A record of what was said…

1993 TO 1999

Twenty-seven editions of The Corporate Report were published between 1993 and 1999 as a forum for senior executives. The report, edited and published by Lawrence Creaghan, featured speeches on a wide range of topics by business leaders (mainly CEOs) from the organizations listed below, including Bill Gates, Louis Gerstner and Alan Greenspan (his famous “irrational exuberance” speech). A 50-word summary and the full text of 200 selected speeches (over 600,000 choice words from the most influential people of their day) is included here for your reading, referencing and sharing pleasure.




Rupert Duchesne, Vice-President, Marketing

German Canadian Chamber of Industry & Commerce Annual Meeting, June 10, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


Alliances and global ventures are being formed in virtually every sector, from banking to telecommunications. But in most cases, customers are still local customers. In this respect, the airline industry is truly unique, since any global alliance has to earn its stripes every time a customer gets on an airplane anywhere in the world. (2,025 words)

Lamar Durrett, President and CEO

The Board of Trade of Metropolitan Montreal, October 29, 1996

Published in The Corporate Report No. 20 (January 15, 1997)



Because many of the traditional North American hubs are now overcrowded or overused, a consolidated Montreal airport will be well-positioned for strategic growth, including hubbing international flights as well as new international, domestic and transborder links, making Montreal into a legitimate North American transfer point again. (1,432 words)

Hollis L. Harris, Chairman, President & CEO

The Board of Trade of Metropolitan Montreal, March 7, 1995

Published in The Corporate Report No. 12 (June 15, 1995)



Since the implementation of the Canada-US Free Trade Agreement, bilateral trade has grown more than 20%. Bilateral trade between Canada and the US is now worth more than US$200 billion a year. The new Canada-US bilateral air services agreement could have an equally major impact on businesses with the right “open skies” strategy to capitalize on it. (2,028 words)


Jacques Bougie, President & CEO

The Canadian Club of Montreal, September 12, 1994

Published in The Corporate Report No. 9 (December 15, 1994)

1984 – 1994: A SWINGING DECADE

Lessons Alcan has learned during a very difficult period, brought on mainly by the collapse of the Soviet Union, can be valuable pointers for industry in general, as we head into the turbulent seas of global competition. Being global means continuously monitoring the horizon for competitive opportunities and internal operations for better ways to do things. (3,355 words)


Alain Belda, Vice-Chairman

Association of American Chambers of Commerce of Latin America, November 18, 1996

Published in The Corporate Report No. 20 (January 15, 1997)


Some countries “never miss an opportunity of missing an opportunity.” Latin America has missed the boat twice, in the natural resource export cycle of the 19th century and in the import distribution cycle of this century. Now that trade has been liberalized, the time has come to realize the real wealth of the region. (1,511 words)


Daniel P. Burnham, President

The Aerospace Industries Association of Canada, September 18, 1995

Published in The Corporate Report No. 14 (October 19, 1995)



While 1994 was the best year in over a decade for the aircraft business, it’s still not time to bring out the brass band. AlliedSignal’s flight plan for continued success includes satisfying customers, eliminating defects throughout their processes, a profound belief that things must always change, motivating employees and transforming customer relationships into partnerships. (2,728 words)


Richard C. Notebaert, Chairman & CEO

Wall Street Journal Technology Summit, October 6, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


Customer requirements for communications solutions are exploding. Solutions are integral to how telecommunications customers do business and to how successful they will be in the competitive global marketplace, with enormous potential for those telcos who look at business through the eyes of the customer – and then respond with flexibility and technological savvy. (2,803 words)


Angus Reid, Chairman & CEO

The Speakers Forum, May 8, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


The homogenization of the world economy creates pressures to homogenize values – and values, in turn, define nations. Without nuances of political or social differentiation based on traditions and values, it becomes increasingly difficult to make a case for the nation state. In terms of the traditional unity worry – relations between Quebec and the rest of Canada – globalization may actually be performing as a bonding force. (1,261 words)


Harold Greenberg, Chairman & CEO

The Board of Trade of Metropolitan Montreal, November 28, 1995

Published in The Corporate Report No. 16 (February 29, 1996)



Culture and communications is the ninth largest industry in Canada and one of the fastest growing. The brave new world of “convergence” is bringing all elements of the industry together – telephones, television, computers, cable, satellites, publishing and entertainment – providing unprecedented opportunities for those ready to give consumers what they want. (2,659 words)


C. Michael Armstrong, Chairman & CEO

Internet World, October 8, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


The internet protocol (IP) standard gives the telecom industry a technological freedom that didn’t exist just a few years ago. If a television signal, a phone call and a computer file are all digital, there’s no reason to confine them to separate lines. IP technology is literally erasing the boundaries between television sets, telephones and computers. (2,290 words)


Paul E. Gagné, Chairman & CEO

The Canadian Club of Montreal, November 28, 1994

Published in The Corporate Report No. 10 (February 15, 1995)


While the ongoing removal of tariffs is good for both Canadian and world trade, a growing array of less tangible barriers to trade is taking shape under legal, ecological and environmental guises. Given Canada’s heavy export orientation, it is critically important to work closely with the country’s stakeholders to maintain full access to international markets. (2,218 words)


Gordon Thiessen, Governor

The Board of Trade of Metropolitan Montreal, January 19, 1995

Published in The Corporate Report No. 11 (April 15, 1995)


The Bank of Canada’s commitment to controlled inflation and price stability has begun to bear fruit, as Canada’s ongoing recovery shows. While the bank cannot set interest rates arbitrarily, for monetary policy works through the exchange rate as well, it can provide a strong underpinning to the expected future value of the dollar. (1,988 words)

Gordon Thiessen, Governor

The Board of Trade of Metropolitan Toronto, November 6, 1996

Published in The Corporate Report No. 20 (January 15, 1997)



By creating uncertainty and instability, inflation works against economic growth. It can only work as a lubricant if it fools people into believing they are better off than they actually are. A monetary policy focused on inflation-control targets ensures that the central bank will not inadvertently make systematic misjudgments about how fast our economy can grow. (2,743 words)


Lloyd C. Atkinson, Executive Vice-President and Chief Economist

North American Business Outlook Conference, May 5, 1994

Published in The Corporate Report No. 7 (August 15, 1994)


In a technology-driven revolution comparable to the Industrial Revolution, the new world economy presents significant opportunities but also considerable risks. Yet if we understand the challenges to the global trading system and embrace the needed changes, the potential for improved living standards is huge. (2,805 words)

Matthew W. Barrett, Chairman & CEO

Public Policy Forum, April 15, 1993

Published in The Corporate Report No. 3 (September 30, 1993)


As a proportion of GDP, Canada is the number one foreign debtor nation in the world, an unenviable distinction. Coming up with the details of a deficit elimination plan will require a broad consultative process, with representatives from all of the groups whose support will be necessary, making it very difficult to try and improve the situation. (940 words)

Matthew W. Barrett, Chairman & CEO

Bank of Montreal Annual Meeting, January 15, 1996

Published in The Corporate Report No. 16 (February 29, 1996)


The ongoing transformation of the world economy is not a threat but an unmatched opportunity for Canada. The real threat is self-imposed. Canada stands at a crossroads today – one road leading to potential greatness and the other to self-inflicted decline. And since no external power is forcing our hand, we are indeed the architects of our own future. (2,507 words)

Tim J. O’Neill, Executive Vice-President & Chief Economist

Montreal West Island Chamber of Commerce, November 7, 1995

Published in The Corporate Report No. 15 (December 31, 1995)


Canada’s outlook for 1996 is bright, with growth expected to bounce back to 3.5% from an expected weak 1% in 1995. A sustained rebound in the US economy and a continuation into 1996 of the interest rate declines already achieved this year are critical for this anticipated renewal of recovery, as is the federal government’s continued commitment to restraint. (2,708 words)


Peter Munk, Chairman & CEO

Ninth Annual Investor Relations Conference, May 27, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


There’s no law that says you have to be a gold miner to succeed in the gold business, or a banker to succeed in banking. What you do need is a fundamental understanding of business and a sound strategy. It’s also absolutely vital to employ a highly aggressive operational methodology and a very conservative financial approach to maintain a strong balance sheet. (2,087 words)


Don Calder, President & CEO

The Vancouver Board of Trade, May 27, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


“Merger mania” spells good news for telecommunications users by making the market even more competitive, and competition breeds innovation, choice and customer focus. It also means the advantage of economies of scale, where the cost of developing new products and services can be spread over many customers. (2,502 words)


Jean C. Monty, President & CEO

Investment Dealers Association of Canada, June 29, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


Telecommunications and television are converging on the internet and, as they draw closer, they lose the defining marks that make a telephone different from a TV or a computer. Perhaps it’s time the telecommunications industry shed its prefix and swam in the greater ambiguity but larger potential of “communications.” (3,139 words)

L.R. Wilson, Chairman, President & CEO

Canadian Chamber of Commerce, September 19, 1993

Published in The Corporate Report No. 4 (December 15, 1993)


After three decades of steady growth, Canada’s standard of living has been stagnant since 1980. Our past successes are affecting our ability to make fundamental adjustments in the way we organize society. The central challenge we face is to transform ourselves from a winner in the industrial economy to a winner in the new information economy. (4,394 words)

L.R. Wilson, Chairman & CEO

Address to shareholders, April 30, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


The future of telecommunications will be to enable telepresence – that is mobile, interactive, high-bandwidth, multimedia capacity. This will revolutionize the service economy by allowing vastly more efficient transactions and interactions. The challenge and the opportunity ahead is to deploy the new network capabilities that create the necessary value-added services. (3,990 words)

L.R. Wilson, Chairman & CEO

The Canadian Club of Montreal, November 10, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


Canadians can seize what is an historic opportunity to become a world leader in shaping the possibilities of cyberspace. The country’s telephone network is virtually 100% digital, a proportion unmatched by any other nation, including the US. In fact, no other G7 nation has a better combination of telephone, cable TV and personal computer penetration. (4,616 words)


John McLennan, President & CEO

The Canadian Club of Montreal, May 15, 1995

Published in The Corporate Report No. 13 (August 7, 1995)


Prosperity is earned, not inherited. Competitive pressure is the engine that will drive the changes needed to ensure Canada has a voice in shaping its own destiny. Canada can compete for the future and win…but we must remember that competition is marked by the entry and exit of firms from the market. (3,294 words)

John McLennan, President & CEO

Canadian Advanced Technology Association Conference, May 6, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


Content is the hottest area in the information business today and Bell is determined to play a role as a major provider. Another important part of Bell’s near-term success will be a growing ability to bundle and package solutions for each of its market segments, something it would like to do with little or no regulatory or government restrictions (2,488 words)


Louis A. Tanguay, President & CEO

HEC Network, April 24, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


The technological leaps that have produced the information highway give a completely new spin on the concept of critical business mass. In a world where nearly every business is concentrating on core activities and customers are asking for global solutions, the need to integrate resources internally with those obtained externally presents a tremendous challenge. (2,743 words)


Derek H. Burney, Chairman & CEO

The Canadian Club of Ottawa, April 15, 1994

Published in The Corporate Report No. 6 (June 15, 1994)


An explosion of new technology is transforming the telecommunications industry, the only high-tech sector in which a Canadian company ranks among the top 10 global firms. Canada’s future prosperity will depend in large measure on our commitment as a country to building an adequate information infrastructure. (3,123 words)

Derek H. Burney, Chairman, President & CEO

International Trade Law Seminar, October 19, 1995

Published in The Corporate Report No. 15 (December 31, 1995)



In a truly borderless, unregulated world, 100% of current Canadian long distance traffic could be accommodated within the existing excess capacity of the giant American carriers. Canada is in need of a modern, domestic policy and regulatory regime that will give Canadian firms the chance to be competitive with foreign giants both at home and abroad. (3,489 words)


Marcel Messier, Vice-President

Fédération de l’Informatique du Québec, Montreal, February 18, 1998

Published in The Corporate Report No. 24 (May 30, 1998)


There is a great deal of money to be made in the multimedia industry but the time for experimentation is over. We can no longer develop content for content’s sake. The time has come for commercial applications. And while there is money to be made on the net, only by developing the right business model can anyone prosper in today’s competitive marketplace. (2,324 words)


Robert A. Ferchat, Chairman & CEO

The Empire Club, October 19, 1995

Published in The Corporate Report No. 15 (December 31, 1995)



Canada’s leadership in telecommunications goes back to Alexander Graham Bell, Marconi’s first transatlantic radio transmission from Newfoundland and Canadian-born engineer R.A. Fessenden, the first person to broadcast human speech and music over radio. If we can get rid of our self-imposed limits, the potential for Canada in telecommunications today is more promising than ever. (2,574 words)


Francesco Bellini, President and CEO

Annual meeting of shareholders, June 5, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


BioChem Pharma became a public company in 1986 with a share offering of $13 million and 5 employees. Today, BioChem has a market value in excess of $3 billion and more than 1,000 employees, with offices and manufacturing facilities in six countries. The company’s breakthroughs include 3TC for the treatment of HIV and AIDS, and lamivudine for hepatitis B. (2,219 words)


Laurent Beaudoin, Chairman & CEO

The Board of Trade of Metropolitan Montreal, October 3, 1995

Published in The Corporate Report No. 14 (October 19, 1995)


It’s not only politicians, artists, intellectuals and union leaders who have a right to express an opinion on Quebec separation. Business leaders also have a right and a responsibility to make their views known on this important issue. The economy of Quebec, the future of its enterprises and the jobs of Quebec workers are all on the line. (3,529 words)


Sir Peter Bonfield, Chairman & CEO

Conference on Converging Technologies, London, September 8, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


The forecasters say it will be mid-1999 before annual expenditure on the internet in Western Europe reaches the level achieved in the US in 1996. Europe has already overtaken North America in terms of the total number of mobile phone users and the gap is predicted to widen in Europe’s favor. Which is why Europe – just as much as the US – is where the action is in the digital economy. (2,157 words)


L. Jacques Ménard, Vice-Chairman & Chairman of the Executive Committee

The Canadian Club of Montreal, April 11, 1994

Published in The Corporate Report No. 6 (June 15, 1994)


Contrary to popular opinion, the economic decline in Montreal is relative, not absolute. Still Montreal has lost economic ground when compared to other major centers and the city cannot hope to progress unless it adopts a more efficient operating structure. Reinventing Montreal starts with reinventing the way we do things and only business can activate this process, because we have the most effective levers of change at our disposal. (3,375 words)


Thomas d’Aquino, President & CEO

Council of the Americas, February 11, 1998

Published in The Corporate Report No. 24 (May 30, 1998)



According to The Economist, Canada will have the strongest economic growth of any G7 country in 1998. Canada also has one of the most impressive inflation-control records in the industrialized world, as well as one of the best in job creation over the past 30 years. All good reasons why more than 10% of the world’s top 200 fastest-growing firms are Canadian. (3,376 words)


François Beaudoin, President & CEO

Chambre de Commerce de Montréal, October 25, 1994

Published in The Corporate Report No. 10 (February 15, 1995)


While the economic recovery we are experiencing today is of a definitely different nature, it is nonetheless a recovery and one with unparalleled opportunities for small and medium-size businesses that know how to take advantage of it. (1,696 words)

François Beaudoin, President & CEO

Canadian Italian Business and Professional Association, Feb. 13, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


Small business may create jobs in the short-term, but real prosperity depends on companies that are big enough to hold their own on the world stage and generate the kind of local prosperity small businesses need to succeed. What is needed is a climate where the small businesses of today can thrive to become the major players of tomorrow. (1,817 words)

François Beaudoin, President & CEO

Sainte-Foy Regional Chamber of Commerce, January 13, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


One positive result of the debate about bank mergers is that it highlighted the particular set of challenges small businesses face. Although small business drives our economy, it is still the most vulnerable sector when the financial services industry is going through a period of drastic change. In this sense, the high concentration of the financial services industry in Canada is a potentially serious handicap for our small businesses. (1,582 words)

Patrick J. Lavelle, Chairman

The Financial Post Conference on Public Sector Commercialization, June 4, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


The BDC has just had its most successful year ever with CAD$1 billion in new loans and a profit of $31 million. The bank has also been running one of the country’s most successful venture capital funds in the past few years, something that is not well known outside the venture capital community. (2,109 words)


John E. Caldwell, President & CEO

The Financial Post Conference on Canadian Defense & Aerospace, November 2, 1995

Published in The Corporate Report No. 15 (December 31, 1995)


Although best known for its highly acclaimed simulation products, CAE is in a host of other businesses including marine, energy and air-traffic control. The company’s strategy of pursuing niche markets – both by leveraging internal capabilities and pursuing strategic acquisitions – is the key to its ongoing international success. (1,916 words)


Jean-Claude Delorme, Chairman & CEO

The Canadian Club of Toronto, April 18, 1994

Published in The Corporate Report No. 7 (August 15, 1994)


Capital markets have a role to play in facilitating dynamic new avenues to growth. In a knowledge-based economy, the greatest potential may lie in companies with investable ideas. This calls for a new paradigm of investment partnerships, balancing expectations of short-term profits with a greater concern for corporate performance over time. (2,993 words)

Jean-Claude Scraire, Chairman & CEO

The Board of Trade of Metropolitan Montreal, October 17, 1995

Published in The Corporate Report No. 15 (December 31, 1995)



With CAD$48 billion in assets, the Caisse is not only the largest shareholder in Canada but the leading manager of public funds as well. The mission of the Caisse is plain and simple, to seek return on investment. Since 1966, the Caisse has earned over $45 billion in investment income with an average yield of 10.6% over the past 10 years. But more can still be done. (3,215 words)


Juri M. Koor, Chairman, President & CEO

The Canadian Club of Montreal, January 29, 1996

Published in The Corporate Report No. 16 (February 29, 1996)


When Canadian long distance was opened to competition in 1992, dozens of companies emerged to fly the free market banner. Today most of them have disappeared. Many went bankrupt. Now the battle for capital, customers and revenues continues as competition spreads to new telecom sectors. (2,368 words)


Buzz Hargrove, President

The Canadian Club of Toronto, February 23, 1998

Published in The Corporate Report No. 24 (May 30, 1998)


The implications of the corporate sector’s triumphs is the central political question of our time. Business may be “winning,” but its failure to turn those same victories into a better life for ordinary people is slowly starting to raise questions about the corporate elite’s legitimacy and even competency to play such a dominant leadership role in society. (4,970 words)


Paul M. Tellier, President & CEO

The Canadian Chamber of Commerce, September 21, 1993

Published in The Corporate Report No. 4 (December 15, 1993)


As a former clerk of the Privy Council, Canada’s top civil servant, Paul Tellier worked directly with three prime ministers. Now he imaginatively steps into their shoes to offer a wide-ranging program. Protect healthcare. Balance the budget. Reduce the size of the public sector. Foster competition. Fix the transportation system. Reposition foreign policy. Promote media improvement. Restore credibility to the political process. Foster love of country. (2,134 words)

Paul M. Tellier, President & CEO

Chambre de Commerce de Montréal, November 8, 1994

Published in The Corporate Report No. 10 (February 15, 1995)


Offering the most reliable, efficient, and economical service possible is the fundamental objective of CN’s overall recovery plan. With a $227 million turnaround in just one year, Canada’s national railway appears to be on the right track. (1,685 words)

Paul M. Tellier, President & CEO

The Vancouver Board of Trade, September 12, 1995

Published in The Corporate Report No. 14 (October 19, 1995)


CN cannot rest on its laurels as the largest railway in Canada. Already a North American company, with 38% of its traffic moving across the border with the US, CN must strive to be among North American leaders in providing low-cost, reliable rail transportation. The proposed privatization will go a long way towards bringing this about. (2,057 words)

Paul M. Tellier, President & CEO

The Canadian Public Relations Society 1998 Conference, May 25, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


Communications is not just an afterthought to a transaction anymore. In the 1990s, communications has become the transaction. Messages must be distilled into their very simplest form and must be communicated with a compelling story line. Announcements are not regional or national any more, they’re global. And, perhaps most importantly, communications must engage the most senior levels of the company. (1,829 words)


David P. O’Brien, President & COO

The Canadian Club of Montreal, February 19, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


Canadian Pacific is a trading company within a trading nation. About 55% of revenues come from trade, with 70% of CP Rail’s sales generated in the US or by moving goods to foreign markets. Canadian Pacific is also a mirror of the Canadian economy. Canada’s prosperity means CP’s prosperity, and CP’s prosperity means not only profits for its shareholders, but jobs for thousands of Canadians. (2,326 words)


Lise Lachapelle, President & CEO

The Canadian Club of Montreal, September 18, 1995

Published in The Corporate Report No. 14 (October 19, 1995)



The Canadian pulp and paper industry recorded sales of nearly CAD$50 billion and profits of $3 billion in 1995. While still a natural-resource-based industry, it is increasingly making use of high technology and is way ahead of most other Canadian industries in the global marketplace. It’s also the number-one contributor to Canada’s trade balance. (2,404 words).


Mac Evans, President

Conseil des Relations Internationales de Montréal, April 4, 1995

Published in The Corporate Report No. 13 (August 7, 1995)


It’s been a great year for Canadian space technology with Radarsat, MSAT, and STS-74, astronaut Chris Hadfield’s scheduled mission on board space shuttle Atlantis…not to mention Canada’s critical role in the International Space Station, the largest scientific project in history. Space is a major growth industry, where more than 3,500 highly-skilled Canadians already boldly go to make their living. (2,243 words)


Donald V. Fites, Chairman & CEO

Business Week CEO Summit, September 24, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


In a borderless, global marketplace, Caterpillar’s credo is that if you’re not competitive everywhere, you’re not competitive anywhere. Caterpillar is creating a competitive advantage through a real-time, global online linkage of customers and products with Caterpillar dealers, internal operations and suppliers. (1,505 words)


G. Yves Landry, President & CEO

The Calgary Chamber of Commerce, February 28, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


Being competitive is all in the way you think and do things. That was the thinking behind the very successful cultural revolution at Chrysler Canada. The company has literally reinvented itself since 1987. And from being a manufacturer whose first name was “struggling,” and whose middle name was “beleaguered,” Chrysler may very well end up being the hottest car company around. (4,330 words)


A.L. Flood, Chairman & CEO

Annual Couchiching Conference, August 7, 1993

Published in The Corporate Report No. 5 (March 15, 1994)


Twenty or thirty years ago North American companies might even have been called learning-proof organizations. They were rigidly hierarchical and conformist in their structures and attitudes. Today learning organizations represent one of the best opportunities we have as a nation to gain a competitive advantage in the global economy. (3,635 words)

A.L. Flood, Chairman and CEO

The Metropolitan Toronto Board of Trade, October 28, 1996

Published in The Corporate Report No. 20 (January 15, 1997)


Today more than 4,000 companies and 500,000 employees compete vigorously in Canada’s market for financial services. The industry is on the brink of a fundamental transformation. The changes that occur over the next five to ten years could very well set the pattern for the industry itself and its place in the world until the middle of the next century. (2,369 words)

Holger Kluge, President, Personal and Commercial Banking

The Regina Chamber of Commerce, June 26, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


Competition is changing the way banking is done and at a pace much faster than many bankers would like to admit. The competition is not just bank against bank. Banks must compete with just about everyone, from credit unions and insurance companies to mutual funds, foreign-based financial players and even software, phone and cable companies. (4,442 words)


Jacqueline Beaurivage, CEO

International Association of Business Communicators, September 25, 1997

Published in The Corporate Report No. 24 (May 30, 1998)


In the early 1990s, for the first time ever, companies spent more money on computing and communications than the combined sum spent on industrial, mining, farm and construction equipment. But the key to meeting the challenges of today is in internal communications. The effective communicator’s messages are like a light that allows everyone to see the road ahead and move forward in the same direction. (3,576 words)


Huguette Labelle, President

International Finance Club of Montreal, January 21, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Effective international development can ensure that the benefits, rather than the problems associated with globalization, flow across the porous, almost nonexistent borders of our global village, generating tremendous opportunities as the billions of people in the developing world are integrated in a meaningful way into the global economy. (2,385 words)


Douglas Ivester, Chairman & CEO

The NSDA International Soft Drink Summit, October 28, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


People tend to place credence in the most pessimistic observations, setting up a faulty mindset that can quickly become a self-fulfilling prophecy. The fact is there are more opportunities for success today than ever before. In the next 30 years, the world will add another 2.2 billion consumers and global per-capita purchasing power will exceed $15,000, two and a half times the current level. (2,454 words)


Eckhard Pfeiffer, Chairman & CEO

PC Expo, June 16, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


In this interconnected world, customers expect to be able to access the information they need quickly and easily, from any place and at any time, using virtually any computing device. They expect vendors to deliver more power at lower cost and to make it easier to buy, operate, integrate and service their products. And they expect the information infrastructure to be reliable and available 24 hours a day, 365 days a year. It is in this environment that Compaq sees an opportunity to set the standard for a new world of computing. (3,598 words)


Bill Knight, President and CEO

The Conference Board of Canada, February 26, 1998

Published in The Corporate Report No. 24 (May 30, 1998)


Credit unions have continually “punched above their weight” by beating out big competitors in customer satisfaction surveys and by providing financial services in communities where banks and others have long since thrown in the towel. But in order to remain a strong and sound alternative for consumers, the credit union system must look at new ways to provide services to its nearly 10 million members across Canada. (3,190 words)



Françoise Bertrand, Chairperson

Canadian Women in Communications, February 17, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


While statistics consistently show an increase in the number of women in senior management in broadcasting and telecommunications, they seem to be confined to certain areas of expertise, like regulatory services. Greater effort must still be made to ensure that competent and talented women get a fair chance to reach the top of the corporate ladder in all areas. (1,777 words)


Edmund Clark, President & CEO

Canadian Payments Association National Conference, June 17, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


The banking industry is under siege in a free-for-all where the rules that once sustained an orderly financial services system are being applied to brand-new, never-before-encountered situations, and where the universal supplier is being usurped by channel and product-specific players. And if you think the pace of change is fast now, fasten your seat belts! (2,351 words)


John M. Cassaday, President & CEO

The Canadian Cable Television Association Convention, June 4, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


A company cannot succeed by trying to be all things to all people. Focus on one area where you believe you can win and become intimate with your customers. Today’s market leaders know they have to redefine value by raising customer expectations in the one component of value they choose to highlight. Success depends on how much extra you can deliver. (3,362 words)


Michael Dell, Chairman & CEO

Internet World, December 10, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


The internet is much more than something to be limited to simple financial transactions and marketing. It is a fundamental agent to dramatically reduce costs of ownership and increase competitive advantages for both supplier and customer. It is anything but a fad. It’s more like an evolutionary shift in the way products will be evaluated, bought and sold in the 21st century. (2,397 words)


Stephen C. Larson, President & COO

Association des MBA du Québec, November 9, 1995

Published in The Corporate Report No. 15 (December 31, 1995)



A radical restructuring has dramatically changed the basic cost structure of the paper and forest products industry. Member companies rang up $2.5 billion in combined profits for 1994 – a welcome change from losses of $200 million in 1993 and $1.4 billion in 1992. But the industry is still not out of the woods yet and must clearly define itself in the global marketplace to ensure future success. (2,988 words)


H. Virgil Stephens, CFO

Conference on Value Based Analysis, June 6, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


Economic Value Added is the best comprehensive measure of how well a company is doing. It is the key to growing businesses that earn more than the cost of capital, improving operational efficiency, increasing the spread between the return and the cost of capital, and fixing those units that are not earning their keep. (2,691 words)


Isabelle Deschamps, Associate Professor, Technology Management

Réseau des diplômés, Montreal, April 24, 1996

Published in The Corporate Report No. 18 (June 30, 1996)



The Peter Principle is dead. Companies have gone from a Ford-type organization, through a Toyota-like model to today’s “neural-based structure.” And in order to make the most of employees and their skills in this new “learning organization,” human resources will offer menu-driven services, with personalized work contracts, compensation and career management. (1,751 words)


Richard Edelman, President & CEO

The Canadian Public Relations Society Conference, May 25, 1998

Published in The Corporate Report No. 25 (August 31, 1998)



Fully 45% of Americans now invest in the stock market. This has caused a demand for transparency and immediacy of response from companies, making them subject to the same demands for information from individuals as they are from Wall Street analysts. In the context of these trends, the public relations industry is now more influential in the communications business than it has ever been. (3,026 words)


Peter Brojde, President & CEO

The Montreal Board of Trade, December 7, 1995

Published in The Corporate Report No. 16 (February 29, 1996)



One can never relax in the information industry. In just ten years we have gone from mainframe and terminal-based computing to the networked enterprise. Alliances, acquisitions, rigorous standards for both product and service quality, as well as reinvesting heavily in R&D, have helped Eicon Technology stay ahead of the game and earn more than 95% of its revenues from exports. (2,124 words)


Thomas Trainer, Chief Information Officer

CIO Summit, November 19, 1996

Published in The Corporate Report No. 20 (January 15, 1997)


At every step in the pharmaceutical value cycle, there are new opportunities for IT intervention. The information content of pharmaceutical science is enormous and still growing. That information intensity is what holds the greatest promise for managing human disease. Because the more information intensive pharmaceuticals become, the greater the value they deliver to patients. (2,917 words)


Michael Adams, President

International Association of Business Communicators, March 25, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Autonomy, hedonism and a spiritual quest for meaning describe a constellation of trends that are among the most significant in Canada today. The stereotype of Canadians as respectful, reserved, and not very imaginative, has never been less true. And despite growing fragmentation, Canadians continue to harbor values that differ significantly from those of Americans. (2,783 words)


Lionel M. Hurtubise, Chairman

The Montreal Board of Trade, October 24, 1997

Published in The Corporate Report No. 23 (January 31, 1998)



There are three critical factors that make Montreal the preferred choice when it comes to global high-tech: an availability of skilled technical personnel, proactive government approaches to business and the city’s superior quality of life. In fact, annual surveys of Ericsson employees in Montreal show one of the highest satisfaction rates of any Ericsson facility in the world. (2,975 words)


Øyvind Hushvod, President & CEO

The CIM-Mineral Economics Society, January 15, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


With the collapse in its domestic consumption, Russian exports now represent a substantial percentage of the supply of nickel to Western World consumers. Its impact on the market has grown accordingly. Between 1996 and 1997 alone, Russian exports increased by over 60,000 tonnes, tipping the Western World market from a supply-demand deficit into a moderate-sized surplus. Western producers have little choice but to adapt to this threat of a large, relatively price-insensitive competitor. (1,926 words)


Bobbie Gaunt, President & CEO

Retail Marketing Conference of the Retail Council of Canada, November 6, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


Research suggests that as the differences between product quality and marketing offers among major manufacturers become more or less equalized, consumers will be looking at other purchase motivators. It is critical to the long-term success of manufacturers and retailers alike to generate passion for their brands and, by doing that and building successful relationships at every level, earn customers for life. (2,897 words)


John Smale, Chairman

The Canadian Congress of Advertising, May 16, 1995

Published in The Corporate Report No. 13 (August 7, 1995)


Procter & Gamble (Mr. Smale, a former chairman of P&G, spent 40 years with that company) has a market value of some US$48 billion and tangible assets of about $6 billion. The $42 billion difference is the equity of the P&G brands in the value of the name Tide, Crest, Head & Shoulders, Pampers, Ivory Soap, Crisco…and so on. Industry needs to support brands, not promote yearly fads, because the key to success and profitability is building brands that consumers come to trust. (2,235 words)

V. Maureen Kempston Darkes, President & General Manager

Association des MBA du Québec, March 8, 1995

Published in The Corporate Report No. 12 (June 15, 1995)


Today’s automobile has more complex electronic control systems than the spacecraft that took man to the moon. But leadership in the automotive industry means more than just offering new products. It’s about providing customers with features and programs that make a real difference in the driver’s total ownership experience, including the development of technologies that further vehicle safety and human health. (3,063 words)

V. Maureen Kempston Darkes, President & General Manager

The Canadian Club of Montreal, April 15, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


The globalization of the auto industry is good for Canadian business. Canadian suppliers have succeeded in picking up more than CAD$6 billion in net new business since GM’s worldwide purchasing program began in 1992. General Motors is also Canada’s largest exporter, shipping more than $18 billion in manufactured goods outside the country last year. (2,216 words)


Sir Richard Sykes, President and Chief Executive

The Empire Club, October 2, 1996

Published in The Corporate Report No. 20 (January 15, 1997)


The explosion of biological knowledge is giving us a much broader understanding of the cellular and molecular basis of disease. And because the search for new treatments can now be much more highly targeted, there is enormous potential for bringing about improvements in the delivery of healthcare, the treatment of patients and the provision of better medicines. (2,737 words)


Robert K. Rae, Q.C., Co-Chair, International Practice Group

Premier of Ontario (1990 – 1995)

Urban Development Institute, Montreal, March 25, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Some people – with differing motives – express the wrongheaded view that Montreal’s, and even Quebec’s, economic and social pains are Ontario’s and Canada’s gain. Some look at the contrast between Toronto’s and Montreal’s economic growth since Expo 1967 and say that Toronto gained because of Montreal’s losses. The truth of the matter is that Montreal’s prosperity is important for Canada and for Ontario. (1,509 words)


H. Stephen Grace, Jr., President

Forbes Chief Financial Officers Forum, February 10, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Senior financial executives can contribute significantly to the resolution of today’s fiscal, social, and public policy problems in a manner that makes use of their strongest skills sets. In doing so, major benefits also accrue to the participants themselves, including added zest for their work and increased respect for their own organizations. (5,502 words)


Daniel Branda, President & CEO

The Canadian Club of Toronto, April 22, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


The rapid convergence of different technologies has translated into fierce, unremitting competition as never before. The HP philosophy places a great deal of stock on nimbleness and market responsiveness. HP is one technology multinational that knows that change can quickly turn winners into losers, which is why it continually seeks ways to build on existing strengths while developing new ones. (3,195 words)

Paul Tsaparis, Vice-President & General Manager

Business Outlook Conference, October 8, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


Responsiveness is one key to a planning process that has produced consistently impressive results at Hewlett-Packard. It’s helped HP develop a hugely successful printer business from scratch, go from 27th to third place in PC sales and be in a position where fully half of revenues are derived from products introduced less than two years ago. (2,494 words)

Paul Tsaparis, President & CEO

Internet World, February 3, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


The emergence of the internet and of web applications built upon it has major consequences for system design, as the power of connected computing creates the emerging digital society, giving us a world where just about everyone and everything is going to be connected, one where any thing or activity that can go digital, will go digital. This change to digital will reorganize how and where we work, the meaning of national and regional borders, how we conduct business, and the nature of government. (3,879 words)


Jean-François Leprince, President

Pharmac, October 6, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


A cultural shift is occurring in the pharmaceutical industry. The shift is brought about by powerful external forces that result in increased international homogeneity and by an attitude that places customer satisfaction as the objective of whatever action the organization performs. This customer orientation, in turn, brings to light the concept of “stakeholders” and the necessity of partnering as a modus operandi. (1,677 words)


Peter Y. Atkinson, Vice-President & General Counsel

Canadian Journalism Foundation, May 21, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


While an independent and vigorous press does play an important role in reporting the news and providing a critical commentary on matters of public interest, newspaper concentration is not necessarily antithetical to these principles. In fact, there is a basis for concluding that in today’s congested media environment, newspaper concentration may enhance the maintenance of a free and healthy press. (3,721 words)

Conrad M. Black, Chairman & CEO

Address to annual meeting of shareholders, May 29, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


While Hollinger acquired or contracted to acquire 26 daily newspapers in the course of 1995 and early 1996 the company is not helplessly addicted to the purchase of newspapers. Aside from having the world’s most technologically advanced newspapers, Hollinger also manages the busiest website in Europe and is using its sophisticated databases as an increasingly powerful competitive resource. (3,984 words)


Thomas E. Kierans, President & CEO

The Canadian Club of Montreal, January 27, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


While most people understand the extent to which economic, financial and commercial power has shifted from Montreal to Toronto, few understand the degree to which economic power has also shifted from Toronto to Calgary and Vancouver. And very few indeed understand that, in spite of this, political power still resides in the Montreal/Ottawa federalist corridor. (5,248 words)


Judith Humphrey, President

The Board of Trade of Metropolitan Toronto, November 25, 1997

Published in The Corporate Report No. 23 (January 31, 1998)



The ability to move the hearts and minds of employees, customers, and other stakeholders is the primary role of senior executives. Unfortunately, too many speakers ramble on, lacking coherence or direction. Executives who want to motivate audiences must move beyond information to inspiration. And they can do so by following the sevenfold path to inspirational leadership. (3,258 words)


Richard Drouin, Chairman & CEO

The Canadian Club of Montreal, May 9, 1994

Published in The Corporate Report No. 8 (October 15, 1994)


From new ventures in Asia, to marketing its leading-edge electro-technologies, to profiting from the booming spot market for electrical power, Hydro-Québec is successfully meeting the needs of a changing world. (1,658 words)

L. Jacques Ménard, Chairman

Canadian-American Business Council, November 21, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


Deregulation of electricity markets in the US will soon result in the most significant restructuring of the industry since the New Deal. Hydro-Québec is almost unique among North American utilities in that nearly 95% of its power is hydroelectric, the most environmentally friendly source by far and part of the reason why Quebec is today the low-cost producer and supplier in eastern North America. (2,682 words)


Pierre J. Jeanniot, Director General

Global Navcom Symposium, May 23, 1995

Published in The Corporate Report No. 13 (August 7, 1995)


The pieces of the world air navigation mosaic of the 21st century are now in place but consistent profitability is essential to improve balance sheets weakened by five years of heavy losses. The big question facing airlines is keeping their growth capacity down to 7% or less…because nothing has greater potential to destroy recent progress than a return to excess capacity. (2,310 words)

Pierre J. Jeanniot, Director General

APEC Transportation Working Group Aviation Seminar, April 16, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


While IATA’s ultimate aim is zero accidents, the major intermediate milestone is to reduce the annual aircraft hull loss rate by 50% over the next eight years. This cannot be achieved without planned, globally coordinated, steady additions to the quantity and the quality of the basic civil aviation infrastructure both on the ground and in the air. (3,061 words)

Pierre J. Jeanniot, Director General

The Board of Trade of Metropolitan Montreal, December 9, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


We are in the middle of an airline industry restructuring, a shakeout which still has a few years to run. Everyone is scrambling to extend their market reach with code-shares, route swaps, alliances, cross-equity holdings and outright takeovers. But to achieve its growth potential, there are a number of important industry-wide issues which must first be resolved. (3,181 words)

Pierre J. Jeanniot, Director General

McGill University, March 31, March 1999

Published in The Corporate Report No. 27 (June 30, 1999)


We are coming to the end of a century of unprecedented progress for mankind. And assuming that the end of the world is not going to happen on January 1, 2000, there is no doubt that mankind will continue to achieve tremendous progress in the 21st century…provided we successfully meet the many challenges we face. (3,413 words)


Martin Clague, General Manager, Worldwide Network Computing Solutions

CIO Summit, November 18, 1996

Published in The Corporate Report No. 20 (January 15, 1997)



Network technologies allow a totally new electronic relationship with customers and employees. With the tremendous latitude and options network computing provides, it is becoming more important than ever to focus on the business processes you want to support and change rather than on the technology you need to change them. (5,768 words)

Louis V. Gerstner, Jr., Chairman & CEO

Comdex, November 13, 1995

Published in The Corporate Report No. 16 (February 29, 1996)


Information technology is the defining technology of this decade and will be well into the next century. We are now at the threshold of the next great phase – network-centric computing – which will transform every business, organization and institution in the world. A good enough reason why IBM is betting so much of its future on it. (5,443 words)

Khalil E. Barsoum, President & CEO

Comdex, July 12, 1995

Published in The Corporate Report No. 13 (August 7, 1995)


Predicting developments in technology is easy. It’s what we human beings do with the technology that is always anybody’s guess. Canada is in surprisingly good shape in a number of key areas and in an excellent position to profit from the major transformations that have taken place, and which will continue to take place in the world around us. (4,213 words)

John D. Wetmore, President & CEO

Congress on Total Quality, October 1, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


Now is the time to identify and begin managing the quality challenges of competing in the age of the networked society, where performance equals customer service. Unless your business is run on established quality principles that address the core elements of your business – cycle time pressures, cost effectiveness, product and service delivery, and responsiveness, to name a few – you will not be successful. (3,151 words)


Purdy Crawford, Chairman & CEO

The Canadian Club of Montreal, October 3, 1994

Published in The Corporate Report No. 9 (December 15, 1994)


For Imasco, social responsibility is a crucial and inseparable dimension to running a successful business. Good corporate citizenship is self-interest of the most enlightened kind. By supporting our communities, we help to create a stronger society and, ultimately, a stronger market for our goods and services. (1,899 words)

Purdy Crawford, Chairman

Canadian Council of Grocery Distributors Conference, May 29, 1995

Published in The Corporate Report No. 13 (August 7, 1995)


The biggest challenge facing business is getting employees excited. Because we are all in the business of getting our customers excited about the products and services we offer. Choosing the best employees and getting them excited about their work is our best bet for doing so. To do this senior management must imbue work with a purpose higher than just a paycheck. (2,542 words)


Sean Maloney, Corporate Vice-President

Comdex Canada, July 9, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


The next killer application isn’t a killer application as such, it’s a killer environment. It’s a way of freeing up useless time that knowledge workers spend and having the computer automate those functions, using what Intel calls “constant computing.” In constant computing, many functions that right now use our time and effort get automated and done in background. (5,682 words)


Joanne De Laurentiis, President

Payments System Strategy Symposium, September 22, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


Nowhere are electronic financial services growing faster than in Canada. The country’s online Interac Direct Payment debit service was launched coast to coast in under two years and is now bigger than the 10 largest US direct-card payment services combined. Interac is also the most reliable network in the world, with virtually no fraud or security breaches. (2,639 words)


Thomas Volpe, Senior Vice-President

Forbes CFO Forum, February 9-11, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Applying the right consistent business policies, principles and practices to global financial, business, operational, political, environmental and regulatory risk exposures ensures that issues are dealt with on the same basis at both the local operating and corporate levels – a proven benefit to clients, employees and shareholders alike. (2,348 words)


Stephen A. Jarislowsky, Chairman & CEO

Financial and Estate Planning Council of Montreal, September 19, 1994

Published in The Corporate Report No. 9 (December 15, 1994)


While the present period in Canada looks good, whole industries must be made healthy again. And then there’s the sorry state of world financial affairs. Fortunately, the economic imperative of competition slowly forces nations to regain reality. World money discipline is also transborder and offenders cannot escape punishment. (1,561 words)


Roger D. Landry, President & Publisher

The Canadian Club of Toronto, March 3, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


By putting so much effort into covering politicians – the very people who accentuate the divisions in Canada – the media are part of the problem. But should the public launch a genuine movement for change, the media could join in and become an important part of the solution, reflecting, as they do, the true concerns of the communities they serve. (2,649 words)


Colleen Fleming, President

Retail Advertising Club of Toronto, October 23, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


The Laura Secord Company had everything going for it but profits. Its brand franchise was so strong that plans for closing even a single money-losing store would bring huge public outcries. The key to success lay in building on the company’s solid brand recognition and quality product line with a strong retail execution designed for today’s hyper-competitive market. (2,119 words)


Henri-Paul Rousseau, President & CEO

The Board of Trade of Metropolitan Montreal, May 22, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


Quebec companies that adopted the “Quebec Intl.” model years ago, like SNC-Lavalin, Bombardier and Teleglobe, are thriving today. The Quebec Intl. model requires, among other things, investing considerable energy and resources in knowing your markets, identifying and developing your comparative advantages and taking stock of and applying the best business practices of the competition. (3,444 words)


Pierre Brunet, President & CEO

The Board of Trade of Metropolitan Montreal, May 9, 1995

Published in The Corporate Report No. 13 (August 7, 1995)


While the Canadian culture business employs 600,000 and generates $15 billion annually, arts organizations are in peril because of funding cutbacks. In order for the arts to survive, businesspeople must give their support, not only because it’s the right thing to do, but because culture improves the quality of life for everyone…and it’s also good for business. (3,092 words)


Richard A. McGinn, Chairman & CEO

Wall Street Journal Technology Summit, October 5, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


What’s going on today is nothing less than a revolution in communications, with access provided by fiber or by fixed wireless systems. The communications networking revolution will have a profound impact on every individual, on every business, and on every nation because it will transform the most important part of the global economic infrastructure. (1,906 words)


Russell S. Young, Senior Vice-President

1996 First Boston Value Based Management Conference

Published in The Corporate Report No. 19 (September 30, 1996)


Lyondell has gone from a money loser to a low-cost leader in the petrochemical industry and is one of the most productive companies in America. A compensation system introduced in 1995 has led to even greater improvements in productivity through an enhanced focus on external – rather than internal – competition, and a better alignment with company-wide goals. (1,832 words)


Kirk R. Schueler, President

The Board of Trade of Metropolitan Montreal, May 22, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


Because the largest costs in Canada’s healthcare system – hospitals and physicians – are reimbursed by governments, drugs form a substantial portion of the costs insurance companies and employers bear. So it’s not surprising that drugs are often targeted for savings, even though focusing strictly on such costs can be a penny-wise/pound-foolish situation that can result in increased doctor and hospital fees. (1,555 words)


Jerry McElhatton, President

Business Week Corporate Crown Jewels Conference, May 5, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


By coordinating product design and positioning to appeal to the right segments and motivate the right behavior, banks can leverage the new electronic channels and continue to be the central delivery point for financial products and services. The investments made in technology today, both in money and talent, will determine where banks can go in serving the next generation. (5,655 words)


Marnie J. Kinsley, Executive Vice-President & COO

Business Computer Convergence ‘98, May 7, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


During the first half of the 1990s, bankers developed a multiplicity of add-on channels like telephones, automated banking machines and computers, channels that were high-tech, but which isolated the client in a low-touch relationship. Today, we are entering the third stage, when high-tech can be used more and more to provide high-touch in the relationship between the bank and its customers. (3,806 words)


Bert C. Roberts, Jr., Chairman & CEO

Bear Stearns Technology Conference, June 17, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


To be successful at a time when information rules, we need to capitalize on an environment marked by convergence, on an architecture driven by flexibility and on a marketplace ruled by competition. Because the real value of intelligent networking lies not just in efficiency, but in its boundless potential as an information and revenue driver. (2,664 words)


Claudio F. Bussandri, President & CEO

The Canadian Club of Montreal, January 30, 1995

Published in The Corporate Report No. 11 (April 15, 1995)



Price clubs, “category killers,” supercenters and evolving consumer attitudes all spell major changes for Canada’s $50-billion grocery industry. In post-NAFTA North America, sane and simple government regulation is one way to attract investors to an industry selling hundreds of products besides food, and intimately tied to the everyday lives of Canadians. (2,207 words)


John C. Crosbie, Chancellor

Horizons 2000, July 19, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


According to Canada’s former finance and justice minister, the time has come to deal with the serious threat posed by the separation of Quebec from Canada. Recognizing Quebec as a “distinct society,” accepting the concept of asymmetry and implementing the principle of subsidiarity are some of the concessions needed to induce reasonable Quebecers to say “Yes” to Canada. (4,494 words)


André Marcheterre, President

The Canadian Club of Montreal, September 15, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


Restrictive policies, transfer of costs to third-party payers and fragmented initiatives are all part of Canada’s troubled healthcare system, a system that not only restricts patient access to the best available products and services, but that actually prevents the pharmaceutical industry from gaining access to certain markets and, as a result, limits R&D. Fortunately, there are solutions to the current state of affairs. (2,732 words)


John L. Steffens, Vice-Chairman

PC Expo, June 17, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


The do-it-yourself model of investing, centered on internet trading, should be regarded as a serious threat to Americans’ financial lives. This approach to financial decision-making doesn’t serve clients well and it won’t deliver lasting value. The greatest opportunities lie in developing technologies that enhance and leverage relationships between individuals and institutions. (2,474 words)


Steve Ballmer, Executive Vice-President

PC Expo, June 10, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


The 90 million units of Windows sold over the next 12 months will push the installed base to near 500 million. The “Windows Everywhere” initiative continues to develop the places in which Windows applications can be delivered with more platforms serving more market opportunities, and that idea is letting developers get the broadest set of deployment opportunities for their applications. (5,090 words)

Bill Gates, Chairman & CEO

Comdex 1995, November 14, 1995

Published in The Corporate Report No. 16 (February 29, 1996)


High-speed PCs will not only change the way we work and do business, they’ll change the way we learn and even the way we entertain ourselves…and far more than people outside the industry can imagine. It’s a step-by-step process – more evolutionary than revolutionary – as we move towards midband and then broadband communications on the internet. (4,229 words)


Gérald A. Lacoste, President & CEO

The Canadian Club of Montreal, April 10, 1995

Published in The Corporate Report No. 12 (June 15, 1995)



Canada’s oldest trading place has a history of innovation – after five years of complex product development and intensive marketing, the Exchange is positioned as the leader in Canadian financial futures instruments – and that’s what’s needed if we are to continue holding our own. While 1994 was another record year for Canadian exchanges, we’re still losing share to US and foreign exchanges. (3,230 words)

Gerald A. Lacoste, President & CEO

The Canadian Club of Montreal, February 1, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


Globalization has transformed the world economy and markets in the 1990s, and the issue for Montreal, Quebec and Canada is how we remain competitive in that context. Market fragmentation, service duplication, a technology lag and non-exchange trading systems challenge us in Canada as never before. (1,982 words)


John A. Bohn, Jr., President

The Canadian Club of Montreal, April 25, 1994

Published in The Corporate Report No. 7 (August 15, 1994)



Canada has traditionally attracted foreign investors who rely on Moody’s to measure their own credit risk exposure. Rating agencies do not trade in securities. A rating is simply their measure of a country’s ability and willingness to manage itself so as to have the needed foreign currency to service debt, including the debt of the central government itself. (2,540 words)

Haig Nargesian, Senior Vice-President

Putnam Lovell, DeGuardiola & Thornton, Annual Symposium on Money Management Companies, March 27, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


Even if there are not a large number of rated independent money management companies, analysis of the money management industry continues to be important to Moody’s because so many financial institutions have money management businesses. Whether on a stand-alone basis, or as part of larger financial enterprises, Moody’s has a basic rating methodology for money management businesses. (2,074 words)


Christopher B. Galvin, President & CEO

Wall Street Journal Technology Summit, October 6, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


Over the next ten years, major shifts will occur in the telecommunications industry. The market will move from traditional mass-market segmentation to individualized personal solutions. The networked economy will shift to the mobile economy and at least 25% of telecom minutes will move from wireline to wireless. In order to realize this evolution of wireless, technology companies have to spend time focusing on the basics. (2,414 words)

Dennis Schneider, Vice-President

Comdex Canada, July 9, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


Universal infrastructure is an environment that is changing how people write software, changing how hardware gets developed, and changing how businesses are run. That infrastructure has become dovetail-jointed, tightly linked via the computer and the internet with so many of the things we use every day, from telephony, paging, email and conferencing to alternate technologies for connectivity and even Web-TV. (6,972 words)

Micheline Bouchard, Chairman, President & CEO

Canada Wireless Telecommunications Association, May 21, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


We’re now in the midst of a rapid and far-reaching shift in technology: the changeover from analogue to digital service. And that creates new opportunities for manufacturers as well as network providers. Success in the wireless industry will not come from any single initiative. Rather it depends on leadership in several key areas. (2,476 words)


André Bérard, Chairman & CEO

The Canadian Club of Ottawa, April 18, 1995

Published in The Corporate Report No. 12 (June 15, 1995)


Canada is like vichyssoise. It’s half French. It’s cold. And it’s hard to stir, but stir it we must if we are to contain the explosion of public service expenditures and put an end to the perverse side-effects of the welfare state. The key is further decentralization of the state, one of the merits of which is to render politicians accountable for their acts. (3,489 words)

Léon Courville, President & COO

The Toronto Board of Trade, February 11, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


It is now well over a year since the banking industry unanimously asked government to reevaluate its so-called privileges. The truth is that the chartered banks do not require any special privileges to compete and succeed. In straight factual terms, compared to the biggest and best in the world, Canadian banks are at or near the head of the list. (3,175 words)


Philip H. Knight, Chairman & CEO

National Press Club Conference, May 12, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


Philip Knight has been described in print as a corporate crook, the perfect corporate villain for these times. It’s been said that Nike has single-handedly lowered the human rights standards for the sole purpose of maximizing profits. One columnist said, “Nike represents not only everything that’s wrong with sports, but everything that is wrong with the world.” Mr. Knight begs to differ. (3,493 words)


Courtney Pratt, President

The Canadian Club of Montreal, October 6, 1997

Published in The Corporate Report No. 23 (January 31, 1998)



Business can be one of the key contributors toward the evolution of society in a way that will benefit every stakeholder. The idea that business has such a responsibility is often characterized as “social responsibility” or “corporate citizenship.” Surveys consistently show that most people consider social responsibility a key element in how they judge a company, something that affects their buying decisions in a significant way. (3,323 words)


Jean C. Monty, President & CEO

The Canadian Club of Montreal, March 18, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


As Canada’s flagship high-tech company, Nortel accounts for 20% of all industrial research and development done in the country, with R&D investments of CAD$1.2 billion last year alone. All told, Nortel provides employment to 21,300 people in Canada. The company has also spawned dozens of high-tech success stories including such well-known names as Mitel, Newbridge Networks, Telesis North, CML Technologies and ABL Canada. (4,742 words)

Keith Powell, Chief Information Officer

CIO Summit, November 9, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


During the past decade Nortel overcame a series of challenges and built an integrated communications infrastructure that has been a key to its corporate success. The “how” is a dramatic story. Unlike many other firms, Nortel adopted a centralized model and got senior management to buy into the project. Nortel’s goal was a centralized model where everything is standardized on a corporate basis, or what the company calls its Common Operating Environment. (3,029 words)


Hans Mäder, President & CEO

The West Island Chamber of Commerce, November 14, 1996

Published in The Corporate Report No. 20 (January 15, 1997)



The brand-name pharmaceutical industry has increased its R&D investments in Canada by more than 600% since the enactment of improved federal patent legislation in 1987. But Canada still lags behind in terms of patent protection, a situation which must be corrected if the country is to continue to attract R&D funds and manufacturing mandates. (2,905 words)

Hans J. Mäder, President & CEO

Swiss Canadian Chamber of Commerce and the German Canadian Chamber of Industry and Commerce, May 19, 1998

Published in The Corporate Report No. 25 (August 31, 1998)



The drug industry is an integral part of the new global economy based on knowledge and technology. The arrival of soft sectors that rely on brainpower and the increasingly rapid circulation of capital and technical resources around the planet have intensified international competition for jobs and investments. There are four factors that can make a firm more competitive on the world scene. (2,764 words)


Shelly Lazarus, Chairman & CEO

Global Convergence Summit, October 28, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


What convergence means is that the advertising industry will transform itself – in fact, it already has – to be all about delivering the brand. Brands will have to be communicated in a 360° manner. Every point of contact will have to reflect the brand, whether it’s the online showroom or the real showroom. The only way a brand will survive in the complexity that’s coming is to make sure that everything that touches the consumer is in touch with the brand. (738 words)


Claude Fontaine, Senior Partner

The Institute of Chartered Secretaries and Administrators in Canada, April 5, 1995

Published in The Corporate Report No. 12 (June 15, 1995)



China has only been open for business in a serious way, with appropriate legislation to protect and encourage foreign investment, in the last five years. Anyone interested in getting in on the action in the world’s largest consumer market would be well advised to start building commercial relationships, on commercial terms, now. And make sure you know what “guanxi” is. (4,755 words)

The Right Honourable M. Brian Mulroney, C.P., CC., LL.D, Senior Partner

Prime Minister of Canada (1987 – 1993)

The Canadian Club of Toronto, April 14, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Before Canadians will be able to fully enjoy the promise of the 21st century, they must deal with a problem created and unresolved in the 20th century – the Quebec problem. Canada’s former prime minister explains how reasonable constitutional changes will secure a place for Quebec in 21st-century Canada and remove an unnecessary impediment to the future prosperity of the country as a whole. (3,612 words)


William Farlinger, Chairman

The Canadian Club of Toronto, January 26, 1998

Published in The Corporate Report No. 24 (May 30, 1998)



When all 19 of its reactors were operating, nuclear power supplied two-thirds of Ontario’s electricity. Unfortunately the performance of Ontario’s nuclear program has deteriorated in the past few years and instead of making the global top-ten list for annual operating reliability – a list the utility once dominated – its reactors are now closer to the bottom when compared to others around the world. (3,096 words)

Ronald W. Osborne, President & CEO

The Toronto Board of Trade, September 11, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


The competitive electricity market in the US has led electrical utilities to become bigger, mainly through mergers and acquisitions. Generation ownership will continue to become more concentrated with fewer owners controlling larger asset bases. Ultimately we may see only 10 to 15 large companies dominating the North American electricity market. (3,407 words)


Martha Rogers, Cofounder

The Canada Post Postal Conference 98, March 12, 1998

Published in The Corporate Report No. 24 (May 30, 1998)



To be successful at “Marketing 1 to 1” there are three critical things we need to know: who are the most valuable customers, who are the second-tier customers and who is not worth targeting. In yesterday’s marketing, we created one-way messages to customers. In tomorrow’s marketing we will be generating feedback from our customers so that we may better identify their needs. (4,113 words)


James Stanford, President & CEO

The Canadian Club of Montreal, April 7, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


If Canadian industry is to maintain its competitive position, it will have to overcome some major challenges, many of them related to protection of the environment. Because Canada is one of the highest-per-capita energy users in the world, the country is particularly vulnerable to across-the-board targets. But Canadians are, by no means, inefficient energy users. (3,902 words)


John W. Hooper, President & CEO

The Montreal Board of Trade, February 13, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


When Phoenix was founded seven years ago, the advantages of locating in Quebec were numerous. The province actually had, thanks to refundable tax credits, the most favorable fiscal climate in the Western World for R&D-based companies. The refundable tax credits are gone and a lot else has changed since 1989. In fact, the actions of government now have a negative impact on the high-tech sector in Quebec. (1,832 words)


Robert M. Franklin, Chairman

The Board of Trade of Metro Toronto, June 18, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


The vast majority of investments from industrialized countries in the APEC region goes to the more urbanized areas, where there is infrastructure and a workforce. Mining, on the other hand, goes to the frontier zones and that’s what puts it at the cutting edge of social and economic development in many places along the Pacific Rim. (2,742 words)

John M. Willson, President & CEO

The Vancouver Board of Trade, June 9, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


The three factors which count in the mining industry are the quality of the deposit, where the deposit occurs and whether the business climate supports the commercialization of the deposit. While none of us can control geology, whether a mine is brought into production or not depends largely on politics and public policy. The Brits used to say that trade follows the flag. In today’s mining world, investment follows the welcome mat. (3,090 words)


Christie A. Hefner, Chairman & CEO

Herring on Hollywood Annual Conference, July 28, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


When talking about the internet and the online world, the people who confidently predict what is going to happen next are the people you should trust the least. At this point, there is much more that is unknown than is known about the internet, how it ultimately will affect the way we interact with one another, and how we receive information and entertainment. The rules governing the internet have not been written yet. (2,734 words)


Paul Desmarais, Jr., Chairman & Co-CEO

The Board of Trade of Metropolitan Montreal, May 28, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


Globalization, trade liberalization and technological advances offer a potential for growth not seen since the boom period following World War II. But to profit from this economic cornucopia, we must liberate the energies and resources currently being paralyzed by political squabbling and invest them in areas that will best improve our global competitive advantage. (2,760 words)


L. David Caplan, President & CEO

The Board of Trade of Metropolitan Montreal, April 13, 1994

Published in The Corporate Report No. 6 (June 15, 1994)


Canada now ranks last of the G7 industrialized countries in total business productivity growth. A particular concern is the gap with the US, our biggest trading partner. The Free Trade Agreement, GATT and NAFTA have defined a new world order in trade and export dynamics. We must adapt to this new world order if we are to remain a prosperous, competitive industrialized nation. (1,937 words)

L. David Caplan, Chairman & CEO

The Canadian Club of Montreal, November 20, 1995

Published in The Corporate Report No. 15 (December 31, 1995)


Tapping into growing international opportunities requires a solid proactive approach. Canadian companies must be participants in the markets we want to penetrate. To this end, Pratt & Whitney Canada has been developing key partnerships and joint ventures in the Pacific Rim and Eastern Europe since the late 1970s – and with great success. (2,782 words)


William D. Friel,, Senior Vice-President & CIO

Business Week Corporate Crown Jewels Conference, October 1997

Published in The Corporate Report No. 23 (January 31, 1998)


The continued price/performance advances in telecommunications, coupled with cheaper, more powerful machines, will provide endless possibilities for seamless global access and exchange of information, regardless of its form. Those that fully integrate business and technology efforts, creatively exploit their information and technology assets, invest in their human resources and listen to their customers will be the leaders of the future. (1,437 words)


Charles G. Cavell, President & CEO

The Canadian Club of Montreal, April 6, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


In ten years Quebecor has grown from approximately the 50th largest printer in North America to number two in 1998. After 11 takeovers, beginning in 1995, the company has also become the largest commercial printer in the European Union. How Quebecor accomplished this is the obvious question and there are obviously a number of reasons, but four important fundamentals stand out: markets, management, unique strengths and people. (1,771 words)


Edward S. (Ted) Rogers, President & CEO

Midland Walwyn Convergence Conference, November 28, 1995

Published in The Corporate Report No. 16 (February 29, 1996)


In mature markets, like local telephone and cable, competition stimulates existing players to improve their market efficiency and customer service. In cases where products have only begun to penetrate the market and where there is a strong potential for growth, competition literally ignites the pace of growth among existing operators. (5,183 words)


Robert R. Dutton, President & CEO

The Board of Trade of Metropolitan Montreal, April 2, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


The role of the merchant is not to buy, stock and sell articles, but rather to efficiently manage a flow of products between producers and consumers. Successful wholesalers will soon be judged not on how they manage stock, but on how they supply consumers and manufacturers with the information they need to operate with greater efficiency. (3,236 words)


John E. Cleghorn, President & COO, Royal Bank

The Vancouver Board of Trade, September 16, 1993

Published in The Corporate Report No. 4 (December 15, 1993)


Nations, businesses and individuals must learn how to cope with an unprecedented rate of change in an era of prolonged economic downturn or wither. Five principles for coping with change, for both business and government, are suggested. (2,261 words)

John E. Cleghorn, Chairman & CEO

Royal Bank Annual Meeting, March 6, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


A major new factor affecting financial services is changing demographics, as the mature population becomes more interested in investing than in borrowing. As Canada’s largest provider of personal and institutional investment management services, Royal Bank is in an ideal position to benefit from this trend by increasing revenue in such key high-potential businesses as money management, mutual funds and insurance. (2,704 words)

John E. Cleghorn, Chairman & CEO

The Montreal Board of Trade, January 26, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


Since 1994, Canada has jumped from 20th place to fifth in the global competitiveness ranking of the World Economic Forum. Unfortunately, real family incomes, after inflation and taxes, have been in decline. It is our mediocre productivity growth that’s mainly responsible for our lackluster performance in raising living standards. Canadian manufacturers are now only 70% as productive as their US rivals are and our unit labor costs are rising much faster. (3,155 words)

Monique F. Leroux, Senior Vice-President

Club Saint-Denis, May 7, 1998

Published in The Corporate Report No. 25 (August 31, 1998)


The changes that the financial services industry is currently undergoing deserve to be called revolutionary – a revolution that in some respects is reminiscent of the one that has transformed how consumer products are distributed. It’s a revolution that can be characterized by three components: increased operational efficiency, greater emphasis on the service component, and increased and redefined competition. (3,540 words)

Allan R. Taylor, Chairman & CEO

Financial Management Association, October 15, 1993

Published in The Corporate Report No. 5 (April 15, 1994)


Since 1984, the pace of technological progress has accelerated so rapidly that we have reached the point where it helps to create not just momentous economic changes, but also political changes. The wealth of nations is now clearly derived from ideas: ideas that create new products, new skills and new relationships in the public and private sectors. (2,157 words)


Morris Saffer, Chairman

Retail Advertising Club of Toronto, March 26, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


Success in retailing is a direct function of how well you live up to the premise that the “store is a brand.” Effective branding depends on a focused, dynamic vision and direction from the top. The main reason so many huge retailers have failed is that they have not grasped the crucial “Brand Soul” of their relationship with their customers. (2,418 words)


Peter C. Godsoe, Chairman & CEO

The Canadian Club of Toronto, March 4, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


Canada’s economic future depends on our ability to create, use and manage knowledge more effectively than the rest of the world. To do this, we must develop the kind of institutional excellence that exists in other countries. We need to unbundle funding and allow universities to compete for students and research grants. Let the market, not the government, determine which universities succeed. (2,937 words)

Peter C. Godsoe, Chairman & CEO

Task Force on Financial Services, June 16, 1998

Published in The Corporate Report No. 25 (August 31, 1998)



Right now, Canada has one of the best financial sectors and one of the best banking systems in the world. It’s a national system – highly efficient, very safe, stable, technologically advanced, and extremely competitive with five strong national players. There is no case to support a massive restructuring, an irreversible move that would eliminate one-third of our country’s banking system. (2,109 words)


Edgar Bronfman, Jr., President & CEO

The Canadian Club of Montreal, March 8, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


Companies periodically need to be renewed, refreshed and even transformed. After a careful analysis of the alternatives, Seagram concluded that the entertainment industry was the best place to redeploy its capital. The transformation process, involving approximately US$40 billion in completed transactions since 1995, has turned a passive holding company into a major enterprise with strong growth characteristics. (3,452 words)


Rochelle Udell, Editor-in-Chief

The Folio Show, November 2, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


As the 1990s drew to a close, most Americans became less interested in living fast and more interested in finding what works for them. Strength, well-being and vitality are the new standards of status and beauty. Menopause is out in the open. Health is driving economic growth. And women’s issues have become the country’s issues. (2,973 words)


Guy Saint-Pierre, President & CEO

The Board of Trade of Metropolitan Montreal, September 20, 1995

Published in The Corporate Report No. 14 (October 19, 1995)


The actual process of Quebec’s accession to independence would monopolize our political and bureaucratic system for a whole generation. And instead of being a powerful and influential player within Canada, as it is now, an independent Quebec would be a small country forced to negotiate on very unequal terms with a country three times its size. (3,351 words)


Colin D. Watson, President & CEO

CIO Summit 1997, November 18, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


Successful international sales are not difficult from the perspective of understanding the various markets or overcoming distribution and shipping challenges. The biggest challenge in doing business in other countries today is understanding the finer points of those countries’ cultures and how those cultural differences define the way business is conducted there. (2,166 words)


Claude A. Garcia, President

The Board of Trade of Metropolitan Montreal, October 24, 1995

Published in The Corporate Report No. 15 (December 31, 1995)


While the full impact of the 1992 reform of financial institutions legislation has not yet been felt, already some of the most striking moves towards concentration in Canadian economic history are under way, along with a spectacular rise in bank assets and profits. Steps must be taken now to restore the competitive balance in Canadian financial markets. (3,222 words)


Daniele Bertrand, President

Women of Influence Luncheon, March 6, 1997

Published in The Corporate Report No. 22 (September 30, 1997)



Today’s changing world provides remarkable opportunities for women. The top-down, command-and-control corporation is giving way to a more fluid, open organization. The tendency for women to be more team-oriented by nature bodes well for their ability to adapt to this new environment. But to really benefit from all the opportunities calls for innovation in all aspects of their lives and careers. (2,774 words)

Carol Stephenson, President and CEO

Women of Influence Luncheon, October 16, 1996

Published in The Corporate Report No. 20 (January 15, 1997)


A new leadership type is emerging. It combines traditional virtues such as self-confidence, well-articulated vision and commitment to the company, with qualities where women are naturally gifted, including the ability to listen, to speak clearly and honestly, to mediate between conflicting views and to brighten up the workplace with a new sense of style. (3,536 words)

Carol M. Stephenson, President & CEO

Conference on Maximizing Women’s Talents, December 10, 1997

Published in The Corporate Report No. 23 (January 31, 1998)



The need for more women in senior management is the direct result of the transformation of corporations. Business has moved beyond hierarchy to collaboration and consensus, demanding new management skills that come more naturally to women than to men. As a group, women bring a set of abilities that are absolutely necessary if knowledge-based organizations are to flourish in the years ahead. (1,945 words)


Richard W. Pound, Partner

The Canadian Club of Montreal, January 15, 1996

Published in The Corporate Report No. 16 (February 29, 1996)


We are faced with the real issue of managing the destiny of our country in the next few years. We can emerge from this process with an even better country, or we can destroy it. What we need to succeed are builders, not tinkerers…statesmen, not carpetbaggers. We need people of vision and resolution. (4,221 words)


Paul V. Godfrey, President & CEO

The Canadian Club of Toronto, November 23, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


The men and women who started the Sun not only created a new big-city daily newspaper (something that had not been done in North America in decades), they fostered a unique culture – a rare combination of laid-back informality and high-pressure competitiveness. The paper’s independent culture is its most valuable asset, and the main reason why the hostile takeover bid by the Toronto Star will not work. (2,804 words)


A. Charles Baillie, Chairman & CEO

The Canadian Club of Montreal, February 23, 1998

Published in The Corporate Report No. 24 (May 30, 1998)


Too many people are willing to leave unchallenged the emotions and prejudices that are disguised as received truths in the Quebec separatist movement. Perhaps the cause is fatigue, fear of reprisal or a sense of inevitable failure. But we must not forget that the seeds of victory or failure will be sown from what we choose or refuse to declare. (3,329 words)


Charles Sirois, Chairman & CEO

University of Ottawa, March 5, 1996

Published in The Corporate Report No. 17 (April 30, 1996)


New economic realities have profoundly shaken the existing order in transportation, telecommunications, radio and television, and created a momentum for change that could ultimately prove unstoppable. Is Canada losing the means it has traditionally employed to promote and protect its economic, technological and cultural development? Or are the tools we have always used to create jobs becoming obsolete? (2,481 words)

André LeBel, President & CEO

The Canadian Club of Toronto, April 24, 1995

Published in The Corporate Report No. 12 (June 15, 1995)


There are only 600 million active phone numbers on the entire planet, or one for every ten people, and half the world’s population lives more than two hours travel from a phone. The potential for growth is staggering and Canadian industry is well-positioned to profit from the CAD$415 billion-plus worldwide telecommunications industry. But the structure of the industry itself is undergoing drastic change and the ground rules are no longer the same. (3,193 words)


Charles Sirois, Chairman & CEO

Canadian Wireless Telecommunications Association, June 15, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


The telecom revolution is bringing personal freedom, convenience, and empowerment to the people. To accomplish this, a stream of new services, better ideas, and new business propositions is in motion or ready to roll. And if the revolution lives up to its promise, it will bring a single portable personal communicator to provide a full range of services to users anywhere in the world. (2,198 words)


George Petty, President & CEO

Conference Board of Canada Mergers and Acquisitions Conference, March 24, 1999

Published in The Corporate Report No. 27 (June 30, 1999)


In an acquisition, the acquirer gets to call the shots. A corporate merger of equals is more complex. A corporate marriage, just like the marriage of two people, needs a solid foundation on which to grow. A merger can make technical sense, financial sense, even strategic sense – and still not work. According to a 1996 study by Mercer Management Consulting of the 300 biggest mergers in recent years, 47% either underperformed or, at best, were compatible with their peers. (1,880 words)


Dana G. Mead, Chairman & CEO

Business Week Presidents Forum, April 10, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Advantages that US companies enjoyed overseas in the past, such as capital, are rapidly disappearing. What turn out to be major advantages are technology, products tailored to the market, brand equity and the painful process many companies have gone through over the last 20 years in learning how to really manage their businesses again. (2,516 words)


Thomas J. Engibous, Chairman, President & CEO

Wall Street Journal Technology Summit, October 5, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


In the future, no matter what type of network, whether it’s wireless, landline or satellite – no matter what type of pipe, whether it’s copper, fiber, coaxial or thin air – at every connection, at both ends of the network, there will be a digital signal processor. DSPs are the engines of the digital age of communications. DSPs allow all electronic equipment to be connected, speaking the same language – a digital language. (2,533 words)


Lewis B. Campbell, President & COO

Aerospace Industries Association of Canada, September 18, 1995

Published in The Corporate Report No. 14 (October 19, 1995)


After reinventing itself in 1992, Bell Helicopter saw its market share soar from 26% to 47% worldwide. Part of the secret of their success was not counting on a cyclical upturn and instilling a competitive passion for continuous improvement in every employee. Textron’s Mirabel operation (near Montreal) is the most modern helicopter production facility in the world and serves as the centerpiece of their worldwide helicopter business. (2,281 words)


Michael Goldbloom, President & Publisher

Quebec MBA Association, March 11, 1998

Published in The Corporate Report No. 24 (May 30, 1998)


In a world where technology is allowing people to live in greater isolation, the daily newspaper will play an increasingly important role in preserving a sense of community. A well-edited newspaper, with an intelligent selection of news, features, sports, business listings and commentary, can also help individuals cope with the growing torrent of information they face in their daily lives. (3,372 words)


Richard D. Parsons, President & COO

Conference on Converging Technologies, September 8, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


The intense deregulation efforts of the European Commission are now resulting in some of the most competitive communications markets in the world. The opportunities made possible by the digital revolution and deregulation are going to require immense amounts of capital investment. No company can do it alone. Successful global companies need to forge international partnerships that infuse them with local instincts and intelligence and also provide them with the necessary capital. (2,747 words)


Rowland Fleming, President & CEO

Canadian Capital Markets & Investment Conference, May 13, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


At a time when technological advances have facilitated new competitive realities, regulatory controls that do not adequately recognize these realities are not only restrictive in their scope, but also discriminatory in their application. And if the SEC does not soon resolve the cross-border issue, the decision will be made for them by unregulated proprietary trading systems and the internet. (3,323 words)

Rowland W. Fleming, President & CEO

Corporate Secretaries Congress, May 6, 1997

Published in The Corporate Report No. 21 (June 30, 1997)


Listing on the TSE means that a company has met standards that are widely recognized as some of the highest in the world. However, all exchanges, including the New York Stock Exchange, rely on accurate disclosure and the integrity of the listed company. And on any exchange, there is always the potential for unpleasant surprises. (3,306 words)

Rowland W. Fleming, President & CEO

Canadian Corporate Shareholder Services Association, March 19, 1998

Published in The Corporate Report No. 24 (May 30, 1998)


Although the phrase “shareholder activism” is fairly new and the concept of corporate governance has only attracted broad interest in recent years, the question of how to make managers accountable to investors has been debated for more than 100 years. Unfortunately, what the populist view is often advocating is not the fiduciary interests of shareholders, but the social agenda of one shareholder. (2,701 words)


David A. Galloway, President & CEO

The Canadian Club of Toronto, April 20, 1998

Published in The Corporate Report No. 24 (May 30, 1998)



Despite tough challenges, the newspaper industry will continue to prosper because of its natural strengths and its ability to adapt. Newspapers have something no other medium has. They distill the news, compress it and make it accessible. People read newspapers with a set of choices they don’t have in other media. That’s why today’s newspaper industry is not simply alive and kicking, it’s flourishing. (3,014 words)


Sidney J. Levy, Head of Marketing

École des Hautes Études Commerciales, November 1997

Published in The Corporate Report No. 24 (May 30, 1998)


As the year 2000 draws near and consumers confront the remarkable ongoing revolution in technology and telecommunications, what they want most of all is accessibility to a market that is welcoming, accommodating, fast and cheap, that enables endless patterns of self-fulfillment and social integration in the “heavenly perfection promised by the millennium.” (4,199 words)


Reed Hundt, Chairman

INET ‘96 Conference, June 28, 1996

Published in The Corporate Report No. 19 (September 30, 1996)


Traditional communications industries think they are in the telephone, broadcast or satellite business. But what they are really in is the access and bandwidth business. Bandwidth and access are not goals that presuppose any particular service. They are means not ends. Because, if the bandwidth and access are there, the services will be invented. (4,666 words)

Reed Hundt, Chairman

Brookings Institution, June 19, 1997

Published in The Corporate Report No. 22 (September 30, 1997)



We are at a watershed point in the evolution of the US telecommunications industry. Whether there will be competitive or monopolized markets depends on the interactive and complex decisions of private firms, investors, Congress, agencies and the courts. At stake is the possibility of billions of dollars of economic growth and astounding feats of innovation only achievable through competition. (2,977 words)


Alan Greenspan, Chairman

Francis Boyer Lecture of The American Enterprise Institute for Public Policy Research, December 5, 1996 (the famous “irrational exuberance” speech)

Published in The Corporate Report No. 20 (January 15, 1997)


A central bank in a democratic society is a magnet for many of the tensions that such a society confronts. Any institution that can affect the purchasing power of the currency is perceived as potentially affecting the level and distribution of wealth among the participants of that society, hardly an inconsequential issue. (3,995 words)

Alan Greenspan, Chairman

The Economic Club of New York, December 2, 1997

Published in The Corporate Report No. 23 (January 31, 1998)


Dramatic advances in the global financial system have enabled us to materially improve the efficiency of the flows of capital and payments. Those advances, however, have also enhanced the ability of the system to rapidly transmit problems in one part of the globe to another. As the international financial system has become even more complex, the particular areas of weakness that have to be addressed have changed. (4,193 words)


William Daley, US Secretary of Commerce

The Montreal Board of Trade, August 4, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


No two countries trade more with each other than the US and Canada. The two-way flow of goods and services exceeds US$1 billion a day. Last year, US-Canada trade was worth even more than US trade with the entire European Union. The prosperity of both nations depends to a great extent on the business they do with each other. (1,929 words)


Lawrence H. Summers, US Deputy Secretary of the Treasury

Overseas Development Council, March 19, 1998

Published in The Corporate Report No. 24 (May 30, 1998)


While the current Asian crisis has a common element with almost all financial crises (money borrowed in excess and used badly), it is also profoundly different because it does not have its roots in government improvidence. The problems that must be fixed are much more microeconomic than macroeconomic, and involve the private sector more and the public sector less. (3,020 words)


Arthur C. Levitt, Jr., Chairman

New York University Center for Law and Business, September 28, 1998

Published in The Corporate Report No. 26 (January 31, 1999)


The motivation to meet Wall Street earnings expectations may be overriding commonsense business practices. In the zeal to satisfy consensus earnings estimates and project a smooth earnings path, wishful thinking may be winning the day over faithful representation, causing an erosion in the quality of earnings, and, therefore, the quality of financial reporting. (3,020 words)


Michael E. Johnson, President & CEO

The Vancouver Board of Trade, June 18, 1998

Published in The Corporate Report No. 25 (August 31, 1998)



In January of 1996, the perception of the VSE among business and the public was negative in the extreme. Today, the Vancouver Stock Exchange is the world’s leading venture capital exchange and the fourth busiest stock exchange in North America. The turnaround strategy has been based on a simple equation: greater market integrity will improve the VSE’s reputation and credibility – and strengthen its competitive position. (4,519 words)


Melvin Goodes, Chairman & CEO

Business Week CEO Forum, September 26, 1996

Published in The Corporate Report No. 20 (January 15, 1997)


The right enabling strategies can free you to focus on your most compelling strengths. Don’t be misled by cynics who try to tell you that values don’t count or that corporate culture can’t be changed. Values count, change can happen and changing values can be the critical difference in enhancing corporate performance. (1,307 words)


Martin Sorrell, Chief Executive

WPP Group Annual Report and Accounts, May 31, 1996

Published in The Corporate Report No. 18 (June 30, 1996)


If you think competition has picked up in the last decade, wait until you see what’s coming. As low population growth continues, as communications and free trade improve, as the transfer of technology expands and as retail power grows stronger, the pace of competition will speed up exponentially, according to the CEO of the world’s largest advertising agency. (6,702 words)

Martin Sorrell, Chief Executive

British Design & Art Direction President’s Lecture, November 27, 1996

Published in The Corporate Report No. 20 (January 15, 1997)


We have moved from the Agricultural, Industrial and Information Ages to the Creative Age, an era that offers business more exciting opportunities than ever before. And no one is better positioned to help business make the most of these opportunities than the marketing services companies that can help turn knowledge into the pearls that make the beans. (4,675 words)


Paul Allaire, Chairman & CEO

DocuWorld, May 14, 1997

Published in The Corporate Report No. 22 (September 30, 1997)


Never before have business documents offered as much potential value as today’s networked digital documents do. They’re easier to share…faster to deliver…and more agile in performance than any previous format. But the new capabilities of the digital document bring new complexities and a new expertise is needed to get the maximum value out of them. (2,165 words)


Diane E. McGarry, President & CEO

The Canadian Club of Montreal, March 27,1995

Published in The Corporate Report No. 12 (June 15, 1995)


The executives at Xerox were so busy counting profits from the plain-paper copier – at the time, the single most profitable product ever invented – that they failed to read the “Sayonara” message in their Japanese fortune cookies. The ensuing crisis produced a dramatic turnaround, and a method of managing corporate change that focused on developing the inner strength to take on anything. (3,110 words)

© 1993–2009 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Rupert Duchesne
Vice-President, Marketing, Air Canada

German Canadian Chamber of Industry and Commerce, Montreal, June 10, 1997
Published in The Corporate Report No. 22 (September 30, 1997)

Let me begin by saying that my perspective on air travel is not so much as an airline executive but much more as a customer. I joined Air Canada eight months ago. Before that I was an international consultant and a very frequent flyer. In fact, I was a top-tier member of two frequent-flyer plans. As a result, my approach to airline marketing is very much influenced by my perspective as a customer.

