Mark Wiseman is chair of the Alberta Investment Management Corporation.
The economic crisis wrought by COVID-19 has been devastating, and the effects will linger long after a vaccine. In the early days of the pandemic our government quite rightly threw everything, including the kitchen sink, at the problem, to protect Canadians physically and economically. The government and the Bank of Canada worked quickly and deployed every fiscal and monetary tool available.
Now, a little more than six months into the crisis, we have racked up hundreds of billions of dollars of debt and monetary policy is quickly reaching its limits. Paying this debt back, especially with the medium-term threat of inflation, will be crippling for a generation of Canadians. To avoid this eventuality, we must embark today on a long-term growth and recovery plan.
There is no doubt that government must continue to spend aggressively. This path is not one that we chose; the pandemic has thrust it upon us. But now that we are here, it is crucial that dollars are spent efficiently and in ways that will stimulate long-term growth. A sustainable economic recovery needs to see Canada’s long-term GDP growth rate rise to approximately 3 per cent (from a prepandemic 2 per cent) to make certain that we can pay off the billions in necessary expenditures.
To begin, Ottawa should ensure spending on near-term relief programs are highly effective and efficient. Every dollar the government spends needs to be repaid, so it should be extra vigilant with every penny spent. Ottawa needs to quickly revisit existing programs to eliminate unintended consequences and disincentives – ensuring that Canadians get safely back to work as soon as possible.
In regards to the longer term, the private sector will lead the economic recovery. The government’s growth plan ought to be one where it invests aggressively in both physical and human capital to catalyze the private sector and create jobs. Government, labour and business must work together to achieve Canada’s economic growth goals.
Ottawa’s investment in physical and human capital should therefore focus on six priorities:
1. The first is long-term infrastructure that catalyzes economic growth, such as investments in transit, transport, pipelines, ports and communications infrastructure. These are projects that will create jobs today and pay dividends for decades to come.
2. Getting our natural resources, including energy, to market efficiently and safely is imperative. We must invest today to get our products to where the demand is globally. Time is of the essence and our natural resources sectors are imperilled. Wherever possible, Ottawa needs to partner with Indigenous communities to achieve this.
3. We must build resiliency into vital components of our supply chain – COVID-19 taught us the importance of this. We cannot allow ourselves to be at risk again. Both government and the private sector must invest more in our supply chains, especially in critical areas such as agriculture and medical needs.
4. The government should support start-ups and innovative small- and medium-sized enterprises through tax incentives, specifically encouraging equity investment and ownership in a small number of key areas where we have demonstrated capabilities, including information technology and agribusiness
5. We need more people – a lot more. We need skilled and unskilled labour from all over the world. The government ought to double down on our immigration advantage, especially for getting talent that traditionally has gone to the United States. In the near term, we must increase our immigration target to 500,000 a year and provide guaranteed permanent residency to any foreigner who completes a postsecondary degree or diploma in Canada. Almost all our economic growth since the Second World War is attributable to population growth. Given current birth rates, accelerated growth requires accelerated immigration.
6. As it has done with health care transfers, Ottawa should work aggressively with provincial governments to create a national child-care/early childhood education program that will be in place within 24 months. This program is conceived as an economic initiative, not a social program. It is required in order to a) achieve higher work force participation by making it easier for caregivers, most often women, to work, b) make it easier for Canadians to have children if they choose to do so, and c) focus on the next generation, since it has been proven that early learning is one of the most important components of human success.
Finally, all the above growth initiatives can and should be done through a green lens, even though a green recovery in and of itself is not a recovery plan. Achieving this growth objective will not be easy. But the government can develop a clear and cogent plan and work with partners in business and labour to execute.
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Building a stakeholder economy – Brookings Institution
Norms and expectations of what corporations should do are changing rapidly. In August 2019, the Business Roundtable, an influential club of the chief executives of major U.S. corporations, announced a new statement on the “Purpose of a Corporation”. Signed by 181 CEOs, the statement of purpose called for a departure from “shareholder primacy” to “stakeholderism” as a core principle of corporate governance, with the CEOs committing to “lead their companies for the benefit of all stakeholders”.
This change of heart in corporate America is a belated response to the decades-old critique and activism against shareholder-primacy. Preoccupation with quarterly profits is blamed for making corporations short-sighted, leading to environmental pollution, income inequalities, weakening workers’ rights, and lower capital investments—all of which are believed to undermine social cohesion and long-term competitiveness. Stakeholderism, also called stakeholder economy/capitalism by the World Economic Forum, is expected to encourage a long-term orientation by rebalancing the asymmetric power of shareholders vis-à-vis other stakeholders, and revitalize the legitimacy of business.
A sizable share of corporations already practice some form of stakeholderism in response to pressure from value-conscious investors, consumers, and others. More than 80 percent of large corporations, for example, claim to explicitly contribute to the Sustainable Development Goals. Environment, social, and governance (ESG) investing—a class of value-based investments that target corporations that meet minimum ESG criteria—has been growing rapidly, with an estimated total value of $45 trillion in assets under management.
