By Conrad Black
From time to time over seven years I have inflicted upon readers some of my public policy ideas, including a partial privatization of the welfare system. The method envisioned is using the tax system to impose a very small and refundable wealth tax to enlist the wealthiest and most financially sophisticated people to assist in job training and creation. It would have to be carefully designed and the taxpayers would have to understand it as part of a comprehensive program of cost and tax reduction and that the additional tax was refundable. Instead of being an assault upon the means that they have amassed by their own work and ingenuity or even 
inheritance, it would be borrowing from them by the state in the public interest to enlist the sagacity of the taxpayer to supplement the efforts of the welfare system in increasing employment and assisting the disadvantaged. It would be designed to encourage the replacement of outright payments to the unemployed with opportunities for them to sustain themselves through gainful employment.
This suggestion was accompanied with a large number of other proposed public policy initiatives and all of these thoughts were published in a thin volume of mine about ten years ago called The Canadian Manifesto. The book had quite a brisk sale. My refundable welfare and wealth tax generated a number of inquiries, but it has obviously had no discernible effect on the federal and provincial governments and legislators. For many years I have believed that the key to conferring upon Canada the influence and respect it can attain is to become a trend-setting laboratory in creative public policy and particularly to use the tax system to incentivize our most successful capitalists to be participants in the attainment of legitimate social goals such as the reduction of poverty and increased job creation and a steadily more talented workforce.
This ties in well with my long-standing call for a much larger defense budget, which has now been embraced by NATO, including Canada. There is a good deal of latitude in what constitutes defense spending, including the construction of highways that can be more or less plausibly claimed to assist in national defence. But in general, the acquisition costs are in the most sophisticated cutting-edge areas of technology, where the investment would enable us to join with international corporations in building up our own defense industries and advancing our scientific and technology base. And the increased personnel costs go in part toward what is in all of the western countries the most successful form of adult education. Almost everyone who enlists for an extended time in the armed forces emerges with much strengthened formal academic and professional qualifications.
Over the approximately 15 years that I have been periodically emitting these ideas, I’ve encountered a number of wealthy lions of commerce who had original public policy thoughts. One was Stephen Jarislowsky, with whom I celebrated our grand reconciliation in this space several weeks ago. Stephen wrote a gracious note published in this newspaper slightly disagreeing with my proclamation of our political unity of mind, defending youthful agitation about climate change. (I remain convinced Stephen knows what unutterable rubbish most of the alarm about climate change is.)
Another extremely wealthy and successful and durable titan of industry who is an old friend is the 93-year-old Frank Stronach, who invited me to lunch a couple of weeks ago at his organic restaurant in Aurora. He appeared to be completely unruffled by his legal travails which were not mentioned, and we lengthily discussed his long-standing and faithfully implemented ideas of corporate governance. These are based on his fervent belief that the ancient squabble between public shareholders, controlling management shareholders, and the workforce must be replaced by a regime of cooperation in which all share in the tangible success of the business.
Frank arrived in this country from Austria in 1954, (four years after Stephen Jarislowsky who was originally from Germany), a worker who a few years later founded his own company which he steadily built up into the colossal auto parts giant Magna. I considered it at the time and still do a misfortune that he was not able to gain control of the German Opel automobile company when it was offered for sale during the financial crisis of General Motors, or of Chrysler Corporation when it was in distress. Canada needs an automobile company of its own, like Sweden, South Korea, and, up to a point, Spain. Frank has moved on to other activities, including the production of the electric vehicle Sarit, but as he reminisced over a very tasty organic lunch including a quite potable wine, he elaborated on the corporate governance philosophy he believes was largely the reason for Magna’s immense success, surviving even the temporary elimination of much of its market by the free-trade agreement of 1989.
Frank’s formula was that 20 per cent of pre-tax profits would go to dividends as a pre-declared matter of right. Ten per cent would constitute employee stock grants and profit participation. Seven per cent would be devoted to research and technology, six per cent to participation in profit by management, two per cent to bona fide charities and all of the rest to taxes and increases in assets and retained earnings. When I was the chief executive of a large international newspaper company, we distributed a great many options at advantageous values to a large swath of employees but almost 95 per cent of them were exercised and sold almost at once, albeit at a handsome and well appreciated top-up to regular income. When I mentioned this to Frank, he said that recipients of stock at Magna, barring emergencies of one kind or another, were required to hold their stock for a time and that this succeeded in converting a great many of them into appreciative and cooperative capitalists, allies of the larger shareholders and management, rather than neo-Marxist rivals in the division of the spoils of the company’s profits.
It was a delightful luncheon. The arrangement that Frank Stronach instituted at Magna should be fiscally incentivized in our tax system. It would be very unfortunate if other controversies that have enveloped Frank obscured the great and imaginative contribution that he has made to corporate governance.
First published in the National Post
One Response
I’m not on board with conceding a lot of latitude in what constitutes defense spending. If spending does not recognizably contribute to the generation of combat power, calling it defense spending is a canard.