So, these days when I go to airline meetings, I tend to ask a lot of the questions, which you probably ask yourself. Why is this so complicated? How many points can you get? Why can’t I get from here to there? How long is the connection? Who gets access to this lounge? And so on. It is questions very much like these that sparked the first discussions leading to Star Alliance, the new worldwide network of Air Canada, Lufthansa, United, SAS and THAI.

Before Star Alliance was formed, I think a lot of air travelers wondered about the actual benefits of airline alliances. According to Airline Business Magazine, there are 363 airline alliances in the world today involving 177 airlines. Seventy-two new airline alliances were formed last year alone.

So we had to ask ourselves: what could Star Alliance do that the other 363 airline alliances couldn’t? Or to be more precise, we had to ask our customers what Star Alliance could do that other alliances couldn’t. That was the starting point for the alliance: defining the needs of the global traveler. It’s a question that is deceptively simple.

The airline industry is truly unique among global industries. There is no doubt that alliances and global ventures are being formed in virtually every sector from banking to breweries to telecommunications. The difference is that most customers are still local customers. Your telecommunications company may have signed a deal with a Japanese telecom but it is a deal, which is largely invisible to you when you dial your phone.

In the airline industry, a global alliance has to earn its stripes every time you get on an airplane, anywhere in the world from Frankfurt to Victoria. It’s a case of “Think global. Act global.”

Airlines also operate in a highly regulated environment, which still plays a large role in determining the abilities – or inabilities – of any one airline to serve international markets. In many cases, this antique web of bilaterals has constrained an airline’s ability to offer the kinds of service that customers want. The Canada-US Open Skies Agreement is a perfect case in point. For 25 years, North Americans were saddled with a highly regulated and inconvenient bilateral agreement. Air Canada was allowed to serve six US cities with scheduled service. You couldn’t even fly nonstop from Ottawa to Washington. It wasn’t allowed. Today, two years after Open Skies, Air Canada has launched 38 new services to the US

There’s also the question of cost. These days airlines simply can’t afford to go it alone when it comes to international expansion. The cost of adding new aircraft, facilities and setting up operations in international locations is prohibitive and uncompetitive. Cost and risk sharing new international services through an alliance can be one economical way of quickly growing an airline network and offering the most choice to customers.

The final challenge for any customer-friendly alliance is the visceral nature of air travel. In other words, air travelers react quickly and unequivocally to the quality of their air travel experience. The stakes are much higher when it comes to an alliance. If we boast about a “seamless connection” and you end up waiting five hours and can’t get into the alliance lounge or earn points, the value of the alliance instantly goes down. In other words the merits of an alliance have to be both evident and consistent to win the approval of customers.

That’s why our first moves in the formation of Star Alliance were based on research. We asked international travelers a few good questions. In fact, we basically asked people like you to build the perfect global alliance. We asked what you wanted and what aspects of international travel were most important.

Some of our findings were blindingly obvious. Global travelers asked for:

•  A better choice of worldwide destinations

•  Smooth connections and that elusive ‘seamless travel’ experience

•  And, perhaps most importantly, consistent recognition, service and comfort

More subtle was the fact that international travelers want the best of both worlds. They don’t want to give up their national brands in favor of some generic global brand.

To deliver on those expectations any international alliance would have to ensure:

•  Schedule harmonization so that connections are convenient and simple

•  Policies and procedures which are similar so there are no surprises

•  Compatible reservations, customer service and frequent flyer operations

•  Compatible levels of premium and economy service and comfort

•  Close proximity of facilities and counters at airports

•  Staff trained to recognize and treat alliance member airlines’ customers like their own best customers

For the most hardened global traveler, I think it really boils down to recognition through personalized service. And two components of this are points and lounges. Those certainly were my top-of-mind concerns before I became an airline executive. And, as you will see, points and lounges are a big part of Star Alliance.

Star Alliance is designed to capitalize on the individual assets of five individual airlines to offer a truly global service to customers. And I think we’ve succeeded in doing that. Star Alliance represents an entity of 210,000 employees operating a high-quality airline service in 106 countries.

As a frequent international traveler, when you choose Star Alliance, you get:

•  Global access to our extensive network of 578 cities in 106 countries

•  Frequent flyer reward and recognition that allows customers to earn mileage points for travel on any Star Alliance flight and credit those miles to their elite-level status with the Star Alliance carrier of their choice

•  Reciprocal access to over 175 lounge facilities around the world for qualified customers

•  Smoother connections and easier transfers as the Star Alliance airlines move their facilities closer together wherever possible

That’s our opening gambit. When we start talking about the vision for Star Alliance, you can begin to see why this particular group of airlines stands out among the world’s 363 alliances. By working together, Star Alliance carriers can improve service when delays occur by taking the initiative to protect passenger bookings and re-accommodating them when necessary.

And one-stop reservations, passenger and baggage check-in will significantly simplify the travel experience for all our customers, regardless of which Star Alliance partner they fly. Furthermore, in the future we want to add more flights, more destinations, simplified ticketing and reservations procedures, easier connections, better baggage and ground services and more schedule choices – to name just a few of the projects already in progress.

At the same time, our research has told us where not to take Star Alliance in the future. It is not our intention to merge our airlines or to develop identical product offerings. Our research tells us categorically that customers enjoy the identity of each flag carrier. Instead we will focus our energies on the benefits of operational synergy such as:

•  Co-locating in airports

•  Joint purchasing of selected supplies

•  Sharing technological innovations

Our goal is to maximize performance and efficiency. There will be no separate management for the alliance. Instead, working groups have been formed when and where necessary to make hands-on decisions quickly and efficiently.

It’s a dynamic process and it’s not a closed system. In fact, we will be adding Varig Brazilian Airlines in October and we will invite other compatible airlines to join in the months ahead.

There are two key reasons why I think Star Alliance is going to differentiate itself from the average airline alliance and be uniquely successful. One is the shared vision of the airlines’ leaders – like Lamar Durrett of Air Canada and Jürgen Weber of Lufthansa. These are individuals with a very similar vision of what an airline should be in the 21st century. They are on the same wavelength when it comes to technology, cost saving, service and customers.

The airlines themselves enjoy a similar profile in their respective home markets. As a result, this alliance will avoid some of the traditional pitfalls of alliances. It’s not based on fear. It’s based on opportunity. There’s no equity stake or accompanying financial wrangling or board representation. There’s no brand gap among the members. There’s no weak partner or dominant player. It’s truly based on common interest and goals.

The other reason which makes me believe in the future success of Star Alliance is the track record of the member airlines and the cooperative relationship which has already developed among the members. In this respect, Star Alliance represents an evolution. Air Canada and Lufthansa are a great example of this evolution and a microcosm of what good alliances can achieve for customers.

In March 1996, Lufthansa and Air Canada announced a comprehensive alliance. In June 1996, the two airlines began code-share flights between Germany and Canada resulting in an unprecedented level of service for travelers. Air Canada and Lufthansa combined to offer joint daily, nonstop service from both Vancouver and Calgary to Frankfurt. Lufthansa operates daily nonstop flights to and from Vancouver, on which Air Canada sells seats using an Air Canada code. Air Canada operates daily nonstop flights to and from Calgary, on which Lufthansa sells seats using a Lufthansa code.

In addition to the increased frequencies, the new service allows customers to accumulate and redeem points on either carrier’s frequent flyer program (Air Canada’s Aeroplan and Lufthansa’s Miles and More) and benefit from one-stop check-in between any Air Canada/Lufthansa connection.

Last July, Air Canada and Lufthansa launched daily code-share service to Athens from Toronto, Calgary and Vancouver via Frankfurt. And in October, Air Canada and Lufthansa launched twice-daily, nonstop code-share service between Toronto and Frankfurt and consolidated airport operations in Terminal 2 at Toronto’s Pearson and Frankfurt Airport’s Terminal 1. This summer, we have added four new nonstop flights for a total of up to 11 flights per week operated in cooperation with Lufthansa. And we’re launching two new nonstop flights a week on the Montreal-Halifax-Frankfurt route – the only scheduled carrier offering this service.

It means that, since 1995, we have doubled the number of seats in the Canada-Germany market. The frequency and choices of service are definitely helping to grow the natural two-way trade and travel links between our countries. Our revenues on the Canada-Germany market are up by 34% over 1995. And we see more growth in the future.

Open Skies is helping us develop Vancouver, Toronto and Montreal as true North American hubs for international travelers. Air Canada now operates more than 1,100 flights per week on 65 routes, crisscrossing the Canada-US border. That’s more nonstop service between Canada and the US than any other carrier or alliance of carriers. That’s good news for North American-based business travelers and good news for European and Asian-based business travelers who have better access than ever to points throughout North America.

The expansion of Canada-Germany air services by Air Canada and Lufthansa is indicative of the tangible benefits an airline alliance can produce for customers. That track record bodes well for customers in terms of choice and service. It also bodes well for Air Canada, Lufthansa and the future of Star Alliance, as we work together as partners to generate service and choice on a scale that is unprecedented in the industry.

It’s a question of keeping ahead of the competition and exceeding customer expectations. In that respect Star Alliance is an excellent blueprint that will give airlines like Air Canada and Lufthansa a competitive edge now and in the next century when it comes to serving you, the customer.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


R. Lamar Durrett
President and CEO, Air Canada

The Board of Trade of Metropolitan Montreal, October 29, 1996
Published in The Corporate Report No. 20 (January 15, 1997)

The countdown to airport consolidation has started and my message is simple. We have just 120 days to prepare for the return of international flights to Dorval airport. That means the members of the Board of Trade, along with airport authorities, all levels of government and airlines like Air Canada, need to come together and work together to make this a success.

Since the announcement was first made by Aéroports de Montréal there has been a lot of debate, a lot of hand wringing and a lot of second guessing. One crucial element seems to have taken a back seat in all of this. This is good news for Montreal.

I think Peter Yeomans, the Mayor of Dorval, has captured the essential importance of this development. He said that the sound of planes taking off and landing is “economic music.” In that case, you can be sure Air Canada will not be playing second fiddle to anyone, even though we’ll be operating the youngest, quietest jet fleet at Dorval.

We view airport consolidation as an opportunity and I can tell you we intend to do our utmost to make this decision a long-term success for air transportation in this region. We will be looking at Montreal for strategic growth and hubbing some of our international flights here where there is good origin and destination potential. New links between international destinations and domestic and trans-border networks at Dorval can now be pursued.

Air Canada will consider daily flights to Frankfurt as well as several weekly flights to Tel Aviv and eventually Beirut. Adding these points to our existing services to London, Paris, and Zurich will begin the process of rebuilding Montreal into a legitimate North American transfer point.

A dramatic increase in long-haul international service such as this will generate the traffic feed necessary to drive more service to the USA and consolidate our position as the leading trans-border carrier. In fact, I can easily envisage Air Canada adding more US cities, like San Francisco.

A consolidated Montreal airport will be well positioned for the future. That’s because many of the traditional North American hubs now find themselves overcrowded or overused. There are no new North American airports-with the exception of Denver-so facilities are at a premium.

I also believe airport consolidation will enable Montreal to draw traffic to points connecting throughout North America. All this bodes well for Montreal in the 21st century. It becomes a new alternative for international air travelers because the inconvenience of two airports and a 45-minute connecting drive have suddenly been eliminated.

Travelers and shippers alike will be taking a second look at Montreal. As air travelers yourselves, you know what you look for in an airport. Convenience and ease of connections are big factors. That’s true in Singapore. It’s true in Frankfurt. And it’s true in Montreal.

A split airport operation has resulted in missed opportunities and sluggish growth. Airlines, including Air Canada, will not be diverting flights to Montreal from other cities.

These days, more than ever, Air Canada shareholders are interested in profitable opportunities and routes. We are constantly adjusting our operations on that basis and that inevitably means some fine-tuning and pruning – like the Montreal-Atlanta route which did not meet expectations.

Some critics have said that the Dorval decision is good for Air Canada. My response is a definite “Yes!” But it’s only good news because we happen to have 7,000 employees here. And we’re about to add more new, well-paying jobs at our maintenance facility in Dorval, which will bring in more third-party maintenance work from international airlines.

It’s only good news because our head office is here. It’s only good news because we have invested millions of dollars in one of the world’s best jet aircraft maintenance centers, not to mention an Aeroplan center, and a reservations office.

We spend $850 million a year here. And we buy Quebec goods and services. About $35-million in fuel alone and $65 million a year for support services and local products. Then there are big-ticket items like our 24 new Canadair Regional jets, which we acquired when we went shopping up the street at Canadair.

Jacques Auger of ADM has said that Mirabel was on the road to losing half of its international flights. Recently LOT announced their departure. They lost Canadian, Alitalia, TAP and Lufthansa. But they never lost Air Canada.

Besides our track record and our investment dollars, we also bring some other assets to the Dorval decision.

•  We have the newest and quietest jet aircraft. Air Canada has set a new standard for corporate responsibility when it comes to operations in and out of Dorval. From the Canadair Regional Jet to the Airbus A320s, A340s and 319s, our new jet aircraft meet or exceed Stage 3 requirements-which are the toughest noise standards in the world.

•  We are upgrading facilities at Dorval airport through a $20-million program to build more convenient facilities for customers connecting from national to regional flights.

•  We offer the best selection of flights: the most daily non-stops to the US, the most flights to New York, the best Florida service and the only daily non-stops to Los Angeles.

•  And we have new routes like the Montreal-Washington nonstop service. Since January of this year, that service alone has generated 34,000 passenger trips. That’s incremental business for this city and a new economic link to the US.

Compared with any other airline, Air Canada brings a lot of assets to the table. We have a vested interest here in our home town as well as a track record of building flights and frequencies.

Now as we look ahead, I believe the success of the move to Dorval will depend on three factors:

1.  Respect for due process and a need to minimize any disruption caused by the transfer.

That means following the processes in place that allow for discussion, the input of citizens and residents, and a transition plan which addresses the key issues and, as much as possible, eases the transition for employees affected.

2.  An integrated plan for infrastructure to accommodate the consolidation.

That means proper road access, rail access, facilities, airport terminals, runways and parking – in short, a mini-infrastructure program which, in itself, is good news because it will create jobs and reintroduce construction cranes on the Montreal skyline. In this effort, I take the occasion to commend Jacques Auger and his team at ADM for getting the ball rolling and looking ahead at the elements needed to revitalize the Dorval facility.

3.  The cooperative support of business and government to view this as a business opportunity and act accordingly.

This is the key. The Mirabel-Dorval situation has lasted 20 years. The implementation of a turnaround strategy has been long, hard and difficult. It is only natural that there are issues which need to be resolved in a constructive and comprehensive way.

This decision will help increase passenger volumes. It won’t happen overnight but it will happen. By increasing passenger volumes, the Montreal regional economy benefits-and that’s good news for everybody. One economic rule of thumb often used in the industry says that for every one million new passengers who fly, about 6,000 new and indirect jobs are created, with $900-million in economic activity.

But it doesn’t happen by itself. It takes a good plan and a good team. Fortunately, we have those ingredients here and we have an excellent team of involved business people, politicians and a forward-thinking airport authority.

Someone who really knows about airports and air travel is Serge Losique, president of the Montreal World Film Festival. Mr. Losique is known for his strong opinions and for expressing them openly. He’s also a good customer of ours, a great business partner and well-informed on how the world works. So I think it’s fitting to give him the last word on the consolidation of Montreal’s airports. In a recent article in La Presse, he said that it amounts to “actually saving and relaunching an international airport for the benefit of Montreal and Quebec.”

In a nutshell, that’s the challenge we face. So let’s work together to make sure that April 1997 doesn’t mark the end of an era – but the beginning of one. A new era for a revitalized North American airport and one that is ready, willing and able to bring business back into Montreal.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Hollis L. Harris
Chairman, President & CEO, Air Canada

The Board of Trade of Metropolitan Montreal, March 7, 1995
Published in The Corporate Report No. 12 (June 15, 1995)

They say in the airline industry, Timing is everything, and frankly I cannot think of a better time for me to discuss with you the new Canada-US bilateral air services agreement. That is especially true since I just returned from launching Air Canada’s new service between Toronto and Atlanta. After years of negotiations, we suddenly have an agreement, and I suspect that it is of intense interest to you, both as air travelers and as business people – and with good reason.

Bilateral trade between Canada and the US is big business – worth more than US$200 billion each year – and it is especially vital to the Montreal region, as a very close neighbor of the US. Since the implementation of the Canada-US Free Trade agreement, bilateral trade has grown more than 20%.

In the long term, I believe this new air trade agreement will exert a similar dramatic impact on the airline industry. In simple terms, this agreement means that, with a few restrictions, airlines on both sides of the border are free to offer point-to-point, across-the-border air service to anywhere they want.

That could have a huge impact on the local economy: on trade, business development, convention business, tourism, hotels, special events and so on.

According to Aéroports de Montréal, Montreal could see as many as 1.4 million new seats per year. On paper, that sounds pretty good, but it’s important to remember that open skies – by itself – does not automatically deliver benefits.

Some cities will do their homework and capitalize on open skies, some cities will lose out. Indeed, if there is one single message that I would impart to you today, it would be that Montreal and Montreal businesses need their own “open skies” strategy, to maximize this opportunity.

I am also here to say that Air Canada is ready, willing and able to act as both a facilitator and a partner for Montrealers and Montreal businesses, those who are aiming to get the most out of open skies.

We have already made our intentions crystal clear. While Canadian Airlines waits for American Airlines to put together a schedule, Air Canada is aiming at opening up 20 new routes between Canadian and US cities, in the next 18 months. Needless to say, that includes some key Montreal routes. Within 60 days we intend to link Montreal and Washington.

Soon we will announce launch dates for Montreal-Cleveland, Montreal-Atlanta and Montreal-Orlando. That will add up to hundreds more Air Canada seats flying in and out of Montreal each day. Also, we intend to make sure there are lots of people in those seats.

What are the chances for success? Very Good! Montreal is well placed to derive some tangible benefits from open skies. The city enjoys good proximity to dozens of US markets. The city is ripe for economic growth. The airport is able to handle the extra business.

Most of all, Montreal enjoys great potential in terms of tourism, convention business and trade. Moreover, we have a low Canadian dollar to tempt Americans. On top of that, you have an aggressive and committed partner in Air Canada. To put it simply, our vision of open skies is good for Montreal.

Our open skies strategy is based on the people, products and planes in Montreal. As proof, I invite you to look back over the past 12 months. Last year, Air Canada and Bombardier teamed up to unleash a great Canadian product – namely the Canadair Regional Jet – onto the air services market in North America.

With 50 seats and a quiet comfortable cabin, this new, short-haul jet is a harbinger of additional, frequent, more convenient and more rapid short-haul jet service. In total, we have ordered 24 Canadair jets.

Equipped with these versatile jets, we didn’t waste any time opening the skies in Montreal. Last December, we doubled the number of flights on the Boston-Montreal route. We went from two turboprops each day to four nonstop Canadair jet flights. Our employees – both in Montreal and Boston – are delighted to have this service to compete with Delta. Customer reaction has been excellent. Customers clearly like the convenience and timing of more nonstop trans-border services. But the economic benefits don’t end there. Our order of Canadair regional jets was great news for the Montreal economy since Bombardier manufactures the jet.

And, two months ago we announced a $5 million contract with Bombardier Regional Aircraft Division for the pilot training for our regional jets. A total of 240 Air Canada pilots will be trained to fly the jet at Bombardier’s training center in Montreal and the contract runs until September 1996.

Then there was our joint announcement with Aéroports de Montreal (ADM). Together, we announced a $20 million agreement which will upgrade Dorval and Mirabel.

The agreement calls for a variety of initiatives, which include:

•  The replacement of PTV buses at Mirabel with walkways

•  New lounges and more convenient facilities at Dorval for customers connecting from national to regional flights

•  And a new Maple Leaf lounge at Dorval Airport

Above all, we are investing in these airports to make air travel on Air Canada more convenient and more comfortable. We also expect to generate more revenues because of this additional investment.

That’s not just good economic news, it’s tangible evidence of Air Canada’s strategy to offer services and products in this province which are mutually beneficial for Montreal and for Air Canada.

That’s why I consider Montreal to be a microcosm and a model of how a well-executed agreement could boost air services and the economy of this city. That is true with the right airline and, as you may expect, I think Air Canada is the right airline to get the job done.

In fact, my second message to you today is that while Air Canada has a lot to offer in the open skies sweepstakes, we certainly appreciate and solicit your support over the coming months.

There is no doubt that over the next weeks and months, many airlines will be visiting Montreal. Many airlines will be talking about Montreal. Many airlines will be making promises to Montreal.

Only one has signed a long-term agreement like ours with ADM. Only one is as committed to the Canadian jets built here by Bombardier. Only one has a workforce of over 6,500 employees in Montreal directly and also generates 11,000 spin-off jobs. Only one spends over $1 billion each year in this area. And, that one airline is Air Canada.

Simply stated, we have a lot to offer – not just now, but in the future. That’s due to the simple economics of airline services.

It goes like this:

When a foreign carrier starts service into Montreal, about 30% of the revenues earned will be reinvested here, 70% of the revenues are siphoned off to the US or another foreign country. Therefore, when Air Canada offers service on the same route, 70% of the revenues are reinvested right here.

Of course, a new bilateral agreement has pushed trans-border air services into high gear. I’m sure many of you are probably wondering if Air Canada can really deliver the economic benefits I’m talking about and if we can compete with all those large US airlines. It’s a good question, and I am here to tell you that I am confident Air Canada will prosper under open skies.

First of all, I believe the new bilateral agreement will help create that all important “level playing field” which will ensure that every air carrier gets an even chance to compete.

That’s why there are transitional periods built into the agreement which allow for a phase-in of new US services at Montreal, Toronto and Vancouver. It is a mechanism which ensures that service, quality and competition is the determining factor in open skies – not sheer size or hub muscle.

Second, Air Canada is building a fleet of aircraft which is eminently suited to opportunities generated by the new bilateral agreement. We have positioned Air Canada’s fleet to be one of the youngest in the world with orders for:

•  Six Airbus A340s to replace our older 747s plus 2 A340s on short-term leases, plus 3 options

•  25 Airbus 319s to replace the DC-9s, plus 10 options

•  5 extended range Boeing 767s and two more 767s on short-term lease

•  And, of course, 24 50-seat Canadair jets with options for 24 more

In 1995 alone, we will be taking delivery of 19 aircraft, just as the opportunities under the new bilateral agreement open up. The timing couldn’t be better. Moreover, I see tremendous flexibility with this fleet on trans-border markets. It is an open skies fleet.

The Airbus A319s and the 50-seat Canadair jets in particular offer us tremendous ability to adjust capacity to meet market demand on a seasonal basis, to serve more routes with low frequency or serve fewer routes with high frequency.

And we can hold on to our DC-9s, if necessary, to ensure that we have enough aircraft to meet demand on trans-border routes.

Third point: many observers are saying that the airlines which are best positioned to take advantage of the new Canada-US opportunities are the ones which have already forged good relationships and alliances across the 49th parallel.

In this respect, Air Canada has once again done its homework by forging excellent working partnerships with Continental and United.

Fourth, and perhaps most important, I believe we have the staff, market experience, and reputation which can only be an asset as we start new services to new markets.

Certainly, people are questioning how Air Canada will compete with giants like American and United or the low-cost carriers like ValueJet.

In fact, our marketing strategy to US air travelers is already well-known. It is inscribed on the Statue of Liberty down in the New York harbor: “Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming hubs.”

American’s Chicago hub, Delta’s big Cincinnati hub, Delta’s mini-hub in Boston, Delta’s plane changing center in LaGuardia. We will by-pass the hubs.

I’ve taken some poetic license with that, but I think you get the idea.

Our strategy for success is as simple as the difference between direct and nonstop flights. As frequent flyers, I know people like yourselves prefer one plane, one flight and no stops. Travelers in the US are like you. They are getting plain tired of being shunted along endless “milk run” services and through inconvenient hubs.

Air Canada is coming into the market with more nonstop services, new aircraft, a great reputation, the best on-time performance in North America and great value for money.

Perhaps, most importantly, we finally have a track record which shows that we can make money.

In fact, our 1994 results speak for themselves. Thanks to the efforts of our people, Air Canada has just recorded its first profit since 1989. The $129 million net profit in 1994 is a $455 million improvement over 1993. The $244 million operating profit is the most ever achieved in Air Canada history.

We have turned the corner and turned the airline into a moneymaking operation and that’s the key indicator of our future success.

The plan for this year is simple. We will keep costs down, grow revenues from new markets and get a fair price for our product. We will press ahead with our open skies strategy and put 19 new aircraft in Canada’s skies. Seven of those 19 are for international destinations.

We will count on your solid support for our applications to the federal government to serve new international routes like: Montreal-Brussels, Montreal-Frankfurt, Montreal-Vietnam and maybe even Montreal-Mexico City.

Most of all we will work to ensure that Montreal gets the full benefit of new air services and, together, I believe we have a lot of good news to look forward to in 1995 and beyond.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Jacques Bougie
President & CEO, Alcan Aluminium

The Canadian Club of Montreal, September 12, 1994
Published in The Corporate Report No. 9 (December 15, 1994)

You will see that I have entitled my remarks today “1984–1994: A Swinging Decade.” Those of you who grew up in the fifties or sixties, will of course know what “swinging” means – the latest in all kinds of fashion, jet-setting away in the fast lane, or being one of the beautiful people. Well, I hate to disappoint you. As far as Alcan and aluminum is concerned – and you will not be surprised that this is what I am going to focus on today – swinging has a different connotation, swinging like a pendulum, from being Canada’s most profitable company in 1988 to three years of losses – from 1991 to 1993 and counting. I want to talk about some of the lessons we have learned in that period and how we have adapted our strategy and our organization as a result of these lessons. They have in them, I believe, some pointers for Canadian industry as it heads into the turbulent seas of global competition.

The world aluminum industry

Let me start with a brief outline of the world aluminum industry, in which Canada is the third biggest producer nation, after the USA and the CIS (the former USSR). In the decade following the Second World War, it was among the fastest growing of the new material industries, growing about 7% a year – that is doubling in size every decade. This continued until the oil shocks of the late seventies, when like a lot of the rest of the world’s industries, growth slowed down abruptly.

Aluminum grew in that period by taking over products from traditional materials, replacing wood and steel in windows and siding, replacing copper in electrical cable, substituting for steel in beverage cans. In the latter case it did so with such success that in the US 100% of all beverage cans are made of aluminum. Americans consume a can a day for every man, woman and child – almost 100 billion cans a year. And the recycling of those purchased cans through the industry’s remelting and rolling facilities, back into filled cans and on to the supermarket shelves again, takes, on average, only six weeks.

Somebody once said that aluminum was the second dullest industry after cement. I suggest that this track record of development and expansion gives the lie to that and there’s more to come, as you’ll hear later.

Aluminum is a capital-intensive business, certainly at the primary aluminum (the raw metal) end. The typical unit of smelting capacity (that is put in by individual companies around the world) costs about US $1 billion and takes about three years to build. Upstream of that are necessary investments in alumina refineries that process the ore – bauxite – and those again typically cost about US $1.0 billion to $1.5 billion and take three to four years to build.

Now aluminum is a commodity business, that is to say that, in its primary ingot form, it is anonymous and easily traded around the world via metal exchanges. Like most commodity businesses, it is subject to cyclical swings in demand, in different countries. However, as in the last rolling world recession, overall world demand continues to grow. Producers can normally plan their investments with some confidence, in the light of overall world growth forecasts.

What was not foreseeable was the abrupt arrival in these relatively predictable Western world markets of a formidable chunk of production capacity from outside those markets. I refer, of course, to the CIS aluminum industry, which is in fact very largely located in Russia, and which, for ease of understanding, I shall refer to as the Russian industry, even though Tajhikistan and Kazakhstan also play a part.

With the collapse of the Soviet Union, the internal markets that had previously absorbed that country’s aluminum output also dried up. Primary aluminum ingot is a highly fungible (interchangeable) material and a very efficient terminal commodity market for it exists in the form of the London Metal Exchange. The obvious route to dispose of the continuing Russian production, and for them to earn much needed hard currency, was to export it. Russian exports climbed very steeply – from about 200,000 tonnes per year in the late 1980s to over 2 million tonnes in 1993, a tenfold increase. This is equivalent to suddenly adding about 15% to Western world capacity – an addition which, if it had occurred under normal Western market conditions, could have been seen coming for three to five years at least and would have required a total investment of about $20 billion. In effect, a major industry, operating under the conditions of a command economy – indeterminate costs, few environmental controls, no requirement for shareholder returns – was suddenly dropped into the Western market economy.

The consequence of this abrupt and abnormal bouleversement of the world aluminum supply-demand balance was to drive world prices in 1993 down to their lowest level ever, in real terms. The reaction by individual companies in the West has been to cut back on their production. Alcan has certainly done that at its facilities in Brazil, Australia, the UK and the US, as well as here in Canada. Even the Russians have been persuaded, by five Western governments, to cut back their production, though with their domestic consumption still falling steeply, whether this will result in a reduction in their exports remains to be seen.

Alcan’s management actions

Inside the company, we have also made some very effective cuts in our own production costs. Comparing 1993 with 1990, while our sales volumes in tonnes were up by 5 per cent, our annual costs were lower by US $1 billion, of which the major part was due to direct management action. Unfortunately this was not sufficient to offset the reduction in sales revenues, which fell by $1.5 billion between the two years. The encouraging aspect is that in the last few months, the market prices have risen somewhat, in response to production cutbacks and strong demand all around the world. However, these price levels are still far from stable.

One thing that we have learnt from all this is in today’s world we have to learn to expect the unexpected – and not only to expect it, but also adapt to, and live with, the unexpected. Fundamentally, for most businesses, this means having the lowest cost possible. This is the only insurance you have against the unexpected, and even this may not protect you from a year or two of pain if, as in our case, a new arrival among the competitors is playing by quite different rules.

Exciting growth prospects over the next decade

I said earlier that the aluminum business had a development record that is very far from dull. Looking ahead, there are some exciting growth prospects over the next decade. While North America is at a relatively mature stage in its consumption of aluminum, growth in Europe is continuing and will accelerate as conditions improve in Eastern Europe, and in due course Russia. Currently, and for some time to come, it is the Asian region that is showing dramatic growth. Japan will be emerging from its current difficulties and again be a major consumer. In the southeast Asian countries, growth remains at around 8% per annum. Above all, China, with double-digit industrial production growth in the last few years and with its population of more than 1.2 billion, is a vast untapped market. Alcan’s association with China goes back to the 1930s, and we have had in China a joint-venture operation with the government’s nonferrous metals corporation, C.N.N.C., and our Japanese partner since 1986. With its innate mercantile instincts and increasing state support for economic growth, China is an exciting prospect for us as it is for many other companies. China, and indeed the whole of the southeast Asian region, is a prospect which Canadian business should be taking very seriously.

A recent statement by a prominent Deutsche Bank economist pointed out that more than half of world economic growth in this decade will occur in the Asian region. This means that by the year 2000 the NAFTA economy will be substantially smaller than that of the Asia-Pacific region. In our industry, one-third of the whole world’s incremental consumption of aluminum to the year 2000 will be in Asia. Our experience is that to do business in Asia one needs to build relationships – and that takes time. If we in Canada are to participate in the growth in Asian markets, it is vital to take the first steps now, or risk being left behind in the race.

As far as end-use markets for aluminum are concerned, probably the most exciting prospect is the automobile. The use of aluminum in the automobile has been growing steadily over the past ten years. Some of you may not be aware of where aluminum is being used. You may be familiar with it in engine components such as pistons, cylinder heads, transmission housings. But do you recognize it in wheels, radiators, even the canisters for your car’s air bags? These applications are already established and will steadily grow. But the big breakthrough, the real excitement, is in the prospect of making the entire body structure of aluminum – not just the doors, the trunk, lid and hood, but the structure itself. This can save 400 pounds in the weight of a typical midsize car, with resulting economies in fuel consumption and reduced exhaust emissions, not to speak of the corrosion resistance that aluminum offers as well as the metal’s recyclable value at the end of the car’s life.

This prospect is nearer than you may think. At Alcan’s annual shareholders’ meeting last April, we had on demonstration an all-aluminum version of the Ford Mercury Sable, one of 40 which have been built for testing using Alcan’s technology for the structure. We have had a ten-year research program, costing $100 million, to develop alloys and joining techniques, including adhesive bonding, which allow car manufacturers to use essentially the same manufacturing process for aluminum as they use currently for steel, thereby avoiding the millions of dollars to retool.

Alcan’s technology was from the beginning aimed at high-volume production of middle-of-the-road cars (if I may use the expression!) rather than small-volume production of specialty vehicles. It is in the mass-produced models that the real volume market lies that we should see developing over the next ten years. By the year 2010 the world auto industry could consume as much as three times the aluminum it does today. The additional shipments to this market alone could require the equivalent of the output of thirty to forty additional world-scale aluminum smelters, although by that time a growing part of this would come from recycled aluminum.

The lessons of the swinging decade

This, then, has been the pattern of the aluminum industry over the past ten years. Growth slowing down in the 1980s, compared with earlier decades, then being sideswiped since 1990 by the fallout from the collapse of the Soviet Union. The industry has been struggling with this abnormal supply situation even though demand growth has been maintained over the multi-country recession of the early 1990s. The demand outlook for the next decade is promising, particularly in the automotive market, where ten years of development work is beginning to pay off.

How has Alcan changed in this swinging decade? In the early 1980s, concerned about the slower growth in our traditional markets, we set out to explore new businesses that would bring added growth and profit. We did so by developing new technologies related to our mainstream business and seeking new markets for the products that emerged. At the time this appeared a logical approach, building on strengths we already had and not simply making acquisitions on a purely financial basis.

Ten years or so later, the success rate has turned out to be dismal and we have learned a number of lessons the hard way. Diversification, even into technologically related fields, is not easy. The time scale is very long and the success rate is low. In many cases the technology was developed successfully, but building bridges to the market proved to be the biggest problem and in some cases the market just did not exist – what we had was a product looking for a market! In addition, there is always the problem of managing small businesses within the context of a large company organization. Fully-owned subsidiaries face competition from single-minded, low-overhead entrepreneurs. They will inevitably carry some of the large company baggage of administrative procedures, despite the best efforts to relieve them of it. Further, the people skills and attitudes required in a small semi-independent business are different from those of a large, capital-intensive operation. Someone once described it as the difference between driving a Mustang and a 40-ton truck! Finally, as the cash availability from the Alcan parent became progressively tighter with decreasing earnings, both financial support and management enthusiasm for continued nurturing of these businesses was in increasingly short supply.

By the early 1990s, certainly by 1992, two things were causing Alcan’s management to take a long, hard look at where it was going. One was the extreme pressure on earnings caused by the Russian situation I have described. Despite the cost savings we were achieving, we were not keeping pace with the fall in sales revenues, even though we were increasing sales volumes and market share in a number of markets. The other was a view that we were heading for a possibly protracted period of disinflation, if not deflation, and that, in common with other raw material producers, we would have to live with world prices that would still be cyclical, but fluctuating about a lower average level than in the past.

Accordingly, we undertook an intensive study, first the market outlook and probable prices, sector by sector, and country by country – a massive undertaking – and then of the viability of each of our businesses in the light of that scenario. For the benefit of investors present, we did this by comparing the net present value of forward earnings for each business (we have over 125) with the capital employed in that business. I will spare you any further detail, but suffice it to say that it gave us an objective indicator of businesses that were potentially wealth-creating, those that were wealth-diluting and those that were actually wealth-destroying.

Overall conclusions of study

The study threw up two important overall conclusions. One was that aluminum is a good and growing business to be in, provided that a company is a really low cost producer. The second is that Alcan does have the assets, the technology and the market position to succeed in the new and tougher kind of market that we were seeing out ahead.

In the light of these findings and the analysis of our businesses, we announced a management reorganization and a revised set of strategic priorities at the end of last year. Again I will not go into details, but these essentially boil down to four key elements:

1.  Be the low cost producer

2.  Focus on areas of comparative advantage, particularly in primary aluminum production and rolling

3.  Spin off businesses offering little long-term shareholder value and redeploy the proceeds

4.  Develop high growth market opportunities, particularly in the automotive sector and in Asia

I’m happy to report that we are moving successfully in all these areas.

This, then, has been the swing in Alcan over the past decade. A diversifying response to the slow growth prospects in the mid-1980s, a cyclical earnings peak towards the end of the decade, followed by a downward trend of prices and earnings, driven by accelerating Russian exports since 1990, and now a strategic regrouping around the core parts of the business where we are strong worldwide. In the course of navigating the business rapids of the last ten years, there are a number of trends we have seen that are, I believe, important to anyone facing international competition. Let me conclude by mentioning a few of them.

Trends in international competition

Conventional wisdom has it that high-tech businesses are less vulnerable to competition than commodity businesses. In our higher-tech businesses we thought there was a greater protection offered by in-house technological advantages, until we observed that with the increasing scope and penetration of information technology, process control can easily be made cheaper and more accessible. This results in what I might call “creeping commoditization,” pulling down individual walls of technological advantage and reducing the kind of price premium that such advantage used to command.

A second feature is that global competition is able to harness offshore sources of low-cost labor, whose productivity can be leveraged by the same transfer of technology that I have just mentioned.

A third observation is that global competition, sooner or later, leads to a minor number of large suppliers dealing with a smaller number of large customers, squeezing out minor suppliers, who, in order to succeed, have to identify and supply niche markets.

The one common defense against all these trends – “creeping commoditization”, low-cost offshore labor and staying as one of the large suppliers or becoming a successful niche supplier – is to ensure rapid and continuous improvement in all facets of the business. Focus on the customers’ needs and benchmark your way to and benchmark your way to become the best – nurture innovation and people involvement. How often have you heard that? But I can tell you from personal experience that it is a must, and it does indeed work.

Finally – as if this weren’t enough – we have to do all this in the context of changing social values. We are all captives – and beneficiaries – of the concept of sustainable development. The conservation of our resources, the environmentally correct operation of our manufacturing processes, the design and liability for our products – they are all part of today’s management mix.

Another vital human concern, not yet as far advanced in public debate, is that of the social implications of the emergence of this new technology. Technology is being successfully harnessed to produce more with fewer people. Alcan around the world today has 11,000 fewer people than it did in 1990, and yet had record output in 1993, a picture repeated in countless other companies. Evidently, new businesses are being created, often based on new technologies; this is a partial solution to unemployment caused by increased productivity, though it poses massive problems of movement and training of people. But we are facing a serious structural unemployment problem. It will be addressed at the forthcoming World Summit on Social Development in March next year, and we shall hear a lot more about this difficult dilemma in the months and years to come. It may well have the kind of direct impact on our people policies and priorities that the environmental revolution has had on our operating practices over the past few years.

Change in global context

I have talked about the swings over the past decade that the aluminum industry and Alcan have faced. What I have really been talking about is change, and change in a global context. As has been said in another connection, “Being a global company is a journey, not a destination. Being global means continuously monitoring the horizon for competitive opportunities, and our internal operations for better ways to do things. It means being secure enough to accept diverse cultures and opinions and mature enough to manage the creativity and innovation they ignite. Finally being global means being in flux, on an ongoing odyssey, accepting change as a constraint and ambiguity as a shipmate.” I believe that this sums up very well the world we live in and the response that it calls for. It is not necessarily comfortable, but it is exciting. What is more, it is the kind of world in which I believe, and I intend, that Alcan will flourish.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Alain J. P. Belda
Vice-Chairman, Alcoa

The Association of American Chambers of Commerce of Latin America, November 18, 1996
Published in The Corporate Report, Edition No. 20 (January 15, 1997)

In talking about customer needs, I am going to concentrate on issues of particular concern in South and Central America and the Caribbean. Let me make it clear that I’m referring to the concept of customer needs in its broader definition, including shareholders and other stakeholders as well as our industrial customers. Many are customers in the usual sense that they buy our products and services, but they are also customers of government policies. Their needs involve expectations, challenges, successes, and failures, and that is what I want to deal with today.

In raising such issues, I am conscious of an old English saying: “Foreigners do not tell jokes on the Queen.” Having lived 40 years of my life in Brazil, a Brazilian national by choice and a Spanish one by birth, I do not consider myself a foreigner. So please grant me the license for any appropriate irreverence.

Our company has operated in the Central/South Americas and the Caribbean since the early 1920s. We have, at replacement cost, about US$3 billion invested and around 25,000 employees. Our major operations are in Brazil, from where we manage our South American businesses. We also have plants in Mexico, Jamaica, Surinam, Colombia, Peru, Chile and Argentina. We produce alumina, aluminum, rolled products, extrusions, castings, plastic caps, PET bottles and automotive wire harnesses, for domestic and export markets.

Our investment decisions have been based on the potential of Latin America, its vast natural resources, and the prospect of developing significant internal markets, specifically those of Venezuela, Mexico, Brazil, and Argentina.

Our ultimate goal has been to achieve an important share in the internal markets of Latin America. This has been attained, but of a market much smaller than we had expected – in fact, a market that has not physically grown in the last 15 years.

Our bet was that, over time, the governments of this region would discharge with competence the role of promoters and defenders of economic and political freedom – which, we believed, would result in economic and market development, driving growth in local consumption and exports of alumina, aluminum, and fabricated products. Pretty simple.

We did not expect perfect free market economies – God knows how many of those there are around the world – but we did expect, in some reasonable time frame, sound economic development. We believed it was possible to grow these markets and to achieve developed economies, growth in per capita income, and rising consumption patterns, if not immediately, if not soon, at least in this century!

We invested on this expectation. We did not cut corners on environmental responsibility, safety, education of our people and customers, technology, or quality. We knew the political and economic risks we were taking as we made these investments. We were aware of the historic context of this region, of having political policies in conflict with economic freedom and the workings of a market economy.

This problem, we felt, was at the source of the gap in GDP per capita between the countries of Latin America and the US. We were convinced that this would change, given the opportunity in the 1960s of a booming world economy and the effort at the local level of encouraging exports and developing a competitive local market-mainly in Brazil, Argentina, and Mexico.

Unfortunately, this gap has continued to grow rather than close, and it has worsened as a consequence of developments in the last 15 years. Roberto Campos once wrote an article stating that there are some countries “that never miss an opportunity of missing an opportunity.” We as a region missed the opportunities presented to us in the natural resource export cycle of the previous century and did it again in the import substitution cycle of this century.

We failed on both cycles to develop our internal markets, which was the driving force in the great development of the US. What we have seen is a history of unfulfilled promises. A gap between words and actions. A lack of political commitment and managerial ability to implement. A gap between the vision, developed or copied from abroad, and the necessary adaptation to local reality. As a whole, we were not prepared politically, collectively, or individually to pay the price required. Or maybe we paid the price too many times-without results.

The fundamental requirements – efficiency in the internal markets, removal of infrastructure constraints, promotion of internal savings and financing of consumption – were defeated by internal politics, the elite’s self interest, incompetence, and government competition with the private sector for resources. The bottom line has been that we failed to create an internal market and a competitive non-export industrial sector.

The last debt crisis finally ended the import substitution model which had lasted well beyond its usefulness. Trade has been liberalized, and we are at last forced to compete against imports. We seem finally to have curbed our addiction to inflation, and we are beginning to talk about the real issues and opportunities available. Will we understand this time that you cannot have a fixed exchange rate if you do not subordinate monetary policy to that fixed rate?

The options are quite clear: either give up monetary independence and fix the rates, or fluctuate the rates and have a flexible monetary policy. Will we be successful this time? Will we be ready to adopt the discipline required? Will we create an environment where there is less reluctance to invest, to develop technology, to finance consumption? Will we face the fiscal policy issues, the social security issue, the health and education issues required to provide a minimum of competitiveness? Will we create a strong local market and an agile, competitive export sector? Will we provide a stable economic environment that will promote all of this?

If we are to meet these challenges, we had better prepare-because it is not going to be easy. The developed world will make our job harder. Tolerances are tighter, demands for quality are greater, time is essential, costs are under greater pressure, and technology and design are as important as cost and quantity.

In a liberalized world economy – or in a managed trade economy – major players in the developed world will protect their own jobs and industries with ever more ingenious non-tariff barriers. There will be no room for giving in to local pressure groups, as we have done so many times before, at the cost of implementing half-baked policies that result in sub-optimum performances.

So where does that leave our customers? From the time Alcoa started to invest in Latin America and the Caribbean, we have practiced the same values by which we operate worldwide. These values include attention to safety, environment, quality, integrity, and respect for employees. There are no concessions made in these areas.

We require from our investments financial performance in line with the cost of capital, as this is the source of employment stability and of growth. We operate locally with the same quality standards that we use in any of our worldwide plants, and we treat our local customers in the same way we treat global customers such as Ford, Tetrapack, Valeo, Coke, and Pepsi.

We offer access to our design centers and technical labs, our worldwide contacts, and our knowledge of opportunities and applications. We have embarked on a new business process, based on JIT, total waste management, and supply chain management. We believe this will create competitive advantages for us and for those whom we supply. This is in line with the expectation of a much harder competitive market, and our intention is to provide a competitive edge for customers who are dedicated to the growth of the local market.

Where will Alcoa be as these events unfold? We will be where we have been. It has been a profitable venture, albeit disappointing in terms of our own expectations. We will continue to bet on Latin America, believing that the local governments will eventually restrict themselves to their fundamental roles and will do so with competence.

We will continue to believe in the competence of our people. We have plenty of evidence of that. We have Brazilians running plants in China, Europe, and North America. We have Mexicans in North America and in Europe. And in Brazil we have just been awarded the quality recognition equivalent of the Malcolm Baldridge Award in the US. Given the opportunity, our people consistently excel. Here in Latin America, we have achieved higher levels of productivity, deployment of quality tools, people involvement, and safety than anywhere else in our system.

We will be here – ready to invest for local or export markets, in our established fields of expertise or in others where opportunities are available based on our knowledge of the area and its people. Above all, we are confident that the time has arrived when it will be possible to realize the real wealth of these countries, their internal markets, their people.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Daniel P. Burnham
President, AlliedSignal Aerospace

Aerospace Industries Association of Canada, Ottawa, September 18, 1995
Published in The Corporate Report No. 14 (October 19, 1995)

Let’s start today with a bit of good news: after a long and gloomy dark spell, the future prospects for our industry are brightening. The signs of the eagerly awaited recovery are clear: the total value of all the Airbus and Boeing orders announced last spring at the Paris Air Show was something like three times the total value of the orders announced at the Show in ‘93. This past quarter, the unfilled order backlog for US commercial transports increased for the first time since 1990. Nineteen ninety-four was the best year in a decade for business aircraft. And, the airlines are slowly but steadily improving their profitability.

But it’s still not time to call out the brass band and start the celebrations. Our industry still faces sobering challenges across all the markets, defense and commercial: government spending everywhere is being held in check; the commercial airlines balance sheets are still a shambles; terrible excess capacity – especially among the airframers, forcing awful price wars; and, new markets seem to grow only in fits and starts. All of us have to navigate through this difficult air space. To succeed, we must continue the hard work to fix our flaws before they cripple us, and to identify and build on our strengths. The worst possible thing would be to take undue encouragement from today’s positive trends and revert to the old ways of doing business. The gallows (not Gallois) have not been dismantled. Those of us at AlliedSignal Aerospace think we’ve filed the right flight plan for our future by keeping a heading aimed straight at Total Quality. Our flight plan’s key elements: satisfying customers; eliminating defects throughout our processes; a profound belief that things must always change, and for the better; and motivating proud employees. You might call our overall strategy “Investing in Excellence.”

Investing to satisfy customers

The most important things we’re doing are making investments to better satisfy our customers, and working to transform customer relationships into partnerships.

We know that “time” now drives every market. We’ve got to have an insatiable itch for speed. Everywhere, we’re adopting process mapping and time-based measures. And we have to keep moving from being a function-based organization to becoming process-based.

At all our major facilities, we’re reconfiguring factory lines for lean manufacturing, incorporating the just-in-time principles of continuous flow and pull production. Once we pick up a product, we don’t want to put it down till we ship it to the customer. We’re investing millions of dollars worth of peoples’ time – in kaizen teams and in a passionate focus on eliminating non-value-added activities that slow our speed – in Toronto, as well as Arizona, California, Kansas, Connecticut and New Jersey. Our benchmarks each year are a 6% improvement in productivity and a 20% improvement in lead time year over year. Lean production can pay dividends right away. At one plant in Maryland, productivity was up 25% early this year, work in process was reduced 80%, and fill rates nearly tripled.

Achieving lean manufacturing is an essential part of satisfying customers, and so is maintaining and extending process-based quality by practicing kaizen. Continuous improvement means the status quo is never acceptable. Or, as former President Ronald Reagan liked to say, “status quo” is just Latin for “the mess we’re currently in.”

In the spirit of partnership with our customers, more than 60 of our own Total Quality teams are joint teams with customers – with all the airlines, every major airframe manufacturer, and even government agencies. I like to think we’re in a unique position in this industry because we supply nearly every segment – OEMs, small manufacturers as well as large, repair and overhaul, and avionics to the after-market.

Major customers of our Canadian operations include the government and the international airlines, as well as fellow companies like Aerospatiale, Boeing, Bombardier, P&W Canada, McDonnell Douglas, Airbus, British Aerospace and Liebherr-Aero-Technik. Here as elsewhere, we know we sure haven’t achieved 100% customer satisfaction yet, but we’re working hard to improve; we occasionally stumble, but we will keep on improving.

The easier we make it for customers to do business with us, the more of their business we’ll win. That’s axiomatic. What this increasingly means is integrating our products into systems, and systems into solutions. Today, vendors and suppliers are willing to play a greater role in working on designs at the system and subsystem level. That includes teaming up with airframe builders and sharing in the responsibility of helping develop new aircraft from the ground up. We share development risks as well as investment costs.

I know that Bombardier, for example, is using an international team that includes Learjet, DeHavilland and Shorts Brothers and us to develop the new Lear 45. Close teamwork with trusted suppliers leads to healthy savings in cost as well as speeds up time-to-market.

Our 777 Air Supply and Cabin Pressure Controller Team in Toronto recently received a splendid letter from Boeing praising them for exemplifying the qualities AlliedSignal strives to demonstrate: Integrity, Teamwork, Speed, Innovation, Performance. The Toronto Air Supply and Cabin Pressure Controller Team, Boeing wrote, “paved the way for a very successful Flight Test Program and 777 Certification.”

Investing in quality

Everybody in the world, of course, talks quality; there are over 6,000 books in print with “quality” in the title. Our task is to make sure we’re among the people who don’t just talk about it, but do it.

One of the most important things we’ve done is adopt a bold campaign of universal employee education in Total Quality. All 40,000 of our people – including the more than 1,400 here in Canada – have been taught the basics of Total Quality in a four-day program aimed at developing the problem-solving skills of employee teams empowered to make changes happen. Doing this helped us jump-start a TQ mind set throughout the company.

Twenty-five hundred Total Quality teams are in action throughout AlliedSignal Aerospace attacking problems and making improvements at many levels. Tomorrow there may be thousands more. Among many rock-solid achievements, they’ve already cut wheels and brakes repair and overhaul turnaround times to a typical average of six days – down from one month.

Now, we’re continuing to press ahead with increasingly ambitious quality goals and more sophisticated quality practices to make these kinds of results routine. This year we’re scheduling another wave of four-day Total Quality Leadership training sessions to give every one of us more advanced skills to apply to our individual organizations and day-to-day work teams.

Also, we’ve been working to earn ISO 9000 certification for all 44 of our facilities. Both our Montreal and Toronto operating units already are approved to ISO 9001. We’re not just committed to Total Quality but energized to achieve it. Of course, we realize that while we may be trailblazing in ISO certification, we know certification is just the beginning. The tough job of maintaining the systems in place at each site is just getting under way, which means we’ve got to keep ourselves motivated.

In addition to ISO 9000, we’re also adopting AQS, an Advanced Quality System that encompasses statistical process controls as well as variability reduction. And, we’re convinced of the power of six sigma defect reduction to help us make defects a rare and almost unheard-of event. Pursuing six sigma is our way of setting a lofty but achievable target – a 50% annual reduction in defects is our internal benchmark – a goal that also gives customers very high expectations for our product quality.

Already the majority of projects we’ve selected for 50% defect reduction this year are right on target to achieve it. In Toronto, for example, our System and Software Development engineers have cut software defects to just two per one thousand lines of code, twice as good as their 1995 goals. And they’ve boosted productivity 75% higher than their target for the year. Now they’re implementing an automated electronic System/Software Engineering Environment to reap further quality and productivity improvements.

To meet the ultimate challenge of becoming defect-free in all our processes, we’ve devised a corporate wide program of “Operational Excellence.” Reducing variation isn’t new, but Operational Excellence will focus on a product as it flows through the entire engineering, manufacturing, and servicing processes, not just when it’s ready to ship. We’ll track defects at each stage and reduce scrap all along the route. We expect the higher yields and lower inspection and rework costs to pay handsome financial dividends. In fact, AlliedSignal Corporation will save over $1 billion annually with this program.

Investing in change

We also expect, and are actively preparing for, continuous change in the future. “Operational Excellence” is not a short-term program. Neither is the idea of “Investing in Excellence.” AlliedSignal’s in it for the long haul.

But any strategy that hopes to achieve success must include something more than just a combination of techniques. True business success doesn’t derive from a simple formula, nor do a set of predetermined policies automatically lead to prosperity. There’s something else that’s needed: an attitude, a sense of organizational and personal self-confidence, a feeling of competitive urgency, in short, some sort of vital spark that can ignite performance. It’s this “spark” that separates companies that are determined to keep changing, to keep becoming more distinctive and more successful, from those that are content with merely reliable practices and steady but unspectacular achievement.

At AlliedSignal Aerospace, we try to convey a sense of controlled panic within our organization because, all around us, customers are demanding ever-higher levels of quality and competitors are making dramatic progress in delivering them. Each plateau we arrive at, someone else has led the way or is right behind. So, we need to keep changing, keep raising our standards, setting new targets and bolder goals.

Investing in our employees

So, in addition to investing in state-of-the-art quality processes and training, we’re also changing the way we lead our employees. Instead of managing through hierarchical layers, we’re now solving problems and revamping processes through cross-functional teams of employees from different disciplines and reporting relationships. Instead of just tapping managers’ brains, we’re asking for ideas from every single employee on how to do his or her job faster, smarter and more economically.

People are excited to be asked. They feel a great sense of satisfaction when they see that not only is management serious about change, but also willing to implement their ideas. Building proud, capable, self-assured, forward-thinking employee teams is the best way we know to fulfill our vision.

We’ve upgraded our supply of talent. First, by confronting the tough reality of having more layers of employees than the business could support. But becoming world-class involves a good deal more than census cuts. Over the past few years we’ve hired more than 3,000 professionals around the world to lead us on the path to distinction. We did this in the face of a depression throughout our markets: industry revenues were declining 10% per year (we were declining at 4% – though we’re growing about 8% this year). We reduced our salaried payroll by a total of 10,000 – but still we hired these 3,000 from companies in and out of the industry, and from the top universities in the world. To move forward quickly, bold strides like this were essential.

I can recall several years ago, soon after getting my present assignment and just as the industry was starting into its long slide, I happened to be in Toronto for a plant tour. I asked one of our young tour guides how she thought the Canadian workforce would cope with the changes that seemed inevitable if our company was going to remain competitive. “No problem,” she replied, “We’re up for it.” At the time, I thought her remark was a bit presumptuous since, historically, you know, Canada has a reputation of being a conservative nation. But, as I stand here today, I’m pleased to say that this young woman was quite right!

Canadians are certainly “up for it.” In fact, it’s been my experience that Canadians are clearly leaders in the change process! Our more than 1,400 Canadian Aerospace employees are among AlliedSignal’s most productive around the globe. In 1995, they’re already on track to exceed $150 million US dollars in sales revenues – 85% exported. Our AlliedSignal Canada facilities span the country from the Atlantic to the Pacific and are growing in number, and our work teams here cross sectors, business units and national borders with ease.

Realizing a return on our investments

The kinds of changes we’ve made to earn customer kudos, quality certification and employee support are fundamental, not superficial; pervasive, not incidental; enduring, not fleeting. Have they made a difference? The answer is a resounding yes. Do they carry a cost? The answer is also yes. Investing what’s needed to train employees in quality and then both implement their training throughout the organization as well as upgrade individual processes costs us in the tens of millions of dollars annually. Investments of that magnitude must have specific and tangible results.

And, make no mistake, the payoff has been handsome. Overall our structural costs have declined by 30%; working capital turns have increased by two; the cycle times have been reduced by one-third. We consistently set records in profitability, regardless of the economic cycle.

But the most eloquent testimony to the power of the kinds of changes we’ve made is in our win rates, which have risen substantially. We track them with a rolling three-quarter average, and for some recent periods we have won as much as 80% of the available business, double the past. Our Canadian win rates have been a direct result of strategic partnering with the government of Canada.

It is important for Canada’s leadership to continue its strategic investment environment – despite funding uncertainties at the government level – in order to keep the aerospace industry growing in Canada. Your investment R&D tax credits have been the best in the world. That’s reflected in all of our companies wanting to do business here. We hope tax credits and strategic investment can be maintained, so that the best companies aren’t tempted to move elsewhere.

Globalization: the challenge of the 1990s

So where do we go from here? Well, one of our major corporate strategies at AlliedSignal is growth through globalization. Not only seeking major new markets like India and China, but also serving the entire global demand for selected products through individual company centers of excellence, or “world product” mandates. We prefer when our products are built in just one place, to productively meet the demanding requirements of AlliedSignal customers wherever they are located.

Our Canadian manufacturing facilities have prospered on a strong foundation of building a world product mandate for the electronic controls for environmental control systems. Now, they have these mandates for power management and generation systems, as well as for ice detection and protection systems. This year, they’ve scored a worldwide hit with our Electro-Thermal Ice Protection System, which is already going on board nearly 170 Scandinavian Airlines, Swissair and Continental Airlines MD-80s. And for the new Boeing 777, they’ll produce 300 pressure/temperature/flow sensors and the air supply cabin pressure controller. And our Canadian support operations enable us to contract for the repair and overhaul of aerospace products from over 160 international OEMs.

For all of us in the aerospace business today, our market is global and so is the competition. In the future, I believe we’ll increasingly find our mutual success tied more and more to global opportunities.

The market challenges and traumas of the last few years have presented us with an opportunity to become a lot better at our business than we were. Our challenge now is to keep our hard-won edge. We must remain uncomfortable with the organizational structures we’ve put in place and keep investing in our workforce. Even with the quality gains we’re making, we’re still a long way from reaching the quality levels of the very best in the world, like Toyota and Motorola. And we certainly can not become complacent in our relationships with our customers. In today’s competitive environment, customers are much too valuable to take for granted.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Richard C. Notebaert
Chairman & CEO, Ameritech

Wall Street Journal Technology Summit, New York, October 6, 1998
Published in The Corporate Report No. 26 (January 31, 1999)

It is a genuine pleasure to join you this afternoon – and an honor to be among the prestigious group of industry leaders The Wall Street Journal has gathered for this two-day summit. I couldn’t help but notice that I am the only speaker on the agenda who leads what used to be known as an RBOC. Maybe that’s because our ranks are shrinking! Or perhaps, as someone suggested to me, my inclusion on the program might be in recognition of the place companies like Ameritech have held in the heritage of this industry.

Indeed, we do take pride in our century-long tradition of delivering outstanding communications services – as well as what that has meant to the progress and prosperity of this nation. To tell you the truth, though, we spend very little time thinking about that. Instead, our attention is riveted on the future, and especially on the far more aggressive role we intend to play in the 21st century as compared to the contributions we made in the 20th. Our objective comes as little surprise to many of you. But I suspect at least a few members of this audience reacted to what I just said with a fair degree of skepticism. After all, you’ve read the opinion pieces declaring us so out of touch we’ll never know what hit us. You’re familiar with the conventional wisdom that we’re saddled with a decrepit infrastructure. And then there’s the charge that really makes me smile – that we move so hopelessly slow we might as well accept eating dust as our destiny.

Of course, if you’re a competitor of mine, I’d just as soon you accepted all that nonsense as reality. In fact, you should just feel free to take a little after-lunch siesta and I’ll wake you when I’m done. But for those of you who intend to leave this conference with a comprehensive understanding of where this industry is headed, let me offer a bit of insight into our view of that future. Where I can, I’ll represent the entire segment – the incumbent local exchange carriers, or ILECs, if you will. Of course, the examples I’ll share are necessarily from Ameritech – first, because that’s what is most familiar to me, and second, because I truly can’t think of any other company with a better story to tell!

First of all, we get it. We understand that customer requirements for communications solutions are exploding. That these solutions are integral to how our customers do business and to how successful they will be in the competitive global marketplace. And that these solutions hold enormous potential for those of us who look at this business through the eyes of the customer – and then respond with flexibility and technological savvy. If that sounds a bit too theoretical, let me share some information that’s a good deal more concrete. On the network investment side, we’re putting our money where our mouth is. Just four years ago, in 1994, we spent US$1.9 billion on our in-region infrastructure. This year, we’re spending US$2.9 billion, in a combination of wireline, wireless, internet, long distance, new advanced broadband for cable and more. That represents a significant spike in our investment. And an extraordinary commitment to serving customers.

What’s more, those customers are indeed reaping benefits. Take new services. Unlike many of our counterparts and competitors, Ameritech only talks about new services when they are actually available. That’s our policy. So there will be no scoops here – no hype about possibilities still on the drawing board. Instead, let me mention two products that we’ve rolled out just in the last 30 days. Take Ameritech Privacy Manager, a breakthrough service that stops most unidentified telemarketing and other unwanted calls. When a call arrives with Caller ID designations like “unavailable,” or “blocked,” the caller is asked to record his or her name before the call rings into the home. When that happens, the customer is told who is calling and then has the option to take the call, reject the call, or play a pre-recorded message asking that his or her name be added to a “do not call” list. (By the way, that is a legally binding request.) The best news is that in tests of this product, we learned that seven of ten unidentified callers refuse to give their names. That means 70% of unwanted calls no longer interrupt our customers! The phone never even rings. And is that something customers care about? Well, they ordered more Privacy Manager in the first two days than our sales projections for the first two weeks!

Or take Ameritech’s AutoVAN service that connects business customers to the Automotive Network eXchange or ANX. The ANX is an extranet that enables the Big Three automakers to share email, files and computer-aided designs with their suppliers – a far better solution than the proprietary and redundant network connections that suppliers had to maintain in the past. Now Ameritech AutoVAN provides the connectivity, equipment and service that suppliers need to access the ANX network. Suppliers can buy router service, using either frame relay, SMDS or ATM access at speeds ranging from 56 kilobits per second to T3. And simplicity is not this product’s only advantage. It also offers outstanding security for the proprietary information shared between the players in this highly competitive industry.

AutoVAN illustrates the direction companies like Ameritech are headed. We are focused on offering new services that meet real customer needs. And we understand that those needs increasingly require innovative data applications. In fact, for Ameritech, 1998 has become something of a watershed year. For the first time, half of the traffic we carry will be between computers instead of people. And if data traffic continues to grow at its present rate, the percentage is predicted to grow to something like 99% of all network traffic minutes by the year 2010.

We get it. Those who work on the data side of our business are people on a mission. They constantly raise the bar on cycle times as they stay on target to generate US$1.5 billion in data revenues in 1998. They build relationships that offer insight and experience into virtually every technology that comes down the pike. As one example, Ameritech has surpassed AT&T as the largest carrier reseller of Cisco equipment – and we are the only carrier with both Bay and Cisco certified data expertise. Most of all, our people live for the implementation of data solutions – wherever customer needs demand them and regulatory impediments can be overcome.

Our people celebrated the University of Michigan’s decision to offer Ameritech ADSL connections to 20,000 off-campus students and faculty members. In one of the nation’s largest commercial deployments of ADSL, this academic community soon will have a remote link to the university’s data network that provides access to the internet and a host of other resources at speeds 50 times faster than standard modems would allow.

And they take great pride in Chicago’s Network Access Point, or NAP, run by Ameritech to enable ISPs to exchange their internet traffic. Thanks to sound technology decisions made when the National Science Foundation awarded us this responsibility back in 1994, we run the world’s largest ATM NAP – one that carries more than 8 terabytes of information a day, and that doubles its traffic every six months.

But increasing volume is only part of the story. Ameritech’s NAP architecture has been copied by other facilities around the world. And the success of our NAP – as well as the key role we play as the first carrier to be invited to join the Internet 2 consortium – has led to additional responsibilities. For one, the National Science Foundation selected the Chicago NAP as America’s international hub, officially known as the Science and Technology Advanced Research Transit Access Point, or STARTAP, and commonly referred to around Ameritech as NAP 2. Now international internet traffic that is bound for any of the vast American research and education networks is exchanged in Chicago. We have connections in Singapore and France, Japan and the Scandinavian countries. I’m even told we have built quite a brand presence in Israel.

And the momentum continues. Ameritech’s NAP also provides connectivity between the high-performance data networks run by various branches of the US government. In the past, networks like those operated by the Department of Defense or the National Institute of Health spanned the country but were not interconnected. Then, about six months ago, we began to remedy that situation by providing connections for the networks run by our first two federal government customers, NASA and the Department of Energy. Now, don’t wake any of the naysayers who may have taken me up on the offer of a little shuteye. But I trust the rest of you understand that incumbent providers are hardly clueless. And that we are aggressively reinventing our networks and ramping up our expertise. We’re determined to improve the delivery of existing services and to effectively deliver what customers will expect from us in the future.