Ambiguous definitions, mixed results
But stakeholderism has had mixed success. While some companies have managed to create environmental and social value, many engage in “greenwashing” or “impact washing” to mask their unsustainable performances. This is in part due to a mismatch between a renewed corporate purpose that emphasizes stakeholder value, and corporate governance principles and incentive structures that are primarily designed to maximize shareholder returns. Even as corporations make commitments to take greater societal and environmental roles, they often fail to change their governance guidelines and board structures to reflect these intentions. This has resulted in a dissonance between what they aspire to achieve and what they can show for it—a process that can also undo the legitimacy of the emerging stakeholder economy.
This is due to a lack of consensus on how corporate governance should adapt to help build a stakeholder economy, due in part to a lack of clarity on who qualifies as a stakeholder as well as what stakeholder value entails. Think of Facebook, with almost 3 billion users, or Boeing, with thousands of customer airlines and hundreds of millions of passenger users, all of whom would qualify as stakeholders. Without specificity on what value a company creates, for which stakeholder and how, a generic commitment to advance stakeholder interests has little practical meaning.
It is also feared that the ambiguity of stakeholderism could enable corporate leaders to amass too much discretionary power that would enable them to dodge shareholder oversight. A vague commitment to all stakeholders could also undermine long-term competitiveness if managers set out to meet multiple goals that are incompatible with one another. Further, implausibly high expectations can end up making managers risk-averse, forcing them to settle for a minimum acceptable performance for all stakeholders rather than excelling in specific issues where they have greater competitiveness. A vague and broad focus on stakeholder value could thus make shareholders and other societal stakeholders worse off.
Needed: Institutional Reform
These critiques, however, do not warrant the conclusion that building a stakeholder economy is an impossible agenda. A growing body of scholarly work, including a recent British Academy report, has documented that building a stakeholder economy requires extensive reforms of market institutions to incentive the creation of long-term corporate and social value. At a minimum, such a reform would include three ingredients.
- Renewed corporate purpose. This is best defined by the directors of individual businesses, who should specify the stakeholders to whom the businesses will create value, and how this will be achieved. This facilitates effective corporate governance by providing clearly defined goals, and the mechanism for aligning them with corporate strategy. A study by professors Oliver Hart and Luigi Zingales suggests that organizational purpose anchored in maximizing shareholder welfare can help link corporate strategy with stakeholder value. To the extent that shareholders care about certain non-financial outcomes, such as environmental sustainability, the purpose of the corporation should be geared towards producing these outcomes. Corporations can then communicate their performance via third-party verified reports to demonstrate if and how they have created the desired outcomes to their stakeholders.
- Corporate law reform. Corporate law needs to incentivize directors to take responsibility for the company’s long-term interests, including its social and environmental impacts. Corporate law in many countries is anchored on the principle of shareholder primacy, creating legal challenges for firms that adopt a broader conception of purpose. A recent study commissioned by the European Union underscored the need to modify corporate law to foster the pursuit of long-term corporate goals and environmental sustainability by corporate directors. Another positive development is the emergence of legal innovations for new corporate entities with governance structures designed for addressing long-term societal issues. More than 30 states in the U.S. have introduced legal mechanisms for “benefit corporations” that pursue a hybrid mission of creating financial and social/environmental value. Similar innovations could facilitate investments into corporate innovations for addressing social and environmental problems.
- Complementary regulations. Stakeholderism should not be expected to substitute for the regulation of negative environmental and social externalities. Many of the issues that currently fall within ESG domain are in fact negative societal and environmental externalities that are not suited for self-regulation by markets. Effective regulation of externalities, such as CO2 emissions, can also level out the playing field by penalizing the distorting effects of non-compliance. In a positive development, the European Commission has recently started to develop a legal framework for mandatory human rights and environmental due diligence, which is expected to outline corporate directors’ duties “not to do harm”.
Building a stakeholder economy requires breaking the artificial boundaries that isolate purpose from performance and creating incentive structures that make corporations drivers of sustainable prosperity. This will entail systematic effort to rewire market and regulatory institutions to ensure that they serve the long-term interests of society.
German economy won't be as bad in third quarter as expected, says minister – The Guardian
A grim milestone and update on pandemic-plagued economy. : In The News for Oct. 28 – Kamloops This Week
In The News is a roundup of stories from The Canadian Press designed to kickstart your day. Here is what’s on the radar of our editors for the morning of Oct. 28 …
What we are watching in Canada …
Canada reached a grim and worrying milestone in the COVID-19 pandemic, surpassing 10,000 novel coronavirus deaths.
Alberta reported two deaths Tuesday from COVID-19 to lift the national tally to 10,001.
COVID-19 case counts slowed across the country through the summer, but have taken a big jump in many areas this fall, with new daily highs regularly being set through Central and Western Canada.
Canada crossed the threshold of 5,000 deaths on May 12, a little over two months after the first one was reported.
Health Canada recently forecast 10,100 COVID-19 deaths in Canada by Nov. 1 as a worst-case scenario and now that number is close, Winnipeg epidemiologist Cynthia Carr said.
