The critical masses

Whatever the Farmer's Almanac may forecast for the coming year, it's safe to predict a chilly November for Canadian business. This is the month when Canada's chartered banks report their year-end financial results. And in another year of record corporate profits, it is certain to kick off a season of Big Business Backlash.

Although the recession has been over for some time, the economy has regained its momentum and stock markets are soaring, North America is paradoxically mired in an antibusiness mood. The publication of executive pay sparks an annual eruption of righteous outrage. Many of the hot corporate governance issues, like shareholder rights, stockoption awards and succession planning, are grounded in cynicism about the motivation and competence of senior executives and their directors.

In a growing number of precincts, there are calls to re-regulate certain sectors, including financial services and airlines. Debate about the social responsibility of companies toward the community and their workers has become increasingly intense.

Entrepreneurs may be hailed as heroes these days. But in part, that's because they are perceived to have triumphed in a system that is stacked against them by big business. Furthermore, despite the slide in union membership, there has been a rebound in popular support for striking workers, especially when they confront management over outsourcing, job security and the rights of part-time employees.

The media have also jumped on the bandwagon: there has been a flurry of books that challenge the new economic order. One World, Ready or Not disputes the merit of globalized markets. Dangerous Company attacks management consultants and denounces their trendy tyranny over senior executives. The Judas Economy maintains that the elite, highlytrained workers of developed nations will eventually be dislocated by rivals in emerging economies. In the daily business press, there is a churlish tone that events like the Bre-X Minerals scandal have reinforced. A September issue of The Economist pontificated at length about the resurgence of left-wing sentiment among Americans.

Although it's simplest for executives to blame the media, it is imperative for them to listen and respond to the rumbling. In the end, public opinion directly influences future policy and legislation. Vocal resentment of bank profits, for example, contributed to Ottawa's decision to deny their access to both insurance and auto leasing. The overhaul of the federal Bank Act has been stalled, in part, because of Ottawa's reluctance to antagonize voters close to an election. In a 1997 budget that otherwise cut taxes, Ontario's Conservative government increased the banks' tax load, confident of voter support.

But while the banks may be the most obvious focus of anti-business attitude, they are not alone. There is lingering bitterness toward the broad range of companies that have "downsized" their workforce or "re-engineered" their operations. In Canada, that backlash is especially acute for two reasons. First, Canadian companies were especially hard hit by the convergence of free trade with the United States, increased global competition and a deep economic recession in the early 1990s. The ensuing pressure resulted in an extreme approach to cost cutting and layoffs. Second, those actions abruptly severed the implicit bond that existed between employers and employees.

That rupture was especially shocking in Canada because of the strong tradition of dependency on big government and big business. At the same time that deficit-conscious bureaucrats were decentralizing government's established role, Canadians were thrust into unprecedented uncertainty in the workplace. The resulting sense of betrayal and abandonment - heightened by income inequalities and soaring unemployment - was, in retrospect, inevitable.

Some companies have recently started to address negative public perceptions. The banks, for example, have hired a Small Business Ombudsman to act as an advocate. They've also started to release information about their loans to the small-business sector although details on servicecharge profit margins remain off limits. Corporate donations to charity have increased and have become more populist; instead of sticking to elite cultural and sports sponsorships, companies are focusing on basic social needs like health care and education. In August, a group of companies developed and signed a voluntary International Code of Ethics.

So far, however, these efforts have had a limited impact. And as the rosy economic forecasts unfold and companies continue to generate sturdy profits, corporate leaders should not be surprised if workers demand a greater share. Neither should they be surprised by the icy blasts of public opinion until that happens.

[Author Affiliation]

Deirdre McMurdy is business editor for CTV's Canada AM and a columnist for Maclean's magazine.