After all, our fundamental skill-set is the integration of technology. That’s a key component of the long and successful heritage I mentioned earlier. Our predecessors moved from an operator-centered environment to one based on direct dialing. More recently, we moved from an electromechanical to electronic facilities, then we successfully transitioned from analog to digital capabilities. Putting ATM in our network is hardly a revolutionary concept for us. It is simply a logical step in a long-standing evolutionary process.

That process is sharpened by the extraordinary talent that has joined our business from outstanding organizations like Sony, Procter & Gamble and American Express. With 30 years at the company, I’m something of an anomaly. Today, five of the seven members of my senior management team, 64% of our business unit presidents and more than 40% of our product managers have joined Ameritech from careers outside our industry. And their arrival has sparked incredible synergies, as the technical and service expertise of career employees joined forces with strategic, financial and marketing skills honed in leading competitive businesses.

That workforce does not fabricate products. It integrates technologies. But first we understand them. We look long and hard at these things that don’t quite mesh with our architecture. We watch their development and assess their potential benefits to our customers and our company. We work with them through partnerships or venture capital investments. And if we introduce them, it’s at the appropriate time, when their reliability, quality and price points make them desirable to customers.

We’re perfectly comfortable with this thoughtful approach to the future, but it tends to bother those who would like us to put a stake in the ground and declare our preference. “Is it going to be IP over ATM?” they ask. “What’s your commitment to SONET? How will ADSL factor into the future scenario? Will you introduce cable modem to those customers passed by your broadband cable plant?” When someone tries to pin us down, we explain that we are “technology agnostic.” In other words, we are far less concerned about choosing a technology than we are with achieving effective solutions for our customers. That’s because, in our view, most customers of the future will not give a rip about the technology running under their applications.

I concede that today’s early adopters do have a great deal of technological savvy – they’ll ask for the platform they want by name and then give you the specific parameters they expect it to meet. But once solutions have migrated to a larger market, that kind of sophistication will no longer determine customer decisions. They’ll be driven by reliable, high-quality solutions. And that’s what drives our technology decisions as well. So we get it. And our fundamental skill-set of technology integration is serving us well. But can we move fast enough? That’s always the question. And there are actually a number of ways we could frame the answer.

The simplest, of course, is just to say: yes, we can. The fast-paced culture we have built over the last few years has enabled me to talk to you today about brand-new services, impressive data revenues and responsibilities including federal government data connectivity and international internet traffic. These are hardly stories told by a sluggard.

A variation on the answer might be: yes, but sometimes we might seem slow. That answer would point out that statistics often fail to reflect the whole story – especially when comparisons are drawn between a large incumbent provider and a startup with no plant or customers. Say both organizations start down the same track at the same time, with the startup building new plant and the incumbent changing over its assets. Who will reach their goal first?

I’d probably bet on the startup to be quickest to 100% completion. But the incumbent who is only at 20% implemented by that same point may be delivering benefits to many times the number of customers that the startup is able to serve. Can we reasonably point at the incumbent’s progress and say they’re moving too slow? I don’t think so.

And finally, there’s the answer to the question that shouldn’t even be a factor in America’s free-market economy: that to far too great an extent the speed at which America embraces the digital future – and the contribution companies like mine can make to that objective – lies not in our capabilities, but in the hands of policy makers.

There are scores of regulatory decisions that are slowing the process in favor of micro-management rather than speeding it to foster the delivery of services the public wants and needs. Of those, the FCC’s ambiguous response to our 706 filing is only the latest. For those of you who are not familiar with that filing, 706 is a provision in the Telecom Act that requires the FCC to remove regulatory barriers to the deployment of these advanced services. We had anticipated early on that regulators would order data applications to be delivered through a separate subsidiary, so we set our business up that way several years ago. Therefore, that so-called breakthrough portion of the FCC decision was no surprise to us. But we also anticipated – based on tremendous demand from customers for high-speed data capabilities, as well as preliminary opinions expressed by some of the commissioners themselves – that the delivery of data services would be subject to some long distance relief. That clearly was the best way to jump-start investment in this critical area. But no dice. Anti-competitive forces once again made their case for the status quo. And let me offer just a glimpse of what that looks like.

In our headquarters state of Illinois, there are 14 LATAs. Fourteen! That’s more than even California has to deal with. Say that Sears, which is headquartered in suburban Chicago, wants us to provide advanced data capabilities between its offices throughout the state. Here’s the FCC’s solution: build separate network facilities in each of these 14 LATAs. Then negotiate with inter-exchange carriers to hand off these connections across the 13 LATA lines. Then work up a business case based on these ridiculously wasteful and expensive hoops we’ve jumped through, and somehow go to the customer with a cost-effective solution.

It can’t be done. Couldn’t be done before the 706 decision and can’t be done now. The FCC had a chance to look through the windshield and move America forward on that fabled information highway. Instead – once again – they kept their eyes locked on the rearview mirror. And once again, they put the brakes on anything that resembled forward movement. We can only hope they will remedy this when they revisit the 706 issue in February.

Frustrating? Yes. For us. For our counterparts and business partners. For those who understand the potential that companies like ours have to spur America’s global competitiveness and economic growth. And especially for customers who have real needs that we could fill in a heartbeat, if this nation’s regulatory environment were more about vision and less about market manipulation.

But if we’ve learned one thing from the heritage of service I mentioned at the outset of my remarks, it’s tenacity. Now combine that with our broad technological competencies, our substantial financial and human resources, and the enormous strides we’ve made in marketing savvy and competitive spirit. Then place all of that on the foundation of our absolute passion for looking at this business through the eyes of customers – and our uncompromising determination to do whatever it takes to serve those who count on us – and have, for generations. We’re excited about the future and the part we’re going to play in it.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Angus Reid
Chairman & CEO, Angus Reid Group

The Speakers Forum, Toronto, May 8, 1998
Published in The Corporate Report No. 25 (August 31, 1998)

Globalization has been with us for a while now, and it continues to gather force. It is, of course, primarily an economic phenomenon. The global economy features reduced trade barriers and sophisticated new information networks that create ever-increasing volumes of international commerce and investment; worldwide competition brings down prices; production tends to move toward pools of cheap and efficient labor; and so on.

But globalization is also a cultural phenomenon. The homogenization of the world economy also creates pressures to homogenize values – you are, to some degree, what you buy. And values, in turn, define nations. Nations have traditionally wrapped their borders around discrete and recognizable patterns of thought and behavior. Without nuances of political or social differentiation based on traditions and values, it becomes increasingly difficult to make a case for the nation-state.

This is of particular interest to Canadians. After all, our closest neighbor, that last great superpower, is the fountainhead of the cultural onslaught that is taking bites out of traditional values around the world.

Canadians have always been more vulnerable to American influence than citizens of more distant countries, which is one of the reasons that there is a smaller gap between typical Americans and typical English-speaking Canadians than there is between Americans and most other peoples. We Canadians like to think we can spot the differences immediately, but anyone who has traveled internationally knows that the world has trouble telling Yankees and Canucks apart.

Of course there is the argument that Canadians may actually be less vulnerable to psychic takeover than are other nations these days, simply because Canadians have always had to struggle to hold onto their identity, whereas more distant nations are only now discovering that, in a figurative sense, they have also become America’s next-door neighbors.

That’s an interesting argument. It suggests that we Canadians have been inoculated for years, making us more resistant to the bug that’s going around. But one set of numbers that we gathered for our World Monitor clients suggests that this just isn’t true. In a poll that the Angus Reid Group conducted in 32 countries, based on the opinions of 17,761 respondents, we asked whether it is the responsibility of national governments to reduce the difference in income between the rich and the poor.

In most countries, a decisive majority of respondents agreed that it was the government’s responsibility. Germans, for instance, were 75% in favor, and urban Brazilians came in at 83%. At the other end of the scale, only 28% of Americans felt the government has a role to play in lessening the economic disparity of its citizens. Can you guess which nationality came closest to the Americans? Canadians, at 52%.

This still represents a considerable difference in attitudes. Nevertheless, it is worth noting that Canadians, who have been most influenced by the Americans over the century, now think much more like their neighbors than do the citizens of other countries. With the new ease of international communications and increased US economic leverage, will trends in US thought start to pervade more far-off countries as well?

The next question is whether it really matters if societies become interchangeable. After all, Margaret Thatcher used to argue that societies were a non-issue; that only individuals count for anything. Which isn’t that different from the dominant message spilling out of the United States, home to Horatio Alger.

Certainly there is truth to the adage that we humans tend to relate pretty well as individuals, but as soon as we start separating into groups, we tend to divide into “us” and “them.” Which can, of course, lead to finger-pointing, which can ultimately lead to the throwing of spears and missiles.

Pierre Elliott Trudeau has been forever suspicious of nationalism, particularly nationalism based on heritage and entrenched beliefs. His affection for Canada as a nation always seemed to be based on his perception of it as a collection of liberal-minded people rather than as an identifiable tribe.

Yes, there are good arguments for spreading common values, and the Americans are experts at making them. On the other hand, Canada, the United States and their allies have fought and won two tough wars in the last 60 years against tyrants who planned to make the world as homogenous as they could, in their own images: Hitler’s Third Reich, featuring national socialism; and the Soviet Union, featuring communism. Wouldn’t it be ironic if the United States played a major military role in defeating such ideologies of sameness twice – then led an economic march to sameness?

Can’t happen, the Americans will tell you, because their national values are based on the spirit, and the rights, of the individual. Hmmm. If the whole world thought like Americans, would the world be a more individualistic place? Interesting question.

The question at the top of all this musing I am doing, however, is “What does globalization mean to Canadian unity?” So I had better address it. I think our polls indicate that, in terms of the traditional unity worry – relations between Quebec and the Rest of Canada – globalization may actually be performing as a bonding force.

Separatist sentiments have for decades burned passionately in the souls of many Quebecers, most particularly in those of young Quebecers. But wonder of wonders, in a poll we completed in June in Quebec, 44% of Quebecers between the ages of 18-34 said they would vote Liberal, compared to 41% who said they would vote for the Parti Québécois. That isn’t an overwhelming margin, but it does put the majority of the youth vote in the federalist camp for the first time in two decades.

This could always turn out to be a short-term phenomenon. Unemployment is high in Quebec, however, and young Quebecers see as clearly as anyone else that – like it or not – if you don’t look outward in the modern economy, your long-term chances of economic success are likely to suffer. The Parti Québécois can argue all it wants that, since nationhood isn’t as important as it once was, a Quebec nation would do about as well as a Canadian nation on the huge international playing field.

Nevertheless there is a sense of inwardness about the separatist message that doesn’t jibe with the new marketplace. Céline Dion may not be the passionate young Quebecer that Gilles Vigneault was, but is she roundly denounced as a sellout in her home province? Among a minority, undoubtedly, but most Quebecers adore her.

In short, for those many Canadians interested in not having a gaping hole in the middle of the Canadian map, globalization could well prove useful at keeping Canada intact ad mare usque ad mare. On the other hand, will what remains intact continue to be something special, the United Nations’ perennial No. 1 place to live? Or will Canada succumb to the endless erosionary pressures that the waves of globalization bring with them?

There was an intriguing line in the Ottawa Citizen this summer in a book review by Wayne Grady, author of The Quiet Limit of the World. He said: “If we all live in a global village, nobody lives anywhere.”

Will Quebecers reject separating from something special, called Canada, in the 20th century, and end up being part of nothing special, still called Canada, in the 21st century? After all these years of disputes over nationhood, wouldn’t that be the ultimate irony?

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Harold Greenberg
Chairman & CEO, Astral Communications Inc.

The Board of Trade of Metropolitan Montreal, November 28, 1995
Published in The Corporate Report No. 16 (February 29, 1996)

As people who know me will tell you, I am not a shy person. So get ready, because I am going to use some dirty words in my address today: words like culture, protection, vision, leadership and profit. I also want to talk about a new word in the language of a new world. “Convergence” is the new word. It means uniting telephones with television, computers, cable, satellites, publishing and entertainment.

Through satellites, cable and the telephone, we can now pay our bills, view what we want on TV, when we want it, send or receive messages anywhere in the world, and even go shopping electronically.

Bringing all these signals of information and entertainment into the home is what you’ve heard called the information highway. It’s really a superhighway, and it’s turning the world into a supermarket of almost instantly accessible programming. This is fantastic. Soccer from Europe, theater via satellite from London, films from France and, of course, anything and everything from the US.

There are now over 130 communications satellites in space, with more appearing every month – and their footprints are getting bigger and bigger. A new Tokyo satellite will serve Russia, China, Indonesia, and include English-speaking Australia, and New Zealand. A European satellite will cover every country from Finland in the north, to Spain and Italy in the south. Cultural borders are disappearing.

I don’t have a crystal ball to predict what the new communications environment will be or where the development of new media will lead. One thing is certain, though: the 21st century will be an exciting time on the information highway. Canadians have to act quickly or become, as our children would say, roadkill on the information superhighway. However, if we take up the challenge, Montreal could become a hub of the converging communications universe.

Keep in mind that despite a technological revolution, creative content will remain paramount. Like consumers everywhere, Canadians want to be educated and entertained. But unless we are creating programs that people here want to watch, technology will just allow foreign programming to leapfrog over our national boundaries.

Beyond our borders, our English- and French-language producers have gained international respect. If our communications industries are to prosper, we will have to continue to make programming that will enchant the rest of the world.

As former Chairman of the Canadian Culture Community Communications Industries Committee, I fought to keep cultural matters out of the North American Free Trade negotiations, because a country that loses its ability to express itself is no longer a country.

As a board member of Partnership pour le développement économique de Montréal, I want the Federal Government and the Government of Québec to do more to prevent the information highway from becoming a one-way street that promotes the American way of life. It must encourage our Canadian creative talent. Supporting the communications industry will also protect Canadian jobs.

You will recognize as business people that cultural industries are not some obscure activity that benefits just a few intellectuals. In Canada, culture and communications is the ninth most important industry, one of the fastest growing sectors, and it employs some seven hundred thousand people, directly or indirectly. The development of content for domestic and international markets is already a major source of employment and economic growth. This is of particular importance for us here in Montreal, where the communications industry already generates revenues of one and a quarter billion dollars a year and employs twelve thousand people.

I doubt that many people understand the size of this business and the number of people who work in it. In Canada, our industry touches people’s lives every day, and contributes more than $25 billion, or 4% to the gross domestic product.

We must create and produce our own programs, with content that embodies thoughts and opinions which reflect our national realities. Naturally, I am not suggesting we restrict foreign companies from doing business in Canada. Ottawa has reviewed limits on foreign investment in communications industries in a bid to raise more capital, but Canadians will still maintain majority ownership.

The economies of scale and the proximity of the larger, more integrated US industries have always represented difficult challenges to the survival of the industry in Canada, be it English or French.

In the 1970s, Canadian-content rulings for radio spawned a dynamic recording industry here. In the 1980s, efforts by the Federal government through Téléfilm’s Broadcast Fund and SOGIC, a provincial government investment agency, helped increase Canadian content on Canadian TV. Quebec has its own locally produced programming of French TV, and it is by far the most popular type of viewing. The industry here has succeeded in creating its own star system, and its own supporting press which reflects Quebec’s interests and sense of humor. In English-speaking Canada, US shows continue to grab ratings. But we still maintain an expanding Canadian production industry that can and does compete with the best on US television here and on the American networks.

Direct-to-home television, the “death stars,” as they are known – satellites and other pervasive technologies that beam programs across borders – must continue to meet Canadian content regulations and cultural needs, or they may spell the death of Canadian content. If we allow ourselves to be flooded by hundreds and hundreds of American channels, offering thousands of American programs, our content will simply be drowned out.

We are about to go from a world of broadcasting to narrowcasting and perhaps even microcasting. The exchange of information and programming will be dictated almost solely by individual taste and need. Fiber optics, digital compression, and more and more satellites will deliver any one of hundreds, perhaps thousands, of programs to consumers when they want them. Your TV, linked to a personal computer, tied to phone and cable, will be like a cultural supermarket: aisle after aisle, packed with various kinds of programming. It’s imperative the supermarket shelves display quality Canadian programming.

Can we compete with Americans who spend millions of dollars on an hour of TV, tens of millions of dollars per hour on a feature film? To do it, cultural policy supporting the industry will have to be strengthened by the Federal and Quebec governments. We must spur our governments at all levels, including the municipal, to provide the type of industry support that is taken for granted in some other countries. We’re not talking charity; we’re talking good business.

Our programming provides a glimpse of Canadian talent to the world. And despite some of our shortcomings, we are the envy of a lot of countries which see that we continue to exist and flourish just north of what a noted journalist recently called the American elephant – the world’s largest producer of programming content.

We have been able to overcome the dominance of American TV by our knowledge of our marketplace. As Canadians, as Quebecers, as Montrealers, we can point with a great deal of pride to our outstanding achievements in the communications sector. We don’t have to look far beyond the walls of this hotel to find examples of world-class communications enterprises. I am talking about companies which took root here in Montreal and which now command stellar reputations in North America and around the world.

To name a few: BCE, Bell Canada, Nortel, Teleglobe, the National Film Board, SoftImage, Cogeco, Vidéotron, CFCF, Discreet Logic and – one I am particularly proud of – Astral Communications. And there are scores of individuals who have made their mark, including Norman McLaren, Denys Arcand, Claude Jutra, Leonard Cohen, Frederick Bach, Norman Jewison, the Héroux and Fournier Families, André Lamy, Robert Lepage and many others.

We have been leaders in cable, broadcast TV and specialty services, as well as developing state-of-the-art technologies. We have been innovative in the distribution of technology and programming to the world. Canadian communications companies are financially involved in North America, Europe, South America and Asia.

Look at SoftImage, Discreet Logic or Alias. Started by Canadian entrepreneurs not so long ago, they have become leading-edge developers of software to service the international video and film markets. Their products have been used to create 2D and 3D special effects in Aladdin, Jurassic Park, The Mask and Forrest Gump.

My own company has become a leader in entertainment and our Broadcasting group has become Canada’s largest provider of pay, pay-per-view and specialty television services. Over the years, we have become a catalyst between the creative community, technology and delivery of programs to the consumer. We contribute to the creation of films, video and interactive multimedia programming for audiences here and abroad. Right here in Montreal, we now operate the most advanced dubbing studio in the world.

When we established Astral Multimedia to finance, develop, create and distribute educational and entertainment-oriented, multimedia programming for world markets, it was an extension of our philosophy of creator to end user. We have just begun to market a program entitled “Man in the Sea,” an interactive encyclopedia of the marine habitat and human life underwater. We are currently working with creative teams on nine other multimedia projects, under development with partners in Canada, the US and in Europe.

We recently acquired a major interest in Ottawa-based Artech Digital Entertainments Inc., a leading developer of computer-based games, interactive broadcast software and multimedia entertainment. Their products are used throughout North America by Sega, Nintendo, Corel, Viacom and Fox. We operate the largest Canadian-owned, release-print laboratory and provide technical services to Disney, Warner, Fox, Paramount, and Universal. Astral has long-standing partnerships with TF1, Europe’s largest private television network, France 2, the most popular of France’s publicly-owned networks, and recently signed an agreement to participate in the worldwide production of multimedia fiction, animation and documentary programs.

We also just established a joint venture called Mediatoon with Éditions Dupuis, one of Europe’s largest publishers. Our new venture company will develop, finance and distribute programming to supply the international demand for children’s animated programming. Right now, we are financing and developing the animated series Spirou & Fantasio, Flash Gordon and Quasimodo, as well as a second series of Tales of the Wild films, based on the adventure stories of Jack London. Our acquisition of programming now extends to multimedia, online products as well as CD-ROM.

Astral’s affiliate, The Movie Network, provides $1 million a year through FUND (the Foundation to Underwrite New Drama for Pay Television) to assist Canadian writers and producers in the development of original scripts and concepts to be made into movies. Our network, Premier Choix: TVEC, has a similar program.

We are very proud of our industry’s vision for the future and we play an important role. But we and others can do more and should be doing more. Federal and provincial programs to support and promote programming need a shot in the arm.

The Federal Government’s Information Highway Advisory Council has recommended increased tax credit incentives for Canadian producers of content and investors to support new products. I support these incentives. I remain convinced that the protection and promotion of creative properties is a generator of wealth and can help revitalize Montreal.

A skilled, flexible and well-educated work force provides an important competitive advantage for any national economy. If we believe that cultural communication and entertainment represent an important industry, we will need trained workers. So we must place greater emphasis on education, training, and apprenticeship programs in the communications arts at the CEGEPs and universities in Montreal. We are planning an advanced training program to develop the work force needed to implement and provide the expertise.

Times are changing quickly and industry and government have to change with them. And we have to change along side the consumer. Pick up any US trade paper and you will see ads from Disney, Fox, Warner and Dreamworks for trained animators. Over 50% of the animators at Disney come from Canada. Let’s work to keep them here to build our industry.

The consumer will want to be informed, educated, and entertained. He or she will want these things conveniently available, affordable and of high quality. To satisfy the 21st Century customer, and compete with interactive news, education, movies-on-demand, home shopping, video games, major events and general online communications, all of us will need vision and imagination.

We must realize that technology is nothing if it does not contain the programming to attract people’s attention. As Montrealers, we have to understand how we can take advantage of the situation and become an important part of the communications universe here and abroad. I’ve lived here all my life. I know that Montrealers can compete with the world when it comes to quality cultural products, and we can do that while preserving our own sense of self, our own identity.

In terms of population, we live in a small country so we may need a little help; government and business will have to work closely with the consumer. If we want to avoid being roadkill on the information superhighway, we need to demonstrate new vision and leadership.

Now, before you get rid of me, I want to talk a little bit about vision and leadership. This great city, Montreal, has rarely been without either. And it’s rarely needed it as much as it needs it today. I believe it’s time we talked about how passionately we feel about this city. My city, and that of my parents, and my grandparents. There are five generations of us here.

There is something unique about Montreal. Regardless of heritage, background, nationality or language – and in Montreal we speak a variety of them – we work together and we create a dynamism that transcends partisan interests.

Montreal has been a leader in the development of research and technology. You only have to look around this room. We’re sitting with people from Vidéotron, GTC, Teleglobe, Bell Canada, Northern Telecom, and of course Astral. They’ve all taken important leadership positions.

The fate of this city lies in our ability to continue being leaders. When I leave this room today I want people to say, “You know we’ve got a lot to fight for. Sure, the environment over the last couple of years has been tough. But let’s use our energies positively.”

Why don’t we concentrate on getting things done, on enhancing the lives of individuals who want to be able to stand on their own two feet, who want to make this a better world? My humble beginnings only gave me the desire to improve myself in this wonderful city, in this wonderful province, in this wonderful country. That is the thing I would like each of you to think about most of all. When you want to succeed badly enough, you are not afraid to speak out and take chances. You are not afraid to voice what’s in your heart, and what’s in your mind.

I’m thinking about our children. There’s going to have to be constant training programs, updating of technology and knowledge so that our children can perform in an environment that’s progressive and positive. The danger of not doing that means we will be second class. I don’t think anybody in this room believes that as Montrealers we’re second class to anybody.

I’m a Montrealer. I believe in this city. I believe in the people. I believe in vision. I believe in the people sitting around the tables here who have done so much.

And I say this to you – people of the Board of Trade – to the political people who are here, and I said it to the Committee for the redevelopment of Montreal, of which I am a member: we must bring back the vitality that we had here. We’ve got to bring back the pizzazz. And my personal belief is: we can do it!

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


C. Michael Armstrong
Chairman & CEO, AT&T

Internet World, New York, October 8, 1998
Published in The Corporate Report No. 26 (January 31, 1999)

My aim today is to put forward some plain talk about the internet, AT&T’s role in it and our future with it. It took radio 30 years to reach 50 million people. It took 13 years for TV to do the same. But the worldwide web reached twice as many users in half the time. Today, more than 100 million of us have logged on to the internet, and experts project there will be more than 300 million internet users around the world by the end of the year 2000.

What are these technological trend lines telling us at AT&T? Let me start with a tale of two purchases. A colleague of mine bought a new car recently. He did all the things a smart car buyer’s supposed to do. He checked out the features. He went over all the options. He shopped around for the best price. And finally he bought the car. The only thing he did not do was visit a dealer showroom. At least not until he was ready to pick up the car. Everything else he did over the internet. The second purchase I have in mind had a slightly higher sticker price than the one on the window of my colleague’s car: AT&T’s acquisition of TCI, the nation’s second largest cable TV company.

What’s the connection between my colleague’s new car and AT&T’s purchase of TCI? What made both possible is that the world has accepted a new standard, IP, or internet protocol.

The IP standard gives the telecom industry a technological freedom that didn’t exist just a few years ago. If a television signal, a phone call and a computer file are all digital, there’s no reason to confine them to separate lines. IP technology is literally erasing the boundaries between television sets, telephones and computers.

TCI will give AT&T a path into almost one third of all American homes. But more than that it will give us the ability to exploit the convergence of TV, PC and telephone to create a whole new generation of communications, information and entertainment services. It will also remove one of the biggest obstacles to realizing the full promise of the internet. Bandwidth isn’t the only problem on the internet. The on-ramps are a real bottleneck. Accessing the internet through the local telephone connection is more like what the computer industry used to call “the wait state.”

High-speed broadband access over TCI’s upgraded cable plant will be a very different experience. It’s instant “on” and always on – no need to dial up and wait for connectivity. Consider the capabilities a digital cable pipeline will provide the typical family. The cable box on your TV will not only let you order pay-per-view movies, it will be a virtual communications center. When you come home, you will be able to turn on the TV, the PC or the telephone to retrieve all your messages: email, voice, chat room or fax. Or if you’re on the road, have them read to you over your wireless phone as the network translates text to voice automatically. The cable box will also give you access to the internet at speeds a hundred times faster than today’s modems.

And the same cable that brings TV and internet into your home will give you as many telephone lines as you would like: one for mom and dad, one for the kids, one for the fax and one for the PC. Each with its own distinctive ring. Those of us with daughters have a particular appreciation for that! You will take as many lines as you need and pay only for what you use. Have a visiting mother-in-law? Point and click to provision another line for her own phone number and message center. Need caller ID, call waiting or call forwarding? It’s packaged in a simple, single, low-cost feature set.

Now imagine what bringing that amount of IP bandwidth to people’s homes will do for business. First, it will fuel electronic commerce, already a $20-billion industry, growing at a compounded rate of 16% a month, according to Ernst & Young. Second, it will fuel a boom in telecommuting and working at home, because people will have the same high-speed access to information they have at the office. Experts say the number of home offices may triple by the year 2000, up from 20 million ten years ago.

But business is not done just in major metropolitan areas in the United States. Being a global leader means taking IP global. That’s why we joined with BT to build a global IP network linking the 100 largest economic centers of the world. Our global IP network will offer applications such as intranets that are truly global and truly secure. Global calling centers that bring customer contact systems together on a single IP platform. And new communications and information services that keep the traveling executive always connected.

Powerful global services like these can have a major impact on a company’s global reach and bottom line. One of our customers, a media conglomerate with 7,000 employees in 70 countries, has already achieved 40% more reach with a 30% reduction in network cost, thanks to its new virtual private network. Another customer, an electronic trading company, reduced its transaction cycle time by 90%.

Our global IP network will share a common architecture with BT’s networks in the UK and Europe, and with AT&T’s in North America. It will be built to open standards because we want the same creative energy developing applications for our network that has already led to the phenomenal growth and success of the net. It will be a carriers’ carrier, attracting all kinds of third-party value.

At AT&T, our goal is to become a leader in providing communications services delivered over the internet. We start from a strong foundation. We are one of the top ten business ISPs, and we’re driving to be number one. Our business IP line growth is 200% a year, and we host over 8,000 websites. Our AT&T WorldNet® consumer business is the largest pure ISP in the country, with 1.5 million customers, and it’s growing faster than the market.

We were the first major long distance company to launch an IP voice service. It’s called @phone. We introduced it in Japan last year, and it’s growing 20% a month, offering service across Japan and to 130 countries. This spring, we introduced IP voice here in the US. All told, we are one of the largest providers of IP telephony in the world. And we intend to maintain our leadership in voice-over-IP. In fact, today, we’re announcing that AT&T is the first major company to offer global “clearinghouse” services for ISPs as well as telephone authorities. Our clearinghouse members will avoid the time and expense of negotiating and managing agreements with other ISPs and telephone authorities to handle their calls.

What is the significance of this clearinghouse announcement? I think it is twofold. We are the first major company to announce being an IP carriers’ carrier. It is good news for both consumers and businesses. As a result of this, rates will come down. Our clearinghouse will handle all the routing management, payments, billing and administration involved in establishing and operating phone-to-phone IP telephony and other communications services to 140 countries. Fifteen companies are already moving traffic through this newly announced clearinghouse.

But real leadership needs more than a commitment to just keep on building. We have to improve the very nature of IP. To do that, we will do for IP what we’ve already done for the telephone. We will make it safe, reliable and secure. That’s why we have focused our 2,000-person research and development organization squarely on IP technology, platforms and services.

One of the first products of that focus is a software platform for advanced services. Probe Research calls it “Java for the public network.” It’s been adopted by Carnegie Mellon and other institutions as an important building block of the next-generation “Internet 2.” And it’s designed to stimulate creativity and innovation going forward. With background functions like authentication built into the platform, software developers can work on the fun stuff. Today, we are also announcing a new Interoperability Lab, a place where software and hardware developers can work together to assure consistent implementation of standards. It will be a test bed for the industry, initially focused on unlocking the potential of internet telephony.

Our third announcement today is a multimillion-dollar commitment to establish an Internet Research Center with the University of California’s International Computer Science Institute at Berkeley. The new center will develop architectures for strong, reliable, real-time IP services.

Investing for leadership costs money and takes time. We’re investing billions to shape the future of IP. Our network investments, the TCI merger and our global venture with BT are just some examples of that and just the beginning.

So far I’ve talked about AT&T’s money. Now let’s talk a little bit about your money. (By now, you should have more of it in your pocket.) The whole idea of the Telecommunications Act of 1996 was to give consumers the same choice in local phone service that transformed the long distance market more than a decade ago. There are more than 500 competitors in long distance. That’s why long distance prices have come down 55% since 1984. It’s why demand has skyrocketed. And it’s why we’re all investing billions of dollars in expanding long distance network capacity.

But the situation in the local service market could not be more different. In fact, the proposed mergers between Bell Atlantic and GTE, and SBC and Ameritech, threaten to create a Ma Bell East and a Ma Bell West, controlling more than a third of all homes in America – 55 million phone lines. And the Bell monopolies know how to exercise that control. The fees they charge for the privilege of having your long distance call travel through their local network are so far above the cost of putting calls through that they constitute a tax – a hidden tax levied on consumers, through higher-than-necessary long distance rates.

How much higher? By most estimates, six times higher than cost. Over $10 billion that consumers must pay in their long distance prices, and that long distance carriers, acting as bill collectors for the Bell companies, have to turn over to them. And now some of the RBOCs are talking about applying these inflated access charges to IP telephony. The fact is that would choke this industry and stifle innovation. It should not be allowed to go forward. Because once the local monopolies get their noses under the tent they will not stop there – extending access charges to ISP connections is the next logical step. It’s unjustified. It’s unwise. And to anyone who knows anything about innovation and competition, it’s incredible.

The internet has flourished because it has been free of taxes and regulation. Free to innovate and grow organically, the net leaped from 100,000 to 40 million hosts in just nine years. The internet started this year with about 400,000 electronic commerce sites. That number is growing by 20,000 to 25,000 sites a month. Online investing alone is growing at a compounded rate of 40% a month. The internet has become the hottest business location in the world. The local monopolies are a threat to this networked economy.

We ought to be ending excessive local access charges, not extending a monopoly practice that already costs American consumers and businesses over $10 billion a year more than it should. We don’t need any new laws to give Americans this tax reduction they deserve. We just need the political will to get it done.

Please let me make clear that by taking local access charges down to cost we’re not talking about eliminating universal service, the commitment we have to bringing affordable phone service to rural areas and low-income consumers and to help link schools and libraries to the internet. What I’m talking about is eliminating the hidden tax every consumer and business customer pays to local phone companies every minute of every phone call, every day. Simply stated, the tax should come off. Monopolies should not be allowed to get bigger. And the market for local phone service should be opened to real competition.

My message today is threefold. First, for AT&T, it’s IP, and today it is central to our business, mission and vision. It will have the reliability, security, service level agreements and quality of service you need and expect. Second, we are making a multibillion-dollar bet on the future of IP technology. We have invested in our network, we will merge with TCI, and we will build a global IP network with BT. And we’ve focused our research and development resources around IP technology and systems. And third, monopoly access charges will kill the introduction of new services such as voice-over-IP. Monopoly control stifles innovation.

It doesn’t have to be that way. Bell monopoly mergers should be denied, and the local phone market opened. And consumers should collect that multibillion-dollar tax reduction due them from excess access charges by local phone companies.

This morning we’ve talked about both threat and opportunity. The threat is letting a few local telcos set the rules of the game and deny us choice of companies, services and prices. This is an industry that has thrived on independence and freedom. The question now is whether decision-makers, both public and private, have the wisdom to discern the alternatives, and the will to choose the right path.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Paul E. Gagné
President & CEO, Avenor

The Canadian Club of Montreal, November 28, 1994
Published in The Corporate Report, Edition No. 10, February 15, 1995

Few Canadians fully realize how much their prosperity depends upon the forest sector. Many believe the forest sector to be a sunset industry, having lived its best years and not having much to look forward to. I couldn’t disagree more.

The importance of the industry

First let me briefly illustrate the place that the forest sector occupies in our economy. In 1993, pulp, paper and lumber companies had annual sales of $40 billion. That included $22 billion in net exports, making it by far the nation’s largest contributor to Canada’s positive trade balance.

To put it in perspective, that is three times more than the entire automobile industry’s net exports of $7.6 billion in 1993. In fact, the forest sector net exports almost equal the combined exports of Canada’s three other leading trial sectors: energy, metals and automotive.

In terms of jobs, the forest sector accounts for the direct and indirect employment of almost one million people or one out of every 12 jobs in Canada. And many of those jobs were occupied by highly-skilled, technically-sophisticated personnel.

I am talking about teams of biologists, environmental specialists, highly qualified foresters, process control engineers, computer specialists and so on. Their average annual compensation and benefits was over $56,000 in 1993, some 12.5 per cent above the Canadian average.

The forest sector has a huge manufacturing output and an enormous impact on employment. It is the direct lifeline of some 350 communities across this country.

In recent years, the Canadian industry has taken major steps to aggressively address its competitive position in world markets. It has invested large amounts of capital to modernize and expand its production capacity, shut down dozens of economically obsolete paper machines and taken unprecedented measures to reduce costs and increase efficiencies. This has resulted in the first major reduction in real operating costs in recorded memory while continuing to raise the level and consistency of product quality.

And even in a difficult year like 1993, when we were still in the recession, forestry companies in Canada injected $2.6 billion into capital spending to improve plant and equipment.

In addition, both the industry and the unions have joined forces to develop a truly effective human resources strategy. Today’s employees work in a more technically-sophisticated environment, have to deal with increased computerization and must have more direct communication and interaction with customers. They face new, difficult challenges and need improved training.

In order to find solutions to these problems, we have conducted an in-depth analysis of the human resource challenges in the pulp and paper industry.

One of the key recommendations coming out of the study was to create a new Industry Forum involving companies, unions, governmnents and industry experts across the country.

Announced in Ottawa last August at a nationwide press conference, the Forum was set up with the objective of bringing people together to identify training and human resource development issues, while building a new partnership between management and labor.

The Forum will address the need for better, more focused technical training in the industry, computer literacy, as well as ongoing education and development. This will be done at the national, regional and local levels.

With this background, it is pretty clear that issues affecting the forest industry are important to the Canadian public, governments and to the entire business community.

Growing Threat of Non-Tariff Barriers

An increasing threat to our exports and to the wealth creation potential of the industry is the emergence of non-tariff trade barriers. More than 80% of Canada’s pulp and paper production is exported, making free trade an issue of vital importance to the industry. We find it encouraging that, as result of the GATT Uruguay Round of trade talks, remaining international tariff levels will begin to fall on July 1, 1995.

We are also pleased that the 9.2% tariff on many of our products exported to Europe will be phased out over ten years. Mind you, we would have preferred that the phase-out period be shorter. In fact, Canada and the United States proposed a five-year period to reduce the tariffs to zero, but unfortunately that was rejected.

The next big challenge for GATT is to decide on how to deal with the trade impact which results from the implementation of more and more environmental measures by governments around the world. Industry experts refer to this as the “Greening of GATT.” Our industry strongly believes that trade and environmental concerns are compatible and that environmental progress can be achieved within existing international trade laws.

Closer to home, we are also pleased that, as a result of the North America Free Trade Agreement, pulp and paper trade between Canada and the United States is now completely duty-free. This is a factor of prime importance for the Canadian industry. Exports to the United States account for more than 59% of our pulp and paper production.

Free trade is not simply good because it preserves and opens up new markets. The removal of artificial barriers to protect local interests means that we all have to work harder to remain competitive. This leads to improved productivity and reduced waste. It encourages research and innovation.

Free trade forces us to focus even more on customer satisfaction. It leads to better products, better service, a healthier industry and eventually, a wealthier society worldwide.

We therefore view the ongoing removal of tariff as beneficial for both the Canadian industry and international trade. But it is also increasingly obvious that protectionism dies hard.

We are seeing a growing array of less tangible barriers taking shape under legal, ecological, and environmental guises.

Tariffs, although harmful to trade, have the advantage of being clear, visible targets that can be individually addressed and negotiated downwards.

Let me give you some specific examples of non-tariff barriers in each of these three areas.

The countervailing duty repeatedly placed on Canadian softwood lumber by the United States is one, and it illustrates the capricious use of legal recourse. This is an issue which is now more than ten years old and Canada’s position has been repeatedly and consistently upheld by Canada-US bilateral committees established under the Free Trade Agreement to settle such disputes.

Still, there continue to be attempts by American industry to reduce imports of Canadian lumber, and some $700 million in duties paid out by Canadian producers remain frozen in the United States.

Another example is the European Union’s eco-label program. As part of this scheme, the European Union develops criteria which it then uses to determine whether a product is environmentally preferable enough to be awarded the eco-label.

Not surprisingly, as currently drafted, the criteria for paper products will favor EU products over imports. As we see it, the eligibility criteria for this scheme were developed without third country participation and without proper and sufficient evidence. The scheme also requires that all products and their manufacturing processes comply with EU health, safety and environmental regulations.

The bottom line is that even when a Canadian product demonstrates superior environmental performance and complies with all Canadian regulations it will likely not be eligible for the European label.

Recycled fiber content in newsprint is another area in which European legislation could very well be detrimental to free trade. Because Canada exports most of the newsprint it produces, it has limited domestic access to recycled fiber. And this is true, despite the fact that our country now recovers half of the newsprint consumed in Canada.

If the European Union passes its proposed legislation, it will effectively restrict the access of Canadian newsprint to the European market.

These are just a few examples of non-tariff barriers facing our industry. As a minimum, such barriers must be based on sound scientific grounds and the rules must be the same for everyone – a level playing field with uniform parameters.

The Response of the Canadian Industry

The Canadian forest industry has a long history of supporting free trade and is continuing to take major steps to ensure that international markets remain open.

Two and a half years ago, the Canadian Pulp and Paper Association took action to present the case of Canada’s forest sector to European customers and governments. Various environmental groups had been portraying the Canadian forest industry around Europe as environmental delinquents and the Association responded by establishing a permanent presence in Brussels.

It was important that our European contacts understand that the Canadian industry spent some $3 billion between 1898 and 1993 on measures to protect the environment. It was vital to point out that Canada is now the world’s fastest growing market for recycling and the largest importer of recyclable paper.

It was also crucial that they perceive the Canadian forest industry to be a leader in sustainable forestry based on scientific principles which we want to see internationally accepted by our trading partners.

To get this message across, our Brussels office has developed a structured, broad-based communications program. The office has arranged missions to Canada for European customers. It has organized a series of workshops on Canadian forestry practices which have been made available to the major users of our products.

Visits by Canadian forest ecologists and forestry academics to European research institutes and universities are also part of the evolving information program. As a result, we have begun to address the widespread misunderstanding of Canadian forest management practices and we are making good progress in keeping the European market open for our products.

We are seeing similar issues emerge in other parts of the world and we are now taking action to resolve them before they evolve into a crisis.

One of the greatest threats to market access for our industry is the current confusion surrounding forestry practices, including those in Canada.

It was with the full support of the forest products industry that the Canadian Government pressed hard for a concrete global commitment to sustainable forestry at the RIO Conference in June 1992. Since then, we have initiated a project with the Canadian Standards Association to develop appropriate standards for sustainable forestry in Canada.

The CSA is the country’s best-known standards writing organization. It is an important Canadian link to ISO, the International Standardization Organization. We want the CSA’s standards to subsequently coincide with those that the ISO would develop for international use.

To carry out its mandate, the CSA will obtain input from a broad range of people interested in forest management. I am talking about consumers, environmental groups, government officials, academics, forest industry representatives and so on.

Its first task will be to set these objective standards. Once this is done, the goal is to establish a process through which companies can apply for certification by external auditors.

The Canadian forest industry welcomes independent audits of its forestry practices. We believe we already do a good, if not excellent job and we want our performance to be recognized for what it is.

We are anxious to have a similar process at the international level through ISO. We are convinced that it is only through objective, science-based standards worldwide that we will eliminate the use of environmental issues as a pretext for protectionism. We want solutions that promote both a healthy environment and vigorous international trade.

Industry Outlook

Before closing, let me take a moment to talk about the outlook for the forest industry.

We have just entered a period of strong recovery following three very difficult years, mainly felt in North America. Given the limited new capacity additions and driven by a strong upswing in the world economy, the outlook for the industry is very good over the next few years.

Looking well beyond the current business cycle, long-term prospects for the world forest industry are excellent. World consumption of paper and paperboard recently passed the 250-million-tonne level. Based on forecasts published by a major research firm, Resource Information Systems Inc. or RISI, world demand will double to 500 million tonnes within the next twenty years.

Canada accounts today for nearly 10% of the world’s combined paper, market pulp and paperboard production. To maintain our share of growing world demand will be a daunting task, but growth prospects for the industry remain bright.

We are also aware that our industry must bury once and for all its image as a sunset industry. The Canadian Pulp and Paper Association has already taken steps to deal with this problem. We are making real progress, but much more remains to be done.

As I said at the outset, in addition to being one of Canada’s largest industries, we are a major and increasing user of new technology. Our industry is energy efficient and is playing a leadership role in protecting the environment. Our fiber resource base is renewable and our products are recyclable.

One thing we must learn to do is work more effectively with governments and unions to remove the remaining barriers to achieving optimal competitive performance.

Given Canada’s heavy export orientation, it is critically important that we continue to work closely with our stakeholders to maintain full access to international markets for our products.

We know the stakes are high and we are determined to win.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Gordon G. Thiessen
Governor, The Bank of Canada

The Board of Trade of Metropolitan Montreal, January 19, 1995
Published in The Corporate Report No. 11 (April 15, 1995)

I propose to address the main part of my remarks today to some of the questions and concerns I have heard expressed about the implications of financial market pressures this past year for economic developments in Canada. Are these market pressures mainly the result of international forces? Do they prevent monetary policy in Canada from responding to the needs of our economy?

First, however, I want to give you a brief summary of the Bank’s assessment of the economy and a report on our success in meeting our inflation-control objectives.

Price stability and the economy

The Bank’s commitment to controlling inflation, and to establishing price stability in Canada, has begun to bear fruit. The decline of inflation in Canada to rates of 2% or less during the last three years has encouraged businesses to control costs and has provided a more predictable climate for making business decisions to invest in productivity enhancements. As a result, businesses have been able to take effective advantage of a depreciation of the Canadian dollar to improve their international competitiveness.

The strong export performance of Canadian firms over the last three years provides concrete evidence of this improvement. And exports have been the driving force behind the recovery and the current rapid expansion of the Canadian economy.

These developments have been the source of the good economic news in Canada over the past year. And as employment has started to pick up, consumer confidence has improved and stronger consumer spending has started to contribute to the economic expansion.

Recovery has also become more widespread across the country. Initially expansion was most evident in British Columbia and Alberta, and economic activity in Quebec and Ontario, which had been hard hit by the recession, was slow to revive. However, the expansion broadened last year, and activity picked up significantly in both Quebec and Ontario. The 230,000 jobs created in these two provinces in 1994 gave particular impetus to consumer spending.

However, I believe the changes that have been going on in our economy are more fundamental than just contributing to the recovery from a period of slow economic activity. The productivity increases, the emphasis on cost control, and the adjustments that Canadian businesses have made to achieve these improvements are signs of a more basic change to the Canadian economy.

It is almost impossible to overstate the importance of productivity increases, because they are the main source of increasing incomes for Canadians over time. All these developments are laying a strong foundation for future economic expansion in Canada and provide grounds for taking an optimistic view about Canada’s economic prospects.

The economic and financial terrain is not, of course, without hazards. Of particular concern to many Canadians recently have been the increases in interest rates and the downward pressure on the Canadian dollar. It is the influence of these financial market developments on the Canadian economy that I wish to turn to next.

The general question about financial market developments that I would like to address today is the influence on Canadian markets from developments in the United States and elsewhere in the world. Does that leave any room for monetary conditions in Canada that are different than in the United States and for a made-in-Canada monetary policy?

Financial market integration and monetary conditions

Financial markets have without doubt become more integrated internationally in recent years. This integration has existed between markets in Canada and the United States for a long time, and has been particularly close since the 1950s. Canada has been a user of foreign savings throughout most of its history. And we have benefited from our access over the years to foreign financial markets – not just those in the United States but also in Europe and Japan.

The competition provided by large international markets means that both Canadian savers and borrowers are much more likely to get the best rates and conditions on their investments or their loans.

However, because of this integration, financial markets in Canada are influenced by events abroad. In other words, interest rates in Canada are not completely independent of what happens elsewhere in the world, and particularly of what happens in the United States. But that does not mean that the Bank of Canada cannot follow a monetary policy aimed at price stability in Canada, and in this way contribute to the good performance of the Canadian economy. Our recent experience can be used to illustrate this point in more practical terms.

An issue that the Bank of Canada has had to face over the past year is the difference in the situations of the US and Canadian economies. The US economy has moved to the ceiling of its capacity to produce, and ongoing increases in spending have raised the risk of upward pressures on inflation. As a result, the US central bank has been acting to tighten monetary conditions by pushing up interest rates.

In Canada, our recovery has been somewhat slower than in the United States and our inflation outlook has remained highly favorable. In these circumstances, there was not the same need to tighten monetary conditions as early in Canada. Still, US interest rate pressures contributed to an increase in our rates in Canada.

But I do not want to leave you with the impression that the interest rate increases in Canada over the past year were entirely due to developments in the United States. In ideal circumstances, interest rates in Canada would have gone up, but they would have gone up by less than in the United States to reflect our lower inflation rate and the greater margin of unused production capacity in the Canadian economy. Instead, interest rates here have tended to rise by more than in the United States. Why was that?

It was mainly because there was a great deal of concern and uncertainty during the year about the fiscal situations of both federal and provincial governments in Canada, given their past difficulties in meeting deficit reduction targets. Political uncertainty related to the September 1994 Quebec provincial election and to the upcoming referendum interacted with and added to the fiscal concerns.

When interest rates are rising generally around the world, debt service costs increase and the financial situation worsens for heavily indebted borrowers like our governments in Canada. If there is already uncertainty about the will of governments to deal with their fiscal problems, rising international interest rates will add to the concerns of savers and investors who hold government debt.

Each time interest rates go up, potential purchasers of government debt are likely to see an increased risk that heavily indebted governments will resort to inflation to ease the burden of servicing their debts and that persistent depreciation of the currency will follow. There are lots of places where Canadian and foreign savers and investors can invest their money, and they have been willing to invest in Canada only at substantially higher interest rates that include increased premiums to compensate for these risks.

In other words, concerns about the fiscal situation can raise questions about the ability of monetary policy to deliver monetary stability. Such concerns have not only undermined the confidence that savers and investors need if they are going to accept smaller interest rate increases in Canada than in the United States, they have in fact contributed to larger rate increases in Canada.

To understand how the Canadian economy has been able to cope with these higher interest rates, it is important to recognize that monetary policy works through the exchange rate as well as through interest rates. In 1994, the impact on the economy of the higher interest rates was offset to a large extent by the decline in the Canadian dollar. Therefore, the pressures on our interest rates from US actions to tighten the stance of their monetary policy and the increased risk premiums because of fiscal concerns did not prevent the continued expansion of the Canadian economy along a path that was consistent with the Bank of Canada’s inflation-control objectives.

Although the economic outcome of the past year was generally favorable, this combination of high interest rates and a weak Canadian dollar is by no means ideal for the Canadian economy over time.

The high rates will have the effect of discouraging future investment that can contribute to improving productivity and rising incomes. They also add to debt service costs for all debtors, but particularly for governments, given the size of their debts.

Similarly, the decline in the Canadian dollar also involves costs. It raises consumer prices and thereby effectively lowers the standard of living of Canadian consumers. Exchange rate depreciation also carries the risk of encouraging upward pressure on inflation if households then seek compensating increases in their incomes.

Moreover, a temporarily weak currency can distort decisions by businesses, as it did in the mid-1980s in Canada. And when the currency recovers, these businesses are often unable to cope. While a currency decline is sometimes helpful to an economy when it has to adjust to difficult circumstances, it is not, for the reasons I have just mentioned, a costless miracle tonic.

What can monetary policy do in these circumstances?

There is a commonly held view that the Bank of Canada has the capacity to set interest rates in Canada at whatever level it wishes. So why has the Bank not used this capacity to counter these unwanted pressures on our interest rates in financial markets?

The reality is, however, that the Bank of Canada cannot arbitrarily set interest rates. We have an important influence on very short-term money-market interest rates, but our influence beyond that on other short-term rates and out to longer-term rates is indirect. It depends on how savers and investors see our actions affecting inflation and the external value of the Canadian dollar. If the Bank is seen as encouraging inflation and an associated downward trend in the value of the Canadian dollar, the result will be higher interest rates.

That is why the proposals that you sometimes hear for the Bank to push down interest rates and stimulate the economy still further so as to help government solve its budget problems would not work. Actions by the Bank to force interest rates lower would require us to pump more liquidity into the financial system. Such actions would raise worries about inflation and a declining trend in the Canadian dollar. This is a recipe, not for low interest rates, but for higher rates and for more pressure on government debt service costs and deficits.

However, by strongly promoting price stability, the Bank of Canada provides an important underpinning to the expected future value of the dollar and thus to lower interest rates than would otherwise be possible.

In summary

I would like to underline that uncertainty about economic policies is a common theme when one looks carefully at the reasons for recent financial market pressures in Canada. Whether the pressures arise from the influence of US developments on Canadian financial markets or from the risk premiums demanded by savers and investors that have pushed up interest rates, our situation can be improved by strong, credible policies in Canada. In the case of fiscal policy, that requires budgetary actions to put government deficits and debt onto a more sustainable track.

As for monetary policy, the best contribution the Bank of Canada can make to more stable financial markets with lower interest rates is to pursue a policy aimed at price stability. The more credible that policy is, the better the anchor it provides for financial markets.

So let me reiterate: the Bank of Canada is completely committed to price stability. You should count on that commitment in making your economic and financial decisions.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Gordon Thiessen
Governor of the Bank of Canada

The Board of Trade of Metropolitan Toronto, November 6, 1996
Published in The Corporate Report No. 20 (January 15, 1997)

The Bank of Canada is a public institution that must be accountable to Canadians for its actions. That is why I and my colleagues at the bank welcome opportunities to explain monetary policy and to talk with audiences all across Canada. I believe that our economy functions better, and monetary policy is more effective, if people know what their central bank is up to and why. But the Bank also needs to be well informed about the economy in all parts of the country and about the public’s views and concerns regarding monetary policy. And when views differ, Canadians should expect us to explain the differences and respond to them.

Today, I propose to discuss some of the ideas you have probably heard about recently: that the Bank of Canada has worked too hard to reduce inflation and that we could use more inflation to grease the wheels of the economy. The suggestion is that the Bank, with its focus on bringing inflation down and keeping it down, is largely responsible for Canada’s sluggish pace of economic expansion and stubbornly high unemployment rate during the 1990s, especially when compared with the United States. Moreover, in this view, a monetary policy that emphasizes price stability will somehow always be too tight to allow the economy to achieve its full potential in the future. The conclusion that follows is that Canada would be better off if the Bank relaxed its stand on inflation control and allowed the rate of inflation to rise above the current target range of 1% to 3%.

You will not be surprised to hear that I do not agree with this one-dimensional explanation of the economic problems of the 1990s. And I certainly do not agree with the proposal to relax our inflation-control targets. This country has come a long way in restoring the credibility of its economic policies and improving its prospects for the future. I can think of no quicker way to undermine the progress we have made than to start backsliding on inflation control.

But before I address this issue further, I want to give you my understanding of economic developments during the first half of the 1990s and to explain why I see things shaping up rather well for Canada in a future with low inflation.

I believe that the reasons for the overall lackluster performance of the Canadian economy in the first half of the 1990s are much more complex than the simple explanation that monetary policy has been too focused on reducing inflation.

This explanation ignores some important economic realities that many Canadians have not been able to ignore in their daily lives. It certainly downplays the importance of the major transformation that our economy has been going through since the beginning of this decade. This transformation has caused a lot of stresses and strains among businesses and households. It has been the source of uncertainty about future job security and has led to an undermining of consumer confidence. But, as I will explain, these are temporary problems, and we are building the base for a more prosperous future.

The fact is that Canada had no real choice but to make these difficult yet very necessary economic adjustments. By the late 1980s, the Canadian economy was on a path that could not be sustained over time. Inflation was not under control, and expectations were that it would rise. Those expectations encouraged a surge of speculative activity, particularly in real estate. Many individuals and businesses were spending a great deal of their time and resources, and were accumulating debt, trying to maximize potential gains from inflation, rather than looking for ways to increase efficiency, productivity and competitiveness. Largely because of this, Canadian firms were slow in responding to the challenges of the technological changes and increasingly open and competitive markets that were transforming the world economy. US firms began this process of change much earlier and were well advanced by the end of the 1980s.

The business sector was not the only area of the Canadian economy in need of an overhaul. Through the 1980s and into the early part of the 1990s, Canadian governments continued to run large deficits that were adding to our public debt at a faster rate than the economy was growing. The ratio of government debt relative to the size of our economy doubled between 1980 and 1990.

And because governments were absorbing such a large share of domestic savings, we as a nation were borrowing more and more from abroad. As a result, our foreign indebtedness was also rising rapidly.

Holders of Canadian debt, both foreigners and Canadians, began to worry about our ability to carry these large debts when the speculative bubble in Canada burst in 1990-91. With real estate and other asset prices falling and with productivity not expanding sufficiently to boost incomes, debt-service costs became very burdensome for many borrowers. And lenders started to demand that our interest rates include risk premiums to compensate for these concerns.

This situation was clearly untenable. If we delayed dealing with these problems, savers and investors placing their funds in financial markets would demand more and more protection against the risks involved in lending in Canada, in the form of higher interest rates. We had a taste of this in 1994 and early 1995. This kind of market response effectively leads to a decline in our living standards, since we end up paying an increasing share of our national income to service our debts.

In both the private and public sectors, the needed adjustments were late in coming. Because Canadian firms started later than their US counterparts, the process of restructuring has been more intense and disruptive than in the United States. Needless to say, for many businesses, restructuring has meant layoffs. Similarly, in the public sector, the cutbacks necessary to restore fiscal health have been larger and more sweeping than if action had been taken earlier.

With these two major structural adjustments taking place back to back in the first half of the 1990s, the recovery of the Canadian economy has been slow. And the short-run disruption associated with these changes has naturally focussed attention on the costs of restructuring, which are direct and immediate, rather than on the underlying longer-term gains.

I do not want to minimize the short-run costs to Canadians of this major restructuring we have been going through. But I believe it is important that we not lose sight of the benefits. So I now want to remind you how much we have already accomplished and to assure you that we are indeed beginning to see light at the end of the tunnel.

The response to the problems we were facing at the beginning of this decade has been remarkable – a real success story. We have made some rather dramatic economic adjustments in this country. Canadian firms have invested in new technology. They have become more productive and more outward-looking. And with these improvements, they have been able to take advantage of a favorable exchange rate to break into new external markets and to expand their market share. Low inflation has contributed to this transformation by encouraging better cost control and providing a more stable environment for sound decision-making. While inflation came down rather more rapidly than the Bank had anticipated in the early 1990s, it has remained relatively stable, within a range of 1.5% to 2%, for most of the past four years.

The restructuring of the public sector is also proceeding apace. Deficits are being brought down at both the federal and provincial levels. However, what investors really care about is the level of government debt outstanding relative to the size of our economy-the ratio of debt to gross domestic product. Next year, this ratio should decline and, on the basis of federal and provincial budget plans, it should continue downwards in the future. This is important. Such a decline is needed to restore fully our financial health.

With the business sector’s success in exporting and the reduced borrowing needs of Canadian governments, we have recently eliminated the persistent deficit in the current account of our international balance of payments. This means that, as a nation, we are no longer building up our indebtedness to foreigners.

As I said earlier, there is no doubt that the changes involved in these economic adjustments have meant a great deal of anxiety and uncertainty for Canadians. Jobs have changed, and many jobs have disappeared. There has not been much inclination among households to spend, especially on big-ticket items such as housing and cars, and this is understandable in the circumstances. In a sense, our economy has not been running on all cylinders – it has been propelled largely by exports.

But because of the fundamental improvements in our economy that I have described, the risk premiums that had earlier raised our interest rates have been coming down, and our currency has been firm. In these circumstances, the Bank of Canada has been able to lower short-term interest rates. Most interest rates are now lower in Canada than in the United States-from the short end all the way to terms of almost 10 years.

I believe that it is only a matter of time before this monetary easing encourages a resurgence in household spending. Indeed, some indicators of consumer and housing activity have a more positive tone to them. And the private sector continues to create new jobs, more than offsetting the ongoing cutbacks in public sector employment. While the improvements have been slow in coming, and our unemployment rate remains high, the economic outlook is favorable. We will soon see signs of the payoff for the difficult restructuring decisions taken in both the private and public sectors.

With this perspective on the economic events of the last six years, we may ask ourselves what would have happened during this period if the Bank of Canada had pursued a monetary policy that was more tolerant of inflation. Would economic progress have been greater? Would the costs of adjustment have been smaller? Absolutely not!

Inflation masks the need for adjustment. With more inflation, we would have ended up with greater economic uncertainty, higher interest rates and a slower process of adjustment in both the private and public sectors. And higher interest rates would have made it even more difficult to cope with our accumulated debts. All in all, we would not be looking at an economy with the sound foundations that ours has today-that is, a strongly competitive business sector, markedly improved fiscal and external positions, and the lowest interest rates in over 30 years.

You may agree that monetary policy was correct in aiming to bring down inflation from the peak it reached at the beginning of the 1990s, but you may still worry about the future. Would the economy work better if monetary policy was less concerned with inflation control and more accepting of some ongoing inflation? There are at least two questions here. One is whether the Bank’s focus on low inflation leads to a monetary policy that fails to support the growth of incomes and employment in our economy. Another question is whether, at very low levels of inflation, the economy is deprived of a lubricant that helps it run more flexibly and smoothly.

Let me respond first to the question of whether monetary policy is too narrowly focused on price stability, at the expense of incomes and job creation. Not the way I see it. In fact, when the Bank takes actions to hold inflation inside the target range of 1% to 3%, monetary policy operates as an important stabilizer that helps to maintain sustainable growth in the economy. When economic activity is expanding at an unsustainable pace, pressing on the limits of production capacity and threatening to push the trend of inflation through the top of the target range, the bank will tighten monetary conditions to cool things off.

But the Bank will respond with equal concern, by relaxing monetary conditions, when the economy is sluggish and there is a risk that the trend of inflation will fall below the target range. A case in point is the easing of monetary conditions in Canada over the past year. While there is always some lag in the impact of monetary policy on the economy, what this approach does is provide monetary support that, over time, will help economic activity and employment to grow at their potential.

This is a very important point. The potential for the economy to grow over time can change, depending on such things as investments in technology and increases in productivity. A monetary policy focused on inflation-control targets ensures that the central bank will not inadvertently make systematic misjudgments about how fast our economy can grow. If the growth potential has improved, the resulting increase in the production capacity of the economy will tend to put downward pressure on inflation. This will encourage the Bank to ease monetary conditions to support faster growth in activity and employment and prevent inflation from falling below the bottom of the target range. The reverse is true if potential output is growing more slowly than we realize and inflation is tending to rise.

The second question I want to deal with is whether we need some inflation to grease the wheels of our economy. At any one time, there are usually some sectors of the economy that are having to adjust to difficult circumstances. The ability of firms in these sectors to make the needed adjustments will be improved if there is some flexibility in their labor costs. The argument for a moderate amount of ongoing inflation is that it presumably helps to provide that flexibility. Although employees may strongly resist rollbacks in their compensation, they will accept an effective decline in wages due to inflation, so the thesis goes. If labor costs cannot be reduced, employers will be forced to cut jobs instead. The conclusion drawn from all this is that without the lubricant of some inflation, our unemployment rate will be high and our economy will never perform as well as it should.

However, inflation will work as a lubricant only if it fools people into believing that they are better off than they really are. But our experience during 20 years of relatively high inflation in the 1970s and 1980s is that Canadians soon figured out the changes in the purchasing power of their wages and salaries, after accounting for inflation. Employees who were willing to accept an increase of only 2% in their wages at a time when inflation was 4% were well aware that this meant a cut of 2% in their purchasing power. Why would they not be able to figure out just as easily that a wage cut of 2% with no inflation amounts to the same thing?

There is, in fact, every reason to expect that people’s behavior adapts to circumstances. In a low-inflation environment, employees are likely to come to understand the need for occasional downward adjustments in wages or benefits in struggling industries, just as they accepted less than full compensation for inflation in such industries at times over the past 20 years. To assume otherwise implies that people are permanently irrational. This strikes me as a poor premise on which to base monetary policy.

Our economy has shown remarkable flexibility in adjusting to the major transformations I described. There is no reason to think that we need to rely on the misperceptions and unfairness created by inflation to get the flexibility we will need to cope with future change. Let us be clear. What our past experience teaches us is that inflation creates uncertainty and instability-not the conditions for durable growth and job creation.

In conclusion, let me say that I have heard no persuasive arguments for changing the economic policies that have helped to bring about the recent improvements in the foundation of our economy. Certainly any sign of a reversal in monetary policy could quickly undo some of these improvements.

I am convinced that the Canadian economy is on the right path. The benefits of the economic transformation we have undertaken are on the way. We just need to stay the course.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Lloyd C. Atkinson
Executive Vice-President and Chief Economist, The Bank of Montreal

North American Business Outlook Conference, Montreal, May 5, 1994
Published in The Corporate Report No. 7 (August 15, 1994)

I’m going to do something a little unusual. I could of course spend a great deal of time detailing my outlooks for the three economies Canada, the United States and Mexico. But I think what I would prefer to do, and what I’m going to do, is raise myself a little bit above that to try and get a lay of the land for the new world economy in which, I think, we find ourselves and what that world economy is going to look like, because I think it’s going to be dramatically different from almost anything that we have seen before.

We are going to be confronted with new kinds of challenges in this world economy, and these new kinds of challenges themselves present significant opportunities, but they also constitute, in my view, considerable risks.

We’ve already heard a great deal about the huge reforms that have taken place, particularly in Mexico, reforms that are really nothing short of remarkable. We hear in the economics literature these days about things like “the East Asian miracle.” Actually if you scrape below the surface there’s really no miracle at all. Essentially what it constitutes is the adoption of appropriate economic policies. But of course we are seeing that visited again and again in the case of Mexico. It is the correctness of the economic policies that holds out the greatest prospect and hope for huge change and improvements in economic standards and living conditions, and that is in fact what you are witnessing today in Mexico. My guess is that we will see more countries in Latin America, led to a considerable extent by Mexico, moving in that same kind of direction. And one day we may stand up here and remove the name “North,” and merely talk about “American,” and when we talk about “American” we won’t mean just the US, we’ll mean South America and North America as well.

But in order to talk about this new kind of world economy in which we find ourselves, let me emphasize that I think there are going to be three fundamental characteristics that constitute the challenges as well as the opportunities.

First and foremost, although there has been a huge amount of concern recently over whether or not inflationary pressures were going to re-emerge in the United States, my guess is that all of this concern is a focus on yesterday’s problem. My general feeling is that we are going to be moving into a period of basic price stability in most of the major economies of the world, and that is going to have profound implications. It’s going to have profound implications for the way in which companies do business, the way in which governments operate, and it holds out, it seems to me, the prospect for sustained, strong growth that is also non-inflationary. I will come back to that in a moment.

Secondly, I think that we are also in the midst, given the kind of restructuring that’s going on in virtually every single sector of virtually every economy in the world – I think that we are in the midst of a revolution, a technology-driven revolution, if you will, whose effects potentially are as profound as the Industrial Revolution itself. And it carries with it the social turmoil, which I believe is reflected in the huge concern that exists globally over jobs. I also think that if we in the industrialized world in particular (but the world economy in general) embrace the changes that are required to adjust to this revolution, we have the potential for improved living standards the like of which we have never seen before.

And finally, it is because of the dynamics of what is taking place, in terms of the overall preoccupation that exists on the part of central bankers for inflation, and this technology-driven revolution, that I think we also see a risk that arises, and that is a risk to the global trading system itself. And the peculiar risk takes the form of what many now want to characterize as “social dumping” that it could be, and has the ingredients within it to be, one of the most blatantly protectionist kinds of forces unless, of course, we are able to drive a wedge, and to understand the dynamics of what is taking place.

The challenge is big, but I will try to be brief, and try to give you a sense of where we’re going.

In order to focus on this whole question of inflation and the preoccupation with inflation, and the difficulties that this presents, let’s just review very, very briefly some recent developments, particularly in the United States.

The catalyst for the most recent turmoil was on February 4. Alan Greenspan, chairman of the US Federal Reserve, walks out of the Federal Open Market Committee meeting (the Federal Open Market Committee is the policy-making arm of the US Federal Reserve) and announces that monetary policy is going to be tightened. The Federal Funds Rate, which had then been trading at about 3%, got boosted to 3.25%. And at that time, Mr. Greenspan was very careful to point out that although at this juncture there was no evidence of any kind of inflationary pressures in the United States, in point of fact monetary policy had to move from a non-neutral stance to something more neutral, to stay ahead of the curve, to stay ahead of the emergence of inflationary pressures.

He had hoped, of course, that this would have a calming effect on the markets, and it had exactly the opposite effect. In fact, what it did precipitate was fear that perhaps there was a lot more inflation building in the US system than many people had imagined. And in consequence we saw deterioration in bond markets. We saw deterioration in stock markets as well.

March 22 saw a repeat performance by Greenspan: he walks out of the Federal Open Market Committee meeting and announces yet another tightening in monetary policy. We now move the Fed Funds Rate to 3.5%. Again bond markets, stock markets deteriorate. And again the focus comes back on inflation in the US system and the difficulties that that’s going to present. On April 18th, another repeat performance: now we’re sitting at 3.75%, and I don’t think we’ve seen the end. I think we’re going to see the Fed Funds Rate move up another quarter at least, and we may even see it move to 4.25%, or higher!

And this, I think, is going to be critical to understand: that the US Federal Reserve is prepared to move interest rates up to whatever level is required in order to ensure that growth in the US economy does not advance at anything stronger than its potential, and in order to ensure that any inflationary pressures that may be building in the system do not, in fact, emerge.

Now, what is it that a lot of people are focusing on in the United States? Well, you’ve got an unemployment rate that sits at about 6.5%. The overwhelming number of economists in the United States would conclude that the inflation-free rate of unemployment in the United States is between 5.5% and 6%. So while there’s still “some slack,” it’s not huge, and of course we’ve been witnessing declines in the unemployment rate, which is one reason to be concerned. Secondly, the focus is on capacity utilization. It currently sits at about 83.6%. Importantly, it’s rising. Historically, when capacity utilization rates got near 87%, then we would typically find bottlenecks and temporary delivery delays, and that’s the stuff which provides opportunities for companies to raise prices and make them stick.

There was a slowdown in the first quarter this year. Everybody expected it: cold weather and the Los Angeles earthquake, which, of course, put the kibosh on growth. The real question in the marketplace is: will we see a resumption of that very strong growth? Second quarter, third quarter…indeed, going into 1995.

Now, most forecasters expect that growth is going to slow down to some more moderate pace. But there’s a huge dispute over whether it’s going to slow down to 4%, plus or minus a little, or to a growth rate that constitutes the US potential the US potential probably being about 3%, maybe a little less. The critical thing here, the thing we should keep in mind, is that if growth were to emerge and remain solidly above potential, the US Federal Reserve would raise interest rates in order to try to squeeze growth to the potential.

But there’s one thing and this is very important there’s one thing that I think the financial markets have also ignored. First and foremost, there has been a huge improvement in productivity growth in the US economy. We’re also seeing it, by the way, in Canada and we’re seeing it in Mexico. In fact we’re seeing it in several parts of the globe. The latter half of last year, of course, productivity growth was very strong, a lot of attention has been given in the papers to it. But if you look at the last three years, productivity growth in the US economy has exceeded 3% on average in aggregate. We haven’t seen numbers like that since the 1960s. If you go back in history, productivity growth averaged 2.5% to 3% annually throughout most of the 1960s. In the 1970s, it slowed to maybe 1.5% and in the 1980s, it was completely stagnant. Now we are seeing the resurgence of productivity growth, and quite strong productivity growth.

And here, I think, is the important point: although we have seen to date virtually no acceleration in direct labor cost pressures, when that is combined with strong productivity growth, unit labor costs in the United States end up advancing at an almost zero pace. It’s essentially been flat. No evident, clear-cut signs of inflationary pressures and as long as US productivity growth remains relatively robust, which I think it is likely to do, in the midst of this technology-driven revolution, then even if there is some modest kind of increase in wage costs, it’s going to be negated to a considerable extent. But again, to come back to the point: if growth were to continue at too robust a pace and if you were to see the emergence of inflationary pressures, the Federal Reserve would shut it down.

But what is true of the US Federal Reserve is true of central bankers generally. There was a time when, particularly on the part of the G7, you could always count on the Bundesbank to be steadfastly anti-inflation. And then, of course, that enthusiasm for zero inflation spilled over to what we call the “Bundesbank of the North,” the Bank of Canada. But it is also dominant as well in virtually every one of the G7 countries.

I don’t know anybody who can read any of Alan Greenspan’s testimonies without coming away with the conclusion that this is one of the staunchest anti-inflation central bankers in the G7 today! Even in the midst of a worsening recession in France, Banque de France is being made into an independent financial institution and assigned essentially the same price-stability mandates as the Bundesbank. And at a time when we’ve seen Mexico go from an inflation rate of over 100% to inflation rates that are now comparable to those you find in most of the industrialized countries (indeed if anything the inflation rate continues to move down), and at a time when Banco de Mexico is itself not only one of the most professional but also staunchly anti-inflation central bankers around I think that fundamentally we are moving into a period of time that is almost without precedent, certainly in the last 20 years. There is almost zero tolerance for any acceleration of inflation in the industrialized world.

And if, in fact, we go back and look at the reasons why we have had the business cycles that we have had in the post-World War II era, with the exception of some identifiable events like OPEC in the 1970s, virtually every single one of the business cycle swings was the consequence of changes in economic policy, and changes in economic policy induced by focusing alternately on inflation, on the one hand, and then on unemployment, then on inflation, then on unemployment.

To the extent that we seem to be moving into an era of essential price stability, and I do think it is an era, then I think we also have the potential for a much more stable economic environment over extended periods of time. There’s no particular reason why the kind of recovery that we have seen in the United States can’t continue for several years in an environment where basically you do not have the possibility of inflationary pressures.

The second force is, of course, this technology-driven revolution. We know what this is all about. Many people have attempted to talk about it in the context of the so-called “new economy.” We hear a great deal about “paradigm shifts.” We hear from Tom Peters in Liberation Management: A World Gone Bonkers. (He also argues, by the way, that if the world has gone bonkers, management has to be bonkers to deal with it!) We hear about the “re-engineering of the corporation,” and so forth.

But if you look at this particular revolution, technology-driven as it is, and try to step back and look at the economic forces at play, strip aside all the language, and try to ask ourselves where this technology revolution has had its most profound impact, it’s had its most profound impact, in my view, in two particular areas.

Number one is in terms of bringing down transport costs. In the past twelve years, unit transport costs globally have been cut in half. We see, for example, supertankers dramatically larger than what previously existed. You see it in aircraft. You see it in huge improvements in the efficiency of engines. You see it in the decline in fuel costs. You see it in containerization, in the technology that is utilized at ports and docks huge declines in transport costs.

Even more important has been the second: namely, the huge decline in communications costs. That dramatic decline in communications costs has enabled companies today to locate production virtually anywhere in the world, and to coordinate that production and delivery with relative ease.

