Labour Pains (4) - Stakeholders and Shareholders

A few months before I was born the locomotive plant in London that Caterpillar now owns opened its door to much fanfare. Like so many other Canadian communities were experiencing, opportunities for employment were expanding rapidly and the middle-class was experiencing its first full flush of excitement. That was 61 years ago – a time when the business culture emphasized its commitment to the communities in which it operated and where business owners were key players in the overall quality of life.Free trade agreements a few decades later began altering that pattern by providing lucrative investments in areas outside of Canada. “But it will bring great wealth to Canada,” we were informed by the federal Progressive Conservative government at the time. Many, perhaps the majority, were dubious, but with the well-documented investment of the corporate sector in the debate Brian Mulroney won a second mandate and began the implementation process for greater trade with the U.S. In subsequent years both PC and Liberal governments, often prodded by provincial leaders, pushed for the access to foreign markets.It dawned only on a minority at the time that the new corporate opportunities would see normally sedentary companies operating in Canada feel the hunger to pull up stakes and journey to where access and lower labour costs were cheaper. The arrival of automation has only propelled the great exodus.I spoke on the phone with some corporate leaders yesterday who felt that “ethics” in the business context referred to the responsibility of CEOs to deliver high returns on investments by shareholders. But there is another view, growing stronger every year, that it’s not just about shareholders but stakeholders – employees, suppliers, government agencies, and community residents. Canadians in general are waking up to the knowledge that investors far removed from where operations take place can remain remarkably uninformed of local contexts.An economist friend of mine, Mike Moffatt, reminded me this week that the Dow Jones Index was founded in 1896 and that shortly thereafter stock investing became a craze. The 1920s brought it to a fever pitch and we all know what happened with that. We appear to be reaching that point once again where shareholders lose a sense of touch with reality.As a guest at a business lunch recently I was encouraged to learn that a good number of the leaders present looked with disdain on what Caterpillar has been doing to the its workers in London. The deeper we got into it the more I queried about how modern capitalism can truly be effective for all when corporations are permitted such extensive financial loopholes, or that shareholders who might live continents away and desire ever-increasing annual returns might never comprehend their impact on local communities. A good discussion ensued among people much smarter than I. When the subject of Caterpillar emerged again, I asked if any of them held shares in companies that only report back to them quarterly and have AGMs once a year. Most did. We quickly realized together that the anger they felt with Caterpillar in London could very well be happening elsewhere through corporations partially funded through their own personal investments.It was a sobering moment for all of us. This is no longer about Mom and Pop operations in our local communities, but massive corporations with global reach that could be having good or adverse affects a world away of which shareholders might know little. As one of the business leaders put it, “We might be coming to understand the real Achilles Heel of capitalism.” Possessing that new knowledge, he shocked me by revealing that he had held stocks in Caterpillar but that he had instructed they be sold off forthwith. He was able to make that sensible leap because of what he was seeing happen in his own town – local context can mean everything.It’s likely most Caterpillar shareholders couldn’t locate London on a map. Most will be people just like us, attempting to leverage some extra income by dallying in the stock market. Well, we are now beginning to comprehend that distant investments can have devastating local outcomes. It won’t be enough to demand that the CEO of Caterpillar come to London and face the music. We must ourselves look into the mirror. Capitalism works best when it is competitive, sustainable and produces great products. But if it grows inhuman in the process and continues to lobby for privileges that eventually undermine communities, then it is time we asked for a wholesale revisiting of the capitalism we now know. Enough with the loopholes already. Tax companies on the basis of their earnings, not their threats. And start enacting better legislation that makes them accountable to people like those in London, Ontario. Many firms will hate it, but when you do business in a democracy you have responsibilities to things equally as important as the bottom line. The London situation is telling us in stark clarity that it’s time for some serious reflection.I spent some time with the workers at the line yesterday (see video below). What was revealing was the sheer amount of support they were getting from passing vehicles.  We all know it could be us in a couple of years. Shareholders have had their era and made their billions. It’s now time for stakeholders to reassert their moral force. Judging by yesterday, a new era of awakening might be dawning – all thanks to some dedicated workers bunched together in the cold, locked out of their own productivity.http://youtu.be/nbrS6MkXEWM