Who's Minding the Maple Leaf Store?
Over twenty years ago, noted management author Peter Drucker predicted in his book The Unseen Revolution the eventual supremacy of pension-fund capitalism. The insatiable appetite that capital corporations possessed would accelerate the obsolescence of privately owned firms and strengthen the twin pillars of diffuse corporate ownership and a distinct managerial class. Karl Marx predicted a century ago that one day the workers would own the means of production. In Drucker's 1993 work, Post Capitalist Society, he argued that Marx was partially correct, but in a manner he never could have imagined.
Pension and mutual funds are the contemporary well springs of liquid capital. The largest global investment powerhouses individually manage hundreds of billions of dollars of savings for a myriad of investors. They possess the boardroom clout as lengthening life expectancies have forced baby boomers to defer wages via pensions to provide for their retirement. And thus unbeknownst to most governments and political commentators, our economies have evolved beyond capitalism and socialism.
Pension and mutual funds are global, disrespectful of national boundaries and government attempts to channel their pathways, and operate in the loosest of regulatory frameworks. As Drucker poignantly asks, "Who are the capitalists in our economic fabric?" Through government pension schemes like CPP, company pension plans and individual RSPs, and personal investments, we all have our fingers in the ownership pie.
The evolving nature of our post capitalist society has left a host of unanswered questions. For the purposes of this article, we are specifically interested in the tangible difficulties that exist in corporate governance. Owners rarely manage the companies they own. Management too often view themselves as short-term hired guns to turn the company around. Diffuse ownership has changed our vocabulary; now we speak of "our investments," not "our company." Cogent critiques of our economic structures have seen their voices lost among the din from the world stock exchanges as the relentless heartbeat of global finance pulses blindly into the new millennium.
Workplaces are communities which impact varied constituents: owners, managers, employees, suppliers, consumers, the broader community, and the environment. For what behaviours are managers to be held accountable? Discussion about corporate governance used to centre on the impact of management's actions on the constituents listed above. Management was expected to carefully balance the interests of all the workplace partners when evaluating corporate direction. Not any more.
The default assumption in our economy is that the goal of management is to "increase shareholder value," a euphemism for "short-term profit maximization." Karl Marx lost the eighteenth-century war of ideas the minute the middle class was spawned and began to grow. During the relentless bull market of the early eighties to the present, the Dow has been running at a 19 per cent pace yearly.
The middle class has taken notice. Slightly more than half of all Americans are currently invested directly in the stock market. For better or worse, we are becoming completely immersed in the "acquisitive age," where values cemented to a moral foundation are regarded as quaint discarded wrecks on the highway of "wealth creation."
For ample evidence that our society is enamoured by the galloping gains of stakeholder capitalism, one has to look no further than to those who proclaim they care about broader society. The media accepts uncritically the notion that the moral authority for striking down the bloated self-centred underside of capitalism resides with groups that claim to possess a social democratic spirit: The NDP, trade unions, poverty groups, and the like.
When the big five (four, three?) Canadian banks report record earnings, you can stake your inheritance (and I don't mean the CPP promised by the government!) that the CBC will interview an irate spokesperson from one of the above groups who pouts with appropriate indignation about the evils of commerce and the profit motive.
But who owns the banks? When the right wing Sun newspaper chain states their viewpoint on trade union issues, they are predictably castigated by the same spokespersons. But who owns the Sun newspaper chain? A union votes to strike and a Maple Leaf plant is subsequently permanently closed. With uncanny predictability, Alberta Provincial NDP leader Pam Barrett wails out the requisite television sound bite questioning the ethical moorings of Canadian corporations. But who owns Maple Leaf Foods?
And therein lies the real story behind the tragedy at the Maple Leaf Foods plant in Edmonton, and the broader mindless pursuit of money that drives many in our society. The answer, in large part, to all three questions posed above, is the Ontario Teachers Pension Plan (OTPP). The OTPP is a $40 billion dollar pension plan for the more than 200,000 elementary and high school teachers of Ontario; namely, a union pension plan partially funded by that province's taxpayers. OTPP owns 41 per cent of the Sun newspaper chain, 30 odd percent of Maple Leaf Foods, and billions of dollars in bank stocks. In 1995, of their top 10 holdings, four were positions in our largest banks.