And it has also enabled companies in the developed world to access workforces anywhere. The workforce that is relevant to large numbers of companies today is no longer the local workforce. It is the global workforce.

It was Paul Kennedy who wrote the book The End of History. Well, it may not be the end of history, but it may be the end of geography, as we understand it. And this, I think is important, because if you step back and think about the decline in communications costs and the decline in transport costs, both of these constituted barriers, sometimes prohibitively high barriers, to the movement of goods, services, people and capital. These barriers are crumbling. Just like tariff barriers, quotas and trade restrictions in general.

In consequence of this technology-driven revolution, we are looking at a new world economy that is intensely more competitive than almost anything we have ever seen before.

Now, as I indicated, this technology-driven revolution has associated with it two side effects. One, of course, is that in order to adopt, or adjust to, the technology that is available, we have seen massive restructuring taking place in virtually every single sector of virtually every one of our economies. And this has entailed, in many instances, massive layoffs of workers. We have seen huge numbers of workers being sacked in this kind of environment, because of what is now permitted by the technology that is currently available. Even today, in the US economy, with a 6.5% unemployment rate (a rate Canadians can only pray for), you have Gallup polls indicating that 28% of the workforce are fearful that they’re going to lose their jobs in the next three years.

This is part of the social turmoil that, in my view, is associated with this technology-driven revolution. If we embrace the changes needed to adjust to it, we have the potential for huge improvements in our living standards.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Matthew W. Barrett
Chairman & CEO, The Bank of Montreal

The Public Policy Forum, Toronto, April 15, 1993
Published in The Corporate Report No. 3 (September 30, 1993)

Canada’s fiscal crisis is seen as the challenge of our generation. Forging a broad-based public consensus is seen as the essential step to meet that challenge.

As a proportion of GDP we are the number one foreign debtor nation in the world – an unenviable distinction. For some of our government borrowers, a Triple-A credit rating is a thing of the past, and that means they are already paying interest rate premiums to entice foreign lenders.

It seems to me that it’s not particularly useful to put the blame on any one political party, or government, or group. In fact we’ve spent far too much time placing blame for the problem rather than finding solutions.

Throwing bricks at people never struck me as a very helpful form of persuasion. On the other hand, I’m not suggesting that we merely sympathize with our political leaders. We have to work with them.

Politicians are constantly under pressure from everybody – from groups with needs to champion and causes to espouse. Very few proposals involve spending less money. Think about it. Business people like you and me call for restraint except for the university or hospital or cultural fundraising drive that we’re involved with at the moment.

So, for whatever reason, the cards have been stacked against anyone trying to seriously cut the deficit. So we have to shuffle the deck.

The Public Policy Forum’s concept of broad private sector involvement in national decision making offers considerable hope. Never has it been more important than today that the leaders in our country public and private sit down and start talking in a sober way about the fiscal crisis, and agree on a course of action to fix it.

We have to agree on common standards and a common language. And we have to work from a common base of facts.

The first order of business clearly should be to seek a broad agreement that we do, in fact, have the challenge of our generation to confront, and that the situation calls for dramatic and collaborative action.

And let’s face it, pain is unavoidable. To achieve a broad-based consensus, it will be important to demonstrate that the burden is borne fairly, and that the public recognizes the sacrifices are worth making for our future. After all, achieving such a consensus is the acid test of leadership.

Coming up with the details of a deficit elimination plan will require a broad consultative process one conducted in the open, with representatives of all of the groups whose support will be necessary.

Many strategies have been put forward for bringing the deficit under control. Whatever their individual merit, they at least help to throw light on the problem.

Many of you already know my views, which I offered a couple of months ago. I’d like to see:

•  No increase in our overall tax burden, or in government program spending for five years

•  An easing of monetary policy, sufficient to raise growth to at least 4% a year in real terms

•  And a national training and education program with clear, measurable goals

In addition, we will need to re-think the social contract for Canada. Perhaps we need a contract that focuses on the subsidy of people – not business, not commodities, not jobs, and not geography.

It is essential that however we tackle our problems, there will be a need for balance and empathy by all the various stakeholders in our society.

Business must restructure, yes! But at the same time it must demonstrate that it cares about the casualties of economic restructuring, as well as the goals. And it must keep in mind that successful restructuring shifts a burden, at least temporarily, from the company to society at large.

Labor must continue to promote the interests of its own constituency, yes! But at the same time it must balance it with a continuing concern for productivity and the ingredients for competitive success. And in particular, labor leaders owe it to their constituents to make sure they have the fullest possible understanding of the implications of the new globalized economy.

To sum it up quite simply, I would say business has to think more like labor, and labor has to think more like business. Maybe we will even see the day when labels like “business” and “labor” no longer apply. When we see ourselves as interdependent partners with the same goals, the same destiny.

And finally, government. Political leaders everywhere know that the world has changed. An election year presents a timely opportunity to put before the public policy options that take account of the new realities. This takes courage. But I think Canadians are in a mood to buy into long-term solutions, if they are given the straight goods.

I would hope that people will ask no more of government than they provide the infrastructure and economic environment that makes good business possible, and thereby generate sufficient revenue to ensure the preservation of the social programs that are a defining and differentiating part of the Canadian ethos.

Canadians are proficient in the art of compromise and it has generally served us well. But the search for compromise should never be an excuse for taking no action at all. Let’s do the things now that we have to do while we can still shape our own future. Let’s make certain that the solutions to our problems are “Made in Canada.”

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Matthew W. Barrett
Chairman & CEO, The Bank of Montreal

Bank of Montreal Annual Meeting, Calgary, January 15, 1996
Published in The Corporate Report No. 16 (February 29, 1996)

These are not ordinary times in Canada – they are not ordinary in economic terms, and they are not ordinary in political terms. I am increasingly uneasy about our national condition. Unemployment too high. Widening disparity between haves and have-nots in society. Economies in transition that show only fragile growth, failing to generate sufficient wealth to maintain traditional levels of social support. Today’s youth facing the prospect of a life not as promising as that of their parents’.

It is not a comforting picture. Yet as I cast my mind back over 1995, and as I scan the landscape of these opening days of 1996, it is not these problems which rank as the highest priority, important though they certainly are. It is our national unity crisis, made right here in Canada, that looms above all else.

It is my concern that if we do not confront it with vigor, if we do not make real progress toward its resolution in the next twelve months, all our other problems, challenging enough in themselves, will become worse by orders of magnitude.

Some will say that anyone focused on the constitution is out of touch with the real, everyday concerns of Canadians. We hear that everyone is fed up, frustrated with never-ending wrangling. Skeptical of anything they hear from so-called “elites.” Resistant to any use of the dreaded C-word by our leaders who should, it is said, be concentrating on “jobs and the economy.”

And they are right, to a point. But there is more to it, I submit. Much more. Let me ask you to briefly suspend disbelief while I try to make the thankless case that far from discouraging politicians from tackling the national unity issue, we should be urging them on.

Let me take you back to the night of last October 30. We all remember it – the night when Canada almost died. In a voter turnout of 90%, very nearly half the people of Quebec voted to leave Canada. As the results trickled in with excruciating slowness, it was stunning to realize that we were on the brink of a crisis for which the country seemed totally unprepared. How is it possible, I wondered, that one of the most civilized and prosperous societies on the face of the planet could come so close to self-destructing? Can so many people in Quebec really believe that separation is worth losing their birthright to Canadian citizenship, and risking profound economic damage? Can so many people outside Quebec believe that while the loss of Quebec would be regrettable, its consequences wouldn’t really affect them or where they live? If Quebec separates, is it certain the rest of Canada would hold together, when the dam of inertia, habit, and custom broke? And when every region and province scrambled to better its position in a Canada with radically new political dynamics?

These and many more troubling questions came to mind as the see-sawing results flashed on our TV screens. Like the millions and millions of Canadians throughout the land who want the country to stay united, I was hugely relieved at the end of that long, long night. Relieved – and deeply grateful that we had another chance to put our national house in order.

Surely, after coming to the edge of the cliff, we will set aside historical grievances and entrenched positions, and open our hearts and minds to new ideas that can preserve a Canada of economic opportunity, social justice and individual freedom. Surely, I felt, we will finally stop this national game of “chicken” before we all end up wrecked in the ditch.

As the weeks since October 30 have passed one by one, my optimism has slowly waned. What I hear are seductive voices calling us back to “jobs and the economy.” Even the incoming premier of Quebec is saying as much. And the polls suggest the public agrees. I don’t agree. I am a banker. The economy is my turf and I know how important it is. But I also know that except on the most superficial level, the choice between the economy and the constitution is an illusion. Over any length of time, economic prosperity and political stability are simply inseparable. And never mind the future – our failure to resolve our national debate is already costing us dearly, all of us. It costs us every time we buy a can of orange juice with deflated Canadian dollars.

Every time anyone in Canada takes out a loan, they pay an interest rate premium for political uncertainty. If you live in Quebec you pay an additional premium for political uncertainty. And if you think this is an unsatisfactory state of affairs, ask yourself how we will be doing if we go back to sleep on the question of Canada’s future for a year – and then wake up, to find that another Referendum has been triggered and we still have no alternatives and no contingency plans.

And we need alternatives. Without them, there are several reasons to fear that in a third round, the partisans of independence would carry the day and force all Canadians into an economic crisis.

At Bank of Montreal we were analyzing the probable results of separation even before the Referendum was called. Such analysis is routine in our business. Confident of a decisive vote for Canadian unity, we thought the exercise interesting but somewhat academic.

Our confidence was misplaced. Our analysis, in retrospect, would prove more relevant than we ever imagined. Let me tell you about the bullet we dodged by a hair’s breadth. If breakup occurs, expect at a minimum:

•  First, a sharp rise in interest rates of as much as 3% to 4%. We could see mortgages at 12% or 13%. The cost of paying interest on our public debts would swell so much we could wave good-bye to any thought of eliminating our government deficits.

•  A fall in the dollar to as low as 68.5 US cents. We would pay more for everything we import, and spend much more of our incomes on servicing our huge foreign debts.

•  Economic growth would falter across Canada. It is possible that the more vulnerable parts of the country would be pushed into recession. In the special case of Quebec, there is the prospect of a fall in GDP of as much as 7% in the first year of independence alone.

•  Worst of all, for at least the following five years, high interest rates, population movements, capital outflows, and reduced capital inflows would bring economic growth for all of Canada well below the average rate of growth if the country stays together. In that regard, we estimated the total growth foregone for all of Canada at between $150 billion and $200 billion. That equals at least $20,000 for every family of four. And that would be a permanent loss.

These are sobering numbers. Quebec particularly hard hit, and a serious hit for the whole of Canada. I am not advancing these figures to bully Canadians into doing something they don’t want to do, still less in order to defend the status quo. Far from it. For me, these potential outcomes are a compelling argument for all of us to overcome fatigue, set aside politician-bashing, and work together for bold and innovative change.

Let’s come out of this post-Referendum denial. We can no longer afford to be disengaged or tuned out. We have to accept the true seriousness of the risks we are running. Only then will we call on our political leaders to act before it is too late.

And I know our leaders will respond if we do. As good politicians they have an ear to the ground for public opinion. We have already seen them respond to public opinion on debts and deficits. I am convinced they are seized of the seriousness of our governance problems.

April 1997 will bring the First Ministers’ Conference on constitutional renewal. Nineteen ninety-seven will probably also see another Quebec Referendum, and very likely a federal election as well. It seems obvious to me, therefore, that we have to act now, calmly and constructively, with cool heads, well before these contests are joined. Fifteen months, when Canada could be lost or won, is not much time. It is enough time, though, I believe for Canadians to agree on the broad lines of a renewed federation, which will serve us well in the 21st Century.

Here are some thoughts on how it might be shaped. We clearly need to reassess and reassign the myriad activities of modern government. Our goal should be a leaner, tauter federation, with far, far less duplication, far more transparency, and sharper accountability.

Surely the time has come for devolution to the provinces of many of the functions Ottawa has assumed over the last half-century. Indeed bringing government closer to the people whenever possible is both desirable in principle and consistent with the broad social trends of our time. I also believe there are areas in which it makes sense for Canada to strengthen the central government. To cite just two examples: we do not need ten sets of trucking regulations; we do not need the absurd internal barriers to trade which make us the most balkanized federation in the world.

We do need a federal government that has the powers and revenues to act when our collective interests and national identity are at stake. A central power able to ensure that Canada becomes a single market, in which agreed high standards of health and education are preserved. And, since a nation is more than economics – a renewed and vigorous cultural life. And above all, we need a Canada that can always speak with a single voice and be clearly heard in an ever-more crowded, clamorous, and changing world. At the same time we must give equal priority to the legitimate and growing interests of different regions in a vast and excitingly varied country. An obvious example is the need to redefine and enhance the role of the Western provinces and ensure their rightful place in a renewed Confederation that matches their size, population and economic clout. Today, when Alberta and BC are among the most prosperous members of Confederation, the willingness of the West to innovate and experiment can stand all Canadians in good stead. In Canada’s story this is a time for the West, a chance to take the lead in forging a more broadly-based union than the Canada we have known.

If we can do these things, I believe we will have gone a long way toward building a Canada to which Quebecers, Albertans, British Columbians, indeed all Canadians will be proud to belong. So what I am proposing is not just a plan for accommodating Quebec, but one with room for all of Canada.

So, can we find the courage and the energy to renew our efforts? I believe we can. Can we find room within the larger Canadian nation for the uniqueness of Quebec? Can we find room for the vitality and economic weight of the West? I believe we can do those things too. But the past years have taught us that while putting forward proposals is one thing, making them a political reality is something else entirely. No one wants to tread the road that took us to Meech Lake or Charlottetown.

That is why we should welcome voices being raised across the country to propose imaginative ways out of the constitutional labyrinth. I would urge all Canadians to think seriously about fresh ideas such as a constituent assembly or an extraordinary commission, and to weigh carefully any proposals that our governments may put forward in the next few months.

Whatever mechanism chosen to reach a consensus, it must have the legitimacy of a formal mandate from our governments. It must involve people who give credibility to the process. And it should be practical and inspiring to create political momentum – to convince Canadians to provide nonpartisan support for our Prime Minister and our provincial premiers as they enter this defining round of constitutional renewal.

If we can think creatively and generously, we can survive this crisis and go on to prosper as we never have before. We have so much going for us: our tremendous reservoir of natural resources and the growing value we add to them; our access to three oceans; the largest economy in the world on our border; our skills in designing, building, and financing infrastructure essential to modern and modernizing economies; our increasing prowess in the “Transforming Economy,” with the highly skilled, knowledge-based jobs it creates.

Few countries anywhere can match such a range of assets. For us the ongoing transformation of the world economy is not a threat but an unmatched opportunity. Canadians are seizing that opportunity by becoming better international traders, able to compete in providing high-quality goods and sophisticated services to any market in the world.

Behind our international success lie the major structural changes we have achieved in our economy at home. Yes, of course we have problems to resolve. But think too of what we have already accomplished. We have tamed inflation. We are bringing order to our public finances. We are opening our economy to a widening range of trading partners. We are achieving far greater levels of cooperation among government, business, labor and universities. Witness Team Canada in China last year and in Southeast Asia today. And all these strengths are in turn backed by the risk-sharing inherent in the broadly diversified economy of a major state, and Canada’s long tradition of civility, tolerance and mutual help.

So, in 1996 we see Canada at a crossroads: one road leads to potential greatness; the other to self-inflicted decline. Which will we choose? Over the next few months, you and I and all Canadians by our words and deeds will answer the question: Is Canada worth saving?

The world looks on, amazed that the question can even be asked in so fortunate a country. And we are most fortunate of all in this, that no external force is compelling Canadians to choose one road or another. We will be the architects of our own future.

This freedom to choose is why I have made these remarks today. My purpose is simple: to play a small part in building public support for our leaders as they grapple with these complex issues.

If we succeed in reforging our union together, our success will not be a panacea. But it will end the sense of helplessness and hopelessness that too many of us feel today. And I’m convinced the recovered self-confidence of that moment of success will spill over into every part of Canadian life. And the Canada we leave our children will be a stronger, richer country, and a blessing to them and to the world.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Dr. Tim J. O’Neill
Executive Vice-President & Chief Economist, Bank of Montreal

The West Island Chamber of Commerce, Montreal, November 7, 1995
Published in The Corporate Report No. 15 (December 31, 1995)

The economic recovery in North America slowed this year compared to 1994. After two years of above potential growth, some moderation was anticipated. While the easing off was about right in the US – it appears that the “soft landing” has been achieved – in Canada, the economy slowed too sharply for comfort.

For 1996, the outlook for Canada is much brighter, with growth expected to bounce back to 3.5% on a fourth quarter-over-fourth quarter basis from an expected weak 1% in 1995. Two factors are critical to the anticipated renewal of recovery next year – a sustained rebound (already underway) in the US economy and a continuation into 1996 of the interest rate declines already achieved this year. We expect both of these to occur.

Nevertheless, there still remain short-term risks to the Canadian outlook, mainly governments’ fiscal agenda and political uncertainty. Though it is important to focus on these, it is also worth looking at longer-term structural changes. The restructuring of Canadian industry, and the increasing integration into a global economy have longer-term implications for Canada’s economic performance.

US economy on the rebound

The US economy slowed in 1995 primarily because of the successive rounds of tightening the Federal Reserve engaged in through 1994 and early 1995 when the Fed funds rate rose from 3% to 6%. The impact was mainly on consumer spending, especially auto sales. The marked decline in exports to Mexico, resulting from the economic impact of the peso crisis, also contributed to driving US growth down to an annualized 1.1% in Q2 from 2.7% in Q1 and 5.1% in the fourth quarter of 1994.

A key to the extent and pace of the US rebound is the household sector. Renewed strong employment growth, reasonable real income growth, still high consumer confidence and reductions in mortgage rates provide a solid foundation for sustained growth in consumer spending.

Rising consumer debt, historically low savings rates and limited pent-up demand for durables will, taken together, dampen the expansion of household spending. Combined with a more moderate pace of investment spending, it is expected that US GDP in 1996 will expand at “soft landing” pace – about 2.5%. Inflation pressure appears unlikely to be a problem for the rest of this year or next. We expect CPI to track around 3% over the next 16 months. Even though the unemployment rate is at, or slightly below, what many economists argue is the “full employment” level, there has been no evidence of inflation-threatening wage increases. Growth at potential implies that the unemployment rate will not decline further, but instead move up slightly to 5.8%.

In the absence of major imbalances in the US economy – no housing market bubbles, financial services sector problems or overly stimulative or restrictive fiscal policy – the glide path to the soft landing has been relatively smooth. What are the potential bumps on the runway that may disturb this pleasant picture?

On balance, the risk may be higher that the US rebound will be too strong than too weak – i.e. growth continues at or near the pace in Q3, which bounced unexpectedly to 4.2%. Inflation would therefore be at risk to accelerate forcing the Fed to tighten policy. However, monetary policy operates with a considerable lag. A surprisingly strong rebound which caught the Fed off-guard, could, in the current full employment environment, push up inflation rates (and inflation expectations) sharply. This could necessitate more extensive and faster tightening by the Fed than would be required if they could move preemptively. It could also call into question that most precious commodity of central bankers – credibility.

Canada’s rebound: the short-term view

A moderate rebound in the US will revive Canadian exports but will not push them to 1994 growth rates. In fact, the role of exports in Canada’s economic performance over the last two years displays just how unbalanced the recovery has been.

Exports and business investment were the basis for the fast-paced growth of 1994 and their slackening the cause of sharp slowing in 1995. Consumer spending has not provided sustained stimulus to the recovery and the reasons are obvious. With virtually no real disposable income growth in five years, virtually no net employment growth in the first half of 1995 and still high real interest rates, there has been no support for consumer confidence or a spending surge.

However, just as the undesirable increase in interest rates in Canada through 1994 and into early 1995 put a damper on domestic spending, the decline in rates that began this spring will encourage it in 1996. Short-term and long-term rates will be 0.5% or more lower by the end of 1996. The 90-day treasury bill will be about 5.5% and 30-year government bonds below 7.5%. This will combine with the spur to jobs and aggregate income from increased exports to encourage household expenditures.

Given the weakness in the economy earlier this year, the Bank of Canada has clearly been inclined to easing monetary conditions as it lowered its policy-signalling overnight call loan rate 7 times by a total of 175 basis points (1.75%) from early May to late August. Though the Quebec Referendum campaign put a temporary halt to any further moves, the positive reaction in financial markets to the narrow NO victory and, in particular, the strengthening of the Canadian dollar, have provided a basis for the Bank of Canada to resume its easing.

Short-term risks to the outlook

While the positive response of financial markets to the Referendum outcome is not surprising, the narrowness of the vote may cause some dampening of enthusiasm. Any elements of continued political uncertainty – e.g. political leadership in Quebec, prospects for a further referendum, administrative or constitutional changes to federalism – are likely to have some influence on Canadian exchange and interest rates. However, it is reasonable to expect that market focus will shift to Canada’s strong fundamentals including long-term political stability, increasingly competitive industries and a sustained low inflation environment. A fundamental policy area towards which attention will be directed is fiscal policy.

With the referendum over, markets will now likely turn attention to the next round of federal and provincial budgets. On the provincial side, the willingness of the new Ontario government to turn campaign promises and early spending cuts into sustained fiscal restraint will become clearer. The Quebec government will have to address its serious debt/deficit problem or risk added negative reactions from investors. From a financial markets perspective however, the next federal budget will be the most important one. Even with slower growth than projected, the deficit target for this fiscal year should be achieved and even surpassed because interest rates have also been lower than forecast in the February 1995 budget.

Markets will be looking for continued commitment to fiscal restraint by the federal government. The mini-meltdown of financial markets that occurred in January of this year would likely be exceeded if the federal government were to display a weakening of its stated resolve to maintain and extend the path of deficit reduction irrespective of changing economic circumstances. Having started the process of building fiscal policy credibility, this budget will be critical to sustaining that momentum. While fiscal restraint implies an adverse direct impact on aggregate demand in the short term, the reduced interest rate risk premium that accompanies it will provide both short- and long-term benefits to the Canadian economy.

The longer view on Canada’s economy

A focus on short-term expectations and challenges can blur our view of the longer-term economic adjustments taking place. Often those adjustments look so complex and varied that it is difficult either to perceive patterns of change or to clearly evaluate their consequences.

Changes in the broad distribution of output and employment by major industry sector provides initial insight into this issue. From the late 1940s to the 1990s, the share of GDP in the goods sectors’ – primary resource industries, manufacturing, construction – fell from 42% to 34%, with the net decline about equally split between manufacturing and primary goods production. The corresponding rise in the service sector share of GDP was spread across each of the main private subsectors – trade, financial services, business and personal services. The adjustment in employment shares is even more dramatic. From over 60% of employment, goods producing industries contributed just over 25% of the jobs by the early 1990s. The big “winners” in services sector employment were the government and the community business and personal services categories. Only the latter increased its share of GDP.

Three critical forces behind this broad structural change have been trade liberalization, the relative decline in traditional industries and the increasing technological/knowledge intensity of production.

Trade liberalization – GATT rounds, the Auto Pact, Canada-US Free Trade Agreement and NAFTA – has steadily increased both the contribution of exports to GDP in Canada (now over 30%) and the share of those exports to the US (now 80%). The composition of trade has also been changing, especially since the signing of the US-Canada FTA. Exports to the US have expanded faster in those categories liberalized by the agreement. In particular, the expansion in non-resource-based manufacturing exports (e.g. office, telecommunications and precision equipment) and in higher value-added, resource exports (e.g. specialty papers and petrochemicals) to the US has been greater than growth in more traditional categories.

The increasing integration of the Canadian economy into the North American and global economy has several potential consequences. While interprovincial exchange will not decline dramatically and quickly, trade will expand more than proportionately in a north-south direction thus weakening the domestic inter-regional linkages. Pressure for policy harmonization, especially with the US, will increase. Tax structures, regulatory regimes, product standards, government procurement policies and business subsidy programs are examples of areas in which international harmonization is either the subject of negotiation or is being forced by market pressures. This will also make the elimination of interprovincial trade barriers a more compelling issue to resolve.

The relative decline in the importance of the traditional resource sectors has been dramatic. The combined share of total employment generated by agriculture, mining, forestry and fishing has fallen in the last 50 years from almost 30% to less than 6%. The most dramatic change has occurred in agriculture but all the main commodity producers have been subject to shrinkage. A key factor in this diminished role for the resource sectors has been the secular decline in relative commodity prices – since the early 1960s they have fallen by 40%. While this is a worldwide phenomenon, for a Canadian economy tied so long internally and externally to the natural resource base, this constitutes a major component of restructuring.

One specific implication of this decline is important. Most resource-related activity (extraction and processing) takes place in rural Canada. The secular decline in employment shares has meant that job growth in many single-industry towns has been, at best, stagnant. Where firms have downsized or departed altogether, it has proven difficult for the local areas affected to attract or grow new businesses to replace the lost jobs. The likely continuation of pressure on the traditional industries means that rural, small-town Canada is more vulnerable to long-term job and income loss than larger urban areas with more diversified economies.

A third element of the structural change is the increasing knowledge and technology intensity of production. All economies are experiencing this shift. In Canada, it has been estimated that employment in high-tech industries increased at three times the rate of job creation in low-tech industries between 1975 and 1991. The growth in high knowledge-intensive industries was four times that of low knowledge-intensive sectors over the same period. As well, employment in the high knowledge-intensive industries appears to be less cyclically sensitive. Job growth was only modestly dampened for that group of industries in the 1981-82 recession and in the 1990-91 recession, employment grew strongly.

Combine this with the fact that average income levels and job retention experience improve significantly with increased education and skills attainment and you reach a familiar conclusion. Investment in human capital is both a critical component of long-run growth and a key to individual economic success. Technological change, the capacity for which is affected by the quality of the labor force, is also a critical contributor to economic expansion and individual achievement.

What may be less obvious are the policy implications of this element of structural adjustment. We have traditionally looked to the public sector purse to fund education and skills development and to provide support for research and development of new technologies. The attack on debt/deficit problems at federal and provincial levels of government has already restrained funding and more of that is likely to occur. As well, debate about the quality of public investment in these areas and about the appropriate role and level of private involvement has been engaged.

In fact, all the components of adjustment mentioned have relevant policy and political implications. One obvious area is social policy. Since economic restructuring inevitably generates gain for some and losses for others, social policy can provide a cushion for the latter group. However, social policy not only is influenced by economic events, it also becomes enmeshed with economic policy in at least two specific ways.

First, there is already a debate about the extent to which income support programs may, while ameliorating the pain of a constantly restructuring economy, also inhibit effective labor market adjustment. Proposals for reforms to the unemployment insurance (federal) and welfare (mainly provincial) programs – more restrictive eligibility requirements, lower benefit levels, “workhorse” programs – embody elements of that concern.

Second, if knowledge is increasingly viewed primarily as the basis for economic power for society and for individuals, education and training policy essentially become economic policy areas. The result is an increased focus, in discussions of education/training reforms, on effectiveness of program design and delivery, on measurement of performance or “outputs” and on the appropriate division of public and private share of the costs.

Another much broader area in which structural adjustment is relevant is that of the division of powers between federal and provincial governments. While hardly a new subject on the Canadian political scene, interest is clearly much higher in the wake of the narrow referendum result. But Quebec is not the only province with a desire for greater decentralization of powers.

The elements of structural change will influence the debate in several ways. The loosening of economic bonds between provinces and regions within Canada will have the tendency to loosen other bonds as well. On the other hand, the pressure for inter-country policy harmonization implies a national government with sufficient policy scope to negotiate any such changes.

While there will continue to be a need/desire to assist those adversely affected by structural change, there is a legitimate debate about whether functional administration and program design is better done at a national or a provincial/regional level. One key element of the debate will be about the proper balance between national standards and responsiveness to unique “local” problems. For example, provinces now have control over education and may want to extend that to manpower training. Education and skills development have both national and local impacts. However, the mobility of labor within a country makes it difficult for provincial governments to directly influence the local impacts. Hence, the issues will be whether national standards are necessary to optimize the economic benefits of education and training and what role a national government should play in establishing and enforcing them.

The long-term structural adjustments in the Canadian economy are clearly creating pressures for the rearrangement of the public sector. Deregulation, downswing and reallocation of responsibilities – to the private sector and to other levels of government – are the key manifestations of that. Just as economic restructuring carries with it adjustment costs so too will the restructuring of government. However, the secular changes in the Canadian economy have also enhanced its competitive strength and provided a sounder foundation for long-term growth in economic activity and living standards. If the changes to the public sector increase its effectiveness in delivering services to Canadians, it will only reinforce those benefits.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Peter Munk
Chairman & CEO, Barrick Gold Corporation

The Ninth Annual Investor Relations Conference, Toronto, May 27, 1996
Published in The Corporate Report No. 19 (September 30, 1996)

I’m honored to address the Annual Conference of the Canadian Investor Relations Institute. I have followed CIRI’s development through Belle Mulligan, who is one of our key executives at Barrick and one of my senior colleagues.

I have much in common with investor relations professionals. We both stand for the need to enhance shareholder value and we focus our efforts on achieving this goal. It is largely because of our mutual objective that I agreed to come here today.

I’d like to tell you about a dinner I attended several months ago in New York. It was a governmental affair involving a large group of people. I was lucky enough to sit next to a gentleman whose name I had heard but whom I had never met before. While the evening was long and boring – like many of these functions – I was fortunate to sit next to somebody who taught me a unique lesson, which I would like to share with you.

The man’s name is Walter Shipley. At that time he was Chairman and CEO of Chemical Bank, based in New York. Shortly before I met him, Chemical completed the acquisition – although publicly it was called a merger – of Chase Manhattan Bank. This took place just a few months after Chemical had acquired Manufacturers Hanover (Manny Hanny).

Now all of you know that if there’s a field in which creativity is rather limited and there is very little room to distinguish one’s performance from one’s peer group, it’s among the senior banks. The very connotation of being a bank chairman implies that you’re not the kind of risk-taker who is prepared to go out on a limb.

Banking is a very narrow field. Your cost of product is determined by federal regulators and the prime rate. Your profit margin is so leveled off by competitors with the same cost and overhead structures that there’s really little room to make your bank stand out from the competition in terms of profit or cash flow margins. And yet, after 75 or 100 years of existence, Chemical Bank, one of the 10 most senior banks in New York State, was able to acquire – through the use of its paper – two of the most important banks in the state. Chase Manhattan was the flagship of the Rockefeller empire, reaching back to the very foundation of American capitalism. Chemical had been there for 120 years.

I asked Walter Shipley how on earth he was able to accomplish these acquisitions. Why Chemical, rather than any of the other banks? And why hadn’t Chase bought Chemical, rather than the reverse? He gave me an explanation that I will never forget.

“It was very simple, Peter,” he said. “I was appointed Chairman of Chemical at the same time as my colleague was appointed Chairman of Manny Hanny. Through some good fortune, I was able to communicate with my investors better than my competitors communicated with their shareholders. Perhaps I sounded better or made better speeches, or maybe investors simply thought that I could do a better job. In any case, Chemical’s shares got a bit of an edge in terms of multiples in relation to its peer group. Meanwhile, Manny Hanny, which was the same size as Chemical, made a couple of mistakes, including overexposure to the real estate sector.”

As a result, the stock market turned sour on Manny Hanny, which meant that it had a lower multiplier factor. Its financial ratios were somewhat lower than peer companies. Recognizing that Chemical had a better multiple and he could progress in his business by rationalizing overheads, Walter explored the possibility of bidding for his competitors.

He pitched the potential of overhead reductions effectively to investors. He told them that he could rationalize branches to offer good customer service while incurring much lower costs. At the same time, through the sheer size of the combined operations, he would achieve more liquidity and therefore a better share price. Since he was able to sell the story, he was successful in his bid for Manny Hanny. Within a year he had accomplished all of the things that he’d set out to do. Chemical became a bit of a darling of the stock market and Walter was the fair-haired boy in the banking sector.

Chemical enjoyed a truly significant edge. For each dollar of Chemical’s earnings and cash flow generated, its stock was given a higher rating. So Walter took another look at his competitors and identified Chase as an attractive target. Ultimately, the only concession made to Chase was to call the resulting transaction a merger. However, not one Chase executive remained with Chemical. The board of directors totally changed as well. The one major constant was the retention of the Chase name.

Guess who really reaped the benefit? Chemical kept a brand name that represents enormous value internationally. Today Walter Shipley runs the most powerful banking conglomerate in America, with a global reputation as the only one to break out of the tight-laced US regulatory system and realize phenomenal growth.

I tell you this story because your professional lives revolve around enhancing shareholder value; just as mine does. You can’t work with the public’s money and not work for the people who give you the money. We have a common interest. But I have never seen more tangible proof of how important the things we all work for can be as a business tool and how crucial incremental improvements in share value can be.

A 10% increment can mean the difference between becoming the winner, or the loser and victim. That’s a hell of a difference. I’m not saying that your profession has exclusive rights on enhancing shareholder value. That may be your perspective; in fact, I hope it is. But my perspective is that before you can enhance shareholder value you have to do one thing: perform. And that’s my job. Without performance, talk of enhancing shareholder value can be simple puffery.

How is performance achieved? It’s very simple. You perform by applying the standard tools of generating and creating a business success; by implementing a strategy that’s logical and doable. You employ the very best people. There’s no requirement that to succeed in the gold business, you have to be a gold miner; or that you have to succeed as a banker to be in the banking business. What you do need is a fundamental understanding of business and a sound strategy. Very often that strategy becomes more valid if it’s designed by an outsider who is able to see the forest for the trees, rather than by someone who has spent a lifetime on the inside and gets lost in the minutiae and the details.

Furthermore, it’s absolutely vital to employ highly aggressive operational methodology and a very conservative financial approach and maintain a strong balance sheet. You also must focus. Whether you want to win a tennis game, be a mountain climber or succeed in business, it can be very tough. You can’t hope to succeed unless you bring every ounce of your energy – the totality of your ability to focus – to the single primary goal that you set for yourself. Focus is vital.

In addition, you have to learn to share. You can’t have top people around you – the best people pulling in the same direction as you are – unless you’re prepared to treat them as partners. The days of simple wage earning are gone.

There’s nothing wrong with dilution. What is wrong with having 10% of a billion dollar pie? Isn’t that better than having 20% of a $400 million pie? It’s much better to create a bigger pie and share it, both in terms of dollars and emotions. You can share your joys and you can share your problems. And you can’t argue the fact that four or six or eight people are much more able to see difficulties ahead than an individual is.

Ultimately, you must learn not to confuse gambling with doing business. Too often in Canada we have seen the tragedy of major international corporations that became big and important because they kept on rolling the dice. As long as the dice came up okay, then everything was great. But the moment things turned against them, the game was over. That’s not doing business. Business means taking risks while covering your down side sufficiently so that when something goes wrong, you can still be there the following day. You may be somewhat damaged, somewhat hurt, somewhat more humble – but you’ll still be there, trying even harder. If you roll the dice and disappear, you were gambling, not doing business.

I apologize that we don’t have much time today, but even if we did, I couldn’t give you the secret for success. If I had one, I’d be as rich as Bill Gates and believe me, I’m not. All that I can tell you is what has worked for me and what I hope works for you. But having talked about these successes and about the fundamentals of performance, I then turn to you, because communication – getting a story across to those who, after all, provided the money to do the job – is absolutely vital.

You can’t expect people to buy your shares rather than your competitors’ if they don’t understand what your company does. Clarity, understanding and confidence – which can only come through good communication – are key components of that process.

There’s one more important thing that I must tell you. All of you – and this unique profession that you represent – have a very important role to play beyond the obvious one. It’s clear from what Belle Mulligan has told me that you have something to contribute far beyond the normally perceived function of an investor relations person. Just think of the chairman of the board of Chase, or the CEO of Manny Hanny, or in my case, Peter Allen of Lac. Lac had been in the gold business for probably a generation before it was taken over by Barrick, yet it disappeared.

Imagine what might have happened if the people at the helms of these other corporations had established relationships with their investor relations people that enabled them to obtain crucial feedback. I’m not talking about conveying a company’s story to investors or analysts; I’m reversing the equation.

What if Peter Allen’s top IR person had told him about a fundamental or emerging change in how investment community looked at Lac? What if the head of Chase had been told that its shares, relative to each dollar earned, were valued lower than Chemical Bank’s? If these executives had received such feedback, if they had understood what caused these changes, there is a 50% chance that they could have done something about it. And in my case, if Peter Allen had obtained such input, maybe he would be standing here today as the person in charge of the largest gold company outside of South Africa.

Feedback makes a very fundamental difference. Without it, those who run businesses don’t get the nuances – the daily changes in attitudes of investors and analysts. In each and every one of our businesses, slight changes, any of thousands of details, can affect investors’ attitudes. That is where investor relations people can become really important. You can make the difference between belonging to an average, a losing or a winning corporation.

Provide feedback; get that information to your top people. Because unless you tell them, they will not know. Unless they know, they won’t be able to change. And if they don’t change, they may be heading down the path to oblivion. You can fulfill an enormously important function.

That’s one of the reasons I came to talk to you. Increasingly, the kind of business evolution that will sustain our continent’s economic viability and success will depend on the public capital markets. As we create corporations that perform for investors, more money will flow in, providing the fuel we need to move to the next stage of growth. That is how we will maintain the whole free enterprise system. You are a vital component, but only inasmuch as you fulfill your true role – becoming the ears, the eyes and the feel of those responsible for running and making the decisions in the corporations of our future.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Don Calder
President & CEO, BC Telecom

The Vancouver Board of Trade, May 27, 1998
Published in The Corporate Report No. 25 (August 31, 1998)

It’s a great time to talk about telecommunications. It’s an industry that’s in the news almost daily. An industry that’s undergoing tremendous change – change that’s impacting you and your business dramatically. Today, I’ll talk about how telecommunications is changing, what’s driving these changes, and what all this change means to you and me.

I said telecommunications is in the news a lot. Let’s take a quick look at some recent headlines. A few weeks ago, the big news was that Telus, one of our national partners was talking with AT&T Canada, one of our competitors. They were talking about forming a “business combination.” Less than two weeks later, those talks were off, but they’ve raised a lot of eyebrows. In the meantime, another one of our competitors, Call-Net made a bid for Fonorola, a player in the long-distance market. And just last week, MetroNet, one of our competitors in the local telephone market said it’s buying Rogers Telecom.

And, of course, this “merger mania” isn’t limited to the Canadian telecommunications market. Consider WorldCom’s acquisition of MCI. WorldCom and MCI are both giants in telecommunications down south. By merging they’re creating one of the largest corporate marriages in US history.

What does all this mean for you, our customers? I believe it’s good news for you. You see, these changes will make the market even more competitive. And competition breeds innovation, choice and customer focus.

What does it mean for BC Telecom? First of all, like all players in the market, we’re having to work harder to win your business. And like all the other players, we, too, are looking for economies of scale. So we can spread the cost of developing new products and services over many customers. That’s why our relationship with GTE is so critical. It’s also what drove the creation of Stentor – and continues to drive our commitment to a national organization. It’s what drove Telus and AT&T into their discussions. It’s what drove MCI and WorldCom to do the same, and so on.

I want to emphasize, however, that despite all the change swirling around us, the critical ingredient is you, our customers. Right now, we’re talking with our Stentor partners about: how we can serve you better, how we can help you compete and how we can help you win. Each member of the Stentor alliance is committed to ensuring you get the best service we can deliver at competitive prices – no matter what happens in our business environment. Certainly at BC Telecom, our focus continues to be you – consumers and businesses here in British Columbia. We’re going to meet all of your telecommunications needs here and around the world.

So, that’s my summary of current industry events. A lot of shakeups. A lot of change. Let’s now look at some of the things driving this change. First and foremost, it’s you. Your need to reach your customers, employees, and suppliers wherever they are in the world. Your need to lower your costs. Your need for creative solutions.

Of course other factors are also at play. They are competition, technology and regulation. Let’s look at each one briefly. First, competition. There are now more than 100 companies vying for your long-distance business, and four companies offering wireless service. There’s no doubt about it, competition is a huge factor in telecommunications today.

What about technology? The internet provides an excellent example of the power of technology. It’s transforming every aspect of business today. You might have seen a recent article in The Vancouver Sun. It said that by the year 2002, the global market for electronic commerce is expected to grow to US$300 billion.

The impact of the internet can also be seen in everyday life. I’d be interested to know how many Canadians sent Mother’s Day cards by email this year. At BC Telecom we’re committed to ensuring you have access to the latest internet technology. Two years ago, we unveiled Sympatico. It’s now the largest internet service provider in BC with approximately 70,000 customers. And just a few months ago, we launched BC TEL MultiMedia Gateway. It provides high-speed internet access. More than that, it allows internet service providers to deliver content at higher speeds. For example, Sympatico High-Speed Zone offers BCTV newsclips and sports highlights.

So far, I’ve touched on competition and technology. What about regulation? I’m pleased to say our regulator, the Canadian Radio-Television and Telecommunications Commission (CRTC), is working hard to keep up-to-speed. The CRTC’s new approach is well suited to our current environment.

Here are two examples. First, the CRTC is making it possible for us to bring the price of local telephone service closer to its actual cost. The CRTC has allowed us to increase prices for local service gradually as we continue to hold the line on our costs. So, we’re finally on track to seeing all forms of subsidy for local service disappear. You see, as business customers you still subsidize the amount residential customers pay. What’s more, long distance subsidizes local. And urban customers subsidize rural customers. That doesn’t make sense in a fully competitive environment.

Tomorrow, the CRTC begins a hearing in Prince George to look at how to serve Canadians in high-cost remote areas. The CRTC will ask:

•  If services to rural and sparsely populated areas should continue to be subsidized?

•  If so, which services and which areas would qualify?

•  Where should the subsidy come from? Right now, as I said, it comes – in part – from you, as business customers in major urban areas.

•  Finally, how should the subsidy be distributed?

The results of that hearing will be of interest to all Canadians.

A second example of how the CRTC is helping to move the industry toward full competition can be seen in a recent decision. It says we can now package and advertise our wireless services with some of our other services. This is something we’ve been pushing for, and you’ve been telling us you want, for a long time. Thanks to this decision, we’ll be able to create personalized offers for you. We’ve already put together an offer that combines long distance and internet service. We’re waiting for word from the CRTC about a couple of other new offers. And we’ve got a team of marketing experts looking at other ways to take advantage of this marketing opportunity. I believe, in the future, you’ll be able to choose the mix of services that works best for you, your family or your business. More to come on this.

So, that’s what’s behind the headlines: increasing competition, dramatic change in technology and evolving regulation. So, what does all this mean for you? How are you benefiting as business people? You’re benefiting because we at BC Telecom are more committed than ever to our three objectives:

•  To be a market leader

•  To partner with our customers

•  To be easy to do business with

What do I mean by a market leader? I mean we are continuing our proud tradition of striking out ahead, taking calculated risks, being the first to offer new services. For example, we were the first to offer consumers a telephone that sends and receives email. We were also the first to launch an interactive website which provides local news and information exclusively in Chinese. Last week, we launched our new Sympatico website for Indo-Canadian internet users. The site includes a wealth of community news, entertainment listings, restaurant reviews and public service announcements. It’s called Jal, which means “web” in Hindi.

As well, we were the first to offer high-speed data service to business customers. High-speed data translates into increased efficiency and cost savings for your business. Some of the businesses using our high-speed network include:

•  Brokerage firms and credit unions like VanCity Savings and Pacific Coast Savings

•  Customers in the forest industry, like Slocan Forest Products, Doman Industries and Western Forest Products

•  School districts in Surrey, Burnaby and Coquitlam

•  Municipalities like the City of Richmond, the District of North Vancouver and the City of Kelowna

I’m pleased to say we recently expanded our high-speed data network to 13 new communities. The latest additions are Terrace, Cranbrook and White Rock. This means that 90% of BC businesses have access to high-speed network capabilities. That’s what I mean by leading the market.

The second part of our vision is to continue partnering with our customers. We want to be your partner. We want to help you succeed. For example, we’re working with municipalities around the province to create “Smart Communities.” We have agreements in place with Victoria and the district of Maple Ridge among others.

We’re also partnering with British Columbians who produce films, TV documentaries and innovative new media programs. Recently, we established the BC TEL New Media and Broadcast Fund. We’ve set aside $10 million for this fund. And the response to our fund is extremely positive. We’ve just cut the first check. It’s gone to a BC producer named Raymond Massey. His project? A made-for-TV film called West of Sarajevo. We’re thrilled to be a partner in this creative endeavor.

Here’s another example of partnering. Two weeks ago, we signed a memorandum of understanding with the Simon Fraser Health Region, which serves people in New Westminster, Burnaby, Port Coquitlam, Coquitlam, Port Moody, Pitt Meadows and Maple Ridge. We’ll link together 57 health agencies in these communities to help the Health Region achieve its vision of having one medical record per patient.

This will mean that with the click of a mouse a patient’s complete medical history can be accessed in any emergency room even if the patient has never been to that facility before. Medical staff will know instantly the last time the patient visited his or her doctor, the results of lab tests taken many months ago, and so on. It’s going to make a significant difference to the delivery of healthcare in the region.

A third example of partnering has to do with the “year 2000.” We’ve been working on our program since 1996. We’re determined to make the century date rollover a “business-as-usual” event. Yet, according to Statistics Canada less than half of Canadian businesses have a year 2000 program in place to address this critical business issue. We recognized an opportunity to partner with you and we jumped on it. In April, we distributed more than 200,000 brochures to businesses around the province. And, today, I’ve brought copies of the brochure for you. They’re at the back of the room. I strongly encourage you to take one back to your office when you leave today. And ensure you will be ready for the year 2000.

As I said, in addition to leading the market and partnering with customers, we want to be easy to do business with – whether it’s on the phone, in person, by email or over the internet. Last September, we made it possible for university students to order their telephone service, long distance and Smart Touch features over the internet. Plans are in the works to enable all of our customers to do the same thing. Not only that, we’re working to develop ways you can pay your bills online as well.

How are we going to achieve our objectives? We’ve started by changing the way we approach our business. Today, we approach every aspect of our business from your perspective. We’re focused on your needs, on understanding them and then designing products and services to meet those needs.

Consider our relationship with Rainmaker Digital Pictures. Rainmaker is a Vancouver-based company. It specializes in post-production for films and TV shows. Shows like Millennium. The people at Rainmaker told us they need to get daily film takes to Los Angeles. Right away, every day. By courier, it takes about eight hours. Instead, Rainmaker uses our MovieRoute service to convert film and TV scenes into light pulses and then transmit them over our network to Los Angeles in real time. That keeps Rainmaker at the forefront of its business and it helps BC’s film and TV industry to be efficient and grow.

Of course, while we’re changing the way we approach our customers, we’re not changing our commitment to investing in this province. This year alone, we’re investing more than $570 million to maintain and expand our network. For example, we’re continuing to invest in our growing Sympatico internet service. This year, we’ve extended Sympatico to seven more BC communities. Now, 85% of British Columbians have local access to Sympatico. And, as I said earlier, we’re expanding our high-speed data network.

These investments benefit the entire province. For example, because of the scale and scope of our network, British Columbia’s call center industry is poised for growth. As you know, call centers are changing the way many customers and businesses interact with each other. The call center industry is growing rapidly across Canada. It spans all sectors: financial, software, healthcare, consumer services and businesses of all sizes. It’s also creating jobs. Jobs for knowledge workers. Quality jobs. Jobs in all parts of the province.

Businesses like yours can locate your call centers almost anywhere in the world. We want you to choose British Columbia. BC already has a lot going for it:

•  A highly trained, multi-lingual workforce

•  BC Telecom’s network

•  World-class training facility at BCIT

And now, thankfully, the provincial government has eliminated the sales tax on toll-free calls. I believe this will be a boon to the call center industry because the use of 1-800, other toll-free numbers and the internet is the lifeblood of the call center industry. And you’ll be pleased to know a group of business people from across the province is working with the government on a new program. A sales and marketing program to attract more call center business to our province.

We’re also talking with the government about introducing training incentives to make BC an even more attractive place to do business or set up a new call center. I encourage everyone here today to add your voice to this issue. Today, about 30,000 British Columbians work in call centers. We want that number to grow. Right now, a number of companies are considering setting up call centers here. It could mean more than one thousand new jobs.

As you can see, call centers are important to BC’s economic future. The development of the call center industry is just one of the ways in which the telecommunications industry is changing and one of the many changes that benefit you. As I said at the beginning of my remarks, it’s a great time to talk about telecommunications. It’s an exciting industry and what I find most exciting is that telecommunications is an economic enabler. My business is helping your business succeed.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Jean C. Monty
President & CEO, BCE, and Chairman & CEO, Bell Canada

Investment Dealers Association of Canada, Mont Tremblant, Quebec, June 29, 1998
Published in The Corporate Report No. 25 (August 31, 1998)

Allow me to start with a quote: “Today…we have extended our central nervous system itself in a global embrace, abolishing both space and time…Rapidly, we approach the final phase of the extensions of man…when the creative process of knowing will be collectively and corporately extended to the whole of human society.”

I challenge you to find a better description of cyberspace, the realm created by the internet. And yet these words were written more than thirty years ago, long before the internet, by one of the century’s most daring thinkers. They were written, of course, by Marshall McLuhan. Small wonder that today’s wired generation venerates McLuhan as their patron saint.

“Extending our central nervous system itself in a global embrace, abolishing both space and time…” When McLuhan wrote, he was describing the extension of electronic man: copper wires and radio waves, as exemplified in every home by the black rotary phone and black-and-white TV. Shortly after McLuhan died, the computer also took up residence in homes. And while its capabilities were impressive at first, little did we suspect the genie waiting within.

So far, so good. Three devices, three industries marching along parallel tracks: the telephone, the TV and the computer. Then, sometime in the early 1990s, someone let the genie out. World-shaping events sometimes descend in a thunderclap, like the start of the Nuclear Age. More often, they sneak up on us, to change society from within, like the steam engine in the 19th century and the internet today.

Spawned by the computer industry about twenty years ago, the internet was at first an esoteric tool for US military researchers. Today, it’s entered the public consciousness, and is exerting a powerful magnetic force on other industries. Telecommunications and television are converging on the internet, and as they draw closer, they lose the defining marks that make a telephone different from a TV and a computer. Fundamentally, this is because phones and TVs are entering the digital universe, the computer’s own backyard. This is a good thing. For digital technologies are the democrats of high-tech, converting all images, texts and data to equal and identical bits.

At Bell Canada, the infrastructure has been digital for a few years now. With data traffic now greater than voice traffic, the main switching and trunking systems are currently being optimized for digital data transmission. As for television, by November of this year, the major American networks will begin digital broadcasting in the 17 largest cities in the US. In Canada, a report by a federal task force, “Canadian Television in the Digital Era,” recommended encouraging television stations to begin digital broadcasting in Montreal, Toronto and Vancouver by the end of 1999. This represents the start of the final fusion, or convergence.

I was invited here today to speak about the state of the telecom industry. But as you can see, I keep straying into the once-foreign territory of computers, television, multimedia and entertainment. Perhaps it’s time the telecommunications industry shed its prefix and swam in the greater ambiguity but larger potential of “communications.”

At BCE, we’ve already taken significant steps toward becoming a communications company. Bell Canada is putting together a national network to provide comprehensive services to business customers. Bell has also increased its stake in CGI, Canada’s largest computer integrator, and in MPACT Immedia, which specializes in electronic commerce. Every 24 hours, $3 trillion – an amount greater than the economies of most nations – moves over electronic networks. Electronic-commerce is growing fast, perhaps by a factor of 10 by the year 2000, and we want a share of that growth.

Similarly, Nortel’s recent acquisition of Bay Networks increases that company’s internet expertise. Bell ExpressVu, our direct-to-home satellite service, is just the first step to providing a greater choice of entertainment and information. We are now the sole owner of our very own satellite company, Telesat. And Sympatico, our internet service provider, is the Canadian leader. Just as national borders are yielding to free trade, the lines that once separated industries are dissolving. The winners will be those who already command outposts in neighboring industries, and who can offer fully integrated solutions.

As it now stands, total world telecom service revenues are US$650 billion. When you include telecom equipment and computer software, the figure reaches US$1.5 trillion and is expected to at least double in the next decade. Three fundamental forces are driving this industry: obviously, the internet, which I’ll return to shortly. But also wireless technologies, and the linked forces of globalization and deregulation.

In developed countries such as our own, wireless technologies have undoubtedly changed the way we work and play. However, to grasp this technology’s true significance, you must travel to less developed nations. There, you’ll find that people don’t take basic phone service for granted, as we do. For these nations, a modern pole-and-wire infrastructure would be a major economic driver, but also a major expense to build. With the advent of wireless systems, all this has changed, virtually overnight. A wireless infrastructure requires a much smaller investment, and can be operational within weeks of license approval. Where people typically waited months, even years, for a telephone, now they can buy a mobile handset and activate service in a single day.

Small wonder that worldwide, one new telephone subscriber in six gets a mobile phone. Within a few years, we could see as many wireless, as fixed, wireline networks. This is why Nortel, one of the world’s top three providers of digital wireless technology, is enjoying record revenues. And why Bell Canada International, which invests in wireless networks in developing economies such as Colombia and Brazil, is experiencing record growth.

The other factor, which I mentioned earlier, behind the so-called “golden age” of telecom is deregulation from explosive technology advances and the globalization of markets. Partly this is because governments now realize that markets are more effective mechanisms for shaping the industry’s future. And partly because, frankly, they have no choice. No one does. The industry is changing too fast, and in too many countries, to be regulated. The rules become obsolete even before the ink dries.

This doesn’t mean that I’m advocating a regulatory vacuum. Rather, I’m suggesting that government can be a force of stabilization rather than direction. National governments can help by establishing fair, competitive trading environments within their borders, particularly in today’s integrated global economy. For as deregulation spreads, each government finds it must follow suit, or risk being left behind. The result is fierce competition, greater investment, and innovation – benefits that accrue to each nation’s industry, economy and end users.

Now let’s return to the internet and see what the genie is up to. At current growth rates, it’s estimated that the number of internet users worldwide will increase from 90 million in 1998 to 200 million by 2000. It’s expected that worldwide internet commerce revenue will amount to $1 trillion yearly in the next century. It’s not surprising that data now accounts for more than half the traffic moving over the public network, and is growing ten times faster than voice. By the year 2000, data will account for nearly 80% of all backbone traffic. What does this mean for telecom carriers? A great deal, both technologically and culturally.

On the technical front, it’s important to remember that telecom infrastructures were primarily designed to carry voice, not data. As data networks continue to grow in size and capacity, voice is becoming just one among myriad other applications, which may include video-conferencing, internet, television and multimedia. With the primacy of data, the challenges are coming thick and fast.

Challenge number one: the industry must complete its transition from the first generation of digital systems to the second, represented by asynchronous transfer mode, or ATM, and the superfast gigabit routers. The essential benefit of ATM and routers is that they’re data-friendly. In the democratic spirit of digitization, it can carry my picture just as easily as my voice and the printed text of this speech.

Challenge number two: these networks will demand new access routes for users to overcome current bottlenecks. The chief bottleneck is the so-called “last mile” to homes and businesses, now connected by copper wires or coax cable. What are the options? One, spend untold billions retrofitting the existing copper-wire infrastructure with fiberoptic strands. Two, find new entry points, such as satellite transmission. Or three, implement solutions that widen the last mile into a “virtual” highway, thus giving new life to our copper infrastructure.

One such solution is the 1-meg modem, introduced by Nortel last year. Seventeen times faster than a 56K modem, the 1-meg modem provides always-on connection, so there’s no need to dial-up each time. What’s more, the modem prompts you when there’s an incoming call, so you can put the internet on hold. In future, you’ll even be able to receive and make phone calls while surfing the internet. And all this over an ordinary copper line.

But that’s just the hardware. There is much more to come, such as Connected Capital Region, a Bell Emergis project now being planned in our capital city. Connected Capital Region offers advanced communications packages tailored to the small home office, consumer and business markets. The packages will include Sympatico internet access at very high speeds as well as the traditional, long-distance service and email. We also intend to offer advanced services such as video conferencing, and integrated one-number voice and email solutions from Nortel, in addition to entertainment packages and home management features.

Challenge number three: move the industry from its current focus on dialtone to webtone. This is a challenge Nortel set for itself during the past year, promising to deliver the same robust, reliable, scaleable and secure internet access we’ve come to expect from dialtone.

Webtone has several implications, particularly in the kinds of technologies being developed. As the internet continues to grow, attracting most data traffic over its networks, internet protocol, or IP, is becoming the de facto standard. IP is the fundamental platform for webtone, and for all future communications solutions, such as the 1-meg modem I’ve already talked about.

If you were in this part of the world last January, you’ll recall the ice storm. You might also recall that throughout those days, as Montreal was brought to its knees by a failing electric power grid, as one service after another collapsed, the telephone system remained standing. This is telecoms cultural legacy: bulletproof, rock-solid stability.

Now contrast this with data networkers, who typically measure downtime in hours per month, sometimes weeks. They may boast of getting a system up and running again in four hours. When billions of dollars are coursing through the network, this is a recipe for disaster. We’ve all experienced the frustration from the failure of the Interac payment system at some point in time. But we can’t afford failures when we move billions of dollars form Tokyo to Paris.

For a telecom carrier, downtime is simply unacceptable. In our world, the goal is always 99.99%. Of course, consumers have paid a price for dependable dialtone, namely a limited number of services, such as call display, call forwarding, conference calling, and a few others. Now, however, telecoms are entering a new era. We’re following the genie’s trail into a universe of almost unlimited choice and interactivity. Like it or not, we’re being infected with this world’s freewheeling, unpredictable and wide-open spirit. The question is which carriers can combine the rich choices of networkers with the dependability of telecom? And which will survive the coming shift in culture?

Computers do have some way to go, but then they’ve also traveled a long way in a short time. In less than two decades, they evolved from giant, water-cooled mainframes to desktops whose power dwarfs their predecessors. This phenomenon is explained by Moore’s Law, which states that the computer’s price/performance ratio doubles every 18 months.

Similarly, the price/capacity ratio of network bandwidth is also advancing at an exponential rate. Here’s one dramatic example. Using the time value, with 1950 technologies, it would have taken 158,000 years to transmit the entire contents of the Library of Congress or 88,000 books. With 1980 technologies, it would have taken 661 years. By 1992, our bandwidth capacity had reduced the time to 53 days. Today, we can transmit the Library of Congress holdings in less than 20 seconds. Here is another way of looking at this example using the dollar value. In 1975, it would cost one dollar to transmit the content of one book in one second. Today, in only one second, we can transmit 160,000 books at a cost of under one cent per book.

Gigabits have now given way to terabits. One terabit is equivalent to all the voice traffic in Europe. This mushrooming capacity, with its economies of scale, also signals a marked cultural shift. We’re seeing that as backbone bandwidth becomes cheaper and more plentiful, the industry is refocusing its values on service speed, service management and user value – in other words, on the customer. And as bandwidth doubles with regularity, new multimedia applications are gobbling up the extra capacity. Parallel to this phenomenon, we are also seeing the cost of transmission services going down dramatically.

In fact, our appetite for bandwidth is insatiable, and is largely responsible for the birth of a new industry. Here’s what the future looks like. As choices proliferate, customers will be able to connect directly, or through a specialized intermediary, to access video, photos, text, audio and multimedia. These intermediaries will be major consumers of bandwidth, buying it from telecom, cable and satellite carriers, or, in future, from local multipoint telecommunications systems.

This sharp divergence between who builds and maintains the networks, and who creates and supplies the services, is at the very heart of the information highway. With ATM technology, as with the internet, anyone can now create and market any service on the public network. Where does that leave telecom carriers? It depends on how smart they are, how flexible and quick to learn. I know that at BCE, we want to remain in the driver’s seat. We want to be part of the convergence of technologies, not victims of the divergence between networks and services.

To do this, we must learn to do business in the global village, where information and knowledge are the new legal tender. This is why Bell Canada has increased its stake in CGI and MPACT Immedia, and why Nortel purchased Bay Networks. These acquisitions are about buying experience in turnkey solutions, flexible management and a computer culture. We want know-how that complements our business, to produce enriched, integrated services.

BCE isn’t alone in this, of course. Cross-pollination is occurring everywhere. Telecom carriers are importing computer culture to ease their transition to the communications industry. At AT&T, chairman Michael Armstrong comes from IBM, while British Telecom CEO Sir Peter Bonfield was formerly with the computer consulting giant ICL. Can we survive convergence? This depends on our ability to change cultures and become providers of solutions that integrate computer technology, telecommunications, and entertainment services.

I can tell you it’s not easy to know what lies ahead. We have no Marshall McLuhans to guide us. Of course, if you know of one, you might tell him there’s a nice job waiting at BCE. I’ll even throw in a cell phone. No, we don’t know exactly what lies ahead, except one thing: competition, and lots of it.

We’ve had a small foretaste of long-distance competition between Bell Canada, AT&T, Sprint, and Fonorola, but there will be much more. Increasingly, telecom companies want to provide total services to customers: voice, data and video communications, mobile and satellite communications, internet access, and, increasingly, radio and video broadcasting on demand. They need to develop a scope of services for customers.

These carriers are in a strong position to shape the industry’s evolution, because they control the networks. But they’re not alone – remember which industry let the genie out. When Microsoft bought the internet-on-TV manufacturer WebTV, invested in the cable company Comcast, flirted with TCI, another cable distributor, and launched its Teledisc mobile satellite project, it was declaring the same intention as telecom carriers: to be more things to more people, at more times and in more places.

This explains why telecom companies are constantly drawn into new partnerships. And it explains the emergence of fully integrated worldwide communications networks. The prototype of this kind of super-operator is WorldCom, which does business directly in some fifty countries. Former national monopolies are even now trying to achieve the same critical mass through mergers, acquisitions or investments. One example is the cross-purchase of shares by Deutsche Telekom and France Télécom, and these companies’ investment in Sprint.

These ex-monopolies have realized that the very concept of a captive territory for a given carrier is vanishing. In its place, we’re seeing local hubs in major cities, linked by international backbones. We’re witnessing the emergence of a world communications market dominated by a small number of players who can bundle a complete range of services. BCE wants to be among this select group. And, serving these players will be myriad small high-tech companies with expertise in developing cutting-edge solutions for any given sector. Bell Emergis is an excellent example of this kind of high-tech company, and Connected Capital Region an example of what’s possible.

Ultimately, telecommunications will continue to play a pivotal role in world markets. If anything, that role will be expanded. Wireless technologies, deregulation and trade globalization will make sure of that. But above all, and increasingly, the internet will enable more and more economic activities to interact transparently across borders. Consider the possibilities when we finally perfect voice synthesization and voice recognition, handwriting recognition, automatic translation and touch-screens.

This is both scary and exhilarating. Scary for some, because we’re entering the unknown. Exhilarating for most, because the internet has the potential to unleash unprecedented understanding, prosperity and value for all humanity. And yet, what is it? It is simply a protocol but is much, much more. It could be the missing link in the way we live and play. The internet has no offices, shareholders or employees. It obeys no national laws, and is therefore answerable to no one.

If you wanted to see the internet, you couldn’t, because it exists in no single place. And yet the genie is out there, somewhere, and it works. Marshall McLuhan was absolutely right, because the internet resembles nothing less than a global mind – not a brain, which can be weighed and dissected – but a mind that can make our wishes come true.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


L. R. Wilson
Chairman, President & CEO, BCE Inc.

Annual meeting of the Canadian Chamber of Commerce, Calgary, Sept. 19, 1993
Published in The Corporate Report No. 4 (December 15, 1993)

Our business is very much a business of the next century. We are an integral part of what has been called the new information economy. The revolution in communications technology and information processing has provided us with new challenges and new opportunities.

To succeed, we have determined that we must concentrate on our core expertise and compete globally. We are embracing change as critical to our survival.

Indeed, we cannot survive except as a company with a global outlook. Three-quarters of Northern Telecom’s revenues now originate outside of Canada. Our investments in Mercury Communications in the UK and Clear Communications in New Zealand have launched BCE into international telecom services activities. And BCE companies now publish telephone directories in 12 countries, from the Caribbean to India.

The establishment of Stentor and its alliance with MCI, as well as our participation in the Financial Network Association, further testify to our determination to increase our ability to serve international customers in Canada. Similarly, Northern Telecom has entered into alliances with international companies such as Matra Communications in France to enhance its ability to deliver products globally.

These ventures build on the business we know. We are expanding on the basis of a sound foundation of experience and expertise. We are pursuing new opportunities and challenges which are important not only to BCE but, we believe, to the Canadian economy as a whole. Our activities bear directly on the competitiveness of a wide range of Canadian-based industries.

Central to our progress is a major commitment to innovation. Over the past decade, we have spent $9 billion on research and development and we intend to keep spending more than a billion dollars a year over the next decade. At the same time, in our telecommunications service companies, we are investing heavily in these new technologies, new equipment and the delivery of new services. In 1992 in Bell Canada alone, we invested $2.7 billion. Finally, we are determined to sell and to source new products and services on a worldwide basis, adapted as need be to local circumstances and requirements.

While we are committed to change and to the globalization of our business, we are also resolutely determined to grow BCE as a Canadian company. Today, BCE has assets of some $45 billion, revenues of over $20 billion and a net income of $1.3 billion last year. With some 300,000 shareholders, we are the most widely held firm in Canada; 86 percent of our shares are held in Canada and 98 percent of our shareholders live in Canada. In 1992, we paid $540 million in Canadian income taxes and a billion dollars in other payments to Canadian governments. Our Canadian workforce in 1992 numbered 85,000 people who together earned wages and salaries of $4.6 billion. BCE is the largest private employer in the country and the largest investor in R & D in Canada, public or private. In short, we have a large stake in this country, and the country has a large stake in us.

Reflecting on BCE’s experience over the past few years and on our aspirations as we head into the next century, I would like to offer some thoughts which may have wider application – application not only to other Canadian firms, but also to the country as a whole.

Let me declare my bias at the outset – I think that Canada is the greatest country in the world. I feel immensely fortunate to have been born and raised here, and to have had the opportunity to live and work in three provinces – Ontario, British Columbia and now Quebec. I am proud to be a Canadian, and I’m sure that all of you in this room today are too. But I don’t believe we should let our pride deter us from asking difficult questions about our future, or blind us to the realities of the challenges we face. I worry about how we can continue to enjoy one of the most prosperous and rewarding societies on earth – a society in which all Canadians can raise their children and grandchildren to enjoy the same opportunity. And I don’t mean rewarding only in the material sense, but also in the broader sense of community and lifestyle.

Unfortunately, there are an increasing number of Canadians who are concerned that the Canadian dream is becoming an impossible dream, if not for them, at least for their children and grandchildren. Why is that? Well, measured in constant dollars, the average incomes of many Canadians have declined over the past decade and a half. After three decades of steady growth, our standard of living, on average, has been stagnant since 1980.

A large part of our unease, however, stems from a nostalgia for an era that is gone. We regret that the circumstances and institutions that have long sustained us as individuals and as a society appear to have disappeared. And by continually looking over our shoulders, we are failing to see the opportunities that are unfolding before us. In the words of Dian Cohen and Guy Stanley:

“As a community, we have eyes only for the old economy, not the new one. For all their imperfections, we loved the good old days. We knew what made us rich (wheat, trees, energy). We knew what to expect (expansion, growth, steadily improving standards of living). We shared a common vision of our society (our values were tied to material growth and the accumulation of wealth). But appealing as that old world was, it no longer exists. And unless we recognize the present era as a transition, not a dip in the old economy, we will be left with an empty shell. Let’s say it up front: this “recession” isn’t going to end. It isn’t going to end because it isn’t a recession.”

This is a hard truth. It is a particularly hard truth for those whose livelihood, whose identity, whose self-worth were inextricably tied to the values and institutions of the old economy. But we must face up to it. Only then can we begin to appreciate not only why we must be prepared to change the way we look at today’s problems, but also the extent to which we must transform the institutions and activities that make our society work.

We have been standing still in recent years because the industries of the past are no longer growing while the industries of the future have not yet been properly and fully defined. A number of goods-producing industries are now the growth industries of yesterday. Their ability to generate wealth and jobs has peaked. They will continue to be a part of our future, but not as the engines of growth.

Our industrial economy has now matured to the point where we need fewer and fewer people to produce the same quantity of goods. We also need fewer people to manage our industrial firms. Others around the globe can now supply us with some of our traditional products more efficiently and more cheaply than we can. And information processing technology has reduced the need for clerks and administrators.

The people no longer involved in producing goods are now providing services and increasing the knowledge base of our society. The skills and training that underpin the efficient delivery of those services, however, are different, and therein lies the problem. There is a profound mismatch between what society now needs and the kinds of workers available. The mismatch in skills is both a personal tragedy and a societal challenge. Just ask unemployed steelworkers in Hamilton or fishery workers in Newfoundland.

Our ability to take advantage of new industries and new opportunities requires adjustment and change in the lives of individuals as well as in the institutions of society. This, I believe, is the central challenge we face as a country today. We need to transform ourselves from a winner in the industrial economy to a winner in the new information economy.

I am confident that we will meet this challenge. I have profound faith in our ability to rise above our current difficulties and ensure that bright future for our children and grandchildren. But I do not believe that we can achieve that future without some tough choices and painful sacrifices. The philosopher Alfred North Whitehead once said: “The first step of wisdom is to recognize that the major advances in civilization are processes which all but wreck the society in which they occur.”

Canadians today are perplexed and troubled by these changes. Some of these changes emanate from circumstances beyond our immediate control, from the technological and other developments that have created a tough new global economy, an economy which provides individuals, firms and countries with very little room to hide. We are not alone in facing this tough new environment. Other nations face similar or even tougher challenges. What matters is how well prepared we are to accept those challenges.

Here the story becomes a little more difficult. In part because of the complacency bred by past success, in part because of the hole we have dug in the past few years as we tried to spend our way out of the difficulties created by these new realities, we appear to be less prepared to face the future than some others.

What evidence is there to support that statement? Every year the World Management Forum publishes an exhaustive annual review called the World Competitiveness Report. It rates the economic performance and potential of the world’s most important economies. In the last few years, we have been slipping. A few years ago, we were fourth and then fifth. Last year we slipped to eleventh. This year? Perhaps you might care to venture a guess.

I am not suggesting that we accept the judgment of the Forum in all respects. Its methods are curious and its criteria subjective. Nevertheless, its assessment of Canada contains a very painful truth. We rate very high on those criteria which spell out the cards that we have been dealt by nature, history and location. Our resource base, our human capital and our geographic location all suggest that we have a favorable future. In short, we have some very valuable assets. But when it comes to those criteria that describe the extent to which we are prepared to make the best of those assets, we slip way down. Two criteria in particular always disturb me greatly – outward and forward orientation. The Forum is convinced that we are not prepared to look seriously beyond our borders and beyond tomorrow.

The Forum points to a truth that most of us know very well but have not done much about. Canadians do not like change. We tend to be risk averse. Our corporate sector has too many managers and not enough entrepreneurs. We look to governments for solutions rather than to ourselves. In short, the challenges we face as a nation are not matters of endowment or capacity but of attitude, will and application.

This is good news. These are matters which we can do something about.

Our famous talent for self-denigration and self-doubt should not be allowed to obscure a fact obvious to the rest of the world – Canada is a very fortunate land. If we carefully manage our natural endowments, they can provide us with a bright and prosperous future.

But we cannot be complacent. There is no guarantee that we will be able to maintain our enviable standard of living forever. We have inherited our current prosperity. We must earn our future prosperity.

Canada is thus at a crossroads. Our past successes are affecting our ability to make some fundamental adjustments in the way we organize our society and get on with our future.

For a lot of Canadians, when we face problems, we turn to government for the solutions. That has been the Canadian way. But that is precisely one of the things that needs to change. Our reliance on government as our guardian angel and guiding light may in fact be one of our greatest liabilities.

It is tempting to become nostalgic and insist that our politicians and bureaucrats were more capable and that government did things better in the good old days. Perhaps so, but that is not the question. The point is not whether we have hardworking, dedicated, capable people in government – we do – but whether today, government is the best place to tackle all of the problems we face.

Because its growth has been slow but steady, many of us may not fully appreciate the extent of the growth in government services and programs in the past thirty years. The total government share of the economy – federal, provincial and municipal – has nearly doubled since we celebrated our centenary.

We are an over-governed country.

Think about it. We have now reached the point where about 50 cents of every dollar spent in this country, is spent by some government body.

In addition to too much government, we have too many levels of government. While I believe in competition, we certainly don’t benefit from competition between governments leading to duplication and overlap. In the nation’s capital, for example, snow is removed by four different levels of government – the city, the region, the province and the federal government. If they got together and let out one contract to a private firm, I am sure it could be done better for less money.

In a 1990 CBC/Globe and Mail poll, a stunning 86% of Canadians believed that if government worked properly, it could solve most of the problems Canada faces. That is a profoundly worrying statistic because it betrays a psychology of dependence that flies in the face of reality. We are paying increasingly more for government services and receiving less. And the reason we are not getting value for our tax dollar is because governments are not able to adjust quickly enough to new realities.

What then should governments do to adapt to the new realities? Let me explore two avenues which I believe are essential to dealing with the challenges of the 21st century. First of all, governments need to get back to basics and concentrate on the activities and responsibilities that can best be undertaken by them. Second, governments need to change the way they do things so that they can do them better. Let’s take these two themes and try to put some flesh on the bones.

