremen, supervisors, department managers, accountants, engineering managers, chemical engineers, and top administrative executives revealed interesting results. They represented a broad range of industries in the provinces of Quebec and Ontario and included food processing operations, metal working, electrical equipment, chemicals, rubber processing, steel fabricating, leather goods and precision instruments. Only one executive worked for a wholly-owned Canadian operated concern. Here are the results of the survey.

THE ONTARIO-QUEBEC POLL

1. Do you work for a foreign controlled concern? Yes - 46; No - 1

2. Would you estimate ,the extent of Canadian industry under foreign control as being more than 80% - 2; 70% - 27; 60% - 8; 50% - 5; less than 50% - 2.

3. Generally speaking, do you think that foreign control works to the advantage of Canada or against? For – 8; against – 39; Undecided – 3.

4. Do you think Canadian subsidiary companies have autonomous control over their own operations? Yes – 4; No – 39; Undecided – 3.

5. Do you think 'takeovers' occur with the active help of Canadian managers? Yes – 24; No – 19; Undecided – 4.

6. Do you know the difference between bonding and equity capital? Yes – 12; No – 35.

7. Again, generally speaking, are you for or against foreign ownership of Canadian industry? For – 10; Against – 31; Undecided – 6.

8. Do you think anything should be done to curb or control of foreign ownership? Yes – 33; No – 8; Undecided – 6.

9. Do you think that Canadian management has failed in its responsibility to Canadian society? Yes – 10; No – 34; Undecided – 3.

10. Do you think we are selling too much of our natural resources? Yes – 41; No – 5;
Undecided – 1.

Undecided means that answers were vague or inconclusive. For example, in reply to question 7 one executive said, "It's not a question of being for or against. We are dealing with a fact of life which I for one accept. That doesn't mean to say I like it." Incidentally, the poll was conducted orally and the answers given were spontaneous.

CANADIAN MANAGERS' DILEMMA

The results are impressive enough to suggest there is fertile ground here for a graduate student to get his or her doctorate. For my part, I wish to make two points only. The first is that most of those surveyed had no idea of the difference between bonding and equity capital. The difference is that bonding capital buys the investor a guaranteed return on the investment with interest, but provides no share of ownership. Equity capital buys ownership or a share of it - with no guarantee of return. The second point is that while a majority of those surveyed were against foreign domination, wanted more stringent controls, thought we were selling too much of our natural resources and accused their own managerial class of helping 'takeovers' from the inside, few viewed this as 'failure of responsibility to Canadian society'.

The bonding-equity capital question (question 6) may seem out of place. It does, however, reveal a poor understanding of the mechanics of corporate takeover practice. It also explains why municipalities and provincial governments can raise development capital - the sale of short and long term bonds - without risk of 'being taken over'. It is this lack of knowledge that makes for easy manipulation of rank and file managers by top executives. Managers, like most in hierarchical organizations, take their lead from the top. A company president who has just gone through a takeover, acquisition, 'upward merger' - call it what you will - and assured himself of a fat annuity for life will have been very careful about the way he gets his subordinates to accept a 'package deal'. He or she has to be concerned with the company's internal and external image, the whole success of the takeover operations being dependent on the power of fear. Corporate takeovers are carefully engineered affairs.

LAW OF THE JUNGLE

Fear is a powerful tool. Everyone is concerned about their continued employment, fearful of sweeping changes in the organization, loss of prestige, demotion and all the other consequences of change of ownership. Once the decision is made, following weeks of preparation, there is usually no alternative to supporting the principle of what is euphemistically called the 'upward merger'. Middle and junior members of a company management are forced into accepting the situation. There is simply nothing they can do about it. The fact is, every decision from above carries with it two choices: either accept a top management decision or get out. We know what most people do.

It is not so much a question of loyalty to society at large - and we are speaking of Canadian society - or to one's principles as one of self-preservation. Managers are constantly being reminded of the need for loyalty to the company: it is something to which most of us pay lip service. The underlying truth is that those in top management are fundamentally selfish. Because top managers gravitate to their positions from the ranks of middle and lower management, it follows that the whole of the management class is selfish, acquisitive, and ultra-materialistic when it comes to serving their own ends. To each the "...divinest impulse is to over-reach his brother."

As educated, intelligent and more fortunate that the rest of society, managers should be concerned with the security and welfare of those they lead. Ask most managers what they feel about responsibility for the rest of society and they will be the first to say that they are 'their brothers keeper.' Put him to the test and he'll promptly prove himself otherwise. If he can get a bigger bowl of rice from the corporate takeover he will – and the devil take the hindmost.

CONCLUSIONS

Canadian managers should not be hypocritical about foreign domination. By their efforts, talents and abilities, they help make it work. So far as industry is concerned, the politicians and academics are right for a change. Only managers know just how right they are. The survey conducted for this essay – even though it was small – proves that Canadian managers are responsible for the state of Canadian industry.

Instead of owning up to their involvement, the managerial class (in James H. Burnham's definition – see The Managerial Revolution, 1941, Indiana Univ. Press, 1966) chose to remain safe and secure behind a cloak of silence. You are the jury. What is your verdict?

The Canadian Manager
1971