Praise for "Growing Global Leaders: The 'Hollowing Out' Solution"

I just read with great enthusiasm an article by Roger Martin, Dean of the Rotman School of Management, and Gordon Nixon, President and CEO, Royal Bank of Canada.

Basically, the article argues that the years 1990-2030 will involve a fundamental change in corporate structure in the world, from a world of many industrial centres and thousands of large corporations, to a world where a few major regions (and correspondingly countries) dominate activity in a particular industrial sector. Think Microsoft's domination of operating systems, or Hollywood's domination of movies. The authors refer to this phenomenon as "spikiness". The nations that put in place effective policies to make sure their nations companies are the ones that house "spiky" clusters of powerful companies are the ones with a more secure, safe future. The whole concern with "hollowing out" of national industries by larger international buyers and conglomerates is basically the symptom of this larger economic reorganization - a kind of second industrial revolution. The authors argue that the companies that positioned themselves well to take advantage of, and be leaders in the first industrial revolution dominated the global economy for the next century, e.g. Britain's succesful practice of the industrial revolution between 1780-1820 enabled it to be a world power for most of the next century. Similarly, nations that attract, retain and nuture clusters of spiky industries will be the nations whose companies acquire other companies, rather than the other way around. The authors also make some excellent arguments about tax policy and how poorly Canada's government is equipped to nurture strong, Canadian companies:

"Since 2003, seven companies, a full 15% of our precious stock of companies ceased to be Canadian companies and this trend may be accelerating. One company exited the list in a perfectly happy way - Placer Dome was acquired by Barrick, another Canadian company on the list. However, six were acquired by foreign firms, half ow hich (ATI, Domtar, and Masonite) were firmst hat built a global position between 1985 and 2003. that is a lot of hard Canadian work to get taken out by a foreign investor".

The authors then expose the inadequacy of current left/right thinking on tax. I just LOVE this paragraph:

"There is a very interesting relationship between corporate taxation strategy and socialist background: the more socialist the ethos of the country, the more the country has figured out how to be intelligent about corporate income taxation. In addition to Scandinavia clocking in at 19.6% the four OECD countries that were formerly Communist-controlled average a mere 14.2%. It is ironic indeed thatthe socialists are more pragmatic rather than ideological about business taxation. Canadian policy falls prey to an important categorical fallacy in respect to corporate taxation. Our logic of fairness holds that poor people make little income and should pay little tax; middle class people make moderate income and should pay moderate taxes; rich people earn lots of income and should pay high taxes; and corporations earn huge income and should pay really high taxes. But corporations are a different category altoghether; they aren't like rich people only richer. They are legal constructions whose purpose in the modern economy is to invest, innovate and create high-paying jobs. Taxing them highly, as all the socialists have figured out, works against them investing, innovating and creating high-paying jobs. As the socialists have figured out, the way to tax corporate activity is to tax at a personal level the earnings that rich people collect from the ownership of corporations....the question is not lower taxation overrall; that is not the fundamental problem. The question is not left versus right; that is a red herring. The question is how to structure taxation so that corporations have the best chance of becoming global leaders and well-to-do Canadian individuals pay their fair share of the overral tax burden".

A question I have for critics of Canadian tax policy, who argue Corporate taxes should be raised (Jack Layton?), would be whether those critics would be happier with non-Canadian corporations paying higher tax down the road? Small Canadian corporations with often competitiveness-handicapping regulatory restrictions face an uphill battle on the global scene; tax them and they will fall, only to give way to larger conglomerates that can use their market power to balance out the affect of an adverse business tax environment.

Comments

[Daisy]

Well written article.

[term papers writing]

Blogs are so interactive where we get lots o informative on any topics nice job keep it up !!