To begin, governments must accept what a lot of us in business have learned the hard way. In the heady days of growth in the 60s, 70s and 80s, we and they took on board a lot of fat; both of us got into activities that we couldn’t very effectively manage. Like business, governments now need to concentrate on their core functions, and let the private sector assume greater responsibility for those things which it can best deal with.

Additionally, governments must accept that they can achieve some of society’s objectives more effectively as partners rather than as sole agents. We need to see a lot more cooperation and rationalization and a lot less competition between levels of government. We need to see a much greater willingness on the part of government to share responsibilities with other sectors in society. This will allow governments to do what they were created to do, and what they can do best.

Let me comment on just three of these core functions.

First, governments must ensure a healthy economic environment, one that favors saving and investment and encourages and rewards initiative and risk-taking. The ingredients for such an economy include a stable currency, sound monetary policy, and a fiscal policy that rewards entrepreneurship and initiative and ensures the availability of capital. In short, governments must provide a healthy and stable macro-economic framework.

In the Canadian context, that means more common cause between federal and provincial levels of government to reduce deficits and eliminate duplication and competing programs. We need to intensify fiscal reform efforts aimed at making Canada a better place in which private capital can invest and do business. We need a simpler and more coherent system of taxation. Otherwise, the underground economy will continue to grow to the detriment of the country as a whole. We need governments that can live within reasonable means and pay their bills.

We borrowed heavily in the 1980s – privately and publicly – to finance fast cars, fancy dinners, and fun-filled vacations. Now that the roof is leaking and we want to send the kids to college, we find that the cupboard is bare. We must face this reality. And to some extent, I believe that we are.

Governments at all levels are now scrambling to reduce expenditures. They know that taxpayer concern has reached the boiling point. As a taxpayer and a business executive, I can only applaud these efforts. But I am afraid that too much of this paring and trimming is taking place without the fundamental changes in assumptions and mindsets that are required to bring government into closer harmony with the requirements of the new economy.

Of course, the best way to tackle the deficit is to get the economy growing so that it generates more tax revenue and governments are required to pay less in income support. A shrinking or stagnant economy provides us with a double whammy – government revenues drop while government expenditures grow. That is why the 1980s were such a tragic decade. We forgot the lesson Joseph taught the Pharaoh three millennia ago. During the seven fat years of 1982–1989, we not only did not put anything away for the lean years, we also borrowed to spend and consume even more. We didn’t invest for the future – we had one heck of a good time! We are now in the lean years and there is nothing in the barn to make up for the poor harvest.

We must put our financial house in order so that governments will be able to ensure the kind of stable macro-economic environment we need for investment and growth. As individuals and as business men and women, we must be prepared to accept the costs involved. We must accept that there are no magic solutions.

The second critical area of government responsibility is the management of a regulatory environment which fosters – not hinders – competitiveness. In spite of attempts at deregulation initiatives over the past seven or eight years, the regulatory requirements placed on businesses by all levels of government continue to consume too large a share of the resources of small, medium and large firms alike. While some of these requirements may once have served worthy objectives, many have failed or outlived their usefulness, while new requirements often serve questionable needs.

Of course we need regulations and regulatory bodies to ensure orderly competition, but governments at all levels must seriously consider the burdens which regulations impose on the wealth-creating sectors of the economy, and recognize the extent to which they undermine our capacity to compete abroad. Total deregulation is not the answer. We have to differentiate between effective, useful regulation and the kind of regulation that flows from political and bureaucratic imperatives.

And, if there’s one area of government activity in which BCE and its companies have had a lot of experience, it’s regulation!

Again, the message for all of us is a simple one. If we want government to be less of a burden, we must be prepared to live with less government. We must accept that government regulation is not always the answer. We must be prepared to accept greater personal and corporate responsibility for our actions and for the well-being of society.

Third, governments must ensure that we continue to make key infrastructure investments – not only involving renewing the infrastructure of the past, but also building the infrastructure of the future. In our industry, for example, we believe that government can and should facilitate the development of telecommunications “super highways” that will allow businesses and individuals across the country to participate fully in the information age.

There are numerous examples of governments around the world finding innovative ways to renew basic infrastructure components. In Great Britain, for example, the privatization of what were formerly considered natural state monopolies has spurred massive foreign and private capital into such areas as telecommunications, water distribution, electricity, and soon, rail transport and highways.

Our governments must also create the mechanisms for the development and installation of state-of-the-art technologies in infrastructure initiatives. These are investments that will, in the long run, give Canada and Canadian businesses a global competitive advantage. Surely there is no more important business development issue than ensuring that Canadian firms secure this competitive advantage now.

And we can help gain that advantage by becoming constructive partners with government, willing and able to invest and share risks and responsibilities in building the human and physical capital for a prosperous future.

But it is not enough for governments just to concentrate on doing the right things. They must also do them better. We desperately need more effective government.

Governments have to learn how to harness the power of modern communications technologies and organizational structures now being successfully implemented in business.

Today, we need a dust-shaking revolution in our public institutions, one that concentrates on results and outcomes and incorporates much more flexibility in choosing the appropriate means.

Government must get rid of its “program mentality.”

Our governments are still imbued with a “one size fits all” approach. Billions of dollars of transfer payments and program expenditures go to Canadians who really don’t need government assistance. We seem stuck on paying everybody rather than targeting those who truly need support. We can, and must, find a better way.

The problem is not one of people but of leadership. Most politicians and public servants are responsible, talented, hardworking, dedicated people who are often even more frustrated than the people they serve. They would like to do better, to take greater pride in their work and we must continue to help ensure that they do.

There is evidence that many of our governments are moving in the right direction. They are learning that the issue is not how to do more, but how to do less and do it better.

I have said a lot about what governments should do. Blaming government for all our problems is easy – but clearly wrong. Unfortunately, it tends to be very Canadian. Let me take the few minutes I have left to suggest some of the things that we business men and women must do. If we are to be listened to, we must lead by example – we must get our own houses in order and show that we are ready to make the necessary sacrifices both as individuals and as businesses.

The demands of the global economy have placed tremendous pressures on all of us. Every business in this room, I am sure, is restructuring and economizing in order to survive. This is not a matter of us being “hard-hearted” capitalists ruthlessly seizing opportunities where responsibilities are small and shedding them where they are large. It is a matter of survival.

But the stresses and strains of adjusting to a more competitive global economy have led to a range of social problems. That should not be surprising. What is surprising – indeed unhealthy – is the deep conviction that government alone is responsible for these problems and the expectation that only government can resolve them.

Of course, government assistance for people affected by change is critical. It is necessary for governments to invest in training and retraining. It is right for them to provide bridging financial support. Adjustment can be hard on individuals.

But we as businesses must be prepared to play a more important role in helping to solve these problems. Putting social problems caused by difficult business decisions on the back of governments is abrogating our social responsibility, and more importantly, limiting our involvement in the resolution of these problems. We need to support our communities – and here I do not mean simply financial support.

However, the most important contribution we can make in helping to cope with the adjustment problem will, of course, be our very success in competing in the global economy, thereby creating rewarding jobs over the medium and longer term.

During the 1980s, we in the business and financial communities, became obsessed with financial engineering and “get rich quick” schemes. We spent much of the decade taking profits by replacing real equity capital with debt – what a great example for our governments!

The factors that make a firm, an institution or a society competitive are not short term. They are built into its values, its organizational structure, its vision, and the quality of its people.

All of us must invest more in our human resources – in particular our education system – in order to ensure that future generations are healthy, curious and knowledgeable and that they have the skills and understanding to adapt to the challenges.

I will say it once again – Canada is a great country. I say that without reservation or qualification. While we have made mistakes over the past decades, both in business and government, you and I also know that it’s time for all of us to do something about fixing those problems. We can and we must. In the words of Winston Churchill, Canadians “have not journeyed all this way across the centuries, across the oceans, across the mountains, across the prairies, because they are made of sugar candy.”

Yes, it is a global economy and a global village. But this land is our land to look after for the benefit of generations yet to come. That means that each and every one of us, man or woman, worker or job-seeker, from the east or the west, the north or the south, must take more responsibility for our own lives and for our future.

We need leadership and vision to keep this country moving ahead – and we desperately need it now. We must all look in the mirror and determine how best each and every one of us can contribute.

Let’s get our act together and help Canada meet the challenge.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


L. R. Wilson
Chairman & CEO, BCE Inc.

Address to shareholders, Montreal, April 30, 1997
Published in The Corporate Report No. 21 (June 30, 1997)

One hundred and seventeen years ago, the Bell Telephone Company of Canada was formed here in Montreal. One hundred and two years ago, the company now known as Nortel was created here in Montreal. Fourteen years ago, BCE itself was incorporated here in Montreal.

Montreal is more than our headquarters city. It is our home. The BCE group has deep roots in this city. We are committed to this city. BCE and its operating companies – Bell, Bell Mobility, Bell Canada International and Tele-Direct, as well as Teleglobe, in which we have a significant equity interest – are all based in Montreal.

Our presence in Quebec includes 15,000 employees at Bell, 3,300 at Nortel, nearly 1,000 at Bell Mobility and 700 at Tele-Direct. All told, the BCE group employs more than 20,000 men and women in Quebec, making us one of the largest private sector employers in the province.

If Montreal, has critical mass in telecommunications – and it has…if it is globally-competitive in telecommunications – and it is…I’m proud to say that the BCE group of companies has played a leading role in its development. In fact, BCE companies are a large part of the reason Canada is a world leader in telecommunications. Across the country, the BCE group provides jobs for 73,000 Canadians, with an annual payroll of $4 billion. BCE companies spent $2.5 billion on capital expenditures in Canada last year, and another $1.1 billion on research and development. Fully 20% of Canada’s private sector R&D is conducted by Nortel, about $80 million of it right here at our Nun’s Island research facility.

We are equally committed to contributing to the communities in which we live and work. Last year, the BCE group of companies provided $25 million in donations, educational grants and other community sponsorships. Bell Canada was the corporate sponsor of a CD-ROM, distributed to schools throughout Ontario and Quebec, that marked the 150th anniversary of the birth of Alexander Graham Bell. Nortel has established a chair in telecommunications here in Montreal at McGill University. And together, Nortel and Bell are co-sponsors of the Governor General’s Performing Arts Awards, which recognize Canadian artists for lifetime achievement and contribution to the cultural enrichment of Canada.

It is important to emphasize that while Canada is our home, our market is the world. Nortel, for example, now has a presence in some 150 countries and territories. Bell Canada International is located in North and South America, Asia and Europe. Tele-Direct operates in the Middle East, Asia, the Caribbean and the United States. Bell Canada and Bell Mobility are both among North America’s leaders in wireline and wireless communications.

Following its creation in 1983, BCE’s corporate direction included diversification into businesses outside of telecommunications. In the 1990s, we have refocused all of our resources on our core strengths within telecommunications. There are good reasons for this. Deregulation, privatization and rapid technological change in the 1990s have created enormous opportunities for growth in this industry.

It is BCE’s good fortune to operate in an industry that has virtually unlimited opportunities in the years to come. 1996 was a year of solid achievement with improved results in all operating areas.

Let me briefly review the numbers. Revenues were a record $28.2 billion, up almost 15% over 1995. Net income was $1.15 billion, an increase of 47% over 1995. That resulted in earnings per common share of $3.40, up 52% from 1995.

Return on equity (ROE) rose to 10.6% in 1996, a major improvement from 7% the previous year. We nevertheless believe that our ROE is still not adequate to sustain the company’s growth. Our longer-term target is to boost our return on equity to 15%.

BCE’s stock price rose from $47 at the end of 1995 to $65 at the end of 1996, providing shareholders with a 38% growth in the value of their investment. This in addition to a cash dividend of $2.72, making the total return of 44% for last year.

In fact, since our reorganization as BCE in 1983 to the end of 1996, the compound annual total return to a BCE shareholder was 14.4%. While most of the share price improvement came in the last two years, we nevertheless beat the TSE 300, in terms of total return, in 9 out of the last 14 years. We must continue to do that.

The primary factor in BCE’s improved financial performance in 1996 was the turnaround at Bell. Bell’s earnings contribution increased to $714 million, from $502 million in 1995, reflecting significant revenue growth, coupled with greater cost efficiencies associated with the company’s transformation program. Bell also reached an important milestone in 1996, achieving positive free cash flow for the first time in more than 50 years.

But Bell still has a challenging road ahead. Bell’s long distance market share dropped to 69% at the end of 1996, and the company will be facing the introduction of competition in local telephone service next year, about which I will have more to say later.

The worldwide explosion in network capacity, both wireline and wireless, driven by new technologies and regulatory liberalization and privatization, propelled Northern Telecom to record revenues of $17.5 billion this past year, up almost $3 billion over 1995. Nortel’s order input increased by 28% to $19.3 billion. Net earnings rose 32% to $844 million.

Nortel is well positioned to capitalize on the continuing growth in this industry. Reflecting this, Nortel’s orders in the first quarter of 1997 were up 35% over a year ago.

The continuing explosion in the demand for wireless services led to a 34% increase in subscribers in 1996 at BCE Mobile. At the end of the year, the company had more than one million cellular customers and almost 400,000 paging customers. 1996 revenues were up almost 20% to $926 million, while net income rose 25% to $64 million.

The year 1996 was another successful one for Bell Canada International. The highlight was the merger of its United Kingdom operations-Mercury and Bell Cablemedia-into a new company known as Cable and Wireless Communications. BCI holds a 14.2% interest in the new company with projected annual revenues of £2 billion, or about $4.5 billion Canadian. Operating across Great Britain, the new company will be among the first in the world to offer integrated communications services, including local and long distance telephone service and cable television. This new company has been trading on the London and New York markets since Monday of this week. BCI’s stake has a value today of more than $1.4 billion.

BCI also saw continued growth, well above expectations, in its cellular operations in Colombia. As well, 1996 featured the launch of cable television service in Brazil and cellular networks in China and India.

Tele-Direct reported a 12% increase in earnings to $56 million based on revenues of $556 million. In order to assist advertisers in reaching their customers in the electronic world, Tele-Direct is actively exploring the use of new media such as CD-ROMs and the Internet.

Turning to the first quarter of this year, BCE continues to report good progress, with earnings of $261 million or $0.76 per common share, compared with $254 million or $0.74 per share in the first quarter of 1996. Excluding one-time gains, earnings for the quarter increased 16% from $0.56 per share last year to $0.65 per share this year.

So, at this point, 1997 looks promising. But this is an industry constantly in flux – a virtual kaleidoscope of challenges and opportunities. I would like to focus now on some of these key issues and how we are dealing with them.

One of these, obviously, is the rapid pace of technological change. Just as we saw the power of computers increase exponentially over the past 25 years, so too are we witnessing exponential growth in the transmission capacity and efficiency of our networks, and consequently, in the range and quality of services we are able to offer.

Consider, for example, the astounding growth of wireless communications. Just five years ago, Bell Mobility was a fledgling service. Today it has one and a half million customers, growing at the rate of more than 30% annually. Another venture, Comcel, our cellular affiliate operating in Colombia, has grown from a standing start to 185,000 customers in just 33 months.

Consider, too, the emergence of the Internet as a mass communications medium. Until very recently the obscure domain of academics and computer whiz-kids, the Internet has suddenly become mainstream, and is estimated to connect some 40 to 60 million computers around the world. In fact, we are only beginning to glimpse the potential applications of this new medium.

Still, there are big challenges ahead. Today, most of what you access on the Internet is virtually free. But realistically, how long can that last? Already, Internet usage is clogging voice networks not designed for hours-long data connections. The big unanswered question is, where will the revenues come from to support the required network improvements and the development of mass-appeal applications that will really begin to exploit the potential of this embryonic information highway?

These are questions BCE companies are grappling with as we push back the frontier of technology and telecom services, whether through new products from Nortel to deal with the Internet overload on public telephone networks…or Bell Mobility’s aggressive investment program to be Canada’s leader in the new PCS digital cellular technology…or Bell Canada’s commitment to dramatically increase its investment in new software and service development, which will become the basis of Bell’s business in the 21st century.

A second key issue is the regulatory framework. As we have emphasized repeatedly, the regulatory rules under which Bell operates have simply not kept pace with the changes in our industry.

It is remarkable, for example, that Bell today does not have the same freedom to compete here in Canada that foreign-owned companies like AT&T and Sprint do. Originally, our regulators believed that new, embryonic competitors needed some initial advantages to compete with the big incumbents like Bell Canada. But that rationale has long since disappeared. It is simply ludicrous to claim that AT&T, America’s largest telephone company – a company about eight times the size of Bell Canada-qualifies as an embryonic competitor, needing special advantages to compete in Canada.

Consider, for example, the implications of coupling local service competition with Bell Canada’s obligation to provide universal phone service at prices that in most communities do not cover costs. During the monopoly era this obligation was financed by a complex web of internal cross-subsidies-particularly from business customers to residential customers, and from urban to rural subscribers.

What will happen when competitors enter the game? Obviously, they will want to go straight to the most profitable communities and customer segments, undercutting the source of the revenues that companies like Bell have relied on to provide low-priced service everywhere.

Clearly, competition and the obligation to serve at prices below-cost are incompatible. Something will have to give. If service and pricing obligations continue to be imposed on the incumbent companies by government, then companies such as Bell must have access to the revenues needed to meet those obligations.

One thing is certain: finding the right formula to assure the benefits of both competition and of fairly-priced service for everyone, will test the wisdom of our regulator, as it is testing the wisdom of regulators in the United States and elsewhere around the world. Moreover, the new rules will have to provide adequate incentives for companies like Bell to invest in new network infrastructure, technologies and services. The directors of Bell Canada and BCE simply cannot be asked to authorize new investments which have no prospect of generating a profit.

A third key issue is the globalization of telecommunications and the new business opportunities that a global outlook creates. To date, this has obviously had the greatest impact on Nortel, which has successfully made the transition to a full-fledged global leader in communications equipment.

Last year, 90% of Nortel’s revenues came from outside Canada. More than half its revenues are generated in the United States, about one quarter in Europe. And the growth opportunities in the Latin American and the Asia Pacific regions are enormous.

Bell Canada International has also been highly successful in seizing the opportunities that globalization presents. From $10 million invested in one company in 1989, BCI now has investments of approximately $1.5 billion in nine companies on four continents, including several of the world’s most promising emerging markets, namely China, India, Brazil and Colombia.

The global reach of BCI is already paying off: gains totaling some $390 million after tax over the past five years, and a market value of current holdings estimated to be substantially in excess of our net investment.

The fourth key issue affecting our industry today is the ascendancy of the customer. This is partly a consequence of competition and partly a consequence of the proliferating choice of services that technology makes possible. The bottom line is that all BCE companies are today focused on their customers as never before. And those customers understandably want the most sophisticated services at the lowest possible price, regardless of regulatory constraints or technical limitations.

So, how are we responding? Obviously, we’re investing in innovation and trimming our costs to be able to offer BCE customers a value proposition second to none. That’s fundamental. More specifically – and to cite just a few examples – Nortel has reorganized its R&D function to move innovation right into the business units so as to maximize direct feedback from the customer. That’s the way to ensure solutions that are relevant and timely. Nortel regularly assesses customer satisfaction quantitatively, and has established this index as one of its most important performance criteria, linking it directly with management compensation.

Meanwhile, Bell Canada, has reoriented itself to be a customer-facing organization as part of its fundamental transformation from a “technology-push” to a “market pull” corporate culture.

One final example: Bell Mobility has been focused intently on customer acquisition and retention. Its success is indicated not only by the extremely strong customer growth to which I referred earlier, but especially by its exceptionally low rate of customer turnover or “churn,” where Bell Mobility has one of the best records in North America.

The fifth issue facing BCE as we go forward – and it really encompasses everything I’ve just reviewed – is the challenge of attracting capital in today’s telecommunications industry. To succeed, we obviously must be able to raise capital, on reasonable terms, to facilitate new technology platforms as well as research and development that will lead to the products and services on which our future will depend.

Fortunately, BCE has a strong balance sheet, with significant capacity to raise additional capital in conventional markets. We also have the potential to raise new funds for strategically important purposes by accessing capital markets at the individual operating company level. In short, we are confident that we have the necessary financial “dry powder” to take advantage of the opportunities that lie ahead.

What does all of this mean? Is BCE well-positioned to exploit the potential growth within this industry? Let me take a few minutes to explain to you why I believe the answer is definitely “Yes.”

A paradigm shift is occurring in the telecom service sector. Voice-based services, that have sustained the first 120 years of this industry, will be supplanted by multimedia services incorporating voice, video and data. In fact, in 1996, data traffic surpassed voice traffic on Bell’s network for the first time, and Bell is responding by transforming its infrastructure with next generation technologies, which bear engineering acronyms like ATM and ADSL.

We believe that the future of telecommunications will be to enable telepresence – that is, mobile, interactive, high bandwidth, multimedia capacity. This will revolutionize the service economy by allowing vastly more efficient transactions and interactions, independent of space and time. The challenge and the opportunity for us is to deploy new network capabilities and to create the value-added services that will generate new revenues to provide an appropriate return for the risk capital involved.

To manage profitably amidst the turbulence of telecommunications today, we must embed in all of our companies an ever greater capacity to adapt continuously by shaping and exploiting change. It is our good fortune to have the scope and the resources to do that. Nonetheless, resources are never unlimited so we have had to assess where the greatest opportunities are likely to lie.

There is no doubt that in the near term, at least, the biggest growth opportunities belong to equipment suppliers like Nortel. But it is also true that the equipment suppliers cannot prosper indefinitely if their customers, the telecom service providers, do not also prosper. Here the adjustment to competition in the face of lingering regulatory constraints poses some genuine challenges. But in the longer run, we believe that new services will drive the industry forward.

So we have asked ourselves: does BCE have the resources, the financial capacity to “play to win” on a global scale in both the equipment sector and the services sector? Or do we have to think about disposing of one segment to support a “play to win” strategy in the other? We have concluded that we do have the capacity to pursue a balanced and coordinated growth strategy to “play to win” in both segments, and we intend to do that.

Consider these strengths:

•  At Nortel, we see very positive trends-such as the growth in demand for wireless and data products-sectors in which the company is exceptionally well positioned.

•  BCI is also well positioned in important new growth markets, and has an enviable track record of creating value.

•  BCE Mobile’s top-line growth prospects in percentage terms are the best in the group, and we will do what it takes to remain the leader in the Canadian wireless communications sector.

•  Tele-Direct is the leader in its field in Canada, has good international growth prospects, and has delivered exceptionally dependable cash flow and earnings.

•  Bell is of course the bulwark of our communications services capability. It has the customer base, the Bell brand and the marketing and technology know-how to succeed. What’s needed is even greater focus on innovation leading to new growth areas, and that is why Bell will soon be launching a major new R&D initiative to generate leading-edge telecom services.

We believe that we should be able to continue to achieve results that will provide shareholders with an excellent return on their investment. We are dedicated to continuing improvement in shareholder value. With almost 400,000 common shareholders, BCE is the most widely held company in Canada. BCE, and Bell Canada before it, has not missed a dividend payment in 117 years. Last year, dividends reached $860 million, most of it reinvested in Canada by Canadians.

We are also dedicated to leadership in management and corporate governance. We have an outstanding management team. We now have a smaller, highly effective board of directors. Officers and directors of the BCE group are encouraged to become sizable shareholders in the company for which they work.

It is important that we recognize the profound extent to which the success of BCE companies has depended in the past, and will continue to depend in the future, on our roots in Canada. These roots have anchored and nourished our development as a corporation. It is because of the very vastness of the Canadian geographic space that Canada has developed world leadership in telecommunications. It is because of the very limitations of the Canadian economic space that Canada has developed world leadership as a trader.

I have often said that BCE’s success is important to Canada, and that Canada’s success is important to BCE. At the same time, more than a third of our assets and over half of our revenues are now related to our international operations. While this growing global presence serves to mitigate the risk of any storm which might adversely affect Canada, economically or politically, BCE is deeply committed to helping Canada prosper in the emerging Information Age.

With our ongoing capital program and investments in new ATM and ADSL technology at Bell Canada, with new PCS services at Bell Mobility and with investments in new satellite services at Telesat and ExpressVu, BCE companies will invest in excess of $5 billion in Canada over the next two years. I might also note that BCE is a very significant supporter of general public services in Canada-in 1996, our companies paid taxes to federal, provincial, and municipal governments in Canada totaling $1.5 billion.

Because of the interdependence of BCE and Canada, I would like to conclude my remarks with a few thoughts on our country and its prospects for the future. The pride that we have in this company is the same pride we share in our country. In both instances it is based on the achievements of people, their vitality, ingenuity and their determination to succeed-as well as their sense of community. The determination to prevail and the instinct to help, witnessed recently on the Red River and last year in the Saguenay, tells me that there is more, much more than geography that defines us as Canadians.

Both Canada and BCE are held in high regard by the world at large. I often wonder why we don’t see ourselves as others do-as a country blessed by Providence and circumstance, as a people with unparalleled opportunity to prosper and to achieve our ambitions. In the world of international trade, all of those attributes add up to the Canadian trademark. There is tremendous goodwill in the Canadian brand name. It is one of the most admired and respected in the world.

People around the world like doing business with us. We are seen as reliable partners, as suppliers of superior products and services, as ingenious entrepreneurs, and as good and decent people from a fortunate land. So we need to do two things about that-first, stop selling ourselves short, and then stop taking any of this for granted. A country exists first and foremost in the hearts of its people. It is up to all of us to keep it whole.

I believe that we as Canadians have great reason for optimism in our future. We have come through a difficult transition in the way in which we view the role of our governments. And our governments-federal, provincial and municipal-in turn are making difficult decisions that are allowing them to put their financial houses in order.

Canada today is a strong country, with economic prospects brighter than at any other time in the past 25 years. BCE is part of that strength and that promise-committed to Montreal, to Quebec and to Canada.

These are not divided and incompatible allegiances. They are the source of our strength-BCE’s strength-and the strength of the communities in which we live and work. We can’t restore the Canadian dream unless we can find some way to bring Canadians closer together. We need a vision for the next century, not a remedy for the last one. When I talk to young people, that is what I hear. They seek a successful future nurtured by hope, not grievance and inspired by confidence, not cynicism.

We all need a shared sense of purpose, and a winning spirit. It works for BCE. It can work for Canada. Winston Churchill once said “Canadians have not journeyed all this way, across the centuries, across the oceans, across the mountains, across the prairies, because they are made of sugar candy.” Canadians are not made of sugar candy. Nor are the men and women of BCE. Combine Canadian values and Canadian determination with a global vision under strong leadership, and I am confident that BCE and Canada will achieve even greater successes in the new millennium.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


L. R. Wilson
Chairman & CEO, BCE Inc.

The Canadian Club of Montreal, November 10, 1997
Published in The Corporate Report No. 23 (January 31, 1998)

I am honored, as always, by the invitation of The Canadian Club of Montreal, which throughout this century has fulfilled the mission of The Canadian Club movement: “to deepen and widen the regard of Canadians for the land of their birth or adoption and to increase their interest in matters affecting the welfare of their country.”

When I last had the privilege of this platform, five years ago, I spoke about the external challenge of globalization and the internal challenge of Canadian unity. And while those challenges are still with us, my choice of title for today’s remarks, “A Leading Role for Canada in 21st-Century Cyberspace,” indicates that much has changed.

Consider that five years ago the internet was the esoteric preserve of a group of university researchers. Today, perhaps 10% of Canadian households, along with tens of millions of others all over the world, are connected to the net – depending on it routinely for email, for access to a global storehouse of information, for purchasing books and plane tickets and for interacting with like-minded people all over the world through internet chat groups. Clearly, something big is happening here.

This new medium of interaction is called cyberspace. It is a medium where the constraints of time and distance have largely disappeared – a medium where interaction takes place through electronically encoded bits of information flashing at light speed through the millions of computers and communications linkages that constitute the global internet. Admittedly, a pretty abstract notion, but one that is already beginning to have a big impact on our lives, and we are only at the dawning.

In these remarks, I will be talking about the new frontier of cyberspace and the telecosm. And while cyberspace is already becoming a household word, what on earth is the telecosm?

The telecosm is a term coined by the technology guru George Gilder, to represent the linkages in cyberspace – the telecommunications networks that began 120 years ago with the telephone system, but that now also connect tens of millions of computers around the globe. In short, the telecosm is the “road network” of cyberspace.

Today, I want to give you a sense of the exciting and revolutionary things that are happening in cyberspace and the telecosm, a domain that is central to the future of the BCE group of companies. I want to talk about how Canadians can seize what is an historic opportunity to become a world leader in shaping the possibilities of cyberspace and the telecosm for the betterment of society.

First, we will need some background to appreciate what is driving this burst of change and excitement in telecommunications. The microchip, together with the plummeting cost of telecommunications capacity, are the key technological drivers. The performance of microchips relative to their cost doubles roughly every 18 months – a regularity that has been dubbed Moore’s Law, after the co-founder of Intel Corporation. This phenomenal rate of productivity growth translates to a hundredfold improvement in a decade, and a 10,000-fold improvement in just 20 years. And even after 30 years, the Moore trend shows no sign of letting up.

To appreciate the economic significance of Moore’s Law, imagine that it applied to car manufacturing. Within ten years, today’s $50,000 luxury vehicle would be down to $500. Within a further ten years, you could buy it for pocket change. Or suppose that the airline industry followed Moore’s Law. If it cost $2,500 to go to Paris and back today, your children could count on paying 25¢ for the same trip in the year 2017!

The amazing economics of the microchip have been driving the computer industry for the past 30 years, during which information processing capacity, relative to cost, has increased one million-fold, making it possible to pack the power of a 1960s mainframe computer into a hundred-gram cell phone today. The conversion of the telephone industry to digital technology in the 1970s, following the leadership of Northern Telecom, brought the microchip to the communications industry, and with it the revolutionary economics of Moore’s Law.

At the same time, the backbone transmission systems of the telephone network were being converted to optical fiber through which voice and data signals are transmitted as pulses of laser light. In recent years the capacity, or bandwidth, of communications networks has been increasing, relative to cost, at a pace even faster than Moore’s Law.

Ten years ago, the biggest single intercity trunks in Canada could transmit digital information at the rate of 565 megabits per second, sufficient to support 8,000 simultaneous voice calls. Today, those trunks run at 10,000 megabits per second and can handle 130,000 simultaneous calls. The latest equipment being installed by Nortel can carry 250,000 simultaneous conversations along a single pair of optical fibers the width of a human hair. The next generation, which is already in the pipeline, is a 160-gigabit fiber, which would be able to transmit the text of 35,000 full-length novels every second.

The key point is that much of this phenomenal increase in capacity is achieved simply by changing the electronics and the lasers that feed existing fiber infrastructure. So, to quadruple the capacity of, say, a modern transatlantic cable, you basically have to change the gadgetry at each end to produce four colors of laser light, rather than just one. Thus the capacity of our communications channels continues to increase much faster than the cost. That is why you may have heard it said, with only slight exaggeration, that “distance is dead.” It means, for example, that the underlying economic cost of sending a message across the Atlantic is really not that much different from sending it from Montreal to Quebec City. And in both cases, that cost is continuing to fall rapidly. The fact that this is not yet fully reflected in end-user prices is due to the regulated system of tariffs that were put in place when domestic telephone service was a monopoly and the international service a cartel.

Now all that, too, is about to undergo a sea-change every bit as revolutionary as what we are witnessing in technology. In Canada, competition in long distance service was introduced formally in 1992. Two months from now, beginning in January, 1998, most of the world’s telephone services will be thrown open to competition. At the same time, competition in Canada is being expanded to cover local service as well as long distance. So technology and competition are now interacting and mutually reinforcing one another in the telecommunications industry – technology making new forms of competition possible, and competition creating powerful incentives for further technological innovation. Nortel’s recent announcement of a way to use existing electric power lines to carry phone and Internet traffic into homes is a case in point.

To summarize: what is revolutionary is that the computer has become fused with the telecommunications network. The result is the Internet. All information, whether voices, or moving images, or symbolic text, has converged into a single digital medium. The performance of this intelligent global information network is doubling roughly every 18 months. And finally, all of this is being propelled by competition. That is why we can talk about the new frontier of cyberspace and the telecosm. And like all frontiers, it presents us with challenges and opportunities.

The opportunity for Canadians was boldly set out in the recent Speech from the Throne, where the federal government committed to “make the information and knowledge infrastructure accessible to all Canadians by the year 2000, thereby making Canada the most connected nation in the world.”

Information is the vital substance of the knowledge-based economy. The government’s goal flows from a recognition that the power of information to enrich a society depends on the extent to which its citizens are connected – connected among themselves and with the rest of the world.

From what I have described earlier, we can see that today’s electronic connections are primitive compared to the possibilities that are now emerging. It is no exaggeration to say that we are at the dawn of an era that will transform human society on a scale comparable to earlier transformations brought about by the printing press, or by the Industrial Revolution. I believe we are at a juncture not unlike that which Canada faced on the eve of the construction of the transcontinental railway. We can allow ourselves to be swept along by the tide of events, a tide which is already gathering prodigious energy around the world – or we can take responsibility for shaping our own future. That is our challenge.

The opportunity – the visionary objective – is for Canadians to be leaders in colonizing the new frontier of cyberspace and the telecosm. More concretely, the goal is for Canadians and their communities to become interconnected through a 21st-century communications network that will carry pictures, sound and data at a speed to suit the situation, and to develop the applications of this capability for the betterment of our society.

The Internet is the prototype of this new capability. But it is still in its infancy, much like the highway system in Henry Ford’s day. And while the telephone, the television, and the personal computer are the devices that today connect us electronically, the future information highway will also be connected to any number of new specialized and personalized appliances: medi-alert devices, home security systems, small portable video terminals and others we still cannot imagine. We will access the information highway intuitively and seamlessly. This connectedness promises to enrich everyday life for all citizens, young and old alike, and no matter where we live.

Let us consider a little more precisely what this vision of connectedness might mean for Canada. What concrete benefits might it bring? Consider first what the goal of making Canada the world’s most connected nation would mean for the economy. Creating the information highway and developing the applications that will take advantage of it – applications in healthcare, in education, in electronic commerce – promise to be the biggest global growth industry of the next century. Those businesses and nations that take the lead will have a big advantage as providers of the expertise and systems that the rest of the world will be eager to acquire. The key point is that to position ourselves as leaders, we in Canada have to put the underlying infrastructure in place at a scale that permits significant new services to be developed and tested here.

At the same time, a world-leading information infrastructure would make Canada one of the world’s most attractive locations for investment, since a high-quality communications system is a key requirement for all of today’s knowledge-based businesses. In the words of the Information Highway Advisory Council, chaired by former McGill principal David Johnston, “Information and its manipulation through communications networks and computers is becoming a key strategic resource that determines the competitiveness of firms and nations.”

Consider next what connectedness can mean for public services like healthcare and education. With sufficient bandwidth, communications will be able to put you there “virtually,” thus allowing you to be telepresent, rather than having to be physically present in the classroom or in the doctor’s office.

Indeed, telemedicine offers some of the best ways to lower the cost and to increase the accessibility and convenience of healthcare services. Many of the pioneering applications are being developed in Quebec, involving, for example, collaboration between Bell and a network of hospitals to transmit diagnostic images such as X-rays and mammograms over high-bandwidth lines to specialist centers. Similarly, a Bell interactive video link allows doctors at the Hospital for Sick Children in Toronto to direct examinations, make diagnoses, and provide follow-up care for children at the Thunder Bay Regional Hospital. And Telemedisys, an entrepreneurial firm based here in Montreal, is pioneering the large-scale use of devices and systems that allow people with certain critical conditions to be monitored while they go about their normal daily lives.

Consider too what being connected to a high-bandwidth multimedia network can mean for training and lifelong learning. Given the critical importance of acquiring and updating skills, our goal must be to provide affordable access to high-quality learning materials, available to people when and where they want them, and tailored to individual needs. Applications of telelearning are already beginning to proliferate. For example, Queen’s University offers MBA courses where students from St. John’s to Whitehorse are linked visually via high-speed phone lines to “virtual” classrooms. But the potential for this kind of instruction is barely tapped. Meanwhile, the federal and provincial governments, in cooperation with the Stentor group of phone companies, Telesat and others in the private sector, are well on their way to completing the SchoolNet project, which aims to connect all 16,000 schools in Canada to the Internet.

Consider as well what a modern vision of connectedness can mean for communities, for businesses, and for the interaction between citizens and their governments. We know that community development and business success in a knowledge-based economy will depend on immediate access to the best sources of information worldwide. That is the idea behind the Community Access Program, an initiative led by the federal government in partnership with other governments and the private sector. The objective is that by the end of the year 2000 every community in Canada with a population of over 400 will have public Internet facilities installed, making at least some access to cyberspace and the telecosm available to the vast majority of Canadians.

This, in turn, will set the stage for a revolution in the delivery of public services. The notion of government in cyberspace may seem a little forbidding at first, but over time it promises not only to revolutionize the efficiency of service delivery, but also to enable entirely new forms of interaction between government and citizen.

I have given you but a glimpse of what connection to cyberspace and the telecosm can mean for our economy, for our communities, for our access to healthcare and lifelong learning and for more efficient and responsive government. These benefits would themselves justify a national objective to make Canada the most connected nation in the world. But there is more.

Connectedness is a vision that can inspire our young people who, as we all know, take to the new information technology like ducks take to water. We can only marvel at their instinctive understanding. This is the enabling technology through which young Canadians will express themselves in myriad ways in their future. A lot have already demonstrated world-leading capability to develop the hardware and software of connectedness. Unfortunately, too many of them have had to realize their potential in the United States. We are going to have to change that.

Finally, there is another message that will resonate in this room: connectedness as a unity builder. A connected Canada would enable an unprecedented degree of “virtual” contact between citizens who are now isolated from one another by geography or by culture. The email phenomenon, for example, is a relatively primitive foretaste of what will be possible. Moreover, if we Canadians fail to create our own model of connectedness, we will inevitably inherit models being developed elsewhere, particularly in the US. And while we must complement our own capabilities with the best available abroad, I believe that a Canadian-developed information highway is a sine qua non for 21st-century nation-building.

To make Canada the most connected nation in the world is a challenging and visionary goal. It catches the flood tide of a revolution in technology that may occur once in a lifetime. It is a goal worthy of a projet de société – a national endeavor uniting citizens, the private sector, and governments to launch Canada into the 21st century in a position of leadership.

But is this a realistic objective? Fair question. It is okay that our reach should exceed our grasp. But not by too much. I, for one, believe that the goal of making Canada the most connected nation on earth is realistic. It is achievable if we commit ourselves. Consider these reasons why Canada is so well positioned.

In the first place, Canada is already one of the world’s most well-connected nations. Our telephone network is virtually 100% digital, a proportion unmatched by virtually any other nation, including the US. In fact, no other G7 country has a better combination of telephone, cable TV and personal computer penetration.

Consider too that our vast distances have always motivated Canadians to excel in the technologies of connectedness, making us pioneers in telephony and satellite communications. This fundamental motivation is reflected in Canada’s outstanding business capability in telecommunications, where companies like Nortel and Newbridge are acknowledged world leaders and where international firms like L.M. Ericsson have chosen to steadily expand their presence here in Montreal.

In the critical skills of software, content development and financing, Canada has world-leading capability, ranking only behind the US. Our universities and community colleges are seen as a world-class source of qualified people in most of the relevant disciplines. In fact, Canada is prime recruiting territory for companies like Microsoft. Our challenge is to give our talented young people more opportunities here at home.

But we are not without visionary competitors for leadership in cyberspace. Japan, for example, has set a goal to bring fiber-optic bandwidth to every home by the year 2010. In Malaysia, the prime minister has taken personal leadership of an extremely ambitious project to create a “multimedia super corridor” that seeks to make Malaysia a leading test bed and development center for the information highway of the future. And of course the United States is counting on the enormous innovative capacity of its private sector to automatically assure a position of global leadership.

Yet I would argue that Canada possesses a unique collection of special advantages. Our proximity to the US allows us to take advantage, before other countries, of the leading-edge developments originating there. At the same time, our bilingual and multicultural character sets us apart from virtually every other country, giving Canada a unique advantage in developing systems and content for the vast new world markets that global connectedness will create. Particularly noteworthy would be the opportunity for Quebec to lever Canada’s capability to pursue its leadership in the Francophone world.

Finally, Canada is big enough and already sufficiently advanced to develop many of the key applications of connectedness so that we can function as a global “living lab.” But we are still small enough that if we set our minds to it, we can get our act together to make it all happen.

So how do we make it all happen? The first thing to admit is that nobody has a detailed road map. The frontier of cyberspace and the telecosm is as uncharted as the New World was at the time of Columbus. Indeed, the future is to be created, not discovered. What we do know is that a projet de société to make Canada the world’s most connected nation will have to enlist the vision and skills of the entire society.

The primary responsibility will rest with the private sector and with individuals themselves. For government, the essential role is to provide leadership, the point of focus around which all of our diverse perspectives and ambitions can collectively converge. Clearly, government must also foster a supportive regulatory and policy environment. Equally important, governments at the federal, provincial and local levels will be counted on to be lead customers, using their enormous purchasing power strategically to create demand for new telepresence services in such fields as healthcare, education and information dissemination.

The primary responsibility of the private sector will be to marshal the skills, the innovation, and the financial investment to create both the infrastructure and the applications of connectedness. This is not without its difficulties. So let me take a few moments to outline some of the dilemmas facing would-be investors and to indicate how I believe these dilemmas can be addressed.

Within the telecommunications and information technology industries, almost everyone embraces the vision of a global society connected by an Internet of high and dependable capacity, an information highway that can eventually deliver the experience of telepresence to virtually every citizen. The reality, unfortunately, is that there is still no concrete business model to support this broadly-shared vision.

A big part of the problem is that people have been conditioned to believe that the Internet should be free, or nearly so. That perception is of course self-limiting. Obviously, it has to give way if the Internet, which will be the foundation infrastructure of connectedness, is going to attract the investment needed to sustain its development and global expansion.

There is a second, and related, dilemma. The investors who are being counted on to build out the infrastructure of the information highway – and people are looking primarily to the telephone companies to put up the cash – are still waiting to see evidence of the mass applications that could support a commercial return on investment, since the telcos no longer have the regulatory assurance of an adequate ROI. The catch now is that until the right infrastructure is in place, potential mass applications in areas like electronic commerce, desktop video-conferencing, delivery of government services, and so forth, cannot be implemented on a large scale and thus proven out financially. So a stalemate of sorts has developed, in which infrastructure is waiting for applications, and vice-versa.

You might say that to break the stalemate somebody simply has to take a leap of faith – that if you believe in the vision, just build it and they will come, as Kevin Costner was urged to believe in Field of Dreams.

But we are forced to play on the field of reality, where life is not quite as simple. Let me explain. Because technology is evolving so rapidly, any big bet today is almost certain to be obsolete tomorrow. Meanwhile, no one, except possibly Microsoft, has enough market power to set standards. So everyone has to remain flexible, placing smaller bets on a broad range of technologies and building out the new infrastructure incrementally.

Competition is another key factor in the mix. And here it is a double-edged sword. On the one side, competition motivates innovation and tends to drive down prices, thereby fostering broad access to the information highway. The flip side is that competition also imposes heavy financial pressure on companies and forces management to focus most of their energy on today’s core businesses rather than on tomorrow’s unproven opportunities. This is not to complain about competition. Indeed, competition is what keeps our industry dynamic and focused on the welfare of customers. But it is simply a fact that the discipline imposed both by competition, and by the returns being demanded by capital markets, has enforced shorter time horizons on the private sector.

The inhibitors I have just described will not ultimately stand in the way of our connectedness vision. But they will condition the way in which it can be achieved. It is unlikely, in my view, that the next-generation infrastructure for the information highway will be built in a single stroke as one grand mega-project. The uncertainties are simply too great for that to be a prudent course. Instead, a more incremental approach is needed that advances across a broad range of technologies, both wireless and wireline.

Having said that, we can already identify the key requirements for the next major stage in the evolution of the information highway – the next course-setting toward the goal of making Canada the world’s most connected nation. Without getting into technical detail, we need a much faster Internet connection for homes and small businesses, one capable of supporting a reasonably high-quality video image on a PC screen.

Second, connecting to the Internet has to be made dead simple, so that accessing the information highway can become as habitual and intuitive as consulting a phone directory. This means in practice a connection that is “always on” and ready to access – no need to turn on a PC and wait – but does not tie up your phone line, or Bell’s switches, in the meantime.

Finally, and most important, this faster, simpler connection must be cheap and widely available so as to stimulate rapid take-up. In short, we need the cyberspace equivalent of Henry Ford’s original strategy for the automobile industry. Once the possibilities of connectedness begin to be understood by everyone, new applications will multiply and the investment needed to further upgrade the infrastructure should be readily forthcoming. A self-reinforcing cycle would be set in motion.

Although we aren’t quite there yet, particularly in terms of the cost of a speedy Internet connection, I am confident that the technological issues can be dealt with. In fact, Bell Canada and the other Stentor companies have begun the commercial roll-out, in limited areas, of a technology called ADSL (asymmetric digital subscriber line), which will provide vastly faster Internet access over ordinary phone lines that are “always on,” but doesn’t tie up your voice service. The challenge will be to get the cost down more quickly.

In that regard, Nortel recently announced a new Internet access technology called the 1-meg modem. It has the required performance characteristics for the next step of Internet evolution, and promises to be much cheaper than present alternatives.

Right across the spectrum, companies in the BCE family are developing the technologies and services to promote the connectedness objective. For example, Bell Canada and its Stentor partners, using equipment from Nortel, Newbridge and others, are well underway with the investment that will produce the next-generation, cross-country multimedia network using a new transmission method called ATM (asynchronous transfer mode). Meanwhile, Nortel’s St-Laurent plant – which is to be the centerpiece of the company’s $275 million expansion in the Montreal area – has produced half the Internet backbone transmission equipment in North America.

On the applications side, we are making large investments in Internet content development in both official languages, through MediaLinx, which provides content to the Sympatico Internet service. And recently, Bell Canada created a major new division, called Emergis, that will be partnering with entrepreneurs and researchers to develop the network software needed to power new applications of connectedness.

I want to emphasize, as well, that we should not think of the connectedness objective just in terms of wires and PCs. We are really talking about telecommunications in all its dimensions. This also includes exciting new wireless possibilities: for example, the digital cellular service that we call PCS (personal communications systems), the satellite-based services of Telesat, encompassing both entertainment and data, as well as a variety of other fixed wireless services just emerging from their development stage but which significantly increase the technological possibilities.

The issue is not whether all Canadians will eventually be connected to cyberspace and the telecosm. The only question is when, and on whose terms. We can either be leaders, or be followers. But we can’t opt out. If we are to be leaders – and we can be – the rewards in terms of investment attracted, jobs created, and services provided will be enormous. If we lag, others will surpass us, for time is of the essence in this business.

The Government of Canada has committed to make Canada the most connected nation in the world. We in the BCE group of companies embrace this vision and are therefore committed to play our part in positioning Canada for leadership in what I believe will be the most important arena of social and economic development in the 21st century.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


John McLennan
President & CEO, Bell Canada

The Canadian Club of Montreal, May 15, 1995
Published in The Corporate Report No. 13 (August 7, 1995)

In the global quest for prosperity, Montreal has what it takes to win. The telecommunications industry plays a particularly important economic role here in Montreal.

Bell Canada’s head office has been here for 114 years, and, along with our sister company Northern Telecom, and our research arm Bell Northern Research, we have played and will continue to play a crucial role in promoting Montreal as a thriving, prosperous city – and as a great place to do business.

My key message today is that prosperity is earned, not inherited. The world of the future will be one of our own design, one crafted through the complex interweaving of critical choices that are made today.

Today, Canada is at a particularly critical fork in the road with respect to its telecommunications industry. As I will shortly discuss, the issues are complex, but the options are remarkably clear.

There are several key decisions – all to be made this year – that will determine the competitive position of this province’s existing manufacturing and service industries, as well as the future prosperity of the new growth businesses of tomorrow.

A strong telecommunications industry is the backbone of an information-age economy, and the decisions of which I speak daily are the bridge to Canada’s economic future.

While we all have our own views about how we prepare for the future, I want to tell you about mine. The title of my speech, “Competing for the Future,” is borrowed from a currently-popular book with the same name, written by two prominent US academics, Gary Hamel and C. K. Prahalad, who have offered timely prescriptions about thriving in the changing markets of tomorrow.

The first reason I like this title is because it manages to pose, in a few short words, the most critical challenge that faces our country and that faces my own company, Bell Canada. We have to learn how to survive and thrive in an environment of high uncertainty, where technological advances associated with the movement of information have irreversibly changed the rules of the game.

These advances have become the greatest levelers in the world economy because they have negated the natural advantages that used to be conferred by geography, natural resources and the size of the domestic market. This means that as the importance of the information economy grows even more rapidly, the distribution of prosperity will depend less on a country’s proximity to its export markets.

National prosperity will depend more on its ability to attract and keep firms whose core competency is creating and distributing information, of any kind, over tiny bursts of light, down long glass fibers to customers anywhere in the world.

For Canada, we will have to earn our future prosperity. Proximity to the United States will no longer be sufficient to ensure that we have a high standard of living. Our businesses will have to meet and beat the best in the world. We will be in a battle for something far more important than just market share. To earn prosperity, we must become leaders in taking advantage of technological breakthroughs, especially in the converging world of computers and communications. And I have every confidence that we will win this battle.

Being a leader means spotting new opportunities and converting them into businesses. It means leveraging your assets to serve more customers in more ways. It means approaching markets with coalition partners, using selective entry into new lines of business as a way to accelerate learning about customer preferences. And it means focusing every achievement toward building a new advantage directly, for your customers, and indirectly, for your country.

Success will also depend on a regulatory and political climate that supports domestic companies as they strive to become strong global players.

The second reason I called this speech “Competing for the Future” is because the answer to the challenges we face is also contained in these few short words. That answer is competition. Competitive pressure is the engine that will drive the changes needed to ensure that Canada has a voice in shaping its own destiny.

The great US industrialist Andrew Carnegie said that competition was hard on the individual, but best for society. It has certainly changed Bell Canada in ways that could not have even been foreseen five years ago.

We are taking the steps necessary to remain Canada’s flagship telephone company and become more customer-focused, cost-competitive, and innovation-driven – qualities I feel are going to be the key success factors for the top firms of the future.

I am pleased to say that our customers are telling me that we have become far more customer-focused, responsive, innovative, and competitive than ever before. But we are beginning to encounter serious roadblocks to the kinds of changes we need to make to maintain our momentum.

We cannot continue to rob Peter to pay Paul, by being forced to maintain cross-subsidies from long distance to local service that distort the true cost of today’s telephone services. We cannot create the jobs this country so urgently needs if we are prevented from serving customers in new lines of business. We cannot commit billions of dollars necessary for new investments if we do not have a hope of earning a fair return for our shareholders. We cannot compete for the future carrying the burdens of a regulatory system that has met the objectives of the past but has not evolved to reflect the new realities of a competitive marketplace.

These are difficult and complicated issues…and there are no easy answers. It is these policy issues that the government and the CRTC will decide this year.

Some of the rhetoric around these issues has become cloudy, and perhaps even a bit misleading. I would like to set the record straight so that everyone will understand what is at stake. My message is simple and straightforward. These decisions are not about abstract concepts like ideal market structures or sustainable competition, even though that’s how these questions have come to be framed. They are about choosing the quality of life for the people who live in this country. They are about deciding whether we want to be involved in creating the markets of the future, or are we content simply to be consumers of someone else’s technology. They are about building opportunities here at home for our brightest and best – our children – instead of saying goodbye as they leave this country to begin more exciting and rewarding careers in the US, Europe or the Far East, with companies who are the architects of change – companies whose vision and daring naturally inspire the hearts of the young.

Framed that way, the answers are easy. Choose the future. Allow companies to have a chance to be great on a world scale. Rely on competition to deliver prosperity. Trust the customer’s judgment.

And above all else, always give people choice.

Let me explain why I believe so strongly that this is the right way to go forward.

Today Canada has a small but important position in the emerging global economy based on the movement of information. Through the work of the telephone companies and innovators like BNR, Northern Telecom, SR Telecom, Mitel, Newbridge, Corel, Softimage, brand new Canadian companies, this country has established credibility and developed valuable competencies in information exchange technologies, particularly in telephony and switching systems. This has paid off handsomely for Canada. Not only have we exported this technology around the world, many businesses have built their advantage on the ready availability of high quality, reliable telephone service.

Canada has one of the highest telephone penetration rates in the world. Canadians love to talk on the phone. They are among the best talkers in the world and aren’t we fortunate this has been built on infrastructure developed in Canada, by Canadians and for Canadians. We then sold this technology around the world. This is indeed a great success story.

Among the world economies, measures like the number of telephone lines per 100 people correlate highly with prosperity as measured by per capita GDP. Given what I’ve just said, it should come as no surprise that we enjoy a high standard of living in this country. Nevertheless, I believe that if we concentrate on this kind of measurement to set public policy, we’re missing the point. Why? Because high quality telephone lines and reliable service are just the price of admission today.

What will matter to the markets of tomorrow and to the customers that we hope to serve will be the added value that our affiliations, alliances, and specialized expertise bring to their business. In other words, intellectual property matters more than the size of your customer base.

These customers want networks that deliver increasing functionality, because they already expect and receive fast, efficient service. They want carriers that can deliver all their information needs at a very competitive price. More services put through the same infrastructure means more value for customers.

Customers want value. Consequently, the indices of success that were prevalent in the old economy will not work any more. The new key success factors will be technical leadership, R&D intensity, a corporate culture emphasizing service, the resources made available from alliance partners that bring a global reach and flexibility.

It will also come from the intangible advantage of insight that makes it possible for a carrier to spot, create, enter and satisfy new customer demands in smaller and smaller niches.

It is crystal clear that competition is the dominant logic, organizing world economic activity and determining the allocation of prosperity.

But technological change has forever altered the time line. In the past, once prosperity had been earned, a nation could almost surely rely on being prosperous for at least a generation or two. Today, the situation is entirely different. Now prosperity is like a trophy awarded to a winning team. It remains with the team only as long as they are the best in their class. It is not forever. It is earned on the competitive playing field every period…every inning…every quarter. Most important of all, it is earned through competition.

The implications are quite clear. Any effort to limit competition limits our access to prosperity in a global market. And frankly, by international standards Canada is too small a market for us to afford the risk of forfeiting an opportunity to earn prosperity, through competition, whenever we can.

In the context of the important decisions to be made about Canadian telecommunications, about our standard of living, and about our collective ability to earn our share of world prosperity, I think it is important and timely to clarify the true meaning of an important word that has strayed from its original meaning during the past few years. I’m speaking about competition. Competition is a process, not an outcome. It is a process that has as its principal purpose the creation of value for customers through the provision of choices in contestable markets. Successful competition is marked by the entry and the exit of firms from markets. Firms should enter if they believe they can win customer loyalty by creating superior value. Firms should exit if customers have decided they failed to create this value.

For competition to work, competitive success can only be determined by customer choices:

•  Not by regulations seeking to build the ideal market structure

•  Not by sheltering firms that customers don’t like

•  Not by specifying a magic number of firms that have to be in a market for it to behave according to some abstract textbook rule.

Throughout my business career, I have learned that companies earn their right to exist only by delivering value to customers. If they are not doing so, based on customer choices that are freely made, then it is contrary to the customer’s interest that these firms be kept alive by the government.

That means public policy about the future of telecommunications should not be made to support the weakest competitors in the market, those that are creating the least value for customers. Instead, telecommunications policy should encourage free and open access to markets, with each company’s shareholders taking the same risks of failure and success as any dépanneur, retailer, or gas station – businesses that provide jobs to Canadians and tax dollars to the government, but don’t require protected status to do so.

Trust the customer. Let the customer decide who best creates value.

From Bell’s perspective, we have made some difficult choices that were necessary for us to survive in an increasingly competitive global economy. However, we are not immune to the consequences of regulatory decisions that are made about us or our industry.

For years, many people in the business community and in government have believed that Bell was invincible. They felt that we were too big to be affected by decisions that left us our obligations but made it harder to earn the revenues needed to fulfill them. If it were ever true, it is certainly true no more. We are a business like any other and we are exposed to the same market forces.

But we are a regulated business and without regulatory approval we cannot always take the actions that we must to grow, to serve customers, and to become the world-class player in this new information economy that Canada so urgently needs.

Our vision is simple. We want to be the carrier of choice to Canadians for all types of information, wherever they go, whatever they wish to do. We want to follow and support Canadian firms as they tackle new markets abroad. We want to provide new services to Canadians at home, such as multimedia and telemetry, and deliver better value in existing services, like cable television, than Canadians are receiving today. We want to sustain research and development activity at the leading edge of telecommunications technology, creating the jobs for our children in the markets of tomorrow.

But to realize these ambitions, and to successfully compete for the future, public policy decisions must be made that favor of customers, choice, and competitive markets. My concern is that if public policy continues to support companies that do not create value for customers, Canada will wind up in the worst possible position:

•  We will have little ability to influence the direction of technological advancement to serve our national interests

•  Extensive cross-subsidies from profitable services to unprofitable ones will continue to weaken us. The only beneficiaries are those companies which customers have chosen not to support

•  The giant international telephone companies will be the ones deciding what kind of telephone service Canadians receive, and as a result will wield considerable influence without any reciprocal obligation to grow Canada’s stock of intellectual capital

The three measures I’m recommending should be considered as an integrated program to expand the range of customer choices. They are all based on a clear, unambiguous concept of competition that affirms customer sovereignty, rejects special treatment of any kind for anyone, and welcomes new entrants into markets. First, the barriers that prevent competition between different sectors of the information exchange industry must be dropped immediately, so that customers can make more choices between suppliers. In practical terms, this means that telephone companies should be allowed to enter new businesses such as transmitting cable TV signals. Our local telephone business is already open to new entrants, including cable companies; there must be reciprocity. Bell agrees with the Federal Director of Competition Policy that any delay in implementing this type of two-way competition is not justifiable.

Mr. Addy said that the cable industry was unable to demonstrate that it needed or deserved protection in the form of a head start, a kind of unbalanced competition that would let cable keep its own monopoly at the expense of cable customers while entering the local telephone service business.

We have heard a lot about something our competitors are calling “sustainable competition.” They would like to have you think that smaller companies need competitive favors in order to succeed. But history has proven time and time again that the size of a company has nothing to do with success. There are many examples of small companies making it big. Take Microsoft, for example. It was a very small company when it was formed by Bill Gates just 21 years ago. And Softimage, which I mentioned earlier, also started small. Dynamism is what matters, and we should not fool ourselves into thinking it does not.

Let there be no mistake about the alternatives from which the government must choose: more choices and better service for customers, or a continued monopoly for the cable companies.

Second, we need price reform in telephone services. Prices must be set by market forces. This means aligning the price of local services with its cost. It means decreasing the cross-subsidies to local services from our shrinking pool of long distance revenues.

Third, policy decisions should be made with a clear understanding of Bell’s true competitors, and with a thorough appreciation of the consequences to our economy if we don’t support and make it possible for our own flagship firms to compete effectively.

When I speak of Bell’s competitors, I’m not talking about Unitel, Sprint Canada, or the 150 or so other resellers and facilities operators, or even the cable TV industry. I am talking about the leading telephone companies of the United States and Europe. In fact, the US telephone giants are already here. They have a beachhead in Canada. Don’t get me wrong. I welcome competition. I only want to have the same ability to compete as my opponents. A recent article in Business Week asked who will be the first global phone company. Needless to say, Bell Canada wasn’t on that list, and that bothers me.

Call this hubris if you like, but the fact remains that it’s becoming increasingly apparent that more and more of the decisions that matter about telecommunications will be made by large, successful international carriers. These decisions will be reflected in international standards, which services get priority in terms of R&D investment, and of course the price that business and residential customers pay for service. And if Canada isn’t at the table when these decisions are made, if we’re not influential because our domestic telecom industry has been hollowed out, or is too small, too weak, or too shackled to have any clout in our own market – let alone abroad – then the direction and speed of our nation’s economic development will be determined elsewhere, by people who aren’t responsible to Canadian regulators or to Canadian customers.

We will become distributors for somebody else’s technology rather than masters in our own house. And that’s not good enough for our customers, and it certainly isn’t good enough for me.

The danger is that we won’t have a seat at that table even though we have the necessary skills, the ability and the drive to succeed.

Our quest to compete for the future must begin with sound decisions about competition made here at home. Bell has already chosen competition as the best way to create value for its customers and to attract prosperity to the communities we serve. The choice for the future lies now with our government and with our regulator. As they deliberate, I encourage them to be bold and realistic. They should also be optimistic, because the changes I believe we need will also unleash a flood of entrepreneurial spirit that will astonish Canadians with its vigor and intensity.

I believe that Canadians can compete for the future, and win. We deserve the chance to try.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


John McLennan
President and CEO, Bell Canada

Canadian Advanced Technology Association Conference, Toronto, May 6, 1996
Published in The Corporate Report No. 18 (June 30, 1996)

In an environment with the kind of upheaval that is commonplace in the technology industry, it’s simply not enough to have a good idea or product. You also have to know how to market and sell, how to find partners and how to project your idea into markets you never thought you could reach on your own – all in times of growing uncertainty.

It’s extremely challenging, to say the least, to identify the home-run products of tomorrow, so it’s vitally important that we create the kind of environment where we can have as much innovation as possible. I don’t offer any easy formulas to hit home runs. However, I know one thing for sure – to be successful, we must be out in front of the rest of the world in serving customers. And I am absolutely convinced that in communications services we have to make critical business decisions that will decide our relative competitive position in world markets sooner, rather than later.

Today, I’d like to give you my perspective on the evolving communications industry, then briefly review some of the critical elements of our strategy. And I’d like to close with a few words on the government’s role in building the new environment for innovation and continuous creation of customer value.

It is no exaggeration to say that we live in an era of constant flux. In my own industry, every day brings news of change. But amidst all the noise and confusion, I think you can distill two trends that will have profound implications for the kind of environment that is emerging.

The first trend is technological change, particularly relating to digitization and new modes of transmission. Here I am referring as much to software as to hardware. The critical factor is that the digitization of information – accelerated by quantum developments in computing power – has created a brand new field that is chock-full of opportunities and risks.

But technology is only half the story. The other half involves markets, and of course competitors in nearly every aspect of the communications business. With the recent passage of the US Telecom Act, which removed the last few regulatory barriers preventing customers in the US. from enjoying the full benefits of competition, things have accelerated to near fever-pitch levels.

The move toward open markets and increased competition has taken on the dimensions of a truly global trend, as other countries in the world follow the US lead. Canada is right in thick of this global trend. So we are left with a situation where we must chart a course across very rough seas. There is no turning back. What we do know is that we must make the journey.

Let me suggest a way that we can make sense of the complexity and begin to steer our ships toward the markets of tomorrow. Let’s begin with the two change agents I spoke of earlier: technology and competition. Conceptually, these forces can be positioned on two axes, one indicating the pace and intensity of competition, and the other indicating the extent to which we are able to create new customer value from technological change. Broadly speaking, we can imagine four evolving scenarios for the future, depending on whether competition and value creation are high or low.

The first scenario has both at low levels. Let’s call this “slow and steady.” I think this is where we are today. It presumes that it’s going to take a very long time to make the required investments in broadband, that competition from the US does not spill over the border, that the Internet has been over-hyped and that the computers now sitting in nearly half of all the homes in Canada revert to being just word processors or platforms for games. To say the least, this is a bit unrealistic, though it is possible if regulatory inertia is brought about by government policy that is deliberately indifferent to the opportunities associated with other, more complex futures.

The second scenario, where competition is intense and value creation is stagnant, has been described as a “war of attrition.” Here the Internet continues to grow at a chaotic pace, but compelling new applications are slow to emerge. Capital is constantly being redeployed, often at cents on the dollar, and the safest investment is felt to be an expansion of capacity. This is somewhat like the communications equivalent of an arms race, with the most disappointed player of all being the customer, who won’t see very much new value created, even though the industry will sound very busy.

The third scenario is one with modest competition but high value creation. We call this “info-heaven.” This scenario is one in which government policy focuses on maximizing investment in the value-creating side of the industry rather than seeking an all-out arms race. You wouldn’t see overbuilding or all-out price wars, because competitive positions in this kind of market environment would be decided by a company’s success in R&D, striking the right alliances, and deploying service – in other words, by delivering value to customers.

The fourth scenario can be described as “cyber-complexity.” This is a future where vigorous competition is coupled with gung-ho value creation. It’s a big-win, big-lose scenario. This could come to pass if government chooses to maintain a two-track policy of promoting both investment and competition, where a flow of services across the border with the US would be complemented by a strong commitment to an environment that gives us a chance to grow an indigenous Canadian information industry.

So what will the future be? Well, depending on where you are in the industry, and depending on which markets you serve, it could be any of these scenarios. What is clear, however, is that “slow and steady” is unlikely. If that’s where we are now, I can guarantee you it’s not going to last.

If you’re in a war of attrition, you’re probably working on strategies to move north, by focusing on value creation. If you’re in info-heaven, you’re probably readying yourself for increasing competition. And if you’re in cyber-complexity, you’ve probably already called your office twice during this talk to see what’s new.

Speaking as a leader of a communications company, obviously info-heaven would be a nice place to be. I might even be able to go home and have a full night’s sleep for a change. I am sure that a war of attrition is a long-term loser for everyone – starting with the customer, then with the investor, the employee and finally the companies involved.

Here’s the point: our future will be decided to a great extent by decisions and risks that are made right here in Canada. I say this is because I think the future will look more like cyber-complexity than any other scenario. And Canada can be a big winner in this kind of world.

That brings me to a discussion of Bell’s strategy. Our approach focuses on creating maximum value for the customer. On this issue, there’s a lot to be done at Bell, but we’re making progress. Although this is not the time and place for a laundry list, I would like to leave you with just a few examples.

In the last year or so, we have undertaken a very successful trial of our new voice-activated dialing technology developed in Canada by a team at Nortel. This technology – which will soon become a service – allows you to place telephone calls by speaking into the receiver the name of the person or business you are trying to reach. No more pressing buttons or dialing numbers. Just tell the telephone who you want to reach, and it does the rest. At the same time, we have conducted an equally successful trial of the new Vista 350 telephone set with Call Mall – an interactive electronic shopping and information service, in London, Ontario. And we’re gearing up for two extensive multimedia trials in London and Repentigny, pending CRTC approval. These trials will give us valuable experience in how to offer packages of service that include cable TV, telephone services, high-speed PC access, and video-on-demand offerings such as movies and educational applications. That’s the short list.

In all of our service development work, our goal is to be the world leader in value creation for customers within each of the main structural elements of the information industry: transport, interface and content.

Transport is Bell’s traditional business, and it is right at the center of the new Bell. In fact, moving information is our main core competence, and it will be a solid platform for future expansion. Transport will include the networks, switching, AIN, voice processing capability and many proprietary capabilities that we will use to differentiate us at the network level.

Surrounding the transport core will be a layer that we call the interface. We will wrap an interface around our transport technologies in much the same way that an operating system like Windows is wrapped around a PC. Our interface will be designed to enable powerful custom applications to be written by our customers, and for our customers by us, or by a new generation of communications software developers – many of whom could and should be Canadians.

Some of the development work will be done in collaboration with firms such as you’ve heard from at this conference. And some of it will be funded, developed and owned by Bell Canada. The kind of applications that we hope to develop will be navigational tools for the information highway, interfaces for electronic commerce, privacy and copyright protection agents, communications profile managers – any kind of customer-facing software you can imagine, that lets customers derive value by driving traffic through our networks with user-designed interfaces.

Content is perhaps the hottest area in the information industry today. And Bell is going to have a place in it, at first in a limited way, primarily through partnerships with customers and industry experts and through alliances. And we are developing an ability to talk with entrepreneurs so we can collaborate effectively. Becoming good at this is an important priority for us.

Another important part of Bell’s near-term success will result from our growing ability to bundle and package solutions for each of our market segments. We want to be able to design packages of value for you with little or no regulatory or government restrictions. For example, we’d like to bundle local service, long distance, interactive services, wireless – whether cellular, paging, or PCS – add in 400 minutes or so of long distance, plus an email address for each of your kids, and sell you the whole thing at a package price.

We have to make considerable changes if we are to become the kind of organization that can deliver value in this manner. Right now, there is major effort underway within Bell to dramatically increase efficiencies and redesign how we serve customers, under an umbrella program called business transformation. But this is just an intermediate step. Business transformation is part of a larger reconfiguration plan that will enable us to thrive in cyber-complex markets.

One thing is for certain: I don’t want to lead a franchise company, one that is dependent on technology purchased from others to survive. That’s a poor future for Bell, and one that is wholly inconsistent with the heritage of service and technological innovation that we, and Canada, so proudly claim.

In this context, I have only two recommendations for the government. The first is that Canada must develop its fair share of new communications know-how right here in this country. We have the skills. We have the people. We have the ambition.

To its credit, the government recognizes the strengths and potential of the Canadian industry. In fact, recent government decisions have put us in a much better position to invest for the future. And we intend to do just that.

But this country also has the world’s number one telecom powerhouse immediately to our south. It may be tempting to forego innovating and let others do it, particularly when AT&T has said in Maclean’s magazine that they have their resources and sights set on our home base.

Well, this doesn’t mean we’re all going to roll over and play dead. Instead, I want to go head-to-head with AT&T. With Sprint. With any global competitor who wants to come in here and take our customers. But we must have an environment that gives us the same freedom to compete as AT&T now enjoys. That brings me to my second recommendation, and it involves industry structure. The only thing we seek is the chance to earn our customers’ business. The opportunity to create value for customers. The ability to put our packages of value on the market and let the customer choose. Without restrictions. Without the cross-subsidies that we’re presently forced to pay. Without having to wait weeks or months to bring new services to market because the existing regulatory structure forces us to file tariffs.

Some of these restrictions were designed five years ago to protect small Canadian startups from the size and market position of the telephone companies. Others were designed more than 25 years ago, long before convergence made the old barriers both irrelevant and counterproductive. Quite simply, these barriers and restrictions are dead wrong for today. This is a view that I know many of you share. And I want you to know I appreciate your willingness and efforts to call for change in a public way. But we’re not there yet.

If global companies like AT&T have the right to compete in ways that I can’t, even though we’re both offering similar products, then that’s simply not acceptable.

The reality is that borders cannot stop the transfer of technology. Borders cannot prevent the arrival of powerful global brands. Borders cannot delay the movement of know-how, and literally billions of dollars of resources.

The best course of action now is to create an environment in which all of us are motivated to take the risks necessary to be a leader. And we can only do that in an environment designed to encourage customer choice, innovation, and a growth industry that generates jobs for Canadians in all sorts of new and interesting market niches.

There are not many formulas for instant success, but as Stephen Leacock said, “It’s amazing how hard work improves your luck.” I know that you understand this. We also know that success never happens by accident.

This is a very exciting time to be in the communications industry. I, for one, wouldn’t miss it for the world. In the months and years ahead, I look forward to working with all of you to make our dreams a reality – for our customers, for ourselves and for our country.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Louis A. Tanguay
President and CEO, Bell Canada Innovation Center

HEC Network, Montreal, April 24, 1996
Published in The Corporate Report No. 18 (June 30, 1996)

I would like to discuss the following subjects with you today:

•  The transformation of companies

•  Jobs today

•  The impact of new information and communications technologies on workplace reorganization in a knowledge-based economy

Everything is being reexamined

Over time, any organization, whether in the private or public sector, develops a characteristic frame of reference for its operations. This is what makes it unique and gives it a personality. This frame of reference includes the company’s values, its way of organizing work and developing its products, its market approach and its concept of strategic alliances: in short, its overall way of doing things.

Often, the reason for the problems experienced by companies that have been very successful in the past is that their frame of reference is no longer consistent with current reality, despite the fact that all the company executives are quite aware that you can’t wait for problems to arise before questioning your way of doing things.

In his book Managing in a Time of Great Change, Peter Drucker writes that when a company reaches its goals, it’s not time to celebrate, it’s time to think.

In today’s world, everything is changing constantly, and changing radically. Markets evolve. So do technologies, employee values, and workers’ sources of motivation. Competitors from all over the world attack markets that only a short time ago seemed secure. Customers have an unprecedented variety of suppliers to choose from.

Even in a field like ours, where technology and regulatory matters are constantly evolving, competitors can suddenly appear from outside without even having to worry about investing in networks. The configuration of the telecommunications industry is changing from day to day, and progress in technology provides the most innovative people with a chance to stand out from the crowd.

In this context, we can’t be content to wait and see what happens. If we’re to go on providing ever-better solutions for our customers, we must consistently stay one jump ahead of change. In concrete terms, this means adopting operating modes and production processes that are more and more flexible and effective.

To achieve this faster and better than our competitors, we must attract and keep the best employees, encourage them to continue learning faster and better than our competitors’ employees, and give them all the freedom they require to meet our customers’ needs.

The danger is that a company’s frame of reference might deteriorate before anyone notices and reacts in time. Drucker suggests two preventive measures to avoid this. First, he advocates reviewing every product, service, policy, and distribution channel every three years. The review would include asking the following question: if we were not already involved in this area, would we decide to go ahead?

You understand as well as I do that what’s involved is a basic reexamination of the company’s very mission. But in a company like Bell, three years without change is too long. We must constantly question everything we do. A large number of the services we offer today didn’t even exist three years ago. In a field like ours, letting three years go by before undertaking a thorough reexamination would be a sign of paralysis. That’s why everything has to be constantly reviewed, even while we’re in the midst of implementing the three-year transformation plan for our company and its processes.