Carr said the increased spread of COVID-19 will result in more opportunities for the virus to infect the elderly and other vulnerable people.
But she said she doesn’t believe imposing further lockdowns on peoples economic and social well-being are the answer.
“We’re sabotaging those businesses and people that are paying the price because they are the ones that have been targeted as part of the solution to stop the spread.,” she said.
Prime Minister Justin Trudeau admitted today that the COVID-19 pandemic “really sucks” but added that a vaccine is coming.
Also this …
OTTAWA — The Bank of Canada will release its updated outlook for the country’s pandemic-plagued economy.
The central bank in July said it believed the country had been spared from a worst-case scenario envisioned in April, but warned things could change.
Governor Tiff Macklem has said a severe second wave of the pandemic, health restrictions that extend beyond December and the timing of a vaccine or other effective treatment could all shift the country’s economic course.
This morning the central bank will provide a more detailed analysis of its forecast for the domestic economy as the country marches through a second wave of COVID-19.
Macklem has said the central bank will keep its key policy rate as low at it can go at 0.25 per cent until the economy has recovered and inflation is back at the bank’s two-per-cent target.
That means experts don’t expect the central bank to change the rate from near-zero when the bank makes its announcement later this morning.
What we are watching in the U.S. …
PHILADELPHIA — The lawyer for the family of a Black man killed by Philadelphia police officers in a shooting caught on video says the family had called for an ambulance to get him help with a mental health crisis, not for police intervention.
Police say 27-year-old Walter Wallace Jr. was wielding a knife and ignored orders to drop the weapon before officers fired shots Monday afternoon.
Following a second night of arrests and reports of theft in sections of Philadelphia, a White House statement asserted that the unrest was another consequence of what it called “Liberal Democrats’ war against the police.”
What we are watching in the rest of the world …
Satellite photos show Iran has begun construction at its Natanz nuclear facility.
That’s after the head of the UN’s nuclear agency acknowledged Tehran is building an underground advanced centrifuge assembly plant after its last one exploded in a reported sabotage attack last summer.
Since August, the satellite photos show Iran has built a new or regraded road to the south of Natanz toward what analysts believe is a former firing range for security forces at the enrichment facility.
Analysts from the James Martin Center for Nonproliferation Studies at the Middlebury Institute of International Studies say they believe that site is undergoing excavation.
On this day in 2008 …
Barenaked Ladies frontman Steven Page avoided jail time on drug possession charges provided he seek substance abuse treatment and stay clean for the next six months. Page was charged with drug possession in July after police found cocaine at a Fayetteville, N.Y. apartment. He complied with his probation conditions and the charges were eventually dropped.
In health news …
The Canadian Medical Association says ongoing surgical and diagnostic backlogs will only worsen without immediate government help to address a strained health-care system.
The CMA found average wait-times increased by one-to-two months for the most common procedures in the first wave and it would take $1.3 billion in additional funds to tackle procedures sidelined from January to June because they were deemed non-essential during the pandemic.
A study ordered by the organization looked at the six most commonly delayed procedures: CT and MRI scans, hip and knee replacements, cataract surgeries and coronary artery bypass grafts, which all plummeted in April, when almost no cataract or knee replacements took place.
Although procedures gradually began to rebound in June, the report found more than 270,000 people had their MRI scans — which can detect serious disease or injury — delayed by a national average of nearly eight months, more than seven weeks longer than before the pandemic. Those waiting for knee replacement surgeries had to wait an average of 14 months, about two months longer than before the pandemic.
“The impact on wait times is just going to be the worst-ever in our system,” CMA president Dr. Ann Collins says.
“It’s going to have serious consequences the longer this pandemic goes on.”
An original member of the Jamaican bobsled team featured in the 1993 movie “Cool Runnings” is imploring whoever stole the nose cone from a sled that appeared in the film to return it to a Calgary bar.
Devon Harris, who is also chairman of the Jamaican Bobsled Federation, says he’s not going to lose sleep over the missing bobsled shell, but is disappointed over the news.
“It’s gone too far now,” Harris says. ‘”Just bring it back.”
Police say the shell was last seen at Ranchman’s country bar last week as it hung outside below the roof of the building. The sled was a gift to to the business by the movie’s production crew after some scenes were filmed there. The bar closed last month.
“Cool Runnings” is loosely based on the true story of the national Jamaican bobsled team’s debut at the 1988 Winter Olympics in Calgary.
Harris, who lives in New York, says he saw a friend from Calgary post on Facebook about the stolen black bobsled shell with the Jamaican flag colours — black, green and gold — and immediately rolled his eyes.
He says the sled was a gift from a Canadian bobsled team and was later painted for the movie.
“It’s kind of like this work of art that somebody go hide in a basement and they are the only ones who have the opportunities to enjoy it.”
This report by The Canadian Press was first published Oct. 28, 2020
G2S2 Capital Inc. Announces Investment in Cominar Real Estate Investment Trust – Canada NewsWire
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