The latest statistics compiled by PricewaterhouseCoopers LLP (PWC) show that B.C. lost more head -office jobs than any of the four biggest provinces over the last decade.
These are jobs we like: high-paying, held by people who attract other head offices and bolster high-paying local support services and who contribute a disproportionate share of funding for local charitable and cultural causes.
Last week I looked at some of the reasons why they’re leaving. Today: what can we do about it?
Saskatchewan Premier Brad Wall has one answer: block head-office takeovers if they involve big, iconic, strategic resource companies with a disproportionate share of the local economy like PotashCorp.
In 2008, the federal government used its powers under the Investment Canada Act to reject the $1.3 billion sale of Vancouver-based MacDonald, Dettwiler and Associates’ space and information system divisions to U.S.-based Alliant Techsystems Inc. in 2008. Back in the last century, former B.C. premier Bill Bennett famously blocked the sale of MacMillan-Bloedel, at the time an iconic B.C. forest company. It was later shredded and sold anyway.
Brad Sakich, PWC tax partner in charge of the B.C. region, said we should follow the U.S. lead in restricting takeovers: “There appears to be a lack of restrictive government policy or regulations to curtail this trend, with the only remedial measure being for the Canadian federal government to step in to block the foreign acquisition under the Investment Canada Act.
“The United States, on the other hand, has woven a sophisticated anti-inversion tax regime targeted at the migration of U.S. domestic corporations to a foreign jurisdiction. Although a controversial tax regime since its implementation in 2004, it’s one of many ideas Canada can borrow to impose tax barriers to prevent the outbound migration of Canadian head offices.”
A better policy is to make B.C. so attractive that no company would ever want to leave.
Both Lee Malleau, the new CEO of the Vancouver Economic Development Commission, and David Berkowitz, general partner of Ventures West, agree on this.
For Berkowitz, that starts with business tax rates, which are soon to be the second lowest in the world here.
“We need to get that story out,” said Malleau.
Agreed.
Berkowitz said he’s encouraged by the number of Canadian entrepreneurs wanting to come back to Canada. “The Canadian business environment today is better than it’s ever been. This is a very good place to build a company.”
Berkowitz also puts great stock in government tax credits and capital investment incentives like the B.C. Renaissance Fund that are tied to private-sector venture capital investments. Sakich also likes incentives, but he’s disappointed that recent amendments to B.C.’s International Business Activity Act (IBAA) undermined its role in attracting more head-office functions to B.C.
“The complete repeal of the strategic management services provided by the head office of the corporation as eligible international financial activities in the 2010 B.C. budget creates additional uncertainty and further restricts the scope and application of this legislative framework.”
Even though Malleau calls the IBBA “our best-kept secret” for attracting head offices, she admits that job No. 1 is “doing a really good job of creating a business environment that’s attractive to any company.”
That feeds retention and expansion of companies already here. Head offices usually stay rooted where they grow, so trying to attract them here can be a mug’s game.
What we’re really missing is a corporate culture that aims at continuing growth rather than selling out for a lifetime pass to our fantastic ski hills, fishing lodges and golf courses.
“Overall, we haven’t seen enough serial entrepreneurs who come back and start new companies,” says Berkowitz.
If those companies keep starting up and growing past acquisition bait size, they’re our best bet for replacing the head offices that are disappearing.