The second preventive measure suggested by Drucker is to take a serious look at what’s going on outside the company, particularly with respect to non-clients. It’s a fact that companies know their customers from all aspects, but are often ignorant about potential customers with whom they aren’t doing business at the moment.

This is the sort of reexamination that can enable a company to detect any flaws that are starting to develop in the organization, and change what needs to be changed before serious problems arise.

The right kind of change

Change is fine, but it has to be the right kind of change, and it has to be done properly. According to a study by Arthur D. Little of 350 major companies in the United States, the results of major upheavals in companies are often disappointing. The study shows that only 17% of the managers queried claimed to be satisfied with the changes made, while 40% said they were clearly unhappy with them.

Peter Scott-Morgan, the author of The Unwritten Rules of the Game, claims that most failures in cases where companies were very careful in implementing change resulted from the fact that they neglected to take into account the informal rules that govern everyday activities in companies.

Let me give you an example. When changes are successful, it’s frequently because of the quality of the teamwork and increased cooperation within the company. But the principles behind the company’s compensation policy (and compensation is still one of the most powerful incentives) often continue to favor individual performance and reward only individuals rather than teams. In such cases, it’s easy to predict that the company will have to face resistance to change which is likely to prove more powerful than the best intentions in the world. It wouldn’t be surprising if, instead of seeing an improvement in teamwork, the company sank deeper and deeper into the most destructive kind of individualism, while everyone went on claiming to support change.

If the various messages being conveyed do not converge in the same direction, particularly when change is involved, human beings tend to revert to the good old rules and traditional ways of doing things. And when we attempt to introduce further changes, we must not be surprised to come up against the cynicism of employees who have lost faith in management’s ability to deliver the goods.

John Dalla Costa, a consultant with a great deal of experience in implementing change in companies, writes in the book Working Wisdom that employees are much more resistant to the poor management of change than to change itself. Badly managed change makes employees lose confidence in one another, the company, and the company’s senior management, and this in turn makes the company lose confidence in them.

Nevertheless, despite all the difficulties it involves, we can’t hesitate to make the changes that are necessary, but we have to pay at least as much attention to the way things are done as to the changes themselves. In the current context, failure to act is suicide.

As I said earlier, at Bell we’re in the process of completely transforming the company. We’re focusing all our activities on a single target, namely the greatest possible satisfaction of our customers’ needs. We literally want to delight them. We’re going to make their lives easier by cooperating with them in developing global solutions to their needs. Our marketing team is committed to offering a new product or service every month.

We also want to work in closer partnership with our customers. We want to become an essential part of their chain of values, to the point where we become their strategic allies in conquering their markets. We’ve come a long way from the days when we were content just being a supplier of telecommunications products and services. But even if those days seem far away now, all these changes have come about very rapidly. To succeed in the new path we’ve marked out for ourselves, we essentially have to design a new company based on different ways of working. We’re reviewing all our processes. Everything has to be on the table: there are no sacred cows!

Whatever the area, the same question must be asked: what’s the best way of actually getting the job done? To come up with the best answer to that question every time, we have to be prepared to change everything.


As companies concentrate all their efforts on their core activity, the ability to network becomes an indispensable advantage. Today, companies tend more and more to grow by making strategic alliances. To offer Bell’s customers global solutions, we are forming alliances that may even involve former competitors.

All the players will be seeking the forces they need to complement their own expertise, wherever they can find it, to meet their customers’ needs. For example, we recently entered into separate agreements with CGI and IBM to help us offer the very best in development and management of large computer networks. As you are well aware, the synergistic development of telecommunications and computers is the driving force behind information technology. If we want to offer our customers the best global solutions, we must look to our partners for knowledge and skills that complement our own.

Today, economies of scale belong to production and management of so-called convenience resources. Providing access to these basic resources at the lowest possible cost is our entry fee to compete in the race, but it’s also much more than that. It’s part of the added value demanded by our customers, which we must provide if we’re to distinguish ourselves from the competition, and which comes from offering global solutions that meet their specific needs.

We must succeed in setting up the best possible organization to create the greatest synergy, to improve our reaction time, and most of all to innovate faster than our competitors. In a world where nearly all companies are concentrating on their core activities and customers are asking for global solutions, the need to integrate resources produced internally with those obtained externally presents a new challenge. The means of meeting this challenge must be new too. To succeed in this we are changing our organizational methods from top to bottom and increasing our strategic alliances.

Traditional jobs are giving way to a new kind of partnership

Amidst all these changes, relations between the company and the people who make up its workforce are changing at the same rate – fast!

During the past century, we’ve lived in a society where relations between companies and their human resources were based on the employer-employee relationship. Today, the company increasingly uses human resources that, while being at its service, are not – strictly speaking – part of its personnel.

The company’s workforce now includes subcontractors, consultants and specialists who are grouped into teams with employees (in the traditional meaning of the term) to carry out a specific mission, which may involve finding a solution to a production problem, developing a new product or reviewing a process. Once the work has been completed, the team is disbanded and its members, employees and others, must be ready to offer their services again, in the company or elsewhere, to take up new challenges.

This kind of relationship represents a considerable change in the relations between the company and its collaborators. In turn, employee motivation, the feeling of belonging and loyalty to the company present new challenges. In this type of organization, managing no longer means giving orders to a lot of employees who carry them out. In many cases, senior managers whose decisions have a profound influence on the company’s future have only a handful of employees reporting directly to them. But this doesn’t prevent them from managing major projects.

In companies like ours, in which the strength of the organization is based on employees’ knowledge and skills and their ability to create added value from information, what’s required is no longer simply to define employees’ tasks and check the work they do. We have to find ways to offer optimal conditions to enable our teams to be as productive as possible, which in our case means making information more productive. This kind of work environment is much more focused on creating new wealth than on trying to control costs without changing our work methods. It’s much more demanding but also much more stimulating.

Individuals are adapting thanks to new technology

All these changes affect more than just the company making the changes. Individuals must also adapt their career paths to the new realities. We can no longer think simply in terms of the next promotion on the company’s organization chart, in an essentially linear progression. And that’s another change.

To succeed in our career path, we must now take a look at the knowledge, skills and expertise we have to acquire so we can offer our services to meet real needs that haven’t been met. And I’d add that this may be inside the company or outside it. We can no longer simply acquire qualifications to fit essentially unchanging job descriptions, as has been the case in the past. Instead, we must try to detect not only today’s needs but also tomorrow’s, and identify the means of meeting them. We must not hesitate to suggest projects. Teams are formed and good opportunities arise around projects that head the company toward the future. Increasingly, making a career will be synonymous with going from project to project.

In his excellent work entitled Job Shift, William Bridges describes the increasing speed of technological development as the main engine of the workforce transformation. The traditional work organization, with fixed hours for everyone and barriers between different functions, has been broken down simply because technology now makes it possible to do so. The new rules of the game free individuals to the point of making them the work unit that is the most productive, favorable to innovation, and dynamic, according to John Naisbitt in Global Paradox.

One of the reasons that individuals are so vitally important to a company is that the most important raw material is intelligence, supported by knowledge and connected to universal access to information. What constitutes the extraordinary power of these three essential elements today is their great mobility. Also they can be connected, and if you’ll allow me to use the expression, multi-connected, to create a synergy with practically unlimited potential.

When you talk to managers in companies that have already been through the transformation, you quickly realize that they are no longer managing a workforce. They are managing individuals who are connected, on the one hand, to information and, on the other hand, to colleagues spread out just about everywhere in the world. And this is due to telecommunications, and more particularly to the information highway, making it possible to globalize the economy and give individuals unprecedented work capabilities. In the information society, individuals can have in their offices, cars or homes, and even in their airplane seats, the kind of access that only a short time ago was reserved for only the largest companies. This enables the most competent individuals to be members of large research and work teams whose scope is worldwide, while utilizing easy-to-use equipment at a relatively reasonable cost.

The technological progress that has produced the information highway gives a completely new meaning to the concept of the critical mass essential to the development of any major business. A company doesn’t need to concentrate its experts in a specific location to provide them with the equipment they need to work. To complete a project, a company can even call upon virtual teams whose members can be located anywhere in the world and can belong to totally different spheres of activity. Technology and the information highway provide the necessary links. And this represents a genuine revolution.

One of the major changes brought on by technological development, one that most profoundly affects companies, is that the instruments required to do the work now belong to the individuals who use them, and these individuals use them to acquire the knowledge that is the company’s most important raw material. In this context, the company frequently needs its experts more than they need the company. This is a complete reversal of the game rules.

Exciting times

I think these are exciting times, full of challenges and great potential.

The greatest successes will be achieved by those who make good use of their access to knowledge and are capable of providing the best added value. This goes for individuals as well as companies. Moreover, the most successful companies will be those that enable their human resources to develop (and this includes employees and collaborators of all kinds), since the companies will be able to benefit from this development to enrich their own knowledge base. This is the path on which Bell is committed to move forward with all its employees and collaborators.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Derek H. Burney
Chairman & CEO, Bell Canada International

The Canadian Club of Ottawa, April 15, 1994
Published in The Corporate Report No. 6 (June 15, 1994)

When I served in places like Japan and Korea, I used to suggest to visitors that they write their impressions after about six weeks. After that, it only gets more complicated.

It is somewhat in that sense that I am here today volunteering views about the “telecommunications revolution” after only 15 months of heavy immersion – the point of maximum liberty and high subjectivity for me – with all the latitude that implies both for me…and you. If you detect a particular emphasis directed at government, you can attribute that to my longer record there prior to entering the private sector.

I promise, at the outset, not to use or try to explain terms like asynchronous transfer mode. For one thing, the acronym ATM probably has a very different meaning for most of us.

Unless you have been frozen in the Rideau Canal over the past winter, you have heard and read countless reports about the revolution that is going on in telecommunications. It has been called the information highway or the electronic superhighway – some are even calling it the info pike, the infobahn – or simply, the web. Those of a more cynical persuasion deride it as the super “hype”-way.

In any event, an explosion of new technology is transforming our industry. Telecommunications networks are becoming faster and more intelligent and their carrying capacity is increasing exponentially. The ability to send and receive massive amounts of voice, video, data and graphic information simultaneously over the phone lines is changing the way we communicate and what we communicate. And advances in satellite, cellular, and wireless technologies are changing how we communicate.

Similar developments in the computer, broadcasting, cable and consumer electronics industries have led to a convergence of technologies. Industries which once had little in common are developing overlapping capabilities and offering competing services.

This convergence is creating unprecedented opportunity to develop and offer new services. The result is a global revolution in information, one that could change our lives as significantly as the industrial revolution, or the invention of the automobile or the telephone.

Ray Smith, the head of Bell Atlantic, has remarked that the convergence of technologies means that “your computer will speak, your TV will listen and your telephone will show you pictures.”

It is, in effect, a social revolution that could affect virtually all aspects of our lives from the way we learn and work to the way we relax – in short, the way we live.

The Revolution Is Real

Why is this happening now? Primarily, because of technological innovations which enable audio, visual and data information to be transformed into digital form and transported in vast quantities along fiberoptic trunk roads, or highways.

No one can really predict what shape the industry will take or what services ultimately will sell. What we do know is that industries that used to be separate are now converging. What we also know is that the rapid convergence of technologies needs a parallel convergence in policy and regulation – encouraging open, universally accessible, interconnected networks by many different service providers.

Now all this may seem a bit baffling for societies still struggling to set the clocks on their VCRs. I confess that my sons taught me the VCR technique and, more recently, because of the business I am now in, I used the same support system to master many of the new services available from my new telephone – call answer, call display, speed dial and all that. (“The smarter the phone, the dumber the user feels.”)

You may not think that is all that impressive, and it isn’t, even for someone who can recall the day when a real operator asked, “Number, please.” The message is that those who taught me and others like them are increasingly the customers of today and tomorrow. They are thriving on the new technologies and services and that is the promise of the future where customer choice will be king.

All this to say that perhaps the most fundamental challenge for industry is to develop products and services which are first and foremost user-friendly, practical in purpose, simple and convenient to use.

There will not be a single device – an all-purpose gadget that serves all communications and entertainment needs. As John Tyson of BNR recently observed, industry is obliged to identify and develop the product or service that will shape the customer’s perception of value. More may come in the form of machines that recognize and respond to human voice commands – a modern extension quite literally of the operator asking, “Number, please.” We may even have the means to converse and translate in real time in two or more different languages – who knows, a possible solution to a perennial Canadian challenge!

Consider some other possibilities:

•  Canadian students studying Australia in social studies could link up with their counterparts in Melbourne and learn firsthand about life down under

•  Doctors in remote communities faced with a medical emergency could get immediate diagnostic help from specialists in hospitals hundreds of miles away

•  It could become routine to do business with customers in Stockholm or Tokyo, relying on video conferencing from your office or home rather than airports and jet lag

•  And of course, there is the promise of an unlimited selection of movies delivered directly to our televisions, without the trip to the video store in the middle of winter

Many of these scenarios are already beginning to unfold:

•  For example, film students at Ottawa University are watching movies from the NFB, using personal computers located on campus. They are part of a video-on-demand trial that Bell is conducting with Carleton and Ottawa University, the first of its kind in Canada. A second phase of the trial, planned for this summer, will bring video-on-demand to 200 homes in Mississauga.

•  Grade 12 students in Riverton, Manitoba, a farming community 120 km north of Winnipeg, are now studying calculus with a teacher in Arburg, 30 km away. Their local high school is too small to hire its own calculus teacher and it was faced with the prospect of closing down and sending its students to a regional “super high school.”

•  The Riverton School chose instead to set up a two-way video link over fiberoptic cables with the school in Arburg. The students get the math they need without lengthy daily bus trips and a rural community has saved its local high school. Unfortunately, I can’t say that it has made calculus any easier to learn.

•  In a trial that Bell is conducting in London, Ontario, doctors at three local hospitals will be able to exchange images from CAT scans and magnetic resonance imaging examinations over a high-speed network called LARGNet.

The electronic transfer will allow doctors to make a diagnosis without waiting for originals to be sent from another hospital where a patient may have been sent for an examination. For patients, that means a faster diagnosis and fewer return trips to the hospital to find out test results.

The Relativity Factor

The revolution is global and the stakes are high. In the United States, Vice-President Al Gore is challenging industry to broaden its concept of universal service to include classrooms, libraries, clinics and hospitals. He predicts that telecommunications will be America’s largest export and the world’s No. 1 business by the end of the decade. The American Administration and Congress are leading a vigorous debate for policy and regulatory change.

Why? To ensure that America takes full advantage of the emerging opportunities. The US is and will likely be the most dynamic market for new technologies and new services involving investments of more than $200 billion over the next 10 years.

In Japan, the government has committed $250 billion to build a national information infrastructure by 2010. As part of that effort, it is deregulating its cable industry and promoting the convergence of telecom and cable markets.

These initiatives in Japan, the US and elsewhere are designed to ignite private sector investment. And they will. Governments that create a hospitable environment for investment from private industry inevitably reap the benefits of innovation, new technologies and increased employment.

The United Kingdom has one of the most open regulatory environments for telecommunications in the world. Cable distributors there can also provide a complete range of telecom services, including local and long distance telephone service.

That is why Bell Canada International is investing in the UK. Our cable franchises will provide cable and telephony services to 60% of the Greater London Area and parts of southeast England. The UK market is highly competitive but it is also experiencing rapid growth, with investment in cable expected to top £6 billion by the end of the decade.

BCI is also investing in cable in the United States. Late last year, we reached an agreement to purchase a 30% share in Jones Intercable, the eighth largest cable operator in the US. Jones has 55 cable systems serving 1.3 million subscribers, 60% of whom are served by fiber technology. This provides the capability to carry interactive multimedia and telephone services in the future.

But we are also taking a stake in several of Jones’ other enterprises, in education, computer networking and film production. Jones is considered a pioneer in delivering university courses by cable TV with a 24-hour education network, reaching more than 25 million American households.

We are positioning ourselves globally in a substantial manner. Five years ago our investments outside North America stood at $12 million. Today the total exceeds $1.5 billion.

We are making these international investments because those markets are open to us (ironically, in many cases, more open than our own) and because we want to broaden our expertise and capabilities in new technologies. We are learning more about what customers want and how to offer those services most efficiently. The experience gained abroad can help us climb the learning as well as the earning curve and enable us to develop better services here in Canada, if and when we have the opportunity to do so.

But this can only happen if Canada creates an environment that is conducive to investment and innovation in telecommunications.

Unfortunately, that is in question today.

Are We Ready?

In an era of limited public resources, the telecom lever may well be the most powerful tool available to stimulate growth and competitiveness. Our ability to employ people in satisfying, high-paying jobs and to improve our standard of living will depend heavily on our competitive capability in the high-tech, knowledge-intensive industries of the future.

But it will not happen in a policy vacuum or with a regulatory framework designed for a very different age and a different pace of change. Success requires more than rhetoric, (certainly more than speeches) and yes, more than consultations or hearings.

Regrettably, our record to date has been too much one of debate rather than direction, of seeking dialogue rather than decisions. Process often becomes a substitute for purpose…and not just in telecommunications.

Canada has been the only country that obliges the regulatory agencies to act as a proxy for leadership and policy-making by the government. In my view, it is the role of our elected representatives to shape policy and the task of appointed regulators to implement those policies.

The Government Role

I recognize the complexity for government and within government in tackling issues with a multitude of public policy implications.

I recognize too the purpose and value of broad-based consultations intended to condition, as well as influence, public policy. After all, I spent thirty years as part of that system.

The words in the Throne speech were encouraging and the advisory process being established is welcome but, ultimately, more is needed and choices do have to be made.

From governments at all levels we need a measure of leadership to bolster efforts by the private sector to build an information highway and to accelerate the deployment of advanced broadband networks. This would connect Canadians better to one another and to the new global economy.

Canada should not become, by default, a ramp running off someone else’s super highway.

Canadians should be able to obtain information and communicate with one another and the world easily, reliably, securely and cost-effectively in any form – voice, data, image or video.

To that end, what is needed is a regulatory and policy framework that encourages private sector investment in telecommunications here in Canada.

Speaking frankly as one who now deals with underwriters, analysts and shareholders, I have to say that the perceptions of investors about our regulatory regime are running in the wrong direction. And investors, including, specifically, Canadian investors, do have other choices these days.

Canada needs rate rationalization and real, as opposed to micro-managed, competition moving us closer to pricing, which reflects market realities.

Our regulatory regime should be a catalyst for innovation, not a constraint.

The industry does not want government subsidies or government expenditures. Surely a novel plea, these days.

We would welcome policy support for a more favorable R&D environment as well as continuing support for Canadian companies in their efforts to compete internationally. (At the risk of preaching for my former parish, let me acknowledge that this is one area in which we do well!)

Knowledge and skills are the keys to our future, competitive advantage. “Software,” as Bill Gates observed, “is like a natural resource except that its source is not in the earth but the human mind.” That reality should guide broader public policy and influence priorities at all government levels. It means specifically more focus on education and training with policies and programs serving needs not entitlements, aimed at motivating the best from our youth and not the latest trend or impulse of political correctness.

Did you know that telecommunications is the only high-tech sector in which a Canadian company ranks among the top 10 global firms? It is also probably the only one in which a Canadian firm has the size and scope to be a leading world player.

Did you know that one company – Northern Telecom – accounts for 20% of all industrial R&D expenditures in Canada? That same single company recruits one-fifth of all this country’s M.A. and Ph.D. graduates in electrical engineering and computer science. An asset, I suggest, worth preserving and worth nurturing if we intend to be more than a spectator observing success elsewhere.

Industry’s Role

By now, you might well ask, what can we expect from industry itself?

Industry should work together and with government to build the necessary networks and to ensure that they are compatible with those of our competitors. Canada’s information highway will be “a network of networks.” It is incumbent upon us all to make sure that we build the bridges and interchanges necessary to create a seamless national network.

Our objective must be to give Canadians greater choice by opening up the avenues for communication and competition, not restricting them with artificial walls.

Industry must also make the investments in research and development that are needed to develop new technologies.

We will look to government for direction, not handouts.

We will invest in both technology and the people behind it, and we will continue to fund the long-term objectives – not just the short-term returns.

And, I think we are doing just that.

Bell Canada and its Stentor partners from British Columbia right across to Newfoundland recently announced plans to invest $8.5 billion over the next 10 years to deliver the information highway to Canadians.

We will upgrade our local, regional and national networks to create a “Canada First” coast-to-coast broadband network that will give Canadian businesses and consumers access to a wide range of enhanced services.

We are also creating a new multimedia company to develop new services and applications for the information highway.

And we will establish a venture capital fund of up to $50 million to assist companies developing multimedia applications and products for the information highway. Good news, I suggest, for the creative talents of Canada.

This information highway will be accessible and affordable to all Canadians. Equally important, it will establish an information infrastructure that is open to all service providers, including our competitors. It will provide opportunities for all businesses to develop and offer their services and products to Canadians.

This will mean jobs, an average of 12,000 jobs across the country for the next 10 years. It will also lead to many more jobs in a brand new multimedia industry.

This initiative will place Canada in the vanguard of the “telecommunications revolution.” It also represents a significant vote of confidence in the future Canadian economy.


In summary, let me say that Canada pioneered the first wave of the telecom revolution – the digital wave in the 1970s. We cannot afford to sidestep the second wave. I believe that Canada’s future prosperity will depend in large measure on our commitment as a country to build a Canadian information infrastructure.

Our industry is taking a major step in that direction.

Private investment in core Canadian strengths such as telecommunications is the best answer to high unemployment, sluggish growth and eroding public finances. Building on these strengths generates jobs and new areas of expertise. It produces new services and opens new markets.

Our industry does not need government funds or protectionist barriers to compete in the telecommunications revolution. But we do need to know what course the government is setting for telecommunications in this country.

We need a policy and regulatory framework that will attract investment and stimulate innovative research. And we need to know what emerging markets will be open to us so that we can make appropriate investments.

Investment in new technologies always involves risk. We are taking that risk because we do not want to forfeit the leadership that Canada has developed in telecommunications.

Technological convergence has opened unprecedented opportunities for our industry domestically and globally. If we are to seize them, our industry’s determination must be matched by well-focused government policy that encourages investment and initiative and allows us to compete at home as well as in global markets.

What is needed is a partnership between government and industry – leadership and a sense of purpose from government; tangible commitments and investments from industry.

We know we need to work constructively with government to sustain that leadership. That is precisely what we want to do. We believe that is how we will win the revolution. We believe that is how Canada will make the most of the opportunities.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Derek H. Burney
Chairman, President & CEO, Bell Canada International Inc.

The 13th International Trade Law Seminar, Ottawa, October 19, 1995
Published in The Corporate Report No. 15 (December 31, 1995)

It is always a pleasure to return to Ottawa and renew some old friendships. Thank you for inviting me. Being present among so many distinguished members of the legal community does give rise to the temptation to dig into my repertoire of lawyer jokes. But, as a former diplomat, I will refrain from doing so. That’s because Thomas Jefferson once said it is the trade of lawyers to question everything, yield nothing and to talk by the hour. Will Durant countered on your behalf by noting that the art of diplomacy is to say nothing, especially when speaking; that diplomacy is the fine art of telling half-truths and the finer art of telling half-lies. And Mark Twain added his own verbal abuse of the poor diplomatic corps by saying that the principle of diplomacy is the principle of give and take. Give one and take ten.

These observations led me to the conclusion that the professional most susceptible to abuse must be the government lawyer involved in international trade negotiations. For surely the ideal trade negotiator is someone who questions everything and yields nothing; who talks by the hour while saying nothing; and who, in the spirit of give and take, gives one and takes ten. (At least, that’s what Simon Reisman always told me.)

As for Konrad and his legal colleagues in the public service, let me acknowledge, in a more serious vein, the important contribution they have made, and continue to make, in the advancement of Canadian trade policy, in particular, their role in the search for impartial adjudication, equitable enforcement and the resolution of disputes. It is important work; it is tough sledding; and we are lucky that professionals of high caliber are committed to the task.

As you know, I was involved in trade negotiations in a past life. But I never was a lawyer and no longer am a diplomat. So I am not going to talk for an hour today. And I hope to say something meaningful in the time available.

Canada is currently involved in WTO negotiations to create rules for basic telecom services. Hence the suggestion that I speak today about the international telecom rules, which BCE believes would best serve Canadian interests.

Unfortunately, that would be a very short speech. For it is a regrettable fact that BCE has not really been able to develop a comprehensive position on the current negotiations. Not unwilling, but unable. Unable to do so because, just as foreign policy is an extension of domestic policy, so too must international telecom rules be a consistent extension of domestic telecom policy. And BCE is simply unable to take a considered stand on the current international negotiations until we know more precisely where we stand in Canada.

We all know the expression “putting the cart before the horse.” It is not a prescription for progress, unless you desire to make rapid progress downhill, and injure the horse. Yet I fear that is exactly what we risk doing in the vitally important sector of telecommunications – the nerve system of modern economies, one which has also been a core Canadian strength for over a century. Canadian negotiators and Canadian telecommunications firms are currently laboring under a major handicap – the absence of a modern, domestic policy and regulatory regime, which will give Canadian firms the chance to be competitive with foreign giants both at home and abroad.

Notice I said foreign giants. Because size is a relative term. In the small Canadian pond, Bell may indeed look like a big fish. Our regulator even called us a Leviathan. But in the North American lake, Bell is only the 10th largest telecom when measured by revenues. And it is only the 25th largest in the global ocean, from a revenue perspective, given our weak currency.

Indeed, to appreciate our national position, consider this sobering fact. In a truly borderless, unregulated world, 100% of current Canadian long distance traffic could be accommodated within the existing excess capacity of the giant American carriers. So perhaps you can understand why Bell Canada has always known that its real competition here at home was not called Unitel or Callnet, but AT&T and Sprint. Companies which have been able to grow hugely because the American domestic market is so huge, and which view the Canadian market as a northern extension of their home turf.

Not only are they welcome to enter Canada and compete with Canadian carriers in all telecom markets, but Canadian domestic telecom policy gives these US giants regulatory incentives in the form of lower contribution payments, which not only subsidize their participation in the smaller Canadian market, but also require the incumbents (the Canadian telephone companies) to absorb this subsidy in keeping residential local rates below cost. These discounts were intended to stimulate competition by “Canadian” firms. But good intentions do not always generate good policy.

What other country in the world would subsidize the entry of large foreign multinationals at the expense of its own Canadian industry? What underlying Canadian policy objectives support such unusual treatment of foreign entrants?

So Burney, you ask, if that’s the kind of world we live in, what should the new Canadian regime look like? How can we ensure that Canadians enjoy the benefits of competition while fostering competitive Canadian firms? How can we ensure that Canada is not just a spur line on the American information highway?

Here’s how. First, we need increases in local rates, which eliminate distorting cross-subsidies. The Canadian industry must be allowed to operate in a system where the rates we can charge are better aligned with our costs, both in terms of what the end user pays for the service, and what long distance providers pay for the use of infrastructure others have paid for. That is not the case today.

Let me give you a concrete example: The cost of local service in Metro Toronto is $30; yet the allowed residential rate is almost half that – $17. For years, this imbalance was offset by the high margin on long distance. But, with competition, the margin on long distance is eroding, leaving less and less to support local service. This is not rocket science.

And when the CRTC finally acknowledged the need for rate restructuring almost a year ago, the government intervened and postponed the decision. This meant a lost year for the telcos – a prolonged period of uncertainty for planners and strategists already grappling with revolutionary changes to the technology of the telecommunications industry.

How important is this revolution? Well, The Economist recently characterized it this way: “The death of distance as a determinant of the cost of communications will probably be the single most important economic force shaping society in the first half of the next century. It will alter, in ways that are only dimly imaginable, decisions about where people live and work; concepts about national borders; patterns of international trade.”

I suggest that, for too long, we have been building a telecom house on sand, with one regulatory distortion inevitably requiring another and then another. It is time, I believe, to lay a solid and reliable foundation in Canada. Second, convergence must be allowed, starting now. Canadian telephone companies – all of them – should have the right to offer a range of services over their networks now, just as cable TV companies have the right to offer telecom services over their networks. Why? Two reasons. Because we won’t be able to finance investment in new broadband networks, new services and new technologies if we can’t generate a reasonable return – something Bell Canada is not doing right now. And because real competition does provide choice for users and consumers while encouraging innovation.

Why is the government role relevant? Well, again, to quote The Economist: “The pace (of convergence) will be set not just by technology but by the interplay of regulation and competition. Governments can delay the revolution; they cannot prevent it. If they try, they will merely fail more spectacularly later.”

There is a difference – a big difference – between sustaining competition (a new euphemism for protection) and stimulating competition. We need more of the latter and less of the former from government. As Ian Angus said recently, it is hard for anyone to argue that AT&T needs protection from Bell Canada.

Third (and in a similar vein), in this increasingly wireless world, all Canadian firms with the bona fides to participate should have equal access to spectrum to provide new wireless services. There is no valid reason for the Government of Canada to handicap existing Canadian cellular operators, when to do so will leave the personal communications field to giant American firms like AT&T – firms with both the desire and the ability to absorb Canada into one seamless, wireless web controlled from the South.

Given the intense competition, which already exists between the Canadian cellular companies, why not allow these Canadian firms to develop a full range of wireless services, so we can effectively compete with our powerful foreign competitors.

Fourth, not only should firms be allowed to deliver a broader range of services over broadband networks, but companies should be allowed to market services in bundled packages which maximize the value and convenience for customers. Innovative packages of voice, video and data services using both wireline and wireless technologies, and tailored to meet the needs of each user, are not just allowed but encouraged in other countries.

Finally, let’s recognize that the key to ensuring competition in this rapidly changing sector is competition law – not outdated regulations or theoretical policy models designed to protect specific firms from competition. Let’s recognize that you won’t make the weak strong by making the strong weak.

Those are the broad parameters for a modern Canadian telecom policy – the way to put the Canadian horse before the multilateral cart in 1995:

•  Rational local rates

•  Convergence now

•  No subsidized entry for foreign carriers

•  No artificial handicaps for Canadian wireless operators

•  Allowing the bundling of services tailored to meet the needs of Canadian customers

•  A reliance on competition law to ensure fair competition

We are not advocating complete deregulation. Nor are we trying to thwart competition. What we need is a healthy balance between regulation and competition. Because, right now, we have the worst of each: irrational pricing, which undermines “sustainable competition” and antiquated regulations being overwhelmed by technology. We believe the market-based domestic framework, which I have just described would give Canadian firms the chance to be successful here at home and abroad in the years ahead. It would allow us to avoid being swamped by the wave of change coming in the form of US telecom policy reform. And it would also allow our negotiators to make international progress, when it is in our national interest to do so. We would be able to define and calibrate our negotiating objectives, both from the perspective of the access we as Canadians want in foreign markets, and the access we are prepared to grant foreign firms here at home.

Above all, we should avoid making unilateral concessions to foreign-based competitors until we define and refine objectives of equivalent value for Canadian firms. That is the heart of my message from a BCE perspective – and from my day job at Bell Canada International.

Let me turn to some more personal views on this issue, based on my past experience in trade negotiations on behalf of Canada, and my more recent experience in the telecom sector.

My first observation relates to the importance of recognizing the limits of law in international commerce, with the collision of cultures and the clash of economic and political interests. In other words, what you see on paper is often not what you get on the ground.

On the one hand, what may appear to be a clear legal obstacle restricting access can often be overcome in fact. Ask AT&T, which apparently has found a legal way to hold a stake in Unitel far larger than Canada’s statutory foreign ownership limit. On the other hand, there are also occasions when a clear legal right of access turns out to be meaningless in fact. This can occur when the primary barrier to entry is economic – not legal. It occurs when one is unable to have the legal right enforced on a timely basis, as, for instance, in New Zealand, where there is no regulator to enforce interconnection rights.

And it can also occur when one is unwilling to engage in the corrupt or “flexible” business practices, which are regrettably rampant in many parts of the world.

In fact, one can make a good case that such practices are often the biggest barrier to participation in many emerging markets today (and some that emerged a long time ago). The Foreign Corrupt Practices Act in the US sets a tall standard for North American companies. Unfortunately, it is neither an international nor a commonly accepted standard. The Americans themselves have difficulty on this front. You may have noticed Secretary Brown’s recent complaint that US firms lost almost $50 billion in foreign contracts due to questionable practices.

The bottom line? In those countries with different ethics on how to do business, a lack of rules is rarely the problem. The rules already exist, but they unfortunately have the same authority as the lofty constitutional provisions of the former Soviet Union. So raising the bar in terms of multilateral disciplines may be a Pyrrhic victory for Canada.

My second observation is this. During the past quarter century, it has become increasingly difficult to achieve meaningful agreement at the multilateral level. Now I know this borders on heresy to the Gattologists, but I am trying to be objective and I suggest the trend is due to many factors:

•  The growing number of participants, driving the point of agreement towards a lower and lower common denominator

•  The inherent constraints of the MFN principle, with countries willing to grant access to their most favored trading partners only at the level they’re willing to grant their most feared competitors

•  The movement from issues involving the MFN principle to the much more sensitive issues of national treatment and non-tariff barriers

Put another way, with most of the easy trade issues resolved long ago, multilateral agreements are becoming as much a way to legitimize and codify existing national practices as they are a means to liberalize further trade and investment.

A third observation. It is undeniable that Canada’s influence in shaping the multilateral agenda has waned with each passing decade. Of course, we still have influence; and we must continue to exercise it as best we can to tame the raw power of the economic giants. But, in a very real way, multilateral negotiations have become a bilateral exercise between the two great customs unions known as the United States and the European Union; between the fifty states of America and the fifteen states in the European Union. Whether we like it or not, the objectives of other parties are now generally achieved when they coincide with the interests of the US, or Europe, or both. The conclusion of the Uruguay Round was proof positive. And, so far, the preliminary jockeying on telecom services reflects the same trend.

What this has meant and will continue to mean for Canadian negotiators is that they must concentrate their leverage on the markets and issues which are most vital to Canada, seeking to complement where we can those with similar objectives but more influence. We are not Americans. We do not have the ability to walk softly and carry a big stick. We are Canadians. So we have to keep skating and stickhandling.

In the telecom sector, for example, Bell Canada International does not need or want the elimination of all investment barriers in all countries. Frankly we have no real interest in uniform, global reciprocity. We will leave such aspirations for global hegemony to others. Some of the national markets of greatest interest to BCI are not even participating in the current multilateral negotiations.

The truth is, the current patchwork of national rules has not really thwarted our ambitions. Indeed, BCI has been able to gain access to the places we really want to be, like the US, the UK and New Zealand, Colombia and Brazil, China and, hopefully, India. If anything, our problem with the status quo is not a lack of rules. The problem we often have is with the manner in which the rules are administered or the proclivity of some to change the rules after the license fees are collected.

What we need, and what I suspect other Canadian telecom firms operating internationally need most of all, is neither new rules nor no rules, but vigorous support from our government when existing rules are being flouted.

Regarding investment and foreign ownership restrictions, we obviously have concerns about the manner in which the hard reciprocity rhetoric in Washington is translated into implementing legislation – one reason in particular why we are firmly opposed to unilateral concessions on this issue by Canada.

Another investment issue of concern to BCI does not relate to the terms of market entry at all. Rather, it is the treatment of capital and profits once invested or earned. Our ability to repatriate capital or avoid retroactive measures. Fair market exit rules. We could definitely use some multilateral disciplines in this area and I suspect the need goes well beyond the telecom sector. Oh, I know this is a perennial discussion item at the OECD and the WTO but frankly we would welcome some teeth to go with the talk.

Finally, we are not confident that the WTO has the capacity or expertise to focus on the core issue of telecom market access – the timing and methodology of interconnection rules – the detailed terms of entry to each national information highway. As all international trade negotiators know, the devil is in the details; and as all domestic telecom regulators know, the subject of interconnection in one country is devilishly difficult, let alone in one hundred.

How much will a new entrant have to pay for distribution? How will the underlying costs of a network be allocated? How are disputes to be settled? These are the type of domestic regulatory issues, which will determine the real value of multilateral rights and obligations for telecom services.

Now, I don’t want to leave the wrong impression about the WTO. We need the WTO; and we should do everything we can to support a dynamic multilateralism which advances our national interests, especially its capacity to resolve disputes. As well, we should always remember that there are risks, as well as opportunities in bilateralism or regionalism, particularly when based on the concept of hard reciprocity. But, if you put my four observations together, and combine them with the continuing domestic uncertainty, I believe one can make a solid case that Canada need be in no rush to create new international rules for basic telecom services. That we may in fact have little to gain, and possibly much to lose, if we race to the finish line in Geneva – a “give ten and take one” situation.

So let’s be careful out there. Let’s first put our own house in order. Let’s not give anything away. Let’s make sure that any concessions we make are exchanged for meaningful and relevant concessions of equivalent value. Let us not sign an agreement for agreement’s sake. Let us not be the Boy Scouts of international trade, in the sense of being altruistic or high minded. But let’s be Boy Scouts in the sense of living up to their motto: “Be prepared.”

Today, I have used the imagery of horse and cart to make my point about Canadian Telecom policy. So let me close by sticking to this equine theme. I believe that the corporate horses in the BCE stable – Bell Canada, Northern Telecom, BCI, Telesat, Bell Mobility and Bell Northern Research – are the thoroughbreds of Canadian telecommunications, with excellent bloodlines and a proven track record. And we have a bit of Northern Dancer in us, having sired a number of other champions outside the stable, like Newbridge, Hummingbird, Mitel and Corel.

I don’t think there is any doubt that companies like those I have mentioned are the best bet for Canada in the global telecom race. And we are confident in our ability to run with the best in the world, especially when some of the handicaps are removed. In the coming months, particularly if and as our government charts a new domestic policy, we hope we will have that chance.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Marcel Messier
Vice-President, Bell Emergis

Fédération de l’Informatique du Québec, Montreal, February 18, 1998
Published in The Corporate Report No. 24 (May 30, 1998)

Since my company, Jazz, is closely involved with the media industry, I’d like to begin with a story about some actors – hundreds of them. You saw them on the screen in the hit movie hit Titanic. But these actors never turned up on the movie set in Mexico. They never drew a paycheck. And they weren’t members of the Screen Actors’ Guild. These actors are computer-generated characters. They were added to the turbulent scenes that occur after the iceberg has struck. They are blended seamlessly with the real characters – who got very, very wet. These new-age actors are part of what makes movies like Titanic so successful. And so expensive. A significant part of the $200 million spent on this “most expensive movie ever” came after the filming was completed.

There is a great deal of money to be made in the multimedia industry. And many people are bringing forward creative ideas that they hope will reap great returns. But let me be up front with you. Too many of these ideas lack commercial viability. And the time for experimentation is over. We can no longer develop content for content’s sake. Spectacular but useless web-page graphics are also a thing of the past. The time has come for commercial applications. There’s money to be made on the net. And the message I have for you is this: only by developing the right business model can a company prosper in today’s competitive, fast-paced multimedia industry.

I’ll use Jazz as an example, because we’ve worked hard to develop and refine our business model. And while we’re a young company, we’re confident we’ve got it right. We’ve designed a commercial model that works. I’ll tell you about this business model by examining the four guiding principles we’ve followed. My goal is to clarify the principal strategies you must undertake to build a viable multimedia enterprise.

Understand your target market. First, you must identify and fully understand the needs of your target market. Ask yourself, is there a target market? How big is it? What is the nature of this market? And, if you’re working in the multimedia industry, your target market is probably a “community of interest,” that is, individuals or organizations grouped together to exchange information for personal, professional or commercial reasons. A community of interest is a self-created grouping defined by the volume of information it exchanges. It is an attractive business opportunity to the extent that the information it exchanges can be digitized. While a traditional market tends to behave as a single entity, communities of interest are dynamic and interactive. And to serve such a market, you must understand it, commit fully to it and immerse yourself in its culture. In short, to reach this kind of market, you must commit enormous time and human resources. But the results can be well worth the effort.

Early in our planning we saw a huge opportunity in the media production industry. It had a pressing and unserved need. Not many years ago, only a few companies were involved in animation, special effects or video production. The companies that did exist were concentrated in a few key locations. But during the last decade this market has exploded – both spatially and in dollar value. The post-production market in North America alone now generates some $17 billion annually.

This community of interest includes animators, computer graphics specialists, film studios, advertising agencies, media labs, screenwriters, in-house facilities, content suppliers and corporate clients. Typically, these individuals and companies work on collaborative projects, with tight deadlines and the need for multiple approvals. The logistics and the costs, in both time and money, of this cooperation can be staggering. Video and audio tapes have to be shipped across town, across the country or around the world. Faxes, phone calls and emails are exchanged in an often frantic effort to coordinate the creative activities.

We knew there had to be a better way, particularly since more and more content is now digitized. We also knew that as broadband capacity increased we could move volumes of data that once would have been nearly impossible to transmit. We saw our mission clearly: helping this community work together.

We got to know our target group. We found out what their needs were. They helped us design the product that would best suit them. Here’s what they told us:

•  They wanted intuitive interfaces. For the most part, these are creative people, not computer technicians.

•  They wanted the ability to work collaboratively on the same video or audio sequence from many places.

•  They wanted to be able to send enormous files, without the frustrating waits that internet users are all too familiar with.

•  They wanted a comprehensive address book as well as email and ecommerce options.

•  They wanted the highest level of security.

•  And they wanted clear and precise, project-oriented billing.

We listened. We responded. The product we began to design was Jazz.

Develop strategic partnerships. Identifying and targeting a community of interest is only the first step in creating a successful commercial model. The second step is finding strong strategic partners and creating a framework in which all parties can work together. You don’t want to do your own thing and then find a partner say, “Look at all I’ve done. It’s worth millions of dollars. Why don’t you pay me for it?” You have to get your partner from day one, so that you’re in it together.

Partnerships are critical in the multimedia business. After all, a multimedia solution requires a three-way convergence among telecommunications providers, computer specialists, and content developers. Jazz needed knowledgeable partners right from the start. Our business involved too many areas to risk trying this venture alone. In launching a high-tech business, there rarely are second chances. We didn’t want to put a product in the marketplace and find out it wasn’t what the industry wanted. So it was important that at least one of our partners came from the community of interest we were serving. We wanted to ensure a close connection between the service we offered and the needs of the community.

We were fortunate in the complementary knowledge that came together to form our company, Jazz Media Network. The three founding partners include Richard Cormier, who had been head of Buzz Image Group. Richard, who is now CEO of Jazz, has an unsurpassed knowledge of the media industry. Next there is Teleglobe Media Enterprises, with its strength in multimedia computing. And the third partner is Bell Canada, with its great expertise in telecommunications. We also wanted to build a structure that was open and responsive, and at the same time highly professional. We have 40 people in Jazz, which keeps bureaucracy to a minimum.

Let me add that in developing Jazz Media Network, we benefited from the expertise and philosophy of our parent organization: Emergis. Emergis was launched by Bell Canada in July 1997. Its goal is to bring together telecommunications companies and leading-edge software and computer-technology firms. Bell knew that achieving this goal required a new and more open structure. So it created a Silicon Valley style campus corporation, and called it Emergis.

Emergis now has a solid core of 450 people, and works with many small and medium-sized businesses. It has facilities in Montreal, Ottawa and Toronto. And it provides an excellent home base for Jazz. Our links with Bell make clear that we have the backing of a telecommunications giant. At the same time our open structure and size give us the freedom and flexibility of a small, highly entrepreneurial firm.

Build a superb product. Knowing your community of interest and getting the right partners are important. But the third step is also necessary for success, and that is: building a superb product. Customers live in a climate of financial austerity and fierce competition. There is no new money for the network. Each new project must be able to prove it can be self-financing, through gains in productivity. If you can help a customer achieve these goals, fine. If not, you’re wasting their time and yours. You have to strengthen their bottom line. If you do, your own will improve.

With Jazz, we’ve developed a product that is very user-friendly with an easy-to-use software interface. It also has tremendous strength. The service rests on a high-speed, secure broadband network. With transfer speeds of up to 270 megabits per second, Jazz allows individuals in different locations to share full-resolution, non-compressed digital video streams. The 270-mbps rate, by the way, is close to 10,000 times faster than the average 28.8-kbps modem in use today.

We’ve created this virtual private network through agreements with various telecommunications suppliers. But we remain responsible for its integrity. We’ve made this network secure by using a variety of protective measures. They include firewalls and authentication services. Unlike the internet, Jazz is a private network. No one logs onto this network unless the server positively identifies them and authenticates their digital signature.

But the network is only a foundation. We’ve also created a remarkable variety of digital tools that facilitate collaborative work. The Jazz mediaboard, for example, provides a shared workspace for video clips and images. Each participant has their own colored digital “pen” for interactive notations. The interfaces are intuitive. They’re powerful but easy to learn.

Jazz has other strengths. The address book offers subscribers access to an ever-expanding client base. It puts subscribers on the desktops of prospective partners. Jazz provides advanced email and ecommerce features. It’s cross-platform and cross-application. And we support this service with a help desk that is always open. Above all, we’ve created a product that will save subscribers time, money and effort. We’ve created a billing system that allows all participants to monitor costs. It enables design houses to bill costs back to their clients. We also offer different levels of service. Participants pay a very affordable subscription fee, and then purchase most services on a “pay-as-you-play” basis.

And we have no real competition. That’s another reason we’re confident of success. Our commercial model stands out because we saw a need, then developed the product. As Harold Geneen, former CEO of ITT, said: “You read a book from the beginning to the end. You run a business the opposite way. You start with the end, and then you do everything you must to reach it.”

Build your organization. Finally, the successful commercial model has one more component: an organization designed for growth. Here are the elements of ours. To begin with, we’re thinking big. In the case of Jazz, it was clear that it had to cover the whole of North America and Europe very quickly to be able to achieve critical mass. We couldn’t serve a studio in Los Angeles properly unless we had links to New York, Montreal and London. How many projects have died because, after an initial enthusiasm, the partners held back. In business, you don’t win by halves. You have to target a goal and take the necessary risks to achieve it.

Another element of our winning strategy is a determination to maintain a quick reaction time as well as great flexibility. Everyone understands the need for speed. The saying “Better late than never” has been revised to read: “Better never than late.” Movement along the information highway occurs at a dizzying pace. One technological generation follows rapidly on the heels of another.

Flexibility is equally important. We must always be able to alter our course to respond to the needs of the customer. A poorly targeted product will cost far more in time and money than a readjustment made while in progress. You have to be able to redo your business plan, adjust your implementation strategy and modify your technological options.

Still another element of our winning approach lies in finding the right balance in our team. The multimedia industry is an intellectual property industry. Intellectual property is created by people who are very different and often quite individualistic. So it’s important to choose and manage these individuals with great care. At Jazz we work hard to achieve a common vision, a good dynamic, and a balance between the strengths of the various creators, technical people and marketing specialists. You need to make sure revolutionaries and administrators can coexist on the same team.

Let me close by underscoring my message: the right business model is the key to success in the dynamic, competitive multimedia industry.

At Jazz we think we have that model. It emphasizes four principles:

•  Identify and understand the needs of your target market.

•  Find partners and create a framework for working together.

•  Build a superb product.

•  Develop a winning organization.

This model, I’d emphasize, is one that has relevance beyond Jazz. I see it working in the healthcare field and other areas.

As for Jazz, the value of our plans should be clearly evident in the months ahead. The Jazz Media Network moved to its commercial phase at the beginning of this year. So we have a lot of growing to do. And I’m sure we’ll face many challenges. But I’m confident we will meet those challenges and flourish. Jazz has embarked on an exciting venture, and I’m pleased to have been there at the start. Jazz provides a model of what can be achieved in the future.

Nicholas Negroponte says: “As one industry after another looks at itself in the mirror and asks about its future in a digital world, that future is driven almost one hundred percent by the ability of that company’s product or services to be rendered in digital form.” There will be many more Jazzes – targeting many more communities of interest, including publishing, education and healthcare.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Robert A. Ferchat
Chairman & CEO, Bell Mobility

The Empire Club, Toronto, October 19, 1995
Published in The Corporate Report No. 15 (December 31, 1995)

Last weekend, I was in a shop to pick up some roses for my wife. While I waited for the flowers to be wrapped, I browsed through a rack of posters along one wall. In addition to the usual dolphins and tigers, there was one called Kids’ Letters to God. The first of the eight or 10 letters on this poster really caught my eye. “Dear God,” the child wrote. “Who draws the lines on the map between countries?” The answer, of course, is both simple and profound: we do. We establish our barriers. We set the limits.

It reminded me of the first time I drove with my children into the US at Detroit, many years ago. My son, in particular, was nervous because I’d made a big deal about “crossing the border.” In the middle of the Ambassador Bridge, I announced that we’d just crossed the border into the US. My son, bewildered, said, “But Dad, there’s nothing there.” He was right, of course. The border that I was trying to impress him with is nothing but an artificial construct. It is a barrier, a limit we have placed on ourselves.

We are much taken up with borders in Canada today, trying to find new ways…or give new life to old ways…of dividing ourselves from one another. I’m thinking, initially, of Quebec as we approach the referendum within two weeks. But I’m thinking, too, of other major schisms in our society that seem to be widening and hardening as we leave this century that was, as we all know, supposed to belong to Canada. Race, sexual orientation, the haves against the have-nots, immigrants against those born here, First Peoples versus the sons and daughters of European settlers, us against them, me against you.

What a debilitating and enervating litany! Would it not be better if we listened to our children, whether they’re writing to God or talking with their parents, if we accepted the fact that it is we, ourselves, who put those barriers in place? And if we put them there, surely we can take them down and move on. That’s my message today. There are no limits – except those that are self-imposed.

We are the reason Sir Wilfrid Laurier’s glorious vision for Canada in the 20th century has not yet come true. We can also be the reason it will come to pass, if not in the next four years, then shortly after. The choice is in our hands.

As Pogo said, “We have met the enemy and he is us.”

Much of the debate over Quebec in recent weeks – and I suspect in the coming weeks as the outcome of the referendum gets increasingly problematic – has centered on what Quebec and Canada stand to lose should the Oui side prevail. Uncertainty would push the dollar down, interest rates up. Capital would seek more secure climates, job creation would dry up. Canada would be out of the G7. Interprovincial trade would be disrupted. And on and on.

As valid as those observations may be, they make me think of a bicycle rider on a path in the woods. Ahead he sees a big rock. There’s plenty of room on both sides to go around, but because he focuses only on the rock…and not the open space…he hits the rock. So let me focus on the open space for a few minutes, and talk about what we have to gain by moving beyond our artificial divisions.

This is a country that nine Canadians in 10 – including nine Quebecers in 10 – agree is the best in the world. A country that year after year ranks at the top of the United Nations’ human development index.

This is a country that has the world’s most strategic geography, with privileged access to the world’s richest market – the United States – plus frontage on both the Atlantic routes to Europe and the Pacific Rim.

This is a country that 30 years ago exported only one-seventh of its output. Today we export one-third and we are heading for 40% by the end of the century. Seven years ago, we signed the Free Trade Agreement. Since then, our merchandise exports to the US have doubled to $200 billion a year.

And Quebec has been a key contributor to all that, including the signing of the FTA. Firms based in Quebec are among the most aggressive in seeking international markets – in going beyond today’s artificial national borders and creating jobs and wealth here at home. Names like SNC-Lavalin, Bombardier, Alcan, DMR and, yes, BCE, including our company, Bell Mobility. Leaders in Canada’s outward-bound, forward-looking business climate.

These organizations – and hundreds and thousands of other Quebec businesses of all sizes – are focused on the open spaces, not on the rock. My sense, as an Ontarian who works in both Quebec and Ontario every week, is that Quebecers as individuals feel the same. Their concerns are first and foremost human concerns:

•  Will I have a job?

•  Will I have good health care and superior education for my children?

•  Will I have an opportunity to create a better life for myself, my family and my community?

An SOM poll last August for Le Soleil and The Gazette found that sovereignty is a priority for only 6% of Quebecers. Contrast that with 52% who are concerned about employment, and 20% about health services. On October 30, Quebecers will vote. Our hope must be that they will choose to continue to build the bridges, to break down the barriers that keep us from realizing all the opportunities within our reach.

For the next few minutes, I’d like to focus on just one of those opportunities, just one of the open spaces. The industry in which I’ve spent most of my career – telecommunications – is dedicated to eliminating barriers between people. And today, it represents an opportunity of truly astounding potential, particularly within the limitless world of wireless: cellular phones, pagers, mobile radio, air-to-ground, and soon mobile satellite.

It’s interesting to note that Canada’s world leadership in telecommunications is traceable not only back to Alexander Graham Bell. In the wireless world, Cape Race, Newfoundland was the western terminal of Marconi’s first transatlantic radio transmission. And Canadian-born engineer R. A. Fessenden was the first person to broadcast human speech and music over radio almost 90 years ago.

Given such a legacy, we see an unprecedented opportunity to build a world-leading wireless industry here in Canada, with all the benefits that come with it, from job and wealth creation to a better quality of life for all Canadians.

Canada today has more than two million cellular users, and half a million people who subscribe to paging services. You can also make and receive phone calls, or exchange data, aboard Air Canada flights.

Next month, we’ll be launching mobile satellite service that will extend coverage across North America, including up to 400 kilometers offshore. And in a few years, through the Iridium project – a constellation of 66 satellites – we’ll cover the world.

The industry worldwide is growing at dizzying rates – by 40% or so a year in Canada, 50% in the US, 60% in Western Europe and more in some less developed countries that see wireless as a way to get service to their citizens without the expense of traditional wireline networks. The OECD predicts that by the turn of the century half or more of all telephone calls will involve at least one mobile party.

Canada has an enviable position in the field of first-generation wireless communications. Bell Mobility, for example, together with its partners in Mobility Canada, has invested more than $2 billion in the last 10 years to create wireless networks second to none. We operate the longest uninterrupted cellular corridor in the world – from Windsor, Ontario to Sydney, Nova Scotia.

The Yankee Group, an American industry watchdog, says the Canadian cellular networks – developed by Mobility Canada and Cantel – are superior to those in the US in three critical dimensions:

•  The coverage was extended to a greater percentage of the population more quickly

•  The quality of service is better

•  The cost to the consumer is less – our customers pay on average 4% to 22% less than Americans

With a record like that, it’s no surprise that in our first 10 years of existence at Bell Mobility, more than 20 countries have come to us for help with their systems. In fact, we helped build the cellular system in Bogota, Colombia in just two years – an extraordinarily short time in this business.

The opportunity facing us today, apart from managing the 40% growth in the core wireless businesses, is managing the second generation of wireless, known as Personal Communications Services, or PCS, at 2 GHz. PCS at 2 GHz will allow us to combine voice, data and video in a device no larger than today’s cellular phone.

I can imagine myself, for instance, on a whale-watching trip off Vancouver Island, or on the Saguenay River. I’ve programmed my PCS handset to send all calls elsewhere – except the critical ones. One of those critical ones is a call about our new television ad. The agency sends me the video which I view on my handset miles from shore, make my comments and send them back with the push of a button. Another tough day at the office.

Or imagine health related uses. Wouldn’t it be better, for instance, to have my vital signs monitored and transmitted to the hospital even while I’m at the theater, or the mall, rather than stuck in a hospital room. Freedom for me…and less cost to the healthcare system. Wouldn’t I want paramedics to have wireless access to my history while we’re riding in an ambulance?

Think of how we could revamp the health industry, reduce the enormous costs of institutionalized care, and still have at least the same level of care, if not better.

The potential uses for PCS are limitless, in every field. Wouldn’t it be better to have my PCS network tell me where traffic jams are, in real-time, and plot alternative routes during rush hour? Wouldn’t it be better to be able to monitor my home security system from the road? Or check on my teenage grandchildren – by wireless video? That’s part of the opportunity of PCS, the extraordinary range of life-enhancing applications that will be coming to market in the next decade.

The other part is the chance to create a Canadian PCS industry so that the world looks to us for the products and services that will make their lives better. As Germans are known for excellent cars, as the Japanese for quality consumer electronics, why not Canada for PCS?

The benefits are real and speak to our fundamental concerns as human beings. For example, should Mobility Canada receive a license for enough spectrum to fully develop PCS, we would invest $2.6 billion over the next 10 years to build the network. The results of our investment alone – not counting the spending by up to five other companies who will compete in the PCS world – are significant: 105,000 skilled jobs, an expansion of 0.3% in the economy and a reduction in the public debt of $6.9 billion.

Our vision of PCS and Canada’s role is clear: apply the talents of Canadians to develop applications to improve our quality of life at home and to serve the world with our expertise. No single organization will do all that, and that is one reason we welcome the increased competition that PCS will bring, with the entry of at least half a dozen new players all seeking to develop applications that serve Canadians and the world.

But, as we’ve seen in the computer business, the dominant applications and their designers won’t emerge exclusively from Bell Mobility or Cantel, or AT&T, or Sprint or any other major player. They’ll come from small and medium-sized businesses that may not even exist yet, or if they do are unable to focus on the killer app, finding it hard to get capital, enter markets, or manage their growth. And if small and medium-sized enterprises are the source of PCS applications, they are also the foundation of the industry.

It’s in that context that the members of Mobility Canada have proposed a $135 million PCS Advancement Fund, in addition to our spending, to build the network and conduct our own R&D. Some $35 million of the fund will finance pre-competitive research by public research laboratories across the country. The rest, $100 million, will be earmarked for the entrepreneurs to get them started on application development. Our commitment goes beyond dollars to include offering entry into national and international markets, and management expertise to enable them to handle the tremendous growth we predict for them.

There are no limits to what can be accomplished with such a model rooted in a country such as ours. Our multiculturalism, our openness to Asia and Europe, our geographic and demographic diversity, our economic vitality, the level and quality of our education…all these become even more valuable assets in a wireless world.

Think of what our expertise could do to meet the needs of others:

•  The Russians who struggle to cope with long distances and a harsh climate

•  The Irish with their tiny domestic market

•  Singapore with its insistence on technological excellence

•  Chile, faced with building a network from scratch in a challenging environment

There truly are no limits to what is possible if we move beyond the self-imposed barriers, the rock in the middle of the path, and focus on the vision, on the possible, on the open spaces.

As I said earlier, the arrival of PCS in Canada coincides with the arrival of a much more competitive environment. Industry Canada is now making decisions to allocate six blocks of spectrum among more than 15 applicants. Many of these applicants have strategic shareholders who are giant multinationals. Nothing wrong with that, as long as our own Canadian-based multinationals have an equitable shot to compete.

We want Canada to be more than just another market. We want it to be the world capital of the PCS industry. We believe the work we’ve done to date, plus our plans for the future can give Canada an indisputable strategic lead in this field and provide our country with yet one more means to be a powerful force in the global economy.

The only thing that might get in the way are the limits we place on ourselves – the lines we draw between provinces, the schisms we invoke between groups of people, the competitive hobbles we might put on our own businesses in an increasingly competitive world.

We have many choices to make in the next few days and months, choices that will affect us for generations. My choice is for a unified country that looks outward and ahead, unfettered by the attitudes and habits of the past. My choice is for a community of interests that, rather than focusing on our differences, speaks to the fundamental needs of people: economic well-being, security in all its dimensions and a strong sense of self-worth.

My choice is for the future. There truly are no limits.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Francesco Bellini
President and CEO, BioChem Pharma

Annual meeting of shareholders, Montreal, June 5, 1996
Published in The Corporate Report No. 19 (September 30, 1996)

Nineteen ninety-six is an important year for BioChem because it marks our tenth year of operations. During the past 10 years, we have made truly remarkable progress. I would like to spend the next few minutes reviewing some of the company’s accomplishments and looking forward to the future.

We should all be very proud of BioChem today. Our beginnings are humble. We became a public company in 1986 with a share offering of $13 million. At that time, we had five employees. Today:

•  We are truly an international company, with more than 1,000 employees. We have offices or manufacturing facilities in Canada, the US, Italy, the UK, France, Germany, Switzerland, Argentina, Japan and Singapore. We also sell our products through a complementary worldwide distributor network.

•  We have three divisions: vaccines, diagnostics and therapeutics, dedicated to the discovery, development, production and commercialization of innovative products for the prevention, detection and treatment of human diseases.

•  In 1995, we achieved a major milestone with the approval in the United States and Canada of our first therapeutic discovery, 3TC, an important new treatment for HIV infection and AIDS. And we have a promising research pipeline.

•  With a market capitalization of over $3 billion, we are now the sixth largest biopharmaceutical company, by market capitalization, in North America.

•  Last year, we were the third most actively traded stock by volume and by value on the Montreal Exchange. And this trading is only about one-tenth of our activity on NASDAQ, the US exchange on which we are listed.

•  In February, we completed the largest biotechnology follow-on equity offering in history, raising gross proceeds of $251.8 million.

•  And finally, we have now achieved profitability, with net profits in each of the last two quarters.

You can see that we have come a long way. In fact, if you had invested $10,000 in BioChem in 1986, your holding would be worth more than $500,000 today.

And we have accomplished everything with very little of the shareholders’ money. Unlike many startup companies, which are in a continuous cycle of raising money and then spending it on operations, we have been able to finance most of BioChem’s growth using the revenues the business has generated. At the end of 1995, we had spent only $19 million of the money raised to create a company worth more than $3 billion today.

I believe that our current financial and competitive situation is impressive. But there is another – much more important reason – why we should be proud. After less than 10 years of operations, our discoveries are making a real difference to people with unmet medical needs.

Our first therapeutic discovery, 3TC for the treatment of HIV infection and AIDS, was approved for sale in the US and Canada near the end of 1995. It has since been approved in Switzerland, Australia and Brazil. In April, 3TC was recommended for approval in Europe. We anticipate receiving European marketing approval in the very near future.¹ At the time of its approval, more than 15,000 people in Europe were taking 3TC as part of a compassionate use program. We expect approval of 3TC in most markets by the end of this year.

In Canada, 3TC is marketed by BioChem in partnership with Glaxo Wellcome. Elsewhere, 3TC is marketed by Glaxo Wellcome.

Based on IMS retail sales data, 3TC total weekly prescriptions in the United States now exceed sales of AZT. This is true even though sales of AZT, the world’s largest selling AIDS drug, have grown 50% in the last year.

Many experts in the field believe that, increasingly, treatment of persons living with HIV is likely to begin earlier in the infection and will include combinations of therapies. Because 3TC is safe and effective, and works well in combination with other drugs, we believe that it is becoming the cornerstone of HIV combination therapy. Today, other company’s clinical trials involve more than 20,000 people using 3TC in combination with other anti-HIV products.

I know that I speak on behalf of all of the employees of BioChem when I say that we are very proud to have discovered this important new medicine, which is making a difference to people living with HIV infection and AIDS.

And we were all honored last month when the 3TC research team was awarded the Prix Galien Canada, Canada’s most prestigious award for pharmaceutical research. The team’s work, and its result, are a reflection of the dedication and culture found at BioChem. I would like to take this opportunity to again congratulate the 3TC team on behalf of the Board and the shareholders.

Now let us look to the future. For any company to succeed, it must have a pipeline of promising products in R&D. We think we have a very impressive pipeline for a company of our size. We expect our next significant marketed drug to be lamivudine, a once-daily oral treatment for chronic hepatitis B infection. Lamivudine is currently in Phase III clinical trials around the world. It is expected that the Phase III trials will be completed in the Far East this year and that Glaxo Wellcome, our partner for the development and commercialization of lamivudine, will file the first marketing applications next year.

The World Health Organization lists hepatitis B as the ninth leading cause of death worldwide. According to this organization, there were approximately 350 million people chronically infected with the hepatitis B virus in 1994. The majority are located in Asia and the Far East with approximately 7 million in North America, Europe and Japan. Chronic hepatitis B is a leading cause of liver damage, with progression to cirrhosis or liver cancer in 20 to 30% of cases, resulting in an estimated 2 million deaths per year. The only drug currently approved for the treatment of chronic hepatitis B is effective in a relatively small group of patients, and its side-effects are significant.

We also have a number of other interesting products in our therapeutics and vaccines research and development pipelines.

In therapeutics, our research is concentrated in four areas. In addition to our antivirals program, which resulted in the discovery of 3TC and lamivudine, we also have programs in cancer, pain control and thrombosis.

In the pain area, we are working with our partner Astra of Sweden on pre-clinical development of BCH-2687, a new generation analgesic to treat inflammatory pain. A pre-clinical compound from the cancer program is BCH-4556, for the treatment of prostate, renal and other cancers. Clinical trials are expected to begin on both compounds in the second half of the year.

In the thrombosis area, we announced a collaboration in July 1995 with US-based Warner-Lambert, to discover and develop orally active anti-thrombotics. Promising compounds have already been identified.

We also have longer-term antiviral research programs aimed at the discovery of new treatments for hepatitis C, and for HIV infection and its complications.

To optimize the resources dedicated to the antiviral and cancer areas, we have signed a number of collaborative research agreements with other companies and research institutions since last year’s annual general meeting. For example, in the antivirals area, we have entered into a collaborative agreement with Oncogene Science, a US biotech company, for the discovery and development of drugs for hepatitis C and novel approaches for HIV. In the cancer area, we have formed a collaborative relationship with the Beth Israel Hospital at Harvard University. This leading-edge collaboration is focused on discovering therapeutics that will interfere with the blood supply that nourishes tumor life and growth. The total resources devoted to this collaboration account for about 10% of BioChem’s therapeutic R&D budget.

We have also in-licensed several compounds in various stages of development to add to our therapeutic product offerings in Canada.

Our vaccine division has also made considerable progress. Last year, we announced the construction of a new $30-million, 118,000-square-foot state-of-the-art vaccines production and administration facility in Ste. Foy, near Quebec City. The construction is ongoing and progressing as planned. Commercial production is scheduled to begin in 1998.

Since we announced our plans, we have made significant advances in the development of new vaccines. Our most advanced new vaccine is an influenza vaccine under development using cell culture technology. This new process is expected to produce a more effective vaccine. Costs would be reduced, and production times shortened from about six months to two. This would greatly increase our ability to respond to demand. The new influenza vaccine is expected to enter clinical trials this year.

Through our relationship with the Vaccines Research Unit of the Laval University Hospital Center in Quebec City, where we support a group of 17 scientists, we have significantly expanded our vaccines research program. We now have two recombinant protein vaccine candidates in pre-clinical development. The first targets Neisseria meningitidis bacteria, a common cause of bacterial meningitis. The second protects against Streptococcus pneumoniae bacteria, the most important cause of bacterial pneumonia and pediatric ear infections. It is anticipated that clinical trials for both of these vaccine candidates will begin next year.

Existing vaccines against these bacteria have limited effectiveness in children. In both children and adults, existing vaccines only protect against certain strains of the bacteria. By contrast, our vaccine candidates appear from preliminary tests to have the potential to protect against all known strains of the bacteria. If these vaccine candidates work in humans as they do in animals, we believe they will be true breakthroughs in the prevention of bacterial meningitis, bacterial pneumonia and pediatric ear infections.

We will now continue with our diagnostics business which was profitable last year, with an after-tax profit of $5 million on total revenues of $158.5 million, compared to a loss of $10 million at the time of the Serono Diagnostics’ acquisition in June 1994.

In 1995, we introduced in the US and Europe new hematology analyzers. The new analyzers are faster and more highly automated than their predecessor.

The diagnostics division also entered a new market in 1995, when it began the commercialization of Allertech, a fully-automated analyzer for allergy testing. With this new product, only a blood test is required to detect allergies. Complicated and uncomfortable skin testing is no longer needed.

During 1996, we expect to introduce a new, low-maintenance hematology analyzer, called Spirit, for low-to-medium volume laboratories. We also expect to launch the Personal Lab, a smaller version of the Labotech immunology analyzer, for use by small volume labs.

As the diagnostics division increasingly focuses on higher margin products such as the Labotech and our new product offerings, we expect to see increased profitability there.

As you can see, BioChem is well positioned to move into the future. Our pipeline is excellent, and our financial situation is very solid. Both of these put us in a strong position for future growth and profitability.

We will continue to look for opportunities, both internal and external, to expand our product pipeline and our international marketing presence. In this way, we can grow the company and continue to contribute to the advancement of healthcare.

BioChem has been profitable for the last two quarters. We expect this trend to continue.

Although I have said this before, it is worth repeating. We would not be where we are today without the efforts of our dedicated employees. We are fortunate to have some of the best young scientific minds in the business focused on discovering and developing drugs, vaccines and diagnostics for unmet medical needs. We also have an experienced marketing team and other support staff who have helped to make our business what it is today. All of our employees are proud to be part of a team contributing to advancements in healthcare.

Recently, we have added further depth to our management team with two appointments. First, we recently appointed Dr. Claude Vezeau as president of our vaccines division. Claude brings to BioChem almost 15 years of experience in senior positions in the pharmaceutical industry. Second, Charles Tessier has been appointed as the company’s vice-president, legal affairs and corporate secretary. Charles held a similar position with a major international information technology services firm for 8 years prior to his appointment at BioChem.

As we complete our ten years of operations, we should all be very proud. BioChem has achieved an outstanding record of innovation. We are changing the way HIV infection and AIDS are treated, we are innovating in the treatment of hepatitis B and we are developing innovative new vaccines. In these ways, we are making important contributions to the advancement of healthcare around the world.

We anticipate that 1996 will be our first profitable year, overall. We expect the growth of 3TC to continue throughout 1996 and beyond. Eventually, lamivudine will be commercialized for the treatment of chronic hepatitis B infection. Our vaccines group will pursue the development and commercialization of its new vaccines. The diagnostics division will also continue to be a steady contributor.

We are proud to be where we are today, but the best is yet to come.

1  3TC was approved in the 15 member states of the European Union on August 8, 1996, under the name Epivir.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Laurent Beaudoin
Chairman & CEO, Bombardier Inc.

The Board of Trade of Metropolitan Montreal, October 3, 1995
Published in The Corporate Report No. 14 (October 19, 1995)

I am going to take advantage of this platform to build upon my speech in Quebec City on September 21st and to set the record straight about what I said and meant.

A snippet of my remarks has been quoted extensively out of context and interpreted in a malicious manner. I was made out to have said that I was choking in a Quebec too small for me. What I said in fact was that Quebecers have achieved, and can continue to achieve, great things in a Quebec which is a part of Canada.

Some people were displeased that I expressed publicly my support for the NO campaign. It is as if only politicians, artists, intellectuals and union leaders have a right to express an opinion on the separation of Quebec from Canada. Whenever business leaders exercise their freedom of expression to oppose the separatist option, they are subject to personal attack, unkind words and even insult.

Some YES supporters who scarcely a moment ago used the Bombardier name to illustrate what Quebec is capable of achieving now want to strip us of any credit and deny our unquestionable success. These people want to muzzle the business community. They refuse to debate the substance of the arguments we are putting forward because they know they will lose on our ground. They would like the population to believe that our stand against Quebec’s separation is motivated solely by our personal interest.

But business enterprises are the Quebec economy. We provide jobs and we know what we are talking about in these matters. The same cannot be said for those who, in the past few days, have accused Bombardier of having benefited unduly from government subsidies and for having lived in tow of government. Let’s consider the facts.

During the past 10 years, our company has invested $1.626 billion in R&D and in new product development in our three operating sectors in Quebec. The federal and provincial governments have contributed $269 million to these investments, of which $211 million is fully repayable by our company. The other $58 million was in the form of R&D tax credits, resulting from the $350 million or so that we have invested on this score.

Moreover, during this same 10-year period, Bombardier has made capital expenditures of $632 million in buildings, tooling and other equipment. The contributions received in relation to these capital expenditures were $41 million, of which $28 million came from the federal level and $13 million from the provincial. These amounts came from programs offered to all enterprises making similar investments.

If you add up our Quebec investments, the total is $2.258 billion of which barely $99 million has come by way of non-repayable support from the two government levels. How have we applied this money? To create wealth for Quebecers and Canadians. Through job creation, certainly, since the number of employees we have in Quebec has risen from 8,600 in January 1986 to 12,700 today. In 1994, we paid $540 million in wages and salaries to our employees.

Please understand that I am speaking out against those who attack Bombardier and its success – a success due to thousands of Quebecers, most of whom are Francophones – because I dare state my opinion on the consequences of Quebec’s separation from Canada.

It would be much easier for me, for my family and probably for Bombardier if I said nothing and just stayed home. But I don’t believe that I have the right to remain silent. As I see it, business leaders not only have the right, but they have a responsibility to make their voices heard on issues of such importance. Let there be no doubt that the economy of Quebec, the future of our enterprises and the jobs of our workers are on the line in the referendum.

I cannot remain silent because, in the event that Quebec were to separate, our employees and all of those footing the bill could blame me for not having shared my views and apprehensions with them. It may be convenient to maintain a sort of political neutrality during the referendum campaign as if we were in a normal election. But in this campaign, Canada itself is on the line, as are political and economic structures that we have contributed towards building and a standard of living we have worked hard to achieve.

In addition to expressing my views publicly, I have done so within our company. I did it to ensure that our managers think about the future of Bombardier and of the risks that separation would bring. I have encouraged those who believe they will have a more secure future if Quebec remains as a part of Canada to support the NO campaign.

As you know, companies are not allowed to make financial contributions to either side under Quebec’s electoral laws. But our managers have a right to do so as individuals, like any other Quebec residents. We have urged them to give their financial support to the NO campaign if they share our view.

As for our Quebec workforce as a whole, we wanted them to be informed of our position by making copies of my Quebec City speech available to them since the only information they had about it were the very short excerpts contained in media reports.