Over the past seven years, relaxed government investment regulations have enabled the OTPP Board to explore the area of takeovers and acquisitions in an attempt to increase their investment rates of return. As Drucker accurate predicted, public-sector government pension plans are the giants of the post capitalist society.
Fooled and conned
One of the most visible strikes in Alberta in the past decade has finally limped to a stop. The 800 workers employed at the Maple Leaf Foods meat plant in Edmonton, and represented by UFCW, had been on strike since November 17, 1997. The 91-year old facility had been owned by several different firms and was the scene of a militant Gainers strike in 1986.
The relationship between management and the employees was a classic example of adversarial labour relations. The early nineties had seen a lengthy dispute finally resolved by the Alberta Labour Relations Board regarding whether management could deduct from employees' paycheques the time lost from the plant floor due to overly lengthy washroom visits.
Maple Leaf had expressed its intent to build a new super plant in 1999 and then close its plant in Edmonton. The company argued that it needed the economies of scale and modern design to compete with the new generation of huge American hog plants being built. This effectively limited the possible life expectancy of the Edmonton facility to three years.
The UFCW won a large strike vote mandate prior to negotiations commencing with Maple Leaf. The company offered a three-year contract extension with annual hourly increases of 28 cents and some benefit plan increases. Negotiations quickly bogged down, with the company threatening to close the plant if the workers didn't settle.
Neither side budged, the strike ensued, and workers began picketing. Public opinion was mixed. Most were confused about why the employees didn't want to keep their jobs with a small pay increase. Since they didn't own the building or the real estate, Maple Leaf carried through on its promise and took the equipment it owned out of the leased plant. Production partially moved to other Maple Leaf plants; the remainder was contracted out. The picketers continued to march around the building through the heart of the prairie winter, resolutely holding to their belief that the company was bluffing.
Maple Leaf then announced that Brandon, Manitoba would be the site of the $112 million dollar super plant and UFCW would be the union of choice. Eventually, UFCW notified their striking members that since there no longer was a company presence at the plant site, they were going to stop doling out strike pay. Needless to say, the accusations starting flying that the Local 312A leadership must have known about the Brandon decision during the strike and deliberately not informed the membership. The day after the pickets dropped in February, a stuffed figure in coveralls was erected at the picket marshalling point holding a sign that read: "The United Fooled & Conned Workers."
Faceless profit maximization
The irony in this senseless strike intensifies when the ownership issue is examined. Maple Leaf Foods was purchased in 1995 in a leveraged $1.2 billion dollar takeover bid led by Wallace McCain. A major provider of financing was the Ontario Teachers Pension Plan, who now hold the largest ownership stake. Shares in Maple Leaf Foods have risen over 60 per cent in the past year as the company has embarked on a strategy of lowering their costs and growing by acquisitions.
Interestingly, the complete lack of action by OTPP about the fate of the unionized workforce didn't rankle anyone's sensibilities. Media coverage blithely walked past the obvious chasm between the teachers union's publicly stated values and its faceless profit maximization investment policy. If a "left wing" union enriches itself on the backs of its "friends" in the labour movement, it goes unnoticed and unquestioned.
Sadly, the naked pursuit of wealth is shown to our youth to be devoid of much, if any, ethical consideration. Pension fund capitalism will make for some pretty strange bedfellows in the coming decades. A small step in the right direction would be to ask the difficult questions about how our collective investment decisions and lack of ownership involvement impacts work communities. In the case of Maple Leaf Foods, for example, where OTPP is the dominant shareholder, why didn't the union Pension Plan Board seek to influence management more strongly, and if their entreaties fell on deaf ears, then fire the managers or divest their shares?
The manner in which we tote the "virtue" of acquisition of personal wealth doesn't bode well for the creation of community and meaningful lives in our society. Increasingly, we choose to hunker down as individuals, clutching our hoard of stocks, fervently hoping that some large pension plan, possibly our own, isn't downsizing our job in order to "increase shareholder value."