There hasn’t been any arm-twisting and there won’t be any. No one has been denied their job at Bombardier for having identified with the YES campaign and no one will in the future. As was made clear during Mr. Johnson’s visit to our La Pocatière plant, freedom of expression is alive and well at Bombardier.

But management will not be prevented from making the case that separation is a strategic issue and that our managers have a right to be made aware of this fact, as with any other strategic issue. Indeed, separation is a risk for our company as well as for a number of other Quebec-based companies. We base this conclusion on the very concrete experience of Bombardier. Therefore, I’m going to support my arguments by referring to some of the milestones in the development of our company over the past 30 years.

From its very beginnings, the company founded by J. Armand Bombardier exported its products. Already in the 1960s, a large proportion of the snowmobiles produced in Valcourt were sold in the United States.

By the way, let me reassure those who like to invoke the memory of J. Armand Bombardier. I knew Mr. Bombardier well, certainly much better than those who would speak in his name, and I am convinced that he would be very proud of the company which bears his name.

In 1974, our company diversified into mass transit equipment. Contrary to what has been stated, our first contract, which was for the Montreal subway, valued at $118 million at the time, was obtained after a tough battle through a bid process, and only because we were the lowest bidder that met all the conditions of the tender. This contract was extremely important, since it enabled Bombardier to enter a new industry sector. We had to wait until 1988 for a second order from Quebec for 24 suburban train cars valued at $24 million.

The third and most recent contract was obtained in 1992 for the commuter train for the Montreal/Deux-Montagnes line, which will soon be inaugurated. This is a more crucial order, not because of the amount – some $100 million – but because it gave us the opportunity to develop commuter cars at the leading edge of technology, entirely with Quebec engineers and workers. This new technology will support the export of commuter cars produced largely in Quebec, where they will create or maintain many jobs. This order was obtained following tough negotiations with the Quebec Transport Ministry in a very open process.

Between 1974 and 1995, out of revenues totaling some $3.6 billion generated by our Quebec plants for mass transit equipment, only about $250 million were from Quebec contracts. This shows clearly that export markets were essential to Bombardier’s development in this industry sector.

Our company has become the largest North American manufacturer of mass transit equipment over the past 22 years. This has been a Quebec success story and we have been successful largely through the commitment of our employees. I want to make this point publicly. Nevertheless, and I repeat, without the support of the federal government’s export financing programs, we would not have developed as we have.

Take, for example, the New York subway contract, which we won in 1982 against much more powerful Japanese and French competitors. At the time, this was the largest export contract ever awarded to a Canadian company. Although we were the lowest bidder, we would never have obtained this $1-billion order without financing from the Export Development Corporation. We would never have been able to create and sustain 1,500 jobs in St-Bruno and La Pocatière. However, in this sector as in the others, Bombardier has not received favorable government treatment. We simply took advantage of programs offered to Canadian industry as a whole, particularly export financing programs similar to those offered to our competitors in their own countries.

I would like to go back to the aerospace sector because, here also, I was misunderstood. Let’s start with Canadair. Once again, I must correct those who claim there was no bidding process when Canadair was privatized and that the sale of the company was a gift from the federal government to Bombardier. This is all false.

The Canadair privatization was conducted through an international bidding process. It was brought to the attention of 150 potential buyers around the world. There were 25 expressions of interest. Six offers were submitted, leading to the selection of two proposals, our own and that of Canadian Aerospace Technologies. The latter company was a consortium formed by a member of the Dornier family, well known for its involvement in the German aerospace industry, and Montreal financier Howard Webster.

The Canadian government decided that Bombardier offered the better financial terms as well as guarantees for the management and development of Canadair. It is universally recognized that this was an excellent choice. Since the acquisition in 1986, Quebec has built an international reputation in the world of aerospace.

We have achieved great things at Canadair in less than 10 years. We have launched four programs representing an investment of more than $1 billion for new aircraft development. We have contributed to the creation of Master’s programs in aerospace in our universities. We have provided Quebec Francophones with an opportunity to demonstrate their capabilities as managers and executives in a sector where we had very little presence. Canadair’s workforce has doubled, growing from 4,000 to 8,000 highly qualified employees, without counting the thousands of jobs created by our Quebec subcontractors and suppliers.

Because of the technological and economic spin-offs, aerospace is seen by the world’s great powers as one of the most attractive industries. It’s a sector long dominated by the Americans. The European industry was unable to achieve significant penetration, particularly in nonmilitary applications, until the creation of the Airbus consortium. Along with government assistance totaling several billion dollars, this consortium brought together the resources of Aérospatiale of France, British Aerospace, DASA, a Daimler-Benz subsidiary of Germany, and Casa of Spain.

The Europeans also felt the need to join forces in regional aviation. They created ATR, which brings together Aérospatiale of France and Alénia of Italy. Just recently, British Aerospace joined the consortium because it was unable to go it alone in this market. In the Netherlands, the government sold half of its interest in Fokker to Daimler-Benz because it no longer wanted to absorb the huge losses and development costs. Yet, the Netherlands is a country of 15 million people with a GNP of US $330 billion. That’s 2.5 times the economy of Quebec and two-thirds that of Canada. And we have one more competitor, Saab-Scania of Sweden, which is mainly involved in the manufacture of military aircraft. Its position in the civilian sector is marginal.

All I said in Quebec City, and I repeat it today, is that it’s already difficult for a nation the size of Canada, supported by the provinces, to provide the backing required by an export industry such as aerospace. It would be even more difficult for a new Quebec state, which inevitably would be smaller in relation to Canada as it stands today.

Let me be more precise about the kind of support I mean. On the one hand, there are risk-sharing programs between governments and private industry related to new product development. As I noted earlier, in the past few years our company has launched four ambitious development projects at Canadair requiring risk investment totaling nearly $1 billion. The governments of Canada and Quebec have accepted to share up to $150 million of this risk, including the sums earmarked for the Regional Jet. All of the balance has been financed through Bombardier’s resources. The advances received from governments under shared-risk programs are fully repayable, including capital and interest, when the programs are deemed successful.

The second type of backing which is absolutely essential for the export of major capital equipment, whether commercial aircraft or subway cars, is the financing provided to those who buy our products. Three factors weigh in their purchase decision: price, product quality and financing. For the first two factors we manage very well, thanks to the capabilities of our employees. For the third factor, and this applies as much to a giant such as Boeing as it does to us, not a sale is made without matching financing terms to those offered by competitors.

In a world of intense competition, where things happen very quickly, I hold the view that we don’t have the means, not for a single moment, to deny ourselves tools such as the EDC, which Canada has placed at our disposal. Not when these tools have been instrumental in our success and in that of other Quebec enterprises similar to our own. That’s what I meant when I said that Canada was at the lower end of the scale of countries with the size to support industries such as transportation equipment and, even more tellingly, the aerospace industry.

Up to now, ladies and gentlemen, I have presented a few stark economic realities, and I have attempted to do so as evenhandedly as possible. Against such realities, they have come up with the counter-argument that small countries, Switzerland in particular, are home to several large-scale multinationals. But Switzerland, a multilingual federation located in the heart of Europe, offers extremely attractive conditions for the head offices of multinational companies:

•  A very favorable tax environment for enterprises and their employees

•  A historically very low cost of capital achieved through an interest rate structure that is always among the lowest in the world

•  One of the most stable and reliable currencies in the world

In my opinion, and in the virtually unanimous view of every expert on the subject, these are not the conditions that will characterize Quebec the morning after separation.

I now come to the third major field of activity for Bombardier: snowmobiles and watercraft. This is a very different case. Firstly, this is a business we started from scratch. Founded in Valcourt, it took root and developed with a motivated and competent local workforce. Today it is prospering, employing 2,700 workers on a permanent basis. The success of this business bears testimony to the most energetic and positive aspects of Quebec entrepreneurship.

Companies operating in this sector don’t need specific government programs to support their business. But here as well, the separation of Quebec could have nasty consequences for our company and for the industry. Our main market is the United States. Under the Auto Pact – we export our snowmobiles – and under NAFTA our watercraft, to the US market, both duty-free. This is an essential condition for our success in the US.

A separate Quebec, which is not party to the Auto Pact or NAFTA, would have to negotiate its membership with Canada and the United States. Our American competitors, Polaris and Arctic Cat, would be delighted to stir up their Senators and Congressional representatives to modify the agreement for their benefit and for that of their workers. A protectionist Congress could lend a sympathetic ear to their arguments and establish entry conditions that could make us much less competitive in this market. There are therefore real risks for us and for the jobs in Valcourt which depend to a large extent on the American market.

Of course, the conviction of Bombardier management that Quebec’s separation is a risk that could prompt lower operating rates for enterprises, compromise their future and put thousands of jobs on the line is based on our experience rather than on theory.

I know that a great number of Quebecers are aware that the prospects I have evoked are realistic. I also know that many continue to believe that we would be spared most of these problems through the new partnership that the leaders of the YES campaign will want to negotiate with the rest of Canada. They would like us to believe that it would be simple and easy to negotiate the terms of such a partnership when Quebec would be independent. Make no mistake about it: the partnership proposed by the leaders of the YES campaign is a clever trick that suits their purpose, but is in fact a proposition without any political or economic foundation.

How are we to believe that Canada would grant the privilege of Canadian citizenship to seven million foreign residents, which Quebecers would become, representing one-third of its own population? How are we to believe that a separate Quebec could continue to use the Canadian dollar when recent experience in Czechoslovakia shows that even under the most favorable conditions, the common currency lasted less than six weeks? How are we to believe that after having broken up Canada, while claiming that two levels of government are one too many, we could force a third level of government on Canada in which Quebec, a foreign country, would have a virtual veto on decisions affecting Canadians? How are we to believe that our American and Mexican partners in NAFTA would accept special arrangements between Quebec and Canada which would not apply to them? If Quebec wanted to join NAFTA, it would have to meet all of the rules governing such agreements.

The proposed partnership can only lead to disappointment for those who really believe in it. The risk is that it would be nothing more than another step, the point of no return, on the road to a unilateral declaration of independence.

I did not want to present all of the arguments against separation in my speech. Instead I chose to present concrete examples based on some facets of our company’s experience that are less understood. I could have chosen to speak about the disastrous consequences of this option on Bombardier and on many other Quebec enterprises in terms of taxation, debt, monetary stability, interest rates and other aspects of our economy in a separate Quebec.

I will conclude by restating my deep conviction that business leaders have a duty and a responsibility to speak up and to bring out those factors, drawn from their experience, which lead them to reject separation. We owe it to those who would be harmed by separation in their jobs, in their standard of living, in their personal growth and that of their family. They are mainly people whose jobs are tentative: young workers, managers and professionals who have yet to build their future in Quebec.

My position in the referendum debate has never been that Quebecers are not capable of great achievements since Bombardier provides a good illustration of what Quebecers can do within the Canadian federation.

I observe with pride how in our company, Quebec Francophones are asserting themselves in the game of international competition in Wichita, Kansas; in Belfast, Northern Ireland; in Toronto, Kingston and Thunder Bay, Ontario; in Bruges, Belgium, and in Mexico, as much as they do here in Quebec.

Why not continue to assert ourselves through our capabilities? Quebec’s separation would not solve any of the urgent problems of our society but it would add new ones. It would deprive us of political and economic arrangements which, despite their imperfections, have contributed strongly to the development of enterprises and of Quebec society.

I invite Quebecers of all political persuasions to build together on these formidable achievements. We have proven that we are capable of great things. We must stop wasting energy on a separation plan which divides us and pits us one against the other.

I address you on these matters as a Quebecer. Proud of my roots, I feel at home in this great land we have built together and which is our own – our country, Canada.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Sir Peter Bonfield
Chairman & CEO, British Telecom

Conference on Converging Technologies, London, September 8, 1998
Published in The Corporate Report No. 26 (January 31, 1999)

I thought that to start off, it would be worth asking ourselves what Europe’s new digital economy really means. After all, people like me spend a lot of time talking about globalization. So does it actually make any sense for us to be talking about Europe’s new digital economy at all? Why not the world’s new digital economy? Why drill down just on Europe? Well, I think there is a story to tell here. But we have to be clear what we’re talking about.

Sometimes in business we can be a bit too territorial. Quite a few recent deals have been talked about very much in terms of the companies origins – for example the BP-Amoco and Daimler Benz-Chrysler partnerships were characterized as Europe meets US deals. But of course we all know that the firms involved were already international operators. And to take another example – entirely at random, of course – BT’s proposed partnership with AT&T is focused on the communications needs of major multinationals, companies who are part of a global supply chain. Their customers get the same products or services whether they’re in New York, New Delhi, New Zealand or Newcastle. So why should global multinationals get or expect any less from their suppliers? They want those suppliers to be citizens of the world as well, offering end-to-end services to consistent standards worldwide.

So is that it, then? Are we saying there’s no such thing as Europe’s new digital economy? Should we call off the conference? Well, of course not. Stay for lunch at least. Because real places do still matter. The more footloose major companies and capital become, the more towns, cities, countries and regions need to compete to attract them all, trying to be the best launchpad into cyberspace. And Europe will stand or fall by how well it can compete as a location in the global economy.

It will be judged on its attractiveness as a market, on the skills of its workforce, on its regulatory and political environment, its supplier companies, its ability to generate new and innovative businesses and its general economic performance. And underpinning much of all of that is the quality of its physical infrastructure, including, of course, its telecoms.

So, how’s it doing so far? Well, if this were an end-of-term report, my general comment would be: improving, but could do better. After all, Western Europe now has more than 370 million consumers and a larger slice of the trade cake than either the United States or Japan. And if you count in Switzerland and Norway, total GDP comes to about US$8.5 trillion, almost exactly the same as the US and Canada put together. Yet there are differences between Europe and North America – particularly in the areas of communications and digital technologies. I guess the conventional wisdom is that North America leads Europe. And in many areas that’s still true.

Look, for example, at internet access. The forecasters say it will be mid-1999 before annual expenditure on the internet in Western Europe reaches the level achieved in the US in 1996. Yet by 2001 the two markets are expected to be neck-and-neck, as many of the small and medium-sized enterprises in Europe – which far outnumber those in the US – go online. What about mobility? Here Europe has already overtaken North America, in terms of the total number of mobile phone users – and the gap is predicted to widen in Europe’s favor. In Finland, to give just one example, more than half the population now use mobiles. And there’s also the small matter of US$200 billion – which is the expected size of the European telecoms market by 2000/2001. So we in BT regard Europe, just as much as the US, as the place where the action is in the digital economy. All of which means that if you’re interested in growth opportunities – and just for the record, I certainly am – you can’t afford to ignore Europe. So having established that we do have a reason for being here today, I’d like to ask: what are the drivers that will enable Europe to build on its successes?

Well, let me pick out three trends I’ve spotted over the last few years which I think are healthy ones. Firstly, there’s been the European emphasis on the whole idea of the information society – where there is a stress on what technology can do for people at home and at work – rather than simply on the technology itself. Secondly, the tradition of cooperation because, by definition, whenever Europe achieves anything it achieves it by working across national borders. And third, getting the market to work properly – making sure Europe has a deeply rooted climate of competition.

In 1993–4, I sat on a group convened by the European Commissioner Martin Bangemann. Even then, we took as our focus the information society, rather than the information superhighway. Making technology work for us, rather than the other way round. It was always about the people rather than the plumbing. And I think it is this kind of attitude that is going to stand Europe in good stead as the digital world develops. Look, for example, at the use of IT and telecoms in health services for remote diagnostics, something which the EU has made a major research priority.

We’re starting to see videoconferencing between hospitals, smart cards that record heart patterns, specialist care online. Soon many routine consultations could well take place via TV or PC. The economic impacts are potentially very significant – both in terms of the growth of our businesses but also, crucially, on government health budgets. Education is another area that will undergo a tremendous transformation. We’re moving from the idea of education as something that happens behind a closed classroom door to the concept of a wired-up classroom without frontiers.

Another potentially explosive growth area for Europe is the wealth of applications associated with digital TV. BT will be a player here through our consortium, British Interactive Broadcasting. Now I think one of the major effects of digital TV will be to drive growth in internet usage in the home – a market where Europe lags behind the US. My belief is that once people start to use interactive TV for entertainment, they’ll move on to use it for shopping, then for banking, for education, then for the internet and email. It will be the gateway to the internet for techno-skeptics and technophobes. And on the business side, there are grounds for optimism that Europe will make up ground in electronic commerce. According to CIT, 10% more European companies than US ones think their e-commerce ventures have been successful.

The likely reason for this is that European firms are entering e-business further down the evolutionary path. They’re waiting to see how it can best benefit their businesses and then going straight into more sophisticated applications. I welcome, too, the way that the European Commission is working to clear the obstacles from the electronic trade routes – grasping various nettles on tax, security and other problem issues. And this, then, takes me on to the theme of cooperation. Because, as well as having a distinctive vision, Europe has also demonstrated a capacity to work across national boundaries to make that vision a reality.

Perhaps the prime example was the development of GSM. This was a long saga of negotiation and diplomacy – but one which showed that with determination, Europe can reach agreements that give it a world lead. And if Europe is to make up ground in areas such as e-commerce, then it will be largely due to its capacity to reach agreements and to turn its linguistic, cultural and geographic diversity into an asset rather than a liability.

Of course the latest result of cooperation has been the agreement to liberalize telecom markets this year – a real triumph for Europe. We have seen most of the domestic markets open, with licenses awarded, and regulators up and running. I should add that BT’s joint ventures are determined to make the most of these new opportunities and we’re keen to work with the European Commission to ensure that we do get full competition across the board.

That in turn leads us to the broader theme of competition itself. I think 1998 has shown how creating a competitive climate delivers benefits for consumers and helps Europe compete in the global market. It’s been commonplace to blame the shortage of broad band in Europe on protected markets, high interconnect charges and differing national standards. Now, post-liberalization, it’s a different story. Broadband networks are springing up all over Europe. As an example – picked again entirely at random – BT and its partners are currently building the largest-ever pan-European network, 19,200 miles of fiber connecting 200 points of presence and optimized for data transmission at 160 gigabits per second. But the next challenge in enhancing Europe’s competitiveness is to develop the right regulation for the digital economy. And indeed, the EC is already working on this. In our view, regulation has to be tight enough to outlaw unfair competition, but light enough to promote investment and innovation. Old style regulation, based on the 20th century sectors of telecoms and broadcasting is simply not adequate for the 21st century’s converged industry. So in response to the Commission’s paper BT proposes a model in which regulatory bodies do not try to focus on all stages in a single technology – such as TV or telecoms – but on individual stages common to all the digital technologies.

We propose separate regulation for four markets: consumer equipment, distribution networks, service provision and content creation. Looking at it geographically, we’re not arguing against having national regulators – but we are arguing for consistency between regulators. In Europe, BT would also support a center of best practice within the Commission to provide benchmarks for national regulators. We also feel that the Commission’s proposal for an international charter setting out benchmarks globally is a step in the right direction. “One size fits all” is impracticable. One style fits all is reasonable. The goal of regulation must be the interests of the consumer. Those interests are served by promoting everything that makes for competition and innovation. And that can mean consolidation as well as proliferation.

But although there may be fewer players, there will be even fiercer competition. Let me tell you that for BT, as a participant in joint ventures with experienced local partners, we are giving European incumbents more of a run for their money than we could have done alone. European companies, like BT, must compete vigorously on this global stage to ensure that our customers get access to low-cost infrastructure and world-beating products and services that will enable them to compete effectively.

This is good news for the European economy. And because there will be healthy and vigorous competition at the global level – and we anticipate it will be stiff competition – the real winners will be European businesses and European consumers. So, globalization, innovation, consolidation. Regulation has to recognize these huge shifts in the industry. Nicholas Negroponte of MIT said in 1994 that if Europe wishes to remain at the vanguard of culture it must step off its high horse. New ideas do not necessarily live within the borders of existing intellectual domains. In fact, they are most often at the edges and in curious intersections. Well, I think Europe has got that message. In Britain we say a week is a long time in politics – well, four years is more than a lifetime in this industry. And since Negroponte’s words were written, Europe has demonstrated a new radicalism. It has opened telecom markets, built on its GSM achievement, made strides in digital TV, and put its best brains together in R&D programs which will open new doors.

The question you will be discussing shortly is whether today’s buoyant European market represents a false spring, or whether there is a fundamental change in Europe. My answer is that there is a fundamental change – and one which is distinctly European. It’s about letting digital technology flow into all areas of life. It’s about cooperation across borders. And it’s about creating a competitive environment for business.

Europe’s digital economy is a new creature and has a lot more growing to do. But however it develops, it must be a converged, interconnected economy and it must demand a converged and all-embracing response from governments, regulators and companies. European economies must continue to support innovation and investment in growth areas, and ensure that vibrant competition in these areas is allowed to flourish. Or to put it another way, the winners in the digital economy, whether companies, countries or continents, will be those who can put the pieces together. And I firmly believe Europe is well placed to achieve this.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


L. Jacques Ménard
Vice-Chairman & Chairman of the Executive Committee, Burns Fry Limited

The Canadian Club of Montreal, April 11, 1994
Published in The Corporate Report No. 6 (June 15, 1994)

I have come to talk to you about the revitalization of Montreal – that movement of renewal we all hope for, but which seems to be so long in coming. I, for one, am optimistic: I believe that we, meaning business people in particular, have the means to get things rolling again without relying on outside intervention from government or anyone else.

First of all, where do we stand? Contrary to popular opinion, the economic decline in Montreal is relative, not absolute. This was confirmed in a 1993 study, Recherches sociographiques, by professors William J. Coffey and Mario Polèse. In fact, the number of jobs in Montreal rose from 800,000 in 1961 to 1.4 million in 1991. That is an increase of almost 75%. From such a standpoint, at least, it would be a mistake to talk about an absolute decline in the city, even though 1993 statistics indicate a reduction of about 25,000 jobs, compared to 1991.

According to the INRS, Montreal lost 9,000 factory jobs, or 4% of the total, between 1981 and 1990. We should also note, however, that during the same period, Pittsburgh lost 43% of its factory jobs, Buffalo lost 30%, Cleveland, 36% and Milwaukee, 23%.

Still, compared to other large cities, Montreal has lost economic ground. Why is that?

The prosperity of a city is generally dependent on the size and vitality of its region. And one of the major reasons for the decline of Montreal can be found in the loss of its original “hinterland,” if I may call it that, to the benefit of Toronto, in particular. In one generation, Montreal’s economic base has shrunk; and as a result, the city’s services industry has been considerably reduced.

The difficult times we have been through have forced us to adjust to the new economic situation. Montreal’s industrial structure is now far less vulnerable than that of other major North American cities, including Toronto: the automobile industry and other heavy industries are still an important part of Ontario’s economic base.

We have also made significant progress in building an economy based on information. Local achievements in telecommunications, biomedicine, the bio-food sciences, pharmaceuticals, computer and financial services and new materials are just a few outstanding examples. Quebec has also made headway in manufacturing, in such fields as aeronautics, aerospace, transportation equipment and other industries where the ability to compete depends essentially on the optimum management of production-related information.

Taking this as our starting point, then, how do we get the whole machine moving again? How can we trigger the widescale renewal everyone longs to see? Let us deal with the medium and long term first. To begin with, we are going to need a vision of Montreal that can inspire people to action and make them feel like rolling up their sleeves.

As the great American author Emerson wrote: “Every great movement in the history of the world is the triumph of encouragement. Nothing great was ever accomplished without enthusiasm.” I know that an enthusiastic vision of Montreal – one that can mobilize people – already exists. I would point out, for example, the exceptional work recently done by the Task Force on Greater Montreal, chaired by Claude Pichette.

Its final report (Montreal/A City-Region: Task Force on Greater Montreal, December 1993) reveals a number of areas around which consensus has developed, including the concept of the city-region, which calls for a completely different organizational structure than currently exists.

The Montreal region cannot hope to progress unless it adopts an operating structure that can efficiently meet the needs of its 3.3 million inhabitants, who live in 102 municipalities, 12 regional county municipalities and one urban community. And that is not counting the five administrative regions created by the Government of Quebec. This has multiplied by five most of the administrative expenditures made in the Montreal area, in addition to systematically frustrating every attempt at the most basic kind of joint action called for under the circumstances.

We simply do not have the means to support five employment development corporations, five economic promotion agencies, five tourism promotion bureaus, five health agencies, et cetera, all in the same region.

The inability to get organized has cost the Montreal region dearly so far. The members of the Task Force on Greater Montreal brought clear, independent thinking to their work. Now it is time for our elected officials to show leadership and vision and make the necessary changes. But we cannot stand idly by while waiting for them to agree among themselves.

The Montreal business community is adjusting to new circumstances. The joint statement by local chambers of commerce in response to the Pichette report is an important indication of how far the community has come in recent years.

Allow me here to stress the urgency of taking action. It is true that, unlike other major North American cities, no major alarm has sounded here to send us hurrying to our combat stations. The City of Montreal did not wake up one morning to find its securities rejected on capital markets; we have suffered no earthquakes or other disasters that might have had us all pitching in together. Things have simply deteriorated quietly and gradually, and the process has been all the more insidious because it has taken place over a long period of time.

We did not even blink when the unemployment rate in the Montreal area reached – and then surpassed – that of almost every other urban center in North America. And that is one alarm we should have paid attention to.

If we cannot maintain a broad enough base of economic activity, then high-profile, prestige institutions, whose costs spiral ever upwards, will be unable to continue operating as they do today. Soon, only large, thriving cities will be able to afford them. We must ensure that Montreal is one of those cities that can support a first-class symphony orchestra, renowned research institutes, major league sports franchises, a world-class stock exchange and other such institutions. The same goes for our civil infrastructures.

If we do not take real action quickly, our overall standard of living will continue to decline, until ultimately we find ourselves without the myriad social and cultural institutions and services that we have taken for granted for decades. As a securities broker, I am concerned that the market share of stocks traded on the Montreal Exchange has dropped from 20% of the total value of shares traded on all Canadian exchanges in 1992, to 15% in the first quarter of 1994. This is but one example among many – all disquieting signs of fatigue that should inspire immediate action.

Once again, it is instructive to see what is happening elsewhere.

There are other North American cities that have also experienced periods of decline. And there are those that have enjoyed a virtual renaissance. Those that have share one thing in common: a large part of their recovery is due to the fact that an important nucleus of business people made a serious commitment to the economic renewal of their region. Which recently led La Presse journalist Gérald Leblanc to comment that, in the pursuit of their own success, our business leaders have forgotten to look after the fortunes of their own city.

Last year, Leblanc visited Atlanta, Minneapolis, Boston and Detroit, and he said the most striking difference between those four cities and Montreal is in the role played by local business.

He noted that, as part of the operation surrounding Atlanta’s bid for the Summer Olympics, the city set up a $12 million fund called “Go Atlanta,” to which 500 companies contributed. In Minneapolis, the business community created a fund to help children in disadvantaged areas, because the future starts with children. In Boston, academics in the city’s prestige universities, such as Harvard, for example, are working closely with business people to ensure the city’s future. In New York, it was the New York City Partnership that helped the city out of the serious financial hole it was in during the early 1980s. And a similar approach has been used in Chicago, Tampa, Pittsburgh and other cities.

In all these cases, local business communities have assumed the responsibility for getting things moving again. And they have succeeded.

On that note, I would like to hail the proposal made last fall by Bernard Roy, Chairman of the Board of the Chamber of Commerce, that a special Council of local business people be created, all of whom would exert influence throughout their networks in order to promote development in Greater Montreal. I think we should all respond enthusiastically to such appeals when we are called upon.

Some of you may wonder what effect individual gestures can possibly have on a situation that sometimes seems out of hand. Just remember that all those individual gestures, when put together, can have an enormous impact. It is the kind of potential we must never underestimate.

Right here in Quebec, we have a wide variety of expertise recognized around the world; despite our difficulties, we still have considerable resources.

More than ever, I believe that the most pertinent question now is: Why have we not yet seen any noticeable movement towards economic and community renewal in Montreal?

In the medium and long term, we know – as business people – that we will have to focus on a number of priorities – in particular high technology, employee training and the development of foreign markets – if, indeed, we intend to realize the vision we have of Montreal as we approach the millennium. I will not go into that now, since many others have already discussed the subject in considerable detail.

We also know that the best way to contribute to economic growth is to run our businesses aggressively and imaginatively, thus creating as many jobs as possible. We can also promote key projects that would have a major economic impact, such as the proposed high-speed train linking Toronto and Montreal.

Some companies have already contributed to the renewal process: Imasco, for example, has created not only jobs (1,400, in fact) but also 400 small businesses, through its 5-year sponsorship of a local community agency in Saint-Henri. Of course, such broad-reaching action is not within the means of everyone.

Still, there are things we can and simply must do. Over and above the pursuit of our basic business objectives, we must, as business people, use the specific powers and levers at our disposal more effectively and bring them to bear on the current situation.

I am talking specifically about the assistance we simply must provide to the thousands of people who are out of work due to corporate restructuring right here in Montreal. I say this not only as a business person, but as a concerned human being.

These men and women include skilled laborers, white-collar workers, former executives and eager young people who ask nothing more than to find work as quickly as possible and contribute to their community.

We are all beginning to feel the effects of major social phenomena, such as the aging of the population, for example, which is going to create a heavy demand for personal service and special or semi-special care for the elderly. Why not recycle some of the available labor force into this type of activity? Yes, it may involve making some necessary changes in the way work has traditionally been organized, but new ideas about what constitutes a job are already leading to changes in the workplace. As a matter of fact, a quarter of the working population is now employed in what we label “non-traditional” jobs, including freelance work, job sharing, part-time jobs and other creative variations on the standard entrepreneurial model.

In other large, North American cities where a movement of renewal has been triggered, experience has shown that the revitalization process and new economic activity are usually generated by local business, not by government.

In Montreal, we are beginning to see some action in certain neighborhoods where business and community groups have been working together for four or five years. This kind of initiative is born of the energy and imagination of people from various backgrounds. Fortunately, government is beginning to understand the phenomenon and adapt. For example, more flexible programs are being developed and other assistance is being provided to encourage local development projects.

Some experiments, like those organized by RESO in the southwest part of Montreal, and Pro-Est in the east end, are producing tangible results. Other parts of the city would certainly benefit from similar action. Last year, nearly 400 residents in the southwest used RESO’s job search assistance program and 60% of them found work, despite the very difficult circumstances in the region. We should be inspired by results like that.

We should also see our own companies as local organizations that can make a difference. I firmly believe that each of us can do something to inject a little optimism into the prevailing mood of gloom and, in our own way, help spark the renewal of our city. It is our turn to act. What do you think would happen if, for example, every company in Greater Montreal with 50 employees or more took in one intern or trainee? It would not be all that difficult.

And yet, that commitment alone could quickly create more than 3,500 jobs on the Island of Montreal, with all the related economic and social benefits.

Organizations like Fondation Ressources Jeunesse could help, too, as could university placement offices in the area. Considering the tremendous social and economic benefits, government could also contribute, if only to the degree that it already pays into existing social programs. After all, it makes far more sense to subsidize training programs that will result in gainful employment, than to pay out unemployment insurance or welfare. In fact, a number of retraining and reintegration programs already exist and could be adapted to accommodate internships.

In many fields, the additional training these interns would receive – simply by dint of the fact that they are working – would give them valuable skills that other companies might want to use.

Let me tell you what we are doing at Burns Fry in Montreal. For almost one year now, we have had five interns working for us. They are mentored directly by our investment executives, who supervise them as they gain valuable experience. After 12 or 18 months, if the intern shows promise, he or she will become a full-fledged trainee in our regular training program. That training is all the more effective, because the person has already had some practical experience and has shown a certain aptitude. We benefit because we get to train exactly the kind of young people we need for our own expansion plans.

Another thing we could do is give all those freelancers out there a break. Corporate restructuring has forced many competent people to pursue careers on their own. Who among us does not know at least one such person who is now looking for work? Again, I am not talking about creating unnecessary jobs. It is simply a question of taking advantage of the often impressive qualifications and experience these people have. All they need is an opportunity to regain their confidence and possibly set themselves up in business as independent consultants.

A recent feature in Fortune magazine discussed the inevitable decline in the number of traditional management positions in large corporations. It noted that, with increasing frequency, work is going to be done by experts hired for short periods of time to carry out a specific task. Career planners in the United States confirm that half the jobs that will be available ten years from now do not yet exist.

Accentuated by the consolidation we are seeing in every sector of the economy, these serious trends have already begun to change the face of Montreal. They affect not only laid-off workers, but also young people seeking entry on the job market. And they largely explain why Montreal, with its generally low-mobility labor force, is afflicted by such a high unemployment rate, which we cannot seem to bring down.

Given our current circumstances, we, the business community, must make every effort to break the vicious cycle. The creation of a significant number of job openings for interns or trainees, and the employment of competent freelance workers are among the means at our disposal. But there are other things we can do, too.

We could emulate countries like the United States, where there is a long-standing tradition of supporting local business. The Montreal region has an abundance of quality suppliers who can be of great assistance to us; unfortunately, because of circumstances and traditional purchasing policies that are rarely questioned or updated, we do not even know who those suppliers are, much less give them priority consideration.

Globalization is forcing us to look to markets around the planet. That is a fact. But it does not mean that we should stop paying attention to our local economy. On the contrary: if we want to be globally competitive, I think we have to build unshakable solidarity here at home and help each other become the best in the world, each of us in our own field.

The countries we admire for their economic strength (and sometimes even their patriotism) are doing exactly that. The Americans have always put such economic wisdom into practice. Not only do they not hide it, they are completely open about it. “Buy American,” they proclaim, loud and clear. Why is it that we seem to be so uncomfortable with the concept here in Quebec?

We should be encouraging the kind of action being taken by the Société de promotion Qualité Québec. Why not develop our own networks and find local alternatives to purchases made outside the area, whether consciously or not. Such purchases range from goods and services as we normally understand them, to listed securities, pension fund management services, and so on. Price and quality being equal, why shouldn’t we give our own people a chance? Of course, this may require a serious change of habits and a shaking up of established practices, starting with our own businesses.

Ultimately, the worst mistake would be to believe that individual gestures are not important enough to be worth the effort.

Parochialism, cry the critics. Protectionism, they say. I say, not at all. The more we encourage local suppliers, the more likely they are to become our customers.

Reinventing Montreal starts with reinventing our way of doing things. Only business people can activate the process, because we have at our disposal the most effective levers of change. But let us not kid ourselves. There’s nothing saintly in what I am proposing: in the end, we are serving our own best interests.

Of course, we should not anticipate a smooth ride. We can expect more corporate restructuring in Montreal, and the consequent loss of more jobs.

But we must not let that discourage us. Montreal can become a vital and energetic city once again…provided we stand together and take immediate action.

This city has always been full of people who have outdone themselves in every field of endeavor. There is no reason the situation should be any different today. Nobody will ever make me believe that Montreal lacks the resources to pull itself up: if we work together, as they have done elsewhere, we are bound to succeed.

To sum up, then, a minimum of three things need to be done right away:

•  Create a core group of business people who love this city and are ready to take up the challenge by making a personal commitment to get the renewal process started right now.

•  Take on interns and hire independent consultants.

•  Support local institutions and enhance our network of suppliers by seeking out local goods and services of equal value and equal price.

We can start right away, without waiting for outside help from either government or Providence. The decision is ours to make.

We have the means, and goodness knows we have the motivation. Solidarity and pride will make it work.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Thomas d’Aquino
President & CEO, Business Council on National Issues

Council of the Americas, New York, February 11, 1998
Published in The Corporate Report No. 24 (May 30, 1998)

The title of my presentation, “Northern Renaissance,” captures the significance of the improvements in Canada’s global competitiveness in recent years and reflects a general consensus among member chief executives of the Business Council on National Issues. The council consists of 150 chief executives of leading Canadian enterprises and concerns itself with strategic issues of national and global relevance. Member companies currently administer in excess of C$1.6 trillion in assets, have an annual turnover of approximately $600 billion and employ about 1.5 million people.

By the end of the 1980s, the general consensus in Canada was that our competitiveness was on a dangerous slide downwards. The World Economic Forum, which at one time had ranked Canada fifth, marked us down to sixteenth by 1994. Professor Michael Porter, in a landmark study carried out in 1990 in conjunction with BCNI and the Canadian government, warned that we had to pull up our socks.

And pull up our socks we did. With the benefit of a free trade agreement in place with the United States, and eventually the incorporation of Mexico, a tough battle against inflation, aggressive restructuring of Canadian companies, a long-overdue battle to bring public-sector finances under control and a stronger market orientation on the part of governments, the tide was reversed. In 1997, Canada was back up to fourth spot in the WEF rankings, with the prospect of doing even better this year.

After several years of export-led growth, domestic demand in the form of consumption, housing and business investment has become the key engine of economic growth. According to a survey taken by The Economist in January, Canada will have the strongest economic growth in the G7 in 1998. The survey suggests that growth will be slightly lower than in 1997 – at 3.6% in real terms. I believe the forecasts to be overly optimistic. The Asian financial crisis will temper Canada’s growth prospects closer to 3%. As a result of the Asian financial crisis, roughly 34% of global GDP is in difficulty (including Japan). This will result in lower demand for products, commodities and services. Approximately 8% of Canadian exports go to Asia. However, more than one-third of exports from British Columbia and 23% of exports from Saskatchewan go to the region.

Commodity prices have plunged, already affecting some of Canada’s major exporters. A significant slowdown in US growth would have an important impact on Canadian exports. Canada’s improving economic performance has been bolstered by an advantageous exchange rate in relation to the United States. While this advantage has contributed very significantly to Canada’s outstanding export performance, it does not account for all of the improvements in productivity growth.

When the Canadian currency is compared to its purchasing power parity level, we estimate that it is undervalued by at least 10 cents. The dollar has recently been under considerable pressure, due to the flight to the US dollar, the decline in commodity prices and the deterioration in the current account. After reaching an all-time low, the Canadian dollar has appreciated 2.5% in a short two weeks against the US dollar. Also, the Canadian dollar has appreciated against other currencies.

The story on inflation is very positive. After almost 20 years of inflation levels ranging from 5% to more than 12%, Canada can now claim to have one of the best inflation records in the industrialized world. Canada’s inflation has stayed below 2% since 1992 – six years. Monetary conditions continue to be extremely accommodating with an inflation performance superior to the United States.

Canada’s output gap is expected to close further in 1998. Canadian interests rates and the current level of the Canadian dollar have combined to offer easy monetary conditions. Canadian short- and long-term interest rates have declined dramatically over the past two years. The current Canada-US T-bill negative spread is at about 66 basis points. Canada has among the lowest short-term interest rates among the APEC economies, as well as in the G7 and the OECD. Canada’s yield curve out to 30 years remains below that of the United States – a significant achievement in the face of the recent flight to quality as a result of the Asian crisis.

Wage performance for the Canadian manufacturing sector has improved dramatically. Canada has among the lowest wage bills in the OECD, not just with respect to time worked, but also including benefits. Germany topped the list in terms of wage bills in 1996, followed by Switzerland, Denmark, the Netherlands and Japan. Canada’s manufacturing sector unit labor costs, when compared with those in the United States, give us a decided advantage. Looking ahead, strong cost performance is expected to continue, as overall wage and cost pressures remain subdued in Canada.

A recent study published by KPMG management consultants concludes that location-sensitive business costs for a variety of industries are lower in Canada than in the United States. (Other cost components include land, construction and income tax credits for R&D investments.) Restructuring, reinvestment and enhanced productivity have combined to improve the profitability of the Canadian private sector. After reaching post-Depression lows in 1992, profits have recovered, but still remain below the long-run average of about 10% of GDP on a before-tax basis.

Canada’s businesses have invested aggressively in productivity-enhancing machinery and equipment. Total real machinery and equipment investment in Canada as a percentage of GDP has increased from 5.5% to more than 10%. Expectations are that this form of investing will continue to outpace the level of economic growth throughout 1998. These expectations also reflect record levels of business confidence, mostly due to a very positive environment for investing and doing business in Canada.

Canada invests heavily in its education system – a crucial component of competitiveness. The equivalent of 7.1% of GDP (both public- and private-sector investment) is allocated to spending on education from grades one to seven. This is the highest in the OECD. Still, Canadians are far from complacent about the education system. There is strong and growing support across the country to extract better results in student performance, particularly in the context of globally competitive skills. And the evidence indicates that we may have some way to go. Canadian students in the eighth grade achieved average scores just above the country mean in the Third International Mathematics and Science Study.

On the jobs front, the news is getting better. Measured in the long term, specifically from 1970 to 1995, Canada has had the best job-creation record among the G7 countries. In 1997, Canada and the United States registered an increase in employment of 2.7% – again, tops in the G7. More than 363,000 new jobs were created in 1997, and next year more of the same is expected. But unemployment in Canada today remains high, at 8.9%, due to rigidities in the labor market, uneven geographic performance (Quebec and the Maritimes are not doing well) and the effects of recession and restructuring.

There is a fundamental complementarity between information technology and human capital. In the development of an index connecting basic national characteristics with the level of information technology, the following factors were deemed important:

•  Enrollment in university

•  The quality of scientific research institutions

•  Sufficient power-generation capacity

As indicated in the World Economic Forum’s 1997 Global Competitiveness Report, Canada ranked first in technology potential. One Canadian advantage is a positive environment for private-sector research and development. The pluses are:

•  A generous tax treatment

•  A highly qualified and skilled work force

•  A low-cost structure for R&D – overall researcher costs are quite competitive internationally

•  Strong institutional linkages

•  A high quality of life

Canada is perceived by foreign-owned multinationals as an attractive place to conduct R&D. According to the Conference Board of Canada, spending intentions by foreign-owned companies are matching intentions by Canadian-based companies.

And yet, as analysis by the OECD and Statistics Canada suggests, Canada has an innovation gap. There are several factors, which have contributed to this innovation gap. The most important are:

•  Overall private-sector R&D spending remains low as a percentage of GDP, despite the fact that Canada has several R&D champions

•  General use of technology is less in Canada than in the United States, our main competitor

•  The same holds for diffusion and adoption of advanced technologies in strategic economic sectors

•  And the private sector is experiencing growing skills mismatches

In its latest survey, the Conference Board of Canada concluded that private sector R&D expenditures are expected to continue at a high pace. However, many companies still have to implement formal processes as well as innovative practices. Canada must improve its productivity performance if it is to achieve both sustainable long-term economic growth and rising standards of living over time.

With its strategic geographical location, its multicultural makeup and its diversified trade links (WTO, NAFTA, FTAA, APEC, EU), Canada provides very attractive access to the world’s richest and most dynamic markets in America, Asia and Europe. Proximity and easy access to the United States are huge advantages for Canada. From Vancouver and Calgary, about 30 million people can be reached within two days’ drive. From Montreal and Toronto, more than 110 million people can be reached within one day’s drive, and more than 170 million people within two days’ drive. Also, an “open skies” policy has considerably facilitated business travel between Canada and the United States.

The Economist Intelligence Unit recently rated the business environment of several countries using market potential, tax and labor market policies, infrastructure, skills and the political environment as indicators. From 1997 to 2001, Canada ranks as the third best country in the world in which to do business. The Canadian private sector also is becoming increasingly recognized for its management expertise, efficiency and service orientation. For example, the World Economic Forum last year ranked Canada third in terms of quality of corporate management. Finally, according to a Deloitte & Touche study, more than 10% of the world’s 200 fastest-growing firms are Canadian. Three Canadian companies actually placed among the top 15 globally.

The Economist Intelligence Unit just last week released a new index of relative business costs in 27 economies, based on indicators such as wages (both direct and indirect), corporate taxes, perceived corruption levels, office and industrial rents, and road transport. Germany was the most expensive, followed by the United States. Canada ranks eleventh, ahead of Singapore.

Further, in a 1997 study carried out in conjunction with Canada’s department of Foreign Affairs and International Trade, KPMG analyzed the costs of doing business in seven countries. (These costs were based on both location-insensitive and location-sensitive factors.) The study concluded that Canada is the lowest-cost country in which to do business. Notably, Canada holds a significant cost advantage over European countries in terms of initial investment costs and has the second-lowest labor costs.

What are some of the other positive factors of Canadian competitiveness? Quality of life, clean air, safe streets, good schools and respect for the rule of law are clear advantages. These helped Canada achieve No. 1 one ranking according to the United Nations Human Development Index of 1993, 1994, 1995 and 1996. Toronto and Vancouver were ranked by the Corporate Resources Group of Geneva as the two best cities in the world in which to live and do business. Other assets are a sophisticated infrastructure, a skilled labor force, a competitive corporate tax environment, a less litigious environment than in the United States, a shrinking public sector and a tradition of political stability.

Other than high unemployment, what are Canada’s two most pervasive economic problems? They are high levels of public debt and high levels of taxation. Let’s look at the debt problem first. On a national accounts basis, combined federal-provincial debt stands at 67% of GDP – second only to Italy among the G7 countries. On a public accounts basis, which includes important off-budget liabilities, the combined public debt stands at about 100%.

The situation, however, is changing. Our foreign indebtedness as a percentage of GDP is in decline, and this year the federal government began paying down its debt load. Canadian governments have taken major strides to roll back deficits. So successful has the assault on deficits been that The Economist recently labeled Canada a “fiscal virtuoso.” The federal government is far ahead of its fiscal targets. Canada has gone from the second-worse deficit balance in the G7 to the best in just three years. The federal government has posted a small surplus over the past 12 months, the first in more than two decades. Barring an unforeseen shock, the government should post a small surplus again this fiscal year.

Federal and provincial deficits have declined 95% over the past five years. Several Canadian provinces are in surplus. Some have offered tax cuts in the coming fiscal year. Both Ontario and Quebec have committed themselves to balanced budgets within the next three years. More good news: total government outlays including federal, provincial and municipal, are falling quite fast, from a high of just over 50% of GDP in 1993. This is due in part to fiscal constraints and in part to a stronger market orientation on the part of Canadian governments.

Among the consequences of runaway debt and deficits and increased government outlays are higher taxes. Canada has among the highest marginal tax rates on personal income in the industrialized world. The average top marginal tax rate is about 53% and is applied at the relatively low threshold of C$66,500. Fortunately, several provinces have lowered and will continue to lower their personal income tax rates in the future. Still, Canada’s high marginal tax rates will continue to be a drag on consumer demand, on domestic growth and on employment. They are already having a negative effect in terms of retaining and attracting managerial and professional talent.

Canada has turned around its current account situation over the past several years, registering a surplus last year. However, significantly higher imports, due to a much-improved domestic environment and massive inflows of productivity-improving machinery and equipment have squeezed Canada’s merchandise trade surplus down to $21 billion for 1997. This has led to the deterioration of Canada’s current account.

But the situation is still far better than in the early 1990s. The total stock of foreign direct investment (FDI) into Canada since 1984 has increased from about $85 billion to $180 billion in 1996. This represents an increase from 19% of GDP in 1985 to 23% in 1996.

From both a flow and a stock perspective, the United States continues to be the dominant source of inward FDI, with a 68% share. European Union members are also major investors in Canada, including Britain, with an 8% share, the Netherlands with a 4% share, France and Germany with a 3% share. Japan likewise has a 3.6% share. Finally, the distribution of inward FDI has shifted away from resources toward services, as well as food, beverages and tobacco, chemicals, electrical and electronic products, construction and communications.

In the past decade, the Canadian private sector has dramatically increased its presence abroad, and has become a major global investor. The total stock of Canadian direct investment abroad since 1984 has more than doubled, from $57 billion to more than $170 billion in 1996. Trade and investment liberalization have improved the outward orientation of the Canadian private sector. As a result, Canada is developing its own homegrown multinationals. In fact, three Canadian-based multinationals rank in the top 15, if one takes into account the average of foreign assets to total assets, foreign sales to total sales and foreign employment to total employment: Thomson Corporation No. 2, Seagram No. 4 and Northern Telecom No. 12.

Export performance continues to be a bright star in the Canadian galaxy. Since 1991, exports have more than doubled. Merchandise trade, as a share of GDP, stands at 35%. Almost half of Canada’s private-sector output is exported. In 1997, Canadian exports will reach and could surpass $300 billion, representing about 7% growth. However, because of a surge in imports, the trade surplus in merchandise goods will decline to $21 billion.

Looking forward, agencies such as the Export Development Corporation forecast that Canada’s exports will moderate from its record growth levels, but will average about 7% for the next several years. According to the World Trade Organization, world trade in 1996 grew 4%, down from rates of between 7% and 8% in the mid-1990s. Nevertheless, Canada maintained its ranking as a top global exporter of merchandise goods – seventh in 1996, with a 3% share. The challenge for the private sector will be to maintain and enhance its outward orientation in the face of increasing export competition from the Asia-Pacific. Taken together, international trade in goods and services, including exports plus imports, represents a whopping 71.5% of total economic output, the highest among the G7 countries.

Improvement in total trade between countries is one of the most important indicators of integration between countries and of successful free-trade agreements. On both, the Canada-United States Free Trade Agreement has worked as predicted a decade ago. Total trade between Canada and the United States has doubled, from $192 to $405 billion in 1996. Trade between the two countries now exceeds more than $1.1 billion per day. United States imports at a single crossing in Ontario exceed the totality of United States imports from Japan. In 1996, Canada registered a merchandise trade surplus of $40 billion with the United States. Our overall balance, including services, was also in surplus in 1996.

Growth in bilateral trade between Canada and the United States has been stellar since the FTA and NAFTA came into effect. Canadian exports to the United States in economic sectors liberalized by the FTA grew by 139% from 1988 to 1995, while exports to sectors not liberalized by the FTA grew 65%. Proving that trade theory works, the same can be said for Canadian imports from the United States. In several cases, the export performance is stunning.

Canada’s export growth to all countries over the past decade has been quite broad, touching all major sectors of the Canadian economy. High value-added sectors such as machinery and equipment, motor vehicles and parts, and industrial products have performed quite well. Canada continues to rely upon exports of energy and natural resources. However, as a percentage of the total, exports in these sectors are declining. Canada holds the largest share of the import market to the United States. Countries of the European Union and Japan follow closely behind.

Arguably, Canada continues to enjoy one of the highest levels of political stability in the developed world. The Canadian federal structure, over time, has proved to be immensely flexible in accommodating political change. An independentist government in Quebec is seeking the secession of Quebec from Canada, with an economic partnership supplanting the existing relationship. A significant majority of Quebecers reject outright independence. It would appear that nationalism in Quebec, for the moment, has ebbed and is in decline. Based on past experience, we are convinced that the current stresses in the Canadian federation can be managed to achieve a positive result.

How would I sum up this assessment of Canada and its prospects? I would have to say we are quite optimistic – but not complacent. What are the key priorities ahead? Some of the obvious ones are:

•  Balance the books. Develop budget surpluses, help the public sector achieve greater efficiencies, promote privatization and deregulation, begin to pay down public debt and reduce taxes, and generate more and better-paid jobs.

•  Achieve further improvements in corporate productivity. Increase investment in R&D, improve adoption and diffusion of technology and accelerate the shift to higher value-added goods and services.

•  Adjust education and training efforts to reflect the global realities of a knowledge-based economy.

•  Expand the depth and reach of global Canadian businesses, and improve market share in fast-developing economies.

•  Promote political reforms that add further to Canada’s competitive advantage as a stable and effective democracy.

Achieving strong results in each of the above will make Canada a true force to be reckoned with in the 21st century.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


François Beaudoin
President & CEO, Federal Business Development Bank

The Board of Trade of Metropolitan Montreal, October 25, 1994
Published in The Corporate Report No. 10 (February 15, 1995)

To address the challenges facing “small businesses beyond the recovery” let’s examine the recovery we are experiencing. To paraphrase an old saying, “Recoveries aren’t what they used to be!”

Indeed, many owners and managers of small and medium-sized enterprises or SMEs, as we like to call them, are asking whether we are really experiencing a recovery at all.

Judging by the number of requests pouring into FBDB for expansion financing, I can definitely reassure you. Yes, there is a recovery going on. Of course I’m speaking from a general viewpoint, which sometimes differs from the viewpoints of operators of small businesses. Some of them have been heard saying: “Oh, really, there’s a recovery? Would you please show me where it is?”

To say the least, the current recovery has been surprising and unique. It is not following the usual scenario where everything goes “back to normal” across the board.

We are living a different kind of economic recovery, emitting different signals from what we have been used to. But it is a recovery full of unparalleled opportunities for our SMEs. Today, we are witnessing the roll-out of a new economic order characterized by market globalization and driven by technological evolution. SMEs are being called upon to adjust to deep and fundamental transformations occurring, not just in our economy, but all around the world.

To illustrate what I mean, allow me to compare this recovery to a sort of high-speed expressway – or to borrow a popular term, an economic superhighway, one which leads to new prosperity. Today I would like to highlight three routes or ramps leading onto this new superhighway to which SMEs must have access.

The First Access Ramp: Exporting

The first access ramp I’d like to tell you about is exporting.

Markets are opening very rapidly. Over the past ten years, foreign sales for Quebec alone soared from $15 billion to $32 billion.

Indeed, exporting is the major force behind the recovery. Some economists would even go so far as to say that without exporting we would still be in a recession.

But our exporting is still very limited in scope. In fact, our exports are limited primarily to two sectors: cars and lumber. Eighty-five per cent of Canada’s exports are generated by only 900 businesses – but just think – there are more than 900,000 small businesses in Canada! This fact may go a long way towards explaining why some small business operators do not feel the effects of the recovery.

It may well be that we are an exporting nation, but we are still not a nation of exporters. Exporting is not yet an integral part of our entrepreneurial genetic makeup and it’s time we did something about it.

A recent study by the Caisse de dépôt on the measurable effects of the Free Trade Agreement showed that companies already involved in exporting prior to the agreement profited most from free trade.

Those that limited their activity to the domestic market have been hit the hardest by its stagnation and by foreign competition. The long-term danger is clear and we must act now.

To get SMEs onto the exporting ramp, I believe we must act on at least two levels. First, it is important to remember that SMEs are often run on intuition, that “sixth sense” which serves as a guide. Now our experience with SMEs clearly shows that intuition can be trained and horizons broadened. Many small businesses avoid exporting simply because it represents the unknown. And yet intuition, coupled with a minimum of training and knowledge, makes a powerful combination that I like to call “educated intuition.”

To prove my point, I’d like to tell you about an FBDB project that began about four years ago. We call it the New Exporters’ Program. Through this program, we work closely with about twenty SMEs. In addition to providing the practical information they need to succeed in a given foreign market, an FBDB counselor specializing in exporting works with each business to develop its market penetration strategy. Each program covers a ten-month period and often culminates in an overseas visit which allows the participants to launch export activity.

Since 1990, a total of 278 businesses from all regions of Quebec have participated in or are currently participating in the New Exporters’ Program. And it works! A program completed in the Eastern Townships is a fine example. In less than two years, participants saw their exports jump from $2 million to $8.5 million! A new program was recently launched, this time, to help SMEs take on the Mexican market. The Federal Business Development Bank is very proud of helping to develop this type of “educated intuition.”

At FBDB, we believe that there is not sufficient financing available to meet the needs of SME exporters. Each stage of business development has its own needs, and exporting requires specialized financing for areas such as pre-shipment, foreign receivables, client building and market development. Financial institutions must address these needs if Canadians are to access the economic superhighway.

The Second Access Ramp: The New Economy

The second access ramp to the economic superhighway is the new economy.

The term new economy refers to those industries related to computers, health and pharmaceuticals, telecommunications, and scientific instrument and equipment fields.

The new economy ramp has been around for a long time. It explains why many businesses were able to avoid the economic slowdown of the recession and travel a significant distance along the economic superhighway. In Canada, over the past ten years, there has been a net gain of 816,000 jobs in new-economy-related industries of which 170,000 are in Quebec. It is interesting to note that the telecommunications industry alone currently employs more people than the forestry, furniture, textile and pulp and paper industries combined!

It is important to understand that new economy businesses form an elite group, which plays a strategic “spearhead” role in this growth sector. That is why it is critical to support our new economy entrepreneurs. All nations are in a fierce battle in this arena. Each country wants its players firmly placed in the stronghold of the new prosperity.

How can we help new-economy enterprises?

One common characteristic of new-economy SMEs is their enormous need for capital to finance research and development. The tangible assets typical of traditional-economy businesses (buildings, equipment, inventory) have been replaced in the new economy by intangible assets such as knowledge and human capital. To meet the needs of these SMEs, FBDB has developed what it calls the Venture Loans Program. This type of loan offers SMEs financing for development projects without relinquishing ownership. Within two years, our venture loan portfolio is fast-approaching the $30 million mark.

It is often thought that venture capital is the solution for new economy entrepreneurs. However, the venture capital industry generally concentrates its activity in projects over $1 million. It, therefore, targets businesses that are already beyond the startup stage and promise a medium-term increase in share capital.

To give SMEs in the startup phase access to capital we must go further than venture capital. In our opinion, the solution lies in a new form of financing that we call patient capital. Patient capital acts like equity, but the payback is spread over a longer period of time and could eventually take the form of profit sharing.

The Third Access Ramp: Working Capital

The third access ramp to the economic superhighway is working capital.

This ramp is important to all SMEs. Without sufficient working capital, SMEs risk running out of fuel on the superhighway to new prosperity! An adequate line of credit to finance ongoing operations is often lacking.

Indeed, the recession has been hard on profits. Many SMEs had to tap into their reserve funds or reach deep down into their own pockets in order to survive. This means that, for many SMEs, assets are at their lowest. But assets are like a rearview mirror – they show you what is behind you – and are the result of past performance, not a measure of potential! And I don’t need to tell you that if you want to get onto a highway you’d better not be looking in your rearview mirror.

How can we help SMEs to get onto the working capital access ramp? This is a priority for all financial institutions. Banks and credit unions are already looking for ways to go beyond the formulas of tangible guarantees and equity. Some have begun to introduce qualitative criteria into their loan decision-making process. But the needs are great. In order to fill them, a concerted effort is required.

For example, FBDB recently launched its Working Capital for Growth Program for businesses that have identified new opportunities for growth or expansion. The program offers SMEs a supplementary loan to top up lines of credit offered by their bank or credit union. We offer this loan using traditional financing ratios for receivables and inventory. It is a complementary source of financing and an example of concrete action taken to respond to the SME need for working capital. This modest initiative has clearly been successful, proof that the need is real. FBDB intends to go much further in this area by consulting with all involved parties.


I believe it is important for us to understand that dynamic SMEs are essential to our prosperity and competitiveness as a nation.

What is waiting for small and medium-sized enterprises on the other side of the economic recovery? I hope I have convinced you that this recovery is filled with a host of business opportunities for SMEs. To seize these opportunities and embark on the economic superhighway which leads to a new prosperity, SMEs must be able to navigate on three access ramps – exporting, the new economy and working capital.

However, the success of SMEs in these three areas depends on the united efforts of all economic and financial players.

As for FBDB, we are committed to making these issues our top priorities for the economic prosperity of Quebec and of Canada.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


François Beaudoin
President & CEO, Business Development Bank of Canada

The Canadian Italian Business and Professional Association, February 13, 1996
Published in The Corporate Report No. 17 (April 30, 1996)

There is no doubt today that whenever the general public thinks about the business world, they perceive small business as being at the top of Canada’s economic “Hit Parade.” The sheer volume of media coverage on the subject, coupled with an outpouring of downbeat articles about the challenges being faced by larger businesses, has ensured the national prominence of small business. Great efforts are being made by all sorts of people and institutions – political, academic and business – to help small business. To advance its perceived best interests. On the financial front, there has been a substantial expansion of the chartered banks portfolio of loans to small business from $20 billion in 1985 to $28 billion ten years later.

Obviously, Federal government guarantees under the Small Business Loans Act have also significantly helped: loans of under $250,000 dollars to small business have jumped by 205% between 1993 and 1994. That’s from $1.5 billion to $ 4.7 billion dollars. In addition, there has been considerable growth of the venture capital industry over the last five years. Clearly, it has taken strides towards meeting the growing capital needs of small business. Total capital under management by the venture capital industry has leapt from $3.2 billion in 1991 to $5 billion in 1994.

Among all the initiatives taken to help small business, those of the Business Development Bank of Canada surely represent a unique contribution. For over fifty years, BDC has been the only coast-to-coast Canadian bank dedicated exclusively to small business. At BDC, small business is our only business. We are the only national financial institution, and one of a mere handful in the world, to help entrepreneurs through a unique blending of conventional lending and venture capital, management counseling and training services.

Our mandate is to take the higher risks often associated with supporting small business while remaining a profitable organization. Over the last six years, BDC has loaned more than $4 billion to small business without costing the public purse a single penny. The Bank’s new mandate, enacted last July, widens our role as a vital complementary player to private sector financial institutions. This shows considerable political will to assist Canada’s small business. Our lending ceiling has been raised from $3.2 billion to potentially $18 billion, once our equity reaches the new maximum prescribed by law. Obviously, this maximum will take a number of years to reach, but it does give us the room to maneuver and the ability to support demand for small business financing.

Clearly, a lot of people right across Canada are putting in a lot of effort and committing a lot of resources to help small business. But perhaps there is a question, which we, as a society, have neglected to ask ourselves: “Is all this well-intentioned effort worth it?” Or, as the popular expression would have it, are we barking up the wrong tree? Would everybody’s time, money and best efforts be better deployed in other fields of endeavor? It is an intriguing question that bears more detailed scrutiny.

On the “pro” side of the argument is the fact that small business now accounts for a full 57% of Canada’s Gross Domestic Product. Small business has become Canada’s number one job creator. After posting a spectacular 49% growth in employment for fifteen years, small business has held the line for the last five years. For the same period, all other sectors have shown a steady decline in employment levels. The increasing opportunities in small business have unleashed an impressive surge of entrepreneurship. Each year we at the Bank actively assist over 75,000 of Canada’s brightest and most innovative individuals, people who are truly knowledgeable in their chosen fields of expertise. We know just how determined they are to run their businesses efficiently and to grow. Clearly, small business must be the way of the future.

On the debit side of our argument, we have to ask ourselves: is small business more effective at creating jobs than at creating permanent growth? Has the small business explosion really been nothing more than a re-division of a shrinking economic pie between more players? It’s a valid question, given the high failure rate among small businesses and the often precarious employment opportunities they offer. Only 50% of small businesses survive beyond their fifth year. Many more fail before their tenth birthday. As well, a significant proportion do not survive their first generation owners.

Which brings us to the next question: instead of expending so much effort on small business, shouldn’t we be helping larger corporations? We must acknowledge the multiple roles that, by virtue of their very size, only larger businesses can effectively play. I am referring here to the corporate world’s leadership in fields such as research and development, workforce training, the setting of industry standards, and so on – all those things that require true clout to have significant impact. After all, the balance sheet, established creditworthiness and sheer staying power of larger corporations have always afforded much-needed stability and momentum to the economy as a whole. The fact is, bigger players were and still are needed to keep the economic playing fields in good shape.

The simple truth, that small business frequently relies upon larger business for growth, is too easily forgotten. Small business does not exist in isolation, and in many cases depends upon the good health of larger corporations. Major corporations have always been excellent incubators within which future entrepreneurs learn and hone essential management skills. Major corporations are also one of the most important sources of work for small business, through subcontracting and outsourcing.

Major corporations play an important role as taxpayers, “enjoying” higher rates of corporate taxation. They also play a unique social role through their sponsorships and charitable works. Yet while we continue to sing the praises of small business, little has been heard on behalf of larger businesses. Were they just a passing phase, whose time has come and gone? Will we only recognize their vital role too late, when we have lost the momentum, the ability and the will to launch and sustain large corporations?

For the ten-year period up to 1989, Canada’s larger businesses exhibited a modest yet sustained growth of 19%. Since 1989, globalization has revealed some of the weaknesses of our economy. Before globalization, it was fairly easy to be big and nimble in a protected marketplace. When it floats in zero gravity, even the biggest dinosaur can look amazingly agile. Only when exposed to the new economic reality did we discover the ill effects of prolonged weightlessness. As a result, we saw a tidal wave of downsizing, right-sizing and re-engineering that led many to wrongly conclude that Corporate Canada had a serious and probably permanent disability.

All had to undergo a crash diet. Many did not make it! Between 1989 and today Canada lost over 260 businesses employing more than 500 people. And some of these businesses were once very large indeed! In the same period, 1,500 businesses employing between 100 and 500 people have disappeared. That’s close to 2,000 larger corporations that are no longer in play to exercise their stabilizing and vitalizing influence on our economy.

So what lies ahead of us? Are we, by default, building an economy totally dominated by small business? We must avoid the pitfall of drawing conclusions from a snapshot in time, while forgetting the rest of the movie and the overall plot. Small is good in that it offers hope for system renewal, but clearly it is the journey, not the overall destination.

Surely what Canada needs is to create more large corporations. Companies big enough to hold their own on a world stage. Companies also big enough to generate prosperity in our local markets, a prosperity that numerous small companies can participate in. Most likely, these larger corporations of tomorrow will emerge from the ranks of the smaller businesses of today. That is the main reason we need to be helping small business.

Our challenge here is to boost the performance of promising players. We need to improve their prospects for growth and enable them to achieve their full potential. The strategic direction we ought to follow is surely a steady process of small business enhancement and development. This is the only viable way to enable Canada to field enough large corporations.

The good news is that there are fast-lane sectors of the economy in which small companies can move to become larger very quickly. Even during the last recession, companies in those sectors posted healthy growth. I’m referring to knowledge-based enterprises which spearhead the so-called New Economy, companies in pharmaceuticals and health services, telecommunications and computers, scientific instrument and equipment. I’m also referring to those companies that have taken full advantage of Free-Trade and NAFTA, and expanded their horizons and sales efforts beyond the domestic market and into world markets.

In a world context, Microsoft is probably the most outstanding example of a knowledge-based enterprise that has grown at exponential rates. In Canada we have similar examples, and they have names like IMAX, Softimage, Ballard Power and Newbridge. When it comes to export-oriented companies, examples that come to mind include Blackcomb Skiing Enterprises, which attracts no fewer than 1.5 million skiers every year to Whistler, a great number of which come from abroad. Or Wrebbit, a 3-D puzzle manufacturer with a unique product which exports more than 85% of its production.

So to answer my original question: is helping small business, of itself, sound business? If we support small business just for the sake of small business – as an end in itself – it will cause us to lose sight of the overall game plan, which is to allow as many companies as possible to develop into larger corporations. It will also greatly disperse our finite resources and thereby leave Canadian companies, and the Canadian economy, forever vulnerable to cherry-picking by stronger competitors.

But as long as we target the right players and provide them with the right tools, my answer is a resounding yes! Helping small business is sound business. It is sound business from an economic standpoint. And it is sound business from a social and human standpoint. A climate in which small business can blossom and grow, where it is positively encouraged, is our best hope for harnessing all the drive, all the talent and all the enthusiasm of the upcoming generation.

This is what the Bank’s new mandate is all about. We have the tools, the focus and the ability to make a difference. We have it within our grasp to become a catalyst for positive structural change. We’re making good business out of helping small business – and that’s our only business.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


François Beaudoin
President & CEO, Business Development Bank of Canada

The Sainte-Foy (Quebec) Regional Chamber of Commerce, January 13, 1999
Published in The Corporate Report No. 27 (June 30, 1999)

In the 1970s, US Secretary of State Henry Kissinger opened an important press conference by saying something like: “In a few minutes you can ask me all the questions you want. But first, let me give you the answers!”

This reminds me of the dynamics surrounding the whole debate about bank mergers. In one sense, these mergers were the conclusions the chartered banks had reached following a thorough consideration of the impact of globalization on the financial services industry in Canada and around the world.

The problem is that few people really knew the starting point of this whole line of thinking. Consequently, few people came to the conclusion that it is really necessary to allow our big banks to merge.

Yet Canadian bankers were sincerely convinced that they had to take this radical step to continue offering Canadians top quality services at competitive prices over the long term. After talking to many of them, I know they thought it was as much in the interests of the Canadian people as in the interests of their shareholders.

But the message didn’t get through. And one of the groups opposed to these mergers was small business. After Paul Martin’s negative response, everyone dug in their heels. For many people, the matter is closed.

The truth is that the finance minister said: “The government will not consider any new proposed merger of the large banks before the new strategic framework is in place.” I think it would be useful today to take a few minutes to put all these issues in perspective.

One positive result of the debate about mergers is that it highlighted the particular set of challenges small businesses face. Although small business drives our economy, it is still the most vulnerable sector when the financial services industry is going through a period of drastic change.

Other players, like large organizations, have many alternatives when it comes to financing. They can count on foreign banks, among other sources. A company like Bell Canada, for example, has several foreign financial institutions in its financing syndicate.

The consumer also has alternatives. With regards to savings, for example, banks are not the only solution. Today, mutual funds are an increasingly popular and accessible alternative. Bank machines, telebanking and electronic services have virtually become the norm for everyday banking transactions. For their borrowing needs, consumers can now turn to institutions other than banks to obtain lines of credit and residential mortgages. How many of you here have been solicited in recent months to accept a new credit card offered by some new player in the field? So there’s no lack of choice.

For small business, however, the scenario is quite different. I’m not telling you anything new when I say that Canadian entrepreneurs still find it difficult to obtain financing. The number of players serving the small business sector has dropped in recent years, with (among other things) the withdrawal of the insurance and trust companies. The need to facilitate access to capital is even more urgent for knowledge-based small businesses and those outside major urban areas.

One interesting point: although more small businesses are created per capita in Canada than in the United States, a smaller percentage of our small businesses reach maturity. This higher mortality rate may be attributed to the fact that small Canadian businesses can count on fewer sources of financing than small US businesses.

From the viewpoint of globalization, the quality and diversity of sources of access to capital are important advantages to ensure that small businesses are competitive. In this sense, the high concentration of the financial services industry in Canada is a potentially serious handicap for our small businesses.

In Quebec, the industry is even more concentrated, because of the dominance of Desjardins and National Bank in small business financing. If we look at the loans under $1 million in the portfolios of these two institutions, Desjardins has $10.6 billion and National Bank $3.5 billion. Far behind them are Royal Bank with $1.9 billion, Bank of Montreal with $1.4 billion and BDC with $1.3 billion.

So it’s not surprising to find that a large number of entrepreneurs viewed the proposed mergers as a solution to the banks’ problems, not as an answer to the needs of small business. On the surface, these mergers would seem to reduce the number of major players in the financial services industry. If forced to choose between the status quo and the prospect of seeing the number of big banks reduced from five to three, small business leaders naturally prefer the alternative that maximizes the number of sources of capital. But the problem is that the status quo is probably not an option. Globalization and the growing use of technology will profoundly change the reality we know today.

Although Paul Martin said no to the proposed mergers in his December announcement, an important part of his message concerned his intention to launch Canada on the path to fundamental reform of its financial institutions. This is very good news for small business.

In Paul Martin’s own words, the new strategic framework should “promote economic growth and job creation, satisfy the needs of consumers and small business, help Canadian institutions establish a strong international presence, and enhance competition by letting both Canadian and foreign newcomers in.”

This type of reform could be described as historic. It is an opportunity to define the kind of financial institutions that will help us prosper in the third millennium. It is an extremely important reform. Financial institutions play a vital role in our personal lives, in the lives of our companies, and in the life of our whole country. They share our secrets, our hopes and our challenges on a daily basis. They are the guardians of our wealth and important sources of access to capital.

At BDC, we believe this reform should proceed promptly if Canada wishes to develop a framework to contain and, to a certain extent, control the rapid evolution resulting from the globalization of markets and the explosion of technology.

Above all, we believe that the particular interest of small business should have a major, even predominant, place in this reform. Because small business drives our economy, actions that benefit small business automatically serve the best interests of all Canadians.

We must seize this unique opportunity to adapt our banking system to the needs of our small businesses, to help them become even more dynamic and prosperous. Specifically, there is an urgent need to set up structures to serve small business in the new millennium. Our small businesses must continue to prosper. Access to capital, in all its forms, is vital.

One approach would be to create a new type of bank dedicated to small and medium-sized businesses, offering financing, venture capital and consulting services. This point of view, mentioned by Royal Bank and Bank of Montreal in support of their proposed merger, has a great deal of merit and should be taken into consideration.

This new type of bank would have a clear mission and an explicit social responsibility, and would offer small businesses such advantages as a greater choice of lending institutions, qualified, stable staff, innovative services and more diversified types of capital.

At the present time, BDC is the only bank entirely and exclusively dedicated to serving small business. But we don’t view this as our private domain – quite the contrary. We think there should be other small business banks. We are proof that serving this segment of the market makes good business sense. BDC is a profitable commercial institution that doesn’t cost Canadian taxpayers a cent. We make a profit and pay dividends to our shareholders, that is all Canadians. Last year, our profits were $45 million and the dividend was $6 million. The financing BDC has provided to Canadian small business has more than doubled over the past five years.

We are also emerging as a leader in the Canadian banking industry, having successfully developed innovative products and services which have been picked up by other institutions, to the great benefit of our entrepreneurs. With assets on the order of $5 billion and a network of 85 branches, recently extended by BDC Connex, the first virtual branch offering a full line of commercial lending services in Canada, BDC is playing an ever-growing role in the small business sector. Our range of services includes not only traditional financial services but a venture capital division and a group of specialized consultants as well. BDC is also in the process of creating a new kind of banker: small business specialists. Our training programs are among the most advanced in the world.

BDC is a typically Canadian solution: a formula we have pushed to a performance level unparalleled anywhere else in the world. In all modesty, we can say that we are attracting a following, and many countries are trying to imitate us. However, we must realize that we cannot be all things to all people. The needs are enormous, and so is the potential market. Therefore we are not looking to protect our niche, but to share it. We are paving the way and cultivating this niche so that others may occupy and enlarge it. And in doing so, we are helping Canadian small business.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Patrick J. Lavelle
Chairman, Business Development Bank of Canada

The Financial Post Conference on Public Sector Commercialization, June 4, 1996
Published in The Corporate Report No. 19 (September 30, 1996)

I am not here to tell you that the government has decided to privatize the Business Development Bank of Canada. The Bank is very much a part of the government’s strategy to combat the absence of capital available to Canada’s small- and medium-sized businesses in high technology, expert-oriented companies. What I can tell you is that we want to do it on a gap-filling, commercial basis, taking into account our mandate to accept more risk than the private sector and not lose money in the process.

The BDC is not a new institution. It has been around for 51 years. Originally part of the Bank of Canada until 1974, and then on its own after that. While it has played an important economic development role in Canada, it has often been ridiculed as just another federal bureaucracy that spends taxpayers’ money doing what other non-government agencies can do better. It was known as “FUBDUB” and many other epithets when it was this country’s lender of last resort.

Thanks to the policy of the present government, particularly Industry Minister John Manley, the bank has been resurrected and is in the difficult process of being transformed into an efficient, but high-risk, lender to Canada’s high-tech, knowledge-based, growth-oriented companies.

The bank has been running one of Canada’s most successful venture capital funds over the past several years, something that is not well known outside the venture capital community.

With an initial investment of $50 million, the bank has invested in close to 100 companies and produced good results, sometimes on its own and, on many occasions, in cooperation with other private sector- and labor-sponsored funds. The point being that changing the focus will be difficult, but not impossible.

The BDC is a small bank with about $4 billion in assets, placing it about 25th among Canada’s financial institutions. While the bank has had its share of red ink in the early 1980s, it has been on a full-cost-recovery mandate since 1984. This year the bank will declare a profit of $31 million, its best financial performance ever. We expect the profit and return on equity to improve in the future, despite our venture into what is considered a more risky area of business. That is, lending without collateral or lending on knowledge instead of things.

In fact, the bank has a very aggressive corporate plan which will increase its lending to at least $5 billion by 2001, while further removing it as a recipient of government largesse. Last year, we removed the $3.2 billion lending ceiling. The only government funding came as a subsidy to our business services arm.

In the last federal budget, the Minister of Finance announced that the bank had issued $50 million in preferred shares to the Government of Canada carrying a 6.8% dividend. The bank has also given up the government guarantee on its hybrid instruments and consistently betters the Government of Canada rate on its short-term borrowings.

At this stage, the Department of Industry provides the Business Development Bank with a $15-million annual subsidy to support our business services side. This subsidy has been declining as the bank’s management attempts to reach full cost recovery, but it has stalled at 57%.

We are currently reviewing this aspect of the bank’s services with a view to providing more cost-effective, niche-oriented business services and ending the subsidy as quickly as possible. This is not a privatization strategy, but an attempt to convince taxpayers and clients that we are open for business and a financial services institution dedicated to filling efficiently and effectively the public policy role given to us in 1995 by Parliament.

It also serves to recognize the pressures on Crown corporations to be more business oriented by adopting private-sector management practices, personnel policies and restraints. We are doing this through reorganization, early retirement programs, and changing compensation expectations so that they are based on performance rather then on seniority.

What does all of this mean to the small business community of Canada? How does it place more money in the hands of entrepreneurs in knowledge-based businesses? How does it offset the perception, if not the reality, that the commercial banks have cut the small business community adrift?

The BDC, by its mandate, is a gap-filling bank. We are not supposed to compete with the commercial banks, but lead the private financial sector in areas where they are reluctant to go or find it too risky because of the profit motive and the need to continually increase shareholder value. If we are not able to fill this role, then the very existence of the bank would be called into question.

The BDC has been asked to take on more risk by courting the knowledge-based sector, while providing equal access across Canada to raise its funds on the markets without government guarantees. We are supposed to do all of this and be reasonably profitable. This is a conundrum which adequately reflects the pressures confronting all financial Crown corporations.

As the country’s lender of last resort, the old FBDB had to put up with a lot of abuse because previous governments never enforced the bank’s public policy role. This is not too dissimilar from what I found when I was Deputy Minister in Ontario with responsibility for the Ontario Development Corporation. The now-defunct ODC did not function as part of government’s policy agenda no matter how hard we tried to change it. It fulfilled its role as a lender of last resort and as a result when the Harris government killed it, it was unlamented.

One could assume that the BDC would have had the same fate if the Chrétien government and the Small Business Committee of the House of Commons hadn’t rediscovered it as a means of providing more outlets for small business lending. This is, of course, where the crunch is, but the banks, regional agencies, and the Small Business Loans Act have helped alleviate, if not cure, the problem.

Simply having the outlets isn’t the solution. A few years ago Canada was a country without much in the way of venture capital. Today, of course, the country is awash with venture capital funds, many of them making more money on interest than on returns from their investments. Money is obviously not the problem. Risk, cost of capital and access to capital remain the problems facing the small business community, particularly outside the metropolitan areas.

This year, the BDC has had the most successful year in its 51-year history. It will have provided about a billion dollars in new loans, which is about a 24% increase over last year. And, we will have achieved a profit of $31 million, or almost 1% of invested capital. A great majority of those loans were less than $100,000. We also took a significant turn in responding to uncollateralized clients by introducing new programs, such as venture loans and patient capital. These companies represented about 17% of the portfolio and 33% of our new loan authorizations.

The bank has also reached out to develop strong working relationships with other Crown corporations, regional agencies and the commercial banks. We have just put in place a National Director of Aboriginal Banking to further our interests in dealing with Aboriginal entrepreneurs across Canada. We have working agreements with the Royal Bank and are in the process of negotiating with other commercial banks to increase lending in the knowledge-based sector.

Have we completed our transformation? We are just at the beginning. Once, change for the bank was virtually unknown. Today, like other sectors of the economy and life in general, change has a momentum that can’t be stopped. Expectations are high both at the political and economic level. Keeping a low profile and out of the way won’t do.

Crown corporations and regional agencies are reeling from change. Privatization has claimed institutions in recent days, such as the Canadian National Railway. The regional agencies are in the process of revolutionary change, which has already altered their profiles and policies, and the financial Crowns in every province are being closely monitored by their governments.

Senator Michael Kirby, Chairman of the Senate Banking Committee, has just issued a report calling for mergers among the financial Crowns and the creation of a holding corporation which would attempt to end duplication in various activities that are common to them all.

The report raises as many questions as it answers, but it is not a report that will go away. Nor should it. The research for economies of scale, better targeting, better service to the client base, more efficient manpower policies and elimination of duplication are every bit as relevant in the public sector as in the private one.

The financial Crowns have all improved their performance over the past several years, but no one has suggested that they can’t go further. What will their mandates be in the future? Will the private sector eventually fill the gaps that these institutions are now filling? Will governments eventually eliminate regional development policy in favor of market or macro policy? I am not brave enough to try and answer those questions, but answers are needed.

These are challenges facing the bank and other creatures of government policy, and the debate over the Kirby report will help focus these issues. In the meantime, the government is pursuing an activist approach to governance issues, which reflect the changes taking place in the private sector. A good deal of work on approach to corporate governance has already been done by the Crown Corporation Secretariat at the Department of Finance.

Peter Dey, the man who headed the committee which developed the report “Where Were the Directors,” states quite emphatically that directors of Crown corporations have the same duties and responsibilities as directors of public companies. This may be a revolutionary thought, but it is quite correct.

At the bank we established a corporate governance committee of the board last year. The committee has been active in assessing the role of directors and the CEO. We have established a succession planning procedure and have initiated an evaluation process for directors. All of this is very much in the spirit of improving the relationship between the Crown corporations, the government as principal shareholder, and, of course, the public.

Will these initiatives lead to broader changes? I hope they do, because taxpayers, as shareholders, have the same rights as shareholders in any public corporation. That is, to be assured that directors and management are operating in the broad national interest with due regard for shareholders – the Canadian public.

The most important changes taking place at the bank are among the 1,000 employees who work there. Neither true public servants nor private sector employees, they are somewhere in between. For compensation purposes, they are treated as public servants and have seen their salaries frozen for the past four years. While the public may applaud this restraint, it does cause difficulties in a commercial environment.

As we try to reorient the bank, the compensation issues are having to be dealt with. This process is ongoing and the board of the bank is determined to introduce pay for performance as a significant part of base salary for all employees. This year, we have already put in place an early retirement program and have stepped up recruiting to bring young and vigorous talent into the ranks.

We are a small bank, a government-owned institution, but that does not mean we cannot function on the leading edge of banking activity and innovation – all the more reason to do so. In fact, that is our goal. And in a very short period of time we have made some meaningful strides. We have increased the visibility of the bank, installed an ombudsman, stripped away a level of senior management, and recruited new and talented employees both in the senior and junior levels. We have set strict cost objectives and have reorganized to provide greater access and less bureaucratic red tape. But more importantly, we have established meaningful goals that relate directly to the mandate given to us by Parliament.

The true test will be the response of Canadian entrepreneurs, many of whom have a negative preconception of dealing with a government institution. This isn’t realistic in these times. My own sense is that the bank’s clients are already seeing changes and keeping a close eye on what we’ll be doing next.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


John E. Caldwell
President & CEO, CAE Inc.

The Financial Post Conference on Canadian Defense & Aerospace, November 2, 1995
Published in The Corporate Report No. 15 (December 31, 1995)

Under the banner of “Strategies for Staying in the Game,” I’ve been asked to spend a few moments to share with you some of the reasons for our success in the international marketplace. Specifically I would like to discuss niche markets, leveraging core competencies and strategic acquisitions. With your permission I will also talk a little later about strategic divestitures.

To begin, CAE is a diverse company. In total, we have twelve operating companies with facilities in eight countries. Of our total staff of 5,700 worldwide, approximately 4,000 reside in Canada. Although best known for our simulation product lines, we are in a host of other businesses including marine, energy and air traffic control. Through our Edmonton company, CAE Aviation, we are also in aircraft repair, overhaul and modification. We have companies specializing in engineered products for the forest product, pulp and paper, railway, petrochemical, food processing and automotive industries.

Despite the diversity of our markets, all CAE companies share certain common strengths:

•  We are market leaders

•  We are leaders in technology

•  Our products and services provide extremely high value added to our customers

•  We are international in scope

•  Furthermore, each business shares a common growth strategy

Niche Markets

Let me now talk a little bit about niche markets. CAE’s philosophy, in fact our entire business – is based on pursuing and dominating niche markets.

We focus on international markets. We are very proud that we currently export 85% of our products to more than 45 countries worldwide. The markets we pursue have these characteristics:

•  High barriers to entry

•  Product differentiation is primary through technology and where CAE has an opportunity to establish industry standards

•  Relatively small but sophisticated customer base

•  No competitor has a large relative market share

•  High potential for sustained growth

Typically, the markets we pursue are in the range of $50 million to $500 million in annual revenue. We have found that by achieving a leading market position, which we define as at least double the size of our nearest competitor, we can achieve higher margins generally with low downside risk.

To grow within our existing markets, or to gain a foothold in new niche market, we work consciously to leverage our core competencies and technologies. In a recent exercise at CAE Electronics in Montreal, our Canadian simulation company, we identified over one hundred core competencies.

Broadly speaking, we define our core competencies as:

•  Creation of real time alternate environments

•  Delivery of complex individual technical solutions to exacting specifications

•  Interfacing computer technology with the external environments

•  Managing and processing information

•  Visualization

•  Control of dynamic systems

•  Networking of separate, highly sophisticated systems and

•  Managing relationships with large organizations

Over the years, as we expanded and further enhanced our core capabilities, we have been able to not only develop sophisticated products, we have been able to leverage our skills and technologies into either broadening product lines in existing markets, or to enter entirely new markets.

Let’s use flight simulation as an example. We built our first full-flight simulator in 1952 under contract with the Royal Canadian Air Force. In 1955, we developed and sold our first commercial flight simulator. Back then, I am told, our people estimated the total market for commercial simulation devices was four – not annually – for ever!

Today the annual market is about 25 to 30 devices. In 1990, the market actually reached 72. Currently, CAE has about 75% of the world commercial simulation market and a growing share in military simulation.

Leveraging our core capabilities, we have migrated full-flight simulation technology:

•  Into flight training devices, which are lower cost, less complex simulators that exactly replicate the aircraft characteristics, but do not have visual or motion systems

•  We have developed evacuation trainers, which replicate commercial airline fuselages and allow airline cabin crews to receive regular training in cabin safety and emergency evacuation procedures

•  We have developed maintenance simulators to provide high-level training to aircraft technicians

•  We have migrated our technology into computer-aided training systems, which are high level classroom training systems enabling students to see how aircraft systems operate in real time on a desktop computer

We’ve also developed extensive capabilities within the area of oceanic air traffic management. We recently developed two Oceanic Flight Data Processing Systems for use in monitoring and controlling the North Atlantic airspace – the busiest non-radar controlled airspace in the world. Based on the success of these systems, the Airways Corporation of New Zealand chose CAE to develop the world’s first APS-based Oceanic Air Traffic Control System.

Combining our expertise in air traffic control and simulation, we are currently developing an airline flight planning system which will allow our airline customers to determine the optimum route to minimize fuel and tariff costs in real time.

But perhaps the best and most recent example of leveraging our skills to develop products for niche markets is MAXVUE, CAE’s world leading visual simulation system. It has literally revolutionized the commercial simulation industry, providing superior performance at about 35% lower cost.

With continued R&D, we also have a new, enhanced military version of MAXVUE. It will be featured in the EH-101 Merlin helicopter program, which was awarded to CAE last year by the Ministry of Defense in the United Kingdom.

Looking further out, we will continue to migrate all of the above capabilities into new emerging technologies destined for new markets.

Two exciting areas we are currently examining are in the use of simulation as a diagnostic tool for sophisticated process control and a fascinating application known as virtual prototyping.

Finally, let me provide you with another slightly different example of leveraging technology.

Through our robotic and visual capabilities developed in a number of space programs, we are developing a unique aircraft, paint-stripping robot that uses – of all things – good Canadian wheat.

It works by blasting wheat starch as a medium at high pressure, to remove paint from the aircraft without damaging the metal and composite surfaces. Given changes in environmental legislation which will no longer permit the use of solvents in paint removal, this application has particular value for both commercial and military markets.


Part of our growth strategy includes acquisitions. We continue to acquire complementary businesses to take us into new markets, or to gain access to important international commercial and military markets.

In the past year alone, CAE has acquired three new businesses within our Aerospace and Electronics group, plus two new businesses within our Industrial Technologies group of companies.

Our acquisition strategy is highly targeted and categorized into three distinct concepts. First, we seek to acquire businesses with complementary products that share a similar customer base. Secondly, we acquire businesses with synergistic technologies and capabilities which address new markets. And, we also seek to purchase businesses we characterize as portfolio investments. I would like to share with you examples of our acquisition strategy as it applies to our simulation and control systems business.

We have recently established the CAE Electronics Group, which consists of five companies in five different countries. The concept behind the CAE Electronics Group is a team of companies which provide products and services, which are complementary and not overlapping, and allow us to leverage our strengths in every market we pursue.

While the notion of an Electronics Group may seem new, it actually dates back to 1961 – the year we formed CAE Electronics GmbH in Germany. The original purpose of setting up this company was to provide support for CAE simulation products in Europe. As this company evolved, it developed further capabilities in simulation modification and upgrades, communication systems and has developed a number of products on its own. GmbH is also the key customer interface with the German military. In fact, CAE today is, by far, the leading simulator supplier to the German military in large part due to strong local marketing strength, combined with joint program efforts between Montreal and our Stolberg operation.

As we looked to further expand our business, particularly in military simulation, it became clear we had to overcome a number of hurdles:

•  We required strong local effort

•  We needed to satisfy stringent local content or offset requirements

•  And often it is necessary to provide in-country product support

With this in mind, we set out to develop certain new markets which were relatively large and attractive. The most promising were the United Kingdom and Australia. Accordingly, over the past year we were able to acquire CAE Invertron, CAE Australia and most recently CAE MRAD also in Australia.

CAE Australia also specializes in a number of complementary capabilities and product lines including simulation and rail control systems.

CAE MRAD is a world-leading supplier of integrated sensor simulation products and systems primarily used in testing and training applications for the military.

CAE Invertron in the UK not only brings added expertise and a number of complementary product lines to the Electronics Group – including artillery, battlefield simulators and target recognition systems – it also enables CAE to meet local content requirements needed to compete for most defense contracts in the UK.

We had already made inroads into this market earlier in fiscal 1995, when CAE Electronics was awarded an $89 million contract to provide five training devices for the EH-101 Merlin helicopter program in the UK. We have also recently been awarded a second program, which we will announce shortly.

Through the acquisition of CAE Invertron, we’ve developed a new CAE business that should generate anywhere from $50 to $75 million in revenue per year in the UK.

We also have an interest in the long-term niches in the US defense market so we have maintained a business in the United States, albeit small, to allow CAE to pursue certain well-defined programs and provide us with a window on this very large market.

To summarize, the profile of a CAE Electronics team member is:

•  A business that is successful and viable in its own right

•  A leader in its market and a center of excellence for specific products and services

•  An organization that provides the group with local market capability, local content and ongoing product support capability

As these acquisitions demonstrate, CAE is pursuing specific opportunities in the military marketplace. We plan to further expand our portfolio of military businesses.

We also made divestitures, most notably CAE-Link in the United States. This decision was based upon these conclusions:

•  The US defense market was in structural decline

•  The outlook simulation and training sector was not encouraging…in fact, there are no major programs forecast until at least the year 2000

•  With the industry in over capacity, consolidation was inevitable

•  CAE had to either be a buyer or a seller

•  Given the prospects, the level of risk and little upside potential in revenue and margins, we decided that divestiture was the best alternative


At CAE, our goal is not only to stay in the game but to win and to ensure we are not only a successful Canadian company, but a successful international company as well. Our strategy of pursuing niche markets – both by leveraging our internal capabilities and pursuing strategic acquisitions – is allowing us to do precisely that.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Jean-Claude Delorme
Chairman & CEO, Caisse de dépôt et placement du Québec

The Canadian Club of Toronto, April 18, 1994
Published in The Corporate Report No. 7 (August 15, 1994)

A consensus is emerging that Canada needs a new economic vision to meet the challenges of new technologies, emerging competitor nations, and a global marketplace for goods, services and capital. It reflects a new business imperative that compels us to identify and nurture the industries and companies of the future, to value knowledge as a treasured resource, and to link capital with opportunity.

Corporate Canada has a role to play. It must ask itself: what are the tools, talents and techniques needed to succeed? What are the prerequisites of success in the new economy? Where must society demand superior performance and superior results to keep our economy competitive? How do we create a business climate that matches innovation with investment?

As Chairman and Chief Executive Officer of one of Canada’s largest investment funds, I believe a good part of the answer lies in the ability of our capital markets – the investors and the pension funds who act as agents for them – to facilitate new avenues to economic growth.

I believe financial intermediaries such as pension funds can foster sustainable wealth by identifying Canadian enterprises with the greatest potential for growth over time. The challenge is to recognize the urgent need to balance expectations of short-term profits with a greater concern for corporate performance over time.

I’m speaking of a new paradigm for an era when companies are paying the price for too much short-term thinking in the past – in lost market share, lost leadership, and lost opportunity. This framework must go beyond a preoccupation with fast results, immediate turnarounds, and a propensity to pursue the investment flavor-of-the-month. It addresses a significantly different concept, in which the providers of capital and users of capital act less as adversaries and more as partners in enterprise.

Harvard professor Michael Porter has called investment capital the key determinant of competitive advantage in the new economy. It’s a question of allocating it where it can do the greatest good – for investors and companies alike. Professor Porter says that companies must constantly innovate and upgrade their competitive advantages in both physical and intangible assets, to compete internationally. He argues that conflicting agendas between investors, financial intermediaries, and company management often inhibit the flow of capital to investments with the greatest potential for profit over time. He describes pension funds as major conduits for the movement of capital from company to company, but points to the limitations of their focus on near-term appreciation.

From my perspective, I believe pension fund asset managers like the Caisse have a vested interest in looking beyond the short term. We must recognize the significance of the role we can play in the creation of sustainable wealth and in shaping our economic destiny.

This investment strategy is entirely consistent with the goals of pension plan sponsors, because investing is a two-way street. The capital we channel to industry helps build stronger, more competitive companies. In turn, a more vibrant corporate sector contributes to national economic growth, further increasing returns to pension funds and enhancing opportunities for wealth creation.

As one of Canada’s major institutional investors, the Caisse is in a position to appreciate the scope of the Canadian capital market system, its sophistication, and its capability to contribute to solutions.

According to the World Competitiveness Report, among 28 industrialized nations, Canada ranks second in availability of capital, third in financing costs, fifth in quality of financial services, and sixth in capital market efficiency.

Canadian business benefits from a large, available pool of investment capital. A nation of savers, we’ve socked away nearly $400 billion in pension and mutual funds. These investment pools are growing by leaps and bounds. Pension funds have grown 16% annually and now represent $290 billion. Mutual funds, as we know, continue to be a hot item. They are now a $115 billion proposition. Institutional investors now represent more than 65% of the shares traded on the Toronto Stock Exchange. The situation is much the same on the Montreal Exchange.

But directing capital to where it is most needed – for the short term and the long haul – is easier said than done. Money – and profit – are powerful motivators. Conventional wisdom says a bird in the hand is worth two in the bush. Investors are no exception. In an era of sound bites and nanosecond decisions, financial consumers want instant gratification.

Pension funds, by their nature, are entrusted with funds for long periods of time. Nonetheless, they are under relentless pressure to demonstrate performance, usually based on short-term profits.

What does all this mean for investment trading decisions? It’s worth noting that the average period of holding shares has substantially declined in recent years. According to the Toronto Stock Exchange, in the past ten years, the value of transactions of TSE 300 companies relative to their float on the TSE has doubled, from 28% to 56%. Put another way, this means more than half of the shareholder base in the float of TSE 300 companies, in aggregate, changes each year.

Don’t get me wrong: vigorous trading in securities is essential to ensuring the liquidity of investments and the integrity of our financial system. Speculation, arbitrage, risk taking are among the defining characteristics of an efficient capital market. I’m suggesting that due regard to the medium and long term be added to that definition, because it makes good investment sense.

The short-term results syndrome is not without its effect on company executives as well. They are too often compelled to focus on immediate and achievable targets in the name of shareholder value maximization. They recognize that losing investor confidence will restrict their options for raising capital under favorable terms in the future.

In the face of trade globalization and liberalization, executives are quick, and rightly so, to restructure and rationalize to restore competitiveness. But in doing so, is there not a greater risk that focusing too much of our attention on short-term profits causes them to lose sight of the investments required for long-term viability?

Are we satisfied that executive compensation practices are not geared unduly to short-term performance, to meeting quotas and cutting costs, to choosing the expedient over the fundamental? Isn’t this short-term bias reflected as well in capital allocation decisions within companies that rely on quantitative models of net present value, internal rates of return, and payback periods? Don’t these models fall short in assessing long-term investments since future income streams, no matter how promising, are heavily discounted?

How can these methods quantify the payback on soft assets – such as research and development or professional training? You can’t put knowledge on a balance sheet.

It’s interesting to note how Canada’s rate of spending on research and development stacks up against other countries. In 1990, only 1.4% of our gross domestic product went to R&D. That’s only half of what’s spent in the United States, and much less than the 3.1% Japanese companies devote to it. Is it any surprise that Canada imports 97% of all technology we use in this country?

Private sector investment in human resources – through professional development – also falls short. Only 15% of Canadian companies have training budgets. On-the-job skills development is a mere one half of one per cent of total payroll.

Knowledge-based industries – from biotechnology to microelectronics – are high-stakes businesses. Just ask a pharmaceutical company president about the ten years and $200 million it takes to bring a drug to market.

In a knowledge-based economy, the greatest potential may lie in companies with investible ideas. Can short termism make room for such ideas? Perhaps. But I believe that lengthening our perspective and broadening our framework improves our chances of generating ideas more supportive of the longer term demands of the new economy. Furthermore, at a time when so much discussion is taking place on corporate governance, it is timely to suggest that effective corporate governance should be understood to extend beyond the mere notion of corporate controls.

Professors Leighton and Thain of the Western Business School, in their landmark series, speak about new directions for corporate governance. They argue that the role of corporate directors is to add value and to bring perspective to companies as both trustees and consultants.

If the debate on corporate governance is to be productive, it must generate a revised approach to corporate management and reinforce the partnership spirit that must exist between business executives and investors.

Sound corporate governance practices should focus the attention of both management and boards of directors on the need for systematic reevaluation of the corporation’s strategic direction, in the light of competitive challenges and shareholders’ interests.

It follows, in my view, that directors must also contribute to setting the corporation’s strategic agenda, and ensuring that short-term objectives are balanced with long-term opportunities.

Certainly this message is well understood in other countries. New international competitors – in Asia and Europe – are prepared to think…and invest…beyond the next fiscal quarter. They understand the need to balance short, medium and long term.

Look at the dedicated capital approach in Japan and Germany, for instance. In Japan, suppliers and customers cement their relationships through keiretsu – interlocking business groups that are part holding companies, part operating companies, and part investment trusts. Seventy per cent of the shares on the Tokyo Stock Exchange are owned by keiretsus.

German businesses rely on close relationships with their bankers, who are long-term investors in these companies and serve on their boards.

This cooperative model – combined with a national will based on history and culture – has allowed companies to focus on the longer term, to achieving market share dominance, leading in technology, and investing in the people and processes that will shape the next decade and beyond.

I don’t mean to suggest that these models can be transplanted. They can’t. However, if these foreign models cannot be transplanted, the spirit behind them should nevertheless inspire our own behavior. Indeed, we are challenged to find a domestic solution fully adapted to our culture. I believe the answer lies in looking beyond the existing business relationship between investors and companies.

I’m speaking of the need for a more dynamic link between capital and business – an investment partnership that compels investors and companies alike to temper our obsession with short-term profits with a more patient, measured focus on medium to long-term performance.

Investment partnering is an essential feature of the philosophy of La Caisse de dépôt et placement du Québec. It implies a stable and durable association that better aligns management with owners.

As any portfolio manager, we are judged on our returns and on our ability to match assets to liabilities in each of our funds. Our goal is to optimize financial returns on the funds entrusted to us. No other strategy could support the Caisse’s mandate more effectively than one which is characterized by the notion of partnership.

With more than $47 billion of assets under administration, the Caisse manages a well diversified investment pool of Canadian and international bonds and stocks, real estate, mortgages, cash, and less conventional products such as derivatives.

The Caisse is a particularly active investor in the Canadian equities market. We have a stake in more than 250 Canadian companies. Some of you may find it surprising that we have more money invested in companies with head offices in Toronto than in Montreal. In fact, we are among the largest shareholders in many of Canada’s leading companies. To cite just a few examples: the Caisse has more than $450 million invested in Seagram’s, close to $300 million in the Royal Bank, over $200 million in Imperial Oil, close to $200 million in Moore Corporation, $150 million in Nova, and slightly less that $100 million in the Molson Companies.

Suffice it to say that the Caisse is a major player in the Canadian economy. Our portfolio of Canadian equities represents four per cent of the market capitalization of the Toronto Stock Exchange. We are also a global investor, with 12% of our investments in the United States, Europe, Asia and Mexico.

I believe our investment strategies, both traditional and innovative, have yielded good results over the years. In fact, our returns over ten years are approximately 12% a year. In 1993, the Caisse earned net income of $7.7 billion, and achieved an overall return of 19.7%.

The vast majority of the Caisse’s equity transactions – more than 95% – are traditional market investments in companies – usually well capitalized and publicly traded.

We exercise our role as investment partner with these companies through vigorous and open dialogue with management. We keep abreast of their business strategies and seek to go beyond the company-speak, corporate jargon, and cliché references to restructuring, realigning, and re-engineering served up by corporate spin doctors.

We ask about realistic and meaningful plans and timetables. Where does the company see itself five years from now? What investments is it making in innovation and staff development? How can the company redefine the market before the market redefines the company?

In addition, approximately 4% of our assets represent negotiated investments made outside the organized capital markets. Our partnership role in negotiated investments is closer, usually achieved through board representation, shareholder agreements, and consultation that we believe helps nurture the success of tomorrow’s companies.

Our focus is typically on emerging industry leaders that embrace innovation, both internally and externally…through breakthrough technologies or products…investments in lifelong learning…and enlightened leadership.

Although the Caisse has been practicing investment partnering long before the concept of relationship investing became fashionable, we are not alone in recognizing its merits. In fact, the $71 billion California Public Employees Retirement System (Calpers)…as well as Lazard Frères & Co., Dillon Read & Co., and US billionaire Warren Buffett have all adopted similar approaches, and none seems to have regretted it.

Neither have we, and the returns on our investments confirm our confidence in this approach. For example, on an annualized basis over the past ten years, our negotiated investments with Quebec-based companies have earned 370 basis points more than the TSE 300 index return.

Beyond the financial results, there are other benefits that serve to consolidate the long-term viability of companies with which the Caisse is associated. As investment partner, we add value through networking, joint ventures, strategic alliances, and financial engineering. The scope of our international network links investee companies with opportunities, such as new markets, products, or methods, both domestically and internationally.

In recent years, the Caisse has committed some $350 million to such networks, through investments in 36 joint ventures and pooled funds with other institutional investors in Canada, the United States, Europe, Asia and Mexico. These investments allow us to benefit from over $6 billion in additional capital pools, and to leverage the expertise of seasoned fund managers worldwide.

A significant part of our assets are invested in promising sectors such as information technology, biotechnology, communications, the environment, and aerospace.

As we move toward the new economy of the third millennium, it is essential to cultivate new technology-based enterprises that will create a more sustainable industrial base in a changing global economic landscape.

As we seek to redefine our role in this economy, we ask: What can we do together to optimize our ability to meet the emerging challenges?

Although the business community – including the users and providers of capital – cannot be expected to provide a complete answer, I believe success must be a common goal. Shakespeare wrote quite appropriately, “Men and women at some time are masters of their fates. The fault, dear Brutus, is not in the stars but in ourselves.”

Becoming masters of our own fates will take a quantum leap in faith from everyone. Short termism negates our confidence in the value of patience and persistence to contribute to the financial viability of business ventures.

I suggest there is an urgent need for a new investment ethos – for a new spirit of enterprise – because no one wins if the long-term profit potential of our industrial base is not realized or is sacrificed to short-term profit taking.

Nothing short of a new investment philosophy, grounded in a broader perspective and focussed on the longer term, will enable us to reap the benefits we can legitimately aspire to in the new economy.

I am talking about a new perspective shared by business executives, entrepreneurs and investors, that acknowledges our collective ability to reconcile the goal of profit optimization with the byproduct of economic growth and wealth generation; to harmonize financial and economic objectives; and to recognize that the strength and vigor of our economy and our standard of living depend largely on the vitality of the business sector.

This objective requires a broader perspective that cannot be reconciled with short-term goals. Speculators may get rich in a vibrant economy, but vibrant economies are not built by speculators.

The new ethos acknowledges that patient capital will be rewarded through partnerships with management, leading to greater dialogue, and, we believe, better returns over time.

It calls upon directors to help ensure management excellence by contributing their expertise and assuming a greater role in defining strategic orientation with management.

For their part, pension funds remain patient investors, confident that their patience is justified by meaningful corporate plans and strategies. In turn, it empowers senior management to pursue medium to long-term strategies, secure in the knowledge there is a stable shareholder base and a consensus on desired outcomes.

Investment partnering links business with capital and entrepreneurs with investors. It acknowledges that patient capital is not complacent or blind capital, given to an investee company with carte blanche. Rather, it is watchful capital, accompanied by a shared vision of what a company should and can become.

It represents an investment in our future that offers the greatest promise of sustainable wealth for everyone.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Jean-Claude Scraire
Chairman & CEO, Caisse de dépôt et placement du Québec

The Board of Trade of Metropolitan Montreal, October 17, 1995
Published in The Corporate Report No. 15 (December 31, 1995)

In January 1966, Claude Prieur, the Caisse de dépôt et placement du Québec’s first President, was working in a modest office in the old Canadian National building on McGill Street in Montreal. He had no staff and barely a pen and a few sheets of paper paid for out of his own pocket. Even in his wildest dreams, he could never have imagined that the Caisse would have total assets of $48 billion thirty years later.

I am pleased and proud to be here today. This meeting, attended by so many of our economic and financial partners from Quebec, Ontario, the United States, Europe and Asia, is the first of a series of activities marking the 30th anniversary of the Caisse. I would like to wish a special welcome to our guests from the United States, Asia and Europe.

My remarks today will focus essentially on the Caisse, its thirty years of activity and the years ahead. I will also take this opportunity to discuss:

•  The importance of social cohesion for a society’s competitiveness

•  The problems of debt and deficit, which still stalk today’s economy, as always

•  The capacity of Quebec society to support its citizens’ choices

•  The assurance that pragmatism and professionalism will remain the prime considerations for businesspeople in Montreal, Toronto and elsewhere

Quebec’s economic strength

In the past 30 years, Quebec’s economic structure has adapted very well to meet the challenges of the coming decades. High value-added sectors, such as chemicals, plastics, metals, transportation equipment, and electrical and electronic products have joined more traditional sectors on the markets. These industries, as well as aerospace, pharmaceuticals, communications and information technology, provide us with some of the world’s most efficient companies. They contribute directly to the strength of Quebec exports. In 15 years, the high-tech component of our exports has climbed from 12.6% to 27%.

From 1983 to 1993, Quebec exports have experienced particularly vigorous growth and their value has more than doubled. Quebec, at the heart of one of the world’s most dynamic markets, the 100 million consumers of the Northeast of this continent, today sells more than 40% of the goods and services it produces outside its territory. In 1994 alone, Quebec’s international exports increased by 21%. This year, they will show similar growth, despite a sluggish economy in the United States, by far our biggest customer. I am proud to mention, especially since we have the honor of having the recently nominated US Consul in Montreal, Eleanor W. Savage-Gildersleeve, with us today in her first official function, that Quebec ranks eighth among the leading economic partners of the United States, with $40 billion in trade annually.

Quebec businessmen and women, whether in New York, Los Angeles, Hong Kong or Paris, are successfully confronting international competition. Thanks to the talent of our workers and the tenacity of our business leaders, we have been tested in international markets and proven our ability. Our companies are taking on the challenge of foreign competition with flair, ingenuity and determination.

Imprimeries Quebecor, the second largest commercial printer in North America, became one of the leading printers in Europe this year thanks to major acquisitions in France and the United Kingdom. We could also talk about Vidéotron in the United Kingdom and more recently in the United States, and the Groupe Jean Coutu, already the second largest pharmacy chain in New England.

Several examples of success speak for themselves. Today, with financial institutions and major firms with deep roots in Quebec, from the Mouvement Desjardins to Hydro-Québec, our major banks and Groupe Transcontinental G.T.C., Cascades, SNC-Lavalin, Teleglobe and Vidéotron, as well as Bell, CAE, Falconbridge, Noranda, Alcan, Domtar, Bombardier, Zellers, Reitmans, Provigo, Métro-Richelieu, Pratt & Whitney, Northern Telecom and many others, Quebec can look forward to the future more confidently than ever. The Caisse has been associated with all of these companies in various ways over the years.

Our financial market is well organized and efficient, ensuring a large part of the financing not only for local enterprises but also for foreign companies coming to Quebec. The Montreal Exchange, with more than $450 billion in Quebec, Canadian and foreign securities, is now the 11th largest in the world. It is efficient and innovative, especially in derivatives. Most of the world’s major financial firms, from Merrill Lynch and Morgan Stanley to Citibank and State Street, including Yamaichi, Banque Nationale de Paris, Republic National Bank of New York, Société Générale and many more, are active in our market and have developed important ties with our institutions and companies. This national and international network now offers efficient access to financing on international markets for the growing number of firms which have the need and the capacity.

Quebec’s per capita GDP compares favorably with that of Germany. In terms of productivity levels, Quebec would rank among the G7 countries, before Japan and the United Kingdom.

We also have weaknesses, as we all know. This is why we must go even further and do even better. We aren’t the biggest or the strongest, but we aren’t the weakest or the smallest either. We have results that are worth being proud of. They show that together, we can succeed with strength of will, self-confidence, a touch of boldness, vigor, effort, hard work and excellence. The Caisse is happy to have made its contribution.

Quebec has the necessary financial and economic capacity to take responsibility for its development choices. This strength is the result of individual efforts and a broad willingness to work together.

The Caisse portfolio

The existence of the Caisse is the expression of a bold and determined act of will 30 years ago. Today it manages a bond portfolio of $24 billion. Specialists know that public debt traded in the form of bonds is the backbone of the capital market. This reality was one of the key reasons for creating the Caisse: to assure Quebec society and its government of stable public sector securities, based on fundamental analytical factors, and guarantee these securities a liquidity and cost that conform to market realities.

The current portfolio of the Caisse is optimally positioned to fulfill our responsibilities to our depositors, the Government and the Quebec economy, as well as to stabilize markets and seize business opportunities. The Caisse has played this fundamental role efficiently for 30 years under all kinds of circumstances and will continue to do so more expertly than ever, while providing its millions of depositors with high yields.

We have mastered modern investment instruments which allow us to move tactically and strategically. We have a high level and potential of liquidities to assume our responsibilities according to market volatility. The same is true for the main financial players in Quebec and Canada, with whom we are working in joint ventures, in cooperation or in business dealings.

Our equity portfolio provides nearly $14 billion to Canadian and Quebec companies. We invest in over 250 corporations, including the major banks and leading companies. The Caisse is more than a major partner in the marketplace: it is also the biggest shareholder in Canada.

For the Caisse as well as for other fund managers, it is important that pragmatism and professionalism remain prime considerations for business leaders in Quebec, Ontario and elsewhere. I would like to share with you my quiet certainty that business executives will continue, over the next few weeks and in all circumstances, to manage their firms in the best possible manner, consistent with the quest for profitability and the bottom line. This is in the nature of their responsibilities, and what the financial markets demand. It would be an insult to the professionalism of businesspeople in Moncton, Toronto, Calgary or Montreal to think for one second that they could neglect the interests of their companies and shareholders by turning their backs on markets and profitable business.

It is up to the provincial and federal finance ministers to provide the most positive, receptive and favorable environment and framework for business activities and growth. It is thus their responsibility to keep a hand on the economic rudder, and not only keep a close watch on deficits, the debt, interest rates and exchange rates.

The challenges of Quebec society

Any modern society has to face many challenges, competitiveness being far from the least of these. As you know, competitiveness takes on many forms. I would like to quote from the 1995 World Competitiveness Report, which notes one aspect particularly relevant to our concerns: “Today, enterprises seek to develop structures which are adaptive, resilient, cost efficient, and which interface easily with the environment and their customers. The same applies for countries. The role of enterprises obviously remains central to a country’s competitiveness. But modern societies will, in addition, have to efficiently manage their structures – public administration, education, research, social care system, etc. – while preserving the enthusiasm of citizens and the value system they care for. They will also have to master the capacity to reform themselves quickly. Ultimately they should aim to become competitive societies, balancing globality and proximity, wealth creation and social cohesion, and managing change while preserving a stable value system.”

Social cohesion requires respect for identity, values, maintenance of an economic and social model – of which the Caisse itself is one manifestation – and the selection of priorities that conform to these values. In our society, cohesion demands a constant concern for increasing the role of women in various fields, including business management. It requires us to review our methods so that we can integrate a large number of young men and women between 18 and 35 years of age, who are being kept on the margins of the economy and out of jobs for which they often are prepared.

One other question is central to social cohesion. The question of Quebec and Canadian political structures has remained essentially the same for 30 years. The true meaning of this question’s permanence is as follows, in my opinion: it is a problem that will not fade away on its own, which therefore must have real causes, a problem which calls for a solution. Denying that the problem exists is no solution. The problem of Quebec and Canadian political structures is a matter of substance. It therefore requires an appropriate solution, not a minor change, as the Bélanger-Campeau Commission on the future of Quebec concluded.

This means an appropriate solution, that requires creativity and imagination, realism and ambition, self-confidence and common sense. It requires open minds. There are several cases in the world where nations and societies have adopted models of government, systems that respect the identity, values and aspirations of each, ensuring their internal cohesion, while they work together through shared resources and powers. The European model is one example.

I am convinced that you, as businesspeople from Montreal, Quebec and everywhere in Canada, also know that our economies and societies will be more competitive internationally once we have decided to face the problem and apply an adequate solution, quickly, efficiently and rationally, with respect and generosity for each other.

Government deficits and debt are another concern related to the competitiveness of our society, both in terms of the growth of wealth and social cohesion.

The last federal budget contained measures, some of which took effect this year and others of which will come into force in 1996, to reduce the 1995 deficit to $32.7 billion and next year’s deficit to $24.3 billion, an additional reduction of $8 billion.

The recent annual report of the International Monetary Fund indicates that the directors of this organization asked the federal government to do more: “They stressed the need for a faster and more front-loaded fiscal consolidation effort during the current cyclical upturn,” the report stated, adding that the announced measures “would still leave federal debt and interest payments at high levels.”

My concern in this regard is that our management of the Canadian debt, the federal and Quebec deficits, is not as good as it should be. If this does not change, not only will it be needlessly expensive, but it will soon undermine our social cohesion and, through this, the competitiveness of our society.

Andrew Coyne, in an interesting article in last Saturday’s Globe and Mail, pointed out that even the members of the European Union, all of them sovereign States, have a better understanding than Canada and the provinces of how their debt decisions impact on each other.

Quebec citizens essentially rely on their government in Quebec City to look at the big picture and make fair and rational choices based on their values and priorities. Choices on which they can agree in solidarity and which can ensure social cohesion. The Canadian and Quebec political structures would benefit from an adjustment to this reality and to our objectives of improved competitiveness, for both Quebec and Canada.

Thirty fruitful years

The Caisse, like Quebec, has come a long way in thirty years. Today, its $48 billion in assets make it the leading manager of public funds in Canada. Through its assets, expertise and network of businesses and partners, it is part of the circle of major financial institutions in North America. Its influence not only covers the North American continent but extends to Europe and Asia.

The mission of the Caisse, as we can never say too often, is to seek return on investment. The size of the funds we manage leaves no doubt that our objective is profit. Since its creation in 1966, the Caisse has obtained over $45 billion in investment income. Over the past ten years, its average yield has been 10.6%. Year after year, the Caisse realizes financial results which compare favorably to the market as a whole, and it has the capacity to do more and better. After 30 years, we can proudly say that the Caisse has lived up to its founders’ expectations.

In a context of globalized economic and financial activities, the years ahead promise to be fertile with new business opportunities and demanding but stimulating challenges. Return will remain our primary concern. The excellence of our team of professionals ranks first among the necessary ingredients for success. This is an advantage that we already have and that must be carried forward. I take this opportunity to underline the determination, commitment and constant efforts of each member of the Caisse to meet our objectives. The Caisse and all of its components must combine a touch of boldness, action and prudence with a high degree of innovation, expertise, flair and agility to seize promising opportunities, whether these be new markets, new financial products or new companies.

We will rely on ever better first-hand information that is serious and credible regarding the entire globe. We have become an investment multinational: our success and our results, like yours, increasingly depend on how we read world trends and understand the specific characteristics of national economies, and our ability to anticipate the challenges of the future with rigorous professionalism. At the same time, we must identify, analyze and seize opportunities regarding productive companies. This requires both the right information and the ability to use it.

Benefiting Quebec companies

For the past three decades, the Caisse has been an active yet patient partner of enterprises of all sizes, from every sector and every region of Quebec. The Caisse Private Investments Group portfolio currently consists of 192 investments, with a market value of $2.7 billion. By associating with dynamic firms and establishing privileged long-term relationships with them, we seek to encourage their growth. Our financial return is excellent. Over the past 10 years, the average return on investments held by the Caisse in Quebec companies has been 11.4% per year, compared to 9.2% for the TSE 300 index, a difference of over 200 basis points.

Doing even more business and doing it better

This high yield and the favorable impact of these investments on the economy have led to the decision to increase our volume of participating investments. The Caisse Private Investments Group thus plans, as I said in Quebec City yesterday, to invest another $1.3 billion in companies over the next two years.

To achieve these objectives, we created five investment subsidiaries aimed at specific market niches, by company size or by sector of activity. These decisions will allow us to participate even more and more effectively in the dynamic growth of profitable and innovative enterprises.

Our reading of the current situation at the national and international levels suggests a number of promising avenues that we intend to take:

•  Support the development of entrepreneurship and encourage the creation of new businesses that will enrich the industrial and commercial fabric and provide employment to Quebecers. It is important to identify, understand and support the J. Armand Bombardiers of today, the Charles Sirois and Daniel Langlois of tomorrow, the next Cirque du Soleil or Robert Lepage of our cultural industry and the Marie St-Pierre, Michel Desjardins or Simon Changs of fashion.

•  Favor sectors with high potential like technological innovation, telecommunications, health, biotechnology and information technology.

•  Invest in small, medium and large companies, the engines of our economy, that penetrate the export markets; for this purpose, we will address the questions of financing product sales and financing infrastructure products; we also want to bring the Caisse closer to the various communities that make up modern Quebec.

•  Participate financially in the establishment of foreign companies in Quebec and assist Quebec companies in their efforts to expand into foreign markets.

•  Consolidate our gains and support productive enterprises in more traditional sectors, which nevertheless occupy a major place in economic activity.

•  Finally, contribute to the vitality and growth of Montreal as a financial center.

The challenge faced by all of us, whether individually in our companies or together in our societies, is to see farther and look a few years ahead. This also means aiming higher, identifying our hopes and setting our objectives high enough. We are living through a fascinating period in human history, filled with changes and difficulties, but also with opportunities and challenges.

Our capacity to grow and build together derives its source and inspiration from the actions and will of men and women from here and from elsewhere who are building Quebec every day. It is also supported by the special contribution of our financial institutions and all businesspeople.

Our job is to map out, anticipate and conceive the future. Each in our own way and according to our role in the world economic chain, we must shape and mold this future in order to build the society of today and tomorrow, a society that is ever more efficient, dynamic, balanced, rich and fair.

I invite you to join in a renewed solidarity to achieve the growth of wealth and social cohesion. A modern solidarity open to the world. A solidarity that calls and reflects on every one of us. A renewed solidarity that demands that we do more and do it better. We certainly have the capacity to do so.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Juri Koor
Chairman, President & CEO, Call-Net Enterprises

The Canadian Club of Montreal, January 29, 1996
Published in The Corporate Report No. 16 (February 29, 1996)

Quebec has a special place in the corporate heart of Call-Net. This was one of our original long distance markets. We maintain a large office in Montreal. This is where we have one of our major switching centers. And we have linked Montreal through our own fiberoptic circuits to Ottawa and Toronto…and the United States.

Montreal is also in the foreground of our strategic thinking because of our investment in Microcell, which is headquartered here. This company won a federal license last month to build a digital wireless telephone service across Canada.

Today, I want to talk about the status and future of telecommunications in Canada. This is an industry going through extraordinary change. Extraordinary in two respects. The speed of change. And the scope of change.

It wasn’t long ago that we all lived in a tidy world of regulated monopolies, duopolies and oligopolies. Indeed, “Regulate, regulate, regulate” has very much been the mantra of Canada since John A. Macdonald’s national policy at the birth of Confederation. And regulation made sense through much of our history, because of the geographic east-west nature of Canada…the sparseness of our population scattered over such vast distance…and the smallness of our economy relative to the Americans.

To bind our people together, the utilities were given the exclusive right to form economic mass and reap rewards for shareholders in return for advancing public policy. Duopoly railways. Duopoly airlines. Oligopolistic broadcasting. An oligopolistic banking system. A monopoly telephone system. More recently, a duopoly cellular phone system…and a monopolistic cable TV system.

Quite clearly, transportation and communication – of people, of ideas, of money – are central to our national purpose. Now our common cry – well, for most of us – is “Competition, competition, competition.” But with competition has come a chaos set in motion by the energies of unfettered market forces. And the big winners – every time – have been consumers. They have won with lower costs, better services, and more choices. This has certainly been the case in long distance.

But competition has a down side for those who move in a short period of time from the mindset of a monopoly or a duopoly. In the case of the telcos, the return on equity to shareholders is no longer guaranteed. For another, management has to do something quite unusual – manage the business through a period of disturbing change.

The other – and grim – downside is that competition forces monopolists and duopolists to lay off staff. The economic reason is simple. Monopolies and duopolies breed inefficiencies, low productivity, and indifference to economic reality. The human toll is tough to take. Through this period of change, the telecom industry is making massive staff reductions. Sprint Canada is one of few major companies to expand staff. We added 400 people in 1995. Today we employ more than 1,200 people from coast to coast.

For Canadian businesses and consumers, however, competition heralds good news. During the past three years, the cost to you of long distance services should have declined by 30% or more. If you are not enjoying savings of that scale, you are likely paying more than your competitors for an essential cost of doing business.

Another consequence of competition in a previously closed industry is the sudden euphoria of new investors – followed punctually by dashed dreams. When long distance was opened to competition in 1992, dozens of companies emerged to fly the free market banner. Today, most of them have disappeared. Many went bankrupt. Others were taken over. Call-Net, for example, acquired five competitors in three years. Our most recent acquisition was last summer. The reason that so many new competitors ultimately wilted is because they lacked financial resources, product lines, technology and management expertise.

So what’s the look of the industry today? In 1991, Bell and the provincial telephone companies owned virtually 100% of the market. In 1992…the CRTC stated that it expected new competitors to win 30% of the market over 10 years. That would leave the former monopolists with 70%. We are talking, by the way, about a market that generates revenues of $8 billion a year. It is also growing by 3 to 4% a year.

Today, nearly four years later…Bell and the other former monopolists still have about 84% market share. New competitors have about 16%. To put that in perspective, the next largest long distance companies after Stentor are Sprint Canada and Unitel. We each have about 6% market share. There are also two other national competitors, as well dozens of small regional and niche players.

So…after four years of intense competition…the long distance sector has made half the market transition that the CRTC anticipated. In the United States, where there is a longer history with competition, new competitors have won about 45% of long distance revenues.

The industry and most telecom observers have always believed that opening long distance to competition would ultimately result in one viable national alternative to Bell and the other telcos. All along, everyone expected Unitel to be that alternative. Today, minds are changing, in view of the unexpected achievement of Sprint Canada, which is now the number one alternative to Stentor. But then again, the race is far from over. Many more surprises could emerge.

A fundamental question is: who will control the industry? We should have the answer fairly soon, because we at Call-net have asked the CRTC to rule on this issue. It is a vital issue…so let me provide some context. In 1993, when we were still a very small company in an industry of giants, and competition was only a few months old, we realized that to grow we needed access to advanced technology with brand identity.

The US telecom firms had the leadership in technology and the experience with competition. Stentor came to that realization first and signed a deal with MCI in the fall of 1992. It bought US technology. Many of the advanced products Bell and the other telcos offer today are MCI-related products and are run on MCI data bases.

Then, in early 1993, Unitel signed a deal with AT&T for US technology. Call-net followed about a year after Stentor in the fall of 1993. We bought both Sprint technology and brand identity. I should emphasize, however, that many of our products for residential customers and small business are Call-net innovations with the software developed here in Canada.

Why were these three alliances formed? To reduce risk. To reduce technology risk, market risk, operational risk and ultimately financial risk. All three transactions with US carriers happened in full accord with the ownership and control provisions of the Telecommunications Act.

Now those provisions are, in our view, being tested by AT&T’s absorption of Unitel. Unitel, as you know, has been in the Canadian telecommunications business for more than 100 years. In 1993, it was owned by three major corporations: Canadian Pacific, Rogers, and AT&T. At that time, its ownership and control conformed with the Telecom Act.

In 1995, it essentially went bankrupt. CP walked away from its historic investment. Rogers wrote off $500 million. And AT&T wrote off its investment. Last September, AT&T struck an ownership deal with three Canadian banks…the banks which own Unitel’s $700 million of debt. The banks have no telecommunications expertise. They know it and, according to recent reports are looking for a quick exit from the Unitel deal.

In the meantime, AT&T has taken control of Unitel. One of its vice presidents is the CEO and the US company is providing operational, management and consulting services. That, in our view, adds up to “control in fact” under the Telecommunications Act. And that is illegal. Federal law says that non-Canadians cannot have “control in fact” of a Canadian telecom carrier. We have asked the CRTC to check all this out – and to enforce the foreign control provisions.

What happens if the CRTC allows the AT&T deal to go ahead? That, we believe, will officially open hunting season on the Canadian telecom industry. Sprint, MCI and other large US telecom companies – joined no doubt by the best of Europe and Asia – will charge over the border in a new round of ownership and management alliances. There is no way they will sit by and watch AT&T march across Canada unchallenged.

Believe me, we at Call-net will not get trampled in the stampede. We have worked hard to grow as a Canadian enterprise under Canadian rules. If the Canadian control rules do not apply to Unitel, then we will be forced to change how we do business in the best interests of our shareholders.

Foreign control in the telecom industry is, then, an important issue for regulators and the government to resolve in the context of Canadian nationhood. In the meantime, despite the chaos and strains created by transforming a monopoly industry into a competitive one…I am pleased to say that we are evidence that a new player can survive.

Listen to these numbers that track our progress. In 1992, we had revenues of $83 million. For 1995, we expect approximately $450 million. That is more than five times the revenues of three years ago. Yet, as I mentioned, during that time, product prices have plummeted by more than 30%. We have also gained the confidence of capital markets. In 1992, we went public with a $30 million equity issue. We have since visited capital markets successfully four more times. In total, we have raised over $450 million. And we know we have the capacity to raise further substantial sums of money because we have created a viable and sustainable business…small though it may be by comparison with the multibillions of Bell.

What is the future for the industry – and for us? A lot depends on whether the CRTC allows AT&T to absorb Unitel and treat Canada as the 51st state. A lot depends on whether competition stays alive. Or will the Stentor companies drive competitors out and regain the comforts of the past? That would be good news for Stentor’s investors – and a disaster for Canadian business and residential customers.

A lot also depends on how the Canadian industry ends up forging new alliances. Will the Stentor alliance fragment into two or three national companies? Or will some of the telcos form alliances with cable firms and other carriers?

The next two or three years will see a turbulence that will undoubtedly provoke even more chaos.

Satellite-to-home television. Digital wireless telephone systems. Local telephone service competition. All of this will pit telephone monopolists against cable monopolists…and both groups against upstart competitors like Call-net.

Change of this magnitude will inevitably breed chaos. And chaos breeds opportunity for the clearheaded, the focused, and the well capitalized.

The area of biggest chaos right now is the Internet. You’ve all been inundated with information. The real challenge is separating the hype from the substance. This room is full of business managers and professionals. I ask you: how many of you spend more than five hours a week on the Internet? Five hours a month? Five hours a quarter? Any time at all? And how much are your firms prepared to invest seriously in the Internet?

If you unplugged all the kids having fun on the Internet – and all the serious subscribers who use it for research – what’s left that is commercially viable? Or is acceptance of the Internet a generational thing, like ATMs and telephone banking? Many observers think 1996 will be the year of implosion for the Internet. We shall see.

For us at Call-net, the immediate challenge is to determine how we carry our enterprise forward to create the greatest value to our shareholders. Should we continue to acquire long distance competitors? Not that there is much left to acquire.

How should we build on our investment in Microcell? Should we expand into new sectors? For instance, we are investigating the value of setting up a local telephone company. Or should we consider merging our business with a company that has strengths in other sectors to match our strengths in long distance?

Yes, this is strategic thinking time. Our minds are focused on the best interests of our shareholders. Chaos breeds opportunities. But opportunities only make sense if they create shareholder value.

Another factor that will influence the future of telecom is the role of the CRTC. The federal commission was for most of its history responsible for regulating the rate of return that the monopoly telephone companies could earn. That process enabled the telcos…along with other utilities…to stand first among industries in the returns they consistently delivered to their shareholders.

We believe that the CRTC exists today to champion a competitive marketplace. How far, though, should it go in supporting new competitors? In our view…as far as is necessary to ensure that new competitors can survive profitably…and that broadly based competition is sustainable.

But doing that is not easy. We have seen disturbing incidents of CRTC decisions being overruled by the federal cabinet. It is difficult for the industry to divine government policy when the CRTC moves in one direction and the government appears to be going in another. We believe that it would be useful to the telecom industry, and to the CRTC, for the government clarified its policy priorities for the next few years. This is important because of the magnitude and the velocity of change occurring in the industry. It is also important because applicants before the CRTC are asking for approvals in areas where the government has not yet established policy. We want to know the rules and their durability so that we can plan our business strategy.

Overall, the Canadian telecom industry stands on the edge of rapid change. Call-Net and Sprint Canada have been through the chaos in one sector. Against all odds, I hope we have succeeded.

The battle for capital, for customers and for revenues will continue to be fierce and bloody as competition spreads to new telecom sectors. I ask you, is there any industry in Canada that offers such excitement?

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Buzz Hargrove
President, Canadian Auto Workers Union

The Canadian Club of Toronto, February 23, 1998
Published in The Corporate Report No. 24 (May 30, 1998)

In the January 1998 issue of our “national newspaper’s” business magazine, the lead editorial began with the assertion that, “Rarely have so many had so much to feel so good about.” As if to quickly pre-empt the slightest debate or dissension rearing its uncomfortable head, this was followed by an article headlined: “Get over it.” Apparently any complaints couldn’t possibly have anything to do with the real world, but were rooted in our national character, which was conveniently defined as “pessimistic and wary” and “incapable of rolling with the good times.”

This glib response to what is actually going on in our country reminded me of a more honest statement made by a Brazilian general in the 1950s. Asked how things were going, he replied: “The economy is doing great but, unfortunately, the people in it aren’t.”

For the corporate sector, these are indeed heady times, the culmination of economic and political victories won over the past two decades. The stock market graphically highlights and symbolizes these triumphs. While family incomes stagnated over the past two decades, stock markets accelerated at rates no one ever imagined were sustainable. Over the 20-year period since 1977, during which the incidence of dual earners increased by 23% and family hours of work increased significantly, real median family income went up, in total, by all of two-thirds of 1%. Meanwhile, someone with the money to invest in the TSE 300 could have sat back with a nice glass of wine and watched his investment over that same period – on average and after inflation – more than quadruple!

A few commentators, not at all typical, but nevertheless still part of or tied to the business establishment, have recently expressed concern over both the ideological and inegalitarian excesses inherent in the business-led restructuring. Billionaire George Soros put this into a post-Cold War context in a highly publicized article: “I now fear that the untrammeled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society. The main enemy of the open society, I believe, is no longer the communist but the capitalist threat.” (Atlantic Monthly, February 1997)

Peter Drucker, America’s most well-known business guru, felt compelled to assert: “We are learning very fast that the belief that a free market is all it takes to have a functioning society – or even a functioning economy – is pure delusion.” (Wired Magazine, October 1996)

The sponsors of the 1996 World Economic Forum, addressing a “who’s who” of international corporate and political leaders, opened with a self-interested warning: “A mounting backlash…is threatening [to disrupt] economic activity and social stability in many countries…This can easily turn into revolt…Public opinion will no longer be satisfied with articles of faith about the virtues and benefits of the global economy. They want action…” (International Herald Tribune, February 1, 1996)

At the most recent World Economic Forum, a group which The Financial Times (February 1,1998) dubbed a “self-styled revolutionary group of young business leaders” warned that “Europe’s socio-economic system is failing the populace.” And Business Week (January 26, 1998), editorializing on the crisis in Asia, warned: “So far an Asian backlash has targeted corrupt politicians and crony capitalists. But angry nationalism is growing and the backlash can easily shift to anti-Americanism or even anti-capitalism.”

Here in Canada, David Olive, at that time editor of The Globe and Mail’s “Report on Business,” but speaking in a very non-Globe-and-Mail way, bluntly asserted: “There may be a CEO or two under the mistaken impression that only politicians hold office at the pleasure of the community. A reminder: capitalism exists by popular consent…the mindless repetition of efficiency mantras and…enhanced shareholder values will not prevail should the public decide that the economic system no longer operates in their interest.” (The Globe and Mail, April 1996)

The question being raised in these comments – the question that will be the central political question of our time – is what are the implications of the corporate sector’s triumphs? The emerging issue is where the corporate agenda – now largely implemented – is taking us. Will it be challenged in any sustained way? What will be the basis of that challenge? How deep and far might such a challenge go?

To some, the economic parallel is to the period leading up to the Great Depression, when economic imbalances threatened the collapse of the system. Our times, like those, are characterized by an extreme polarization of incomes, exhaustion of savings and growth of consumer debt, excess capacity in a wide range of industries, over-valuation of stock markets, national austerity programs, international financial instability and competitive devaluations, and the self-defeating and contradictory attempts of each country trying to solve its own “domestic” problems through exports to others trying to do the same thing.

There is, however, another parallel to that earlier period to be raised – one obviously linked to the economy but which goes on to question, as happened in the thirties, the corporate elite’s credibility, competency, and leadership role in our society. In the 1920s that elite was – like today – riding very high. Autos and electronics were emerging as mass-production sectors full of new possibilities, and the “captains of industry” were national heroes. When the Depression hit, people turned to these same heroes – because of their past leadership and experience – to be their saviors through the difficult times. But when the economy worsened, and the advice and leadership of the captains of industry proved not just ineffective but harmful, people quite suddenly and massively turned against them. After all, if the captains of industry were given the credit for the good times, they should also be held responsible for the bad. As Rubens Ricupero, secretary-general of the United Nations Committee on Trade and Development (UNCTAD) recently noted, “the 1920s and 1930s provide a stark, and disturbing, reminder of just how quickly faith in markets and economic openness can be overwhelmed by political events.” (The Wall Street Journal, September 16, 1997)

The economic and social crisis that subsequently emerged within capitalism was ultimately alleviated by a set of policies and structures which became known as “the welfare state.” Ironically – or perhaps predictably – it is the corporate-led dismantling of that previous solution to a fundamental social crisis, which is now recreating the conditions for a new crisis. The welfare state had emerged out of series of linked historical events: the loss of credibility of capitalists and capitalist solutions during the 1930s, the determination to limit the radical movements that were the response, the war and the strong bias for equality whenever people fight and sacrifice for democratic principles, and the postwar competition with the Soviet Union for global moral leadership.

What that postwar period represented was a form of “class compromise” or a “social contract” to legitimate and stabilize capitalism. Social conflicts – many of them very significant – continued, but at the end of the day there was an acceptance that while corporations would run the economy, restructure it, and increase trading relationships, the general population would have jobs, feel protected through economic change, and share in the benefits achieved. Whatever hardships working-class families had, there was an assumption of uninterrupted generational progress – sons and daughters would end up better off than their parents.

In the quarter-century after the war, Canadian workers saw unemployment fall and stay relatively low. Working-class families achieved steady and dramatic increases in their standard of living. A progressive coalition lobbied for and won new social programs like Medicare and the Canada Pension Plan. And we saw inequalities eased and a measure of security generalized. By the late 1960s, however, the postwar “consensus” was showing its first signs of unraveling. Two things in particular had changed. Europe and Japan had reconstructed their economies and become serious competitors globally. And at home, the working class, buoyed by secure times and social programs that provided entitlements independent of the market, had become more confident and less amenable to corporate and market discipline.

With profits under pressure and workers resisting discipline, the corporate sector found the welfare state was no longer affordable, nor acceptable. Radical change was necessary. By the mid-1970s, the Business Council on National Issues was established in Canada, mimicking a similar organization in the United States. Corporate Canada was organizing itself and mobilizing to change ingrained expectations, structures, and the direction of Canadian society. Over the next two decades, business was remarkably successful in both political achievements and the limited reaction against them. Before this assault began, those of us on the other side had assumed that social programs were untouchable – the relevant debate being only about how they could be expanded and deepened to include new rights. Few of us would have believed that steady double-digit unemployment rates could be sustained without riots in the street, or that the gradual but consistent move to greater social equality could be reversed.

That the corporations were so effective reflected not just their resources and power, but the real gains people had previously made within capitalism. Whatever frustration and resistance there was to the new pressures for cutbacks and restraint, people ultimately hoped that this was temporary, and they reluctantly accepted the austerity as part of hanging on to the greater part of what they already had. Without an effective opposition, corporations had free reign. The ideological implications of the collapse of communism and Eastern Europe’s rush to jump on the capitalist bandwagon, reinforced corporate confidence and corporate aggressiveness reached new heights.

The new world, business told us, was tougher, but the pain would be short-lived and well worth it – the restructuring of the economy and of society was an investment that was part of building for the future. The cold shower of unemployment forced on workers was the unfortunate cost of getting inflation under control, but ending inflation would make us competitive, keep the dollar strong, and set the stage for steady progress. Weakening unions would remove barriers to job creation. Free trade would close the productivity gap with the US, bring more and better jobs, and secure our social programs. Deregulation would be a boon to consumers, privatization a blessing to taxpayers. Getting the deficit in shape would protect future generations.

Well, it’s been almost a generation now and people are starting to do their own accounting – and starting to demand some accountability. With echoes of the 1930s, people are looking around at this new world and asking what past sacrifices were for, and what happened to the benefits promised. The success of the corporations in winning their agenda has set the stage for a test of what their leadership has meant for the rest of us. Have, as The Globe and Mail declared, “so many [rarely] had it so good?”

In the previous 25 years, between 1946 and 1971, real per-capita income in Canada had more than doubled. In the 25 years since, and in spite of the acceleration of technology, the painful restructuring, the longer hours and harder work, it’s gone up by only a fraction of a percent per year. In fact, in the decade 1986-1996, the real median family income actually fell – the first 10-year period this had occurred since the years spanning the Great Depression more than half a century before. And the social programs which were formerly an example of our achievements as a country, are today seen by our business and political elites as “problems” that, although affordable without deficits in earlier periods when we had less collective wealth and productive capacities, are today inexplicably considered as being “beyond our means.”

Behind the stagnation in the average material standard of living lies a stunning growth in the unequal distribution of what we get. Some have in fact never had it so good, and this is clearest when we listen to their complaints. Richard Todd, writing in the magazine Worth (December 1997), reports a conversation with a retiree in Florida: “All I know is that it seems to take another digit these days. There are lots of people around here…who retired a few years ago with two or three million, thinking they were set. Now they feel poor.”

Alan Binder, the American economist who formerly worked under Alan Greenspan, the head of the US Federal Reserve, recently commented that, “When historians look back at the last quarter of the 20th century, the shift from labor to capital, and money and power up the income pyramid is going to be their number one focus.” (The Toronto Star, July 20, 1997)

Internationally, the impact of 30 years of accelerating globalization has included a rising gap between rich and poor. The ratio of the top 20% of the world’s population to the bottom 20% was 30 to 1 in 1965. Latest numbers show it to have doubled to 60 to 1. Half of the Asian population – 1.5 billion people – make less than $500 per year. A 1997 United Nations report warned that, “Evidence is mounting that slow growth and rising inequalities are becoming more permanent features of the world economy.” (UNCTAD, September 11, 1997)

In Canada, overall income equality is today worse than at any point in the past half-century. And unlike the past, inequality is now increasing even during upturns: between 1993 and 1996, the top fifth saw real family income increase by some $4,600, while the bottom fifth – averaging a little over $17,000 in annual income – actually experienced a decrease in income.

Child poverty in our country is worse today than when the federal government sanctimoniously began its “War on Child Poverty” at the end of the 1980s. In Metro Toronto, so long a model for other North American cities, one in three children now lives in poverty. In Ontario, payments to single mothers are being cut to pay for tax cuts heavily biased to the well-off in society (to generate the monies for Harris’s tax relief for someone earning $250,000 per year, you have to apply the welfare cuts to five families led by single mothers with kids). For people on welfare, “incentives” are about having less, for executives, “incentives” are, conveniently, about having more.

The Financial Post (December 20, 1997), commenting on the expansion of the million-dollar club in Canada, advised: “Wanna get rich? Be a player, not an investor.” The red-suspender crowd, busy “playing” the market and often producing nothing except the occasional turmoil, takes the occasional break to pass on a different kind of advice to workers, lecturing them to work harder.

The extent of the inequality in our society – and the hypocrisy that is its constant companion – is most evident not so much in the tax breaks but in the mind-boggling corporate salaries themselves. CEO compensation in Canada increased by $190,000 or 32% in the three-year period 1992-95 (according to a study done by accounting firm KPMG). Just the increase by itself represented four times the total annual income of the average family. A bank president now makes more, in his first two days of work after the Christmas break, than a clerical worker makes year-round.

As for all the talk about efficiency, there is nothing less efficient than unemployment; yet we tolerate some 1.5 million Canadians denied the chance to be productively employed citizens. Today, two consecutive months of under 9% unemployment has economists raving about our fantastic success. To put this in context, in the 30 years after the war, the unemployment rate never went above 7.5%.

Young people today represent the most educated potential workforce ever, but they’re having a tougher time getting jobs, and the average pay they get is below the pay for comparable age groups with less education 20 years ago. The hype about new opportunities in high-tech obscures the real problems the next generation will face. In the United States, for example, with its powerful high-tech base, jobs related to computer systems will in fact grow very rapidly. But projections through 2006 suggest that such jobs will still only represent about 2% of total job openings, and will be far exceeded by job openings for occupations like cashiers, or cooks and kitchen staff, or retail clerks, or waiters and waitresses.

The Canada-US Free Trade Agreement, business confidently stated, might mean a slight loss in sovereignty, but would bring us the more important benefits of higher productivity. Now, recent analyses show, the Canada-US productivity gap in manufacturing has worsened and widened. As a Wood Gundy study put it, in classic understatement: “In the eight years since the Canada-US Free Trade Agreement was signed, Canada’s productivity performance has failed to live up to expectations.” (Occasional Report No. 19, September 2, 1997)

Corporate success in changing the political climate held out the payoff of attracting more foreign investment. And foreign direct investment did in fact, increase dramatically over the years, doubling in money terms over the past decade – but the outflow of direct investment tripled.

During the 1950s and 1960s, Canadian capitalism, and capitalism more generally, built a base for stability that rested on three specific legs. It had demonstrated that it could deliver the goods in terms of a material standard of living. It could (in spite of the reality of owners and workers, rich and poor) argue with credibility that capitalism provided the democratic spaces, via unions and parliament, for everyone to influence outcomes. And it could rally people around a common national project and vision – in Canada’s case, that of maintaining our independence from the United States, and building a kinder, gentler capitalism on our share of the continent. Today, each leg of that base has been seriously damaged and the base itself is starting to wobble. Today, the message, at least for most of us, is less about the system delivering the goods and more about austerity, restraint, and the erosion of social programs ranging from education to healthcare and unemployment insurance to public pensions. Workers can work harder, their employers can be more successful, but – and downsizing and outsourcing are only one example – the link between overall economic success and the guaranteed sharing in that success is weaker than ever before.

In the workplace and in society at large, the expansion of international economic links is directly related to the contraction of democracy. Globalization, we’re told, imposes pressures that neither unions nor governments can challenge. So here too, a former asset of capitalism, its compatibility with a relevant and working democracy, is undermined. The message, as someone explains to the knight in the feudal comic strip The Wizard of Id, is: “Remember the Golden Rule – them that has the gold, rule.”

In this context, any vision of what we are or what we can do is narrowed to the restricted world of corporate bottom lines and competitiveness. Margaret Thatcher publicly acknowledged this, proudly proclaiming – in response to criticism about the direction of her policies – that “There is no such thing as society.”

What we are left with is a world not just devoid of hope, but which depends on the very loss of any hope, and the resultant passivity, to sustain itself. It may leave most people living in fear, insecurity, cynicism and therefore demoralized and temporarily demobilized. What it cannot do is unite, move, excite, or expand on what human beings can jointly construct. It represents the end of community and, as Thatcher said, any meaningful sense of “society.”

This reduction of society to the economic, and the collapse of any vision to a transparently class vision, is particularly blatant in the business sector’s latest project, the MAI (Multilateral Agreement on Investment). What that proposed treaty essentially argues for is “protecting” investors from the democratic intervention of the community. It elevates investor rights to a status that is beyond citizens and their governments. At the same time, there is total silence about any corresponding responsibilities of investors. In a sense, this simply reflects the inherent logic of capitalism. Milton Friedman, the ideological father of modern laissez-faire, once said that “Business as a whole cannot be said to have responsibilities. The doctrine of social responsibilities is a fundamentally subversive doctrine.”

At one level, I can agree that under capitalism, the business of business is, and perhaps should be, business. I’ve never believed that we should expect corporations and bankers, going about their business and responding to competitive pressures, to act socially responsible on their own – in fact, that’s precisely why, in any society that sees itself as more than one giant factory, we so clearly need rules and regulations to direct business in a way that incorporates social and democratic needs.

The point is that business and society are always interrelated. What business does always impacts on society. If we pretend otherwise and leave business “alone,” then the “business” of society is also reduced to “business.” The deregulation of business and investment will simply translate into the regulation of citizens and communities by business and through the market. As a Globe and Mail (November 25, 1996) editorial approvingly put it: “In politics there is no left or right anymore, just arithmetic.”

In the past, governments were a buffer between business and the people in a dual sense: they provided programs to offset negative impacts of the economy, and, at least as important, represented something to blame for problems, a group that could occasionally get turfed out with the hope of change. The Mulroney government is a clear example of the latter. The frustration of Canadians with so much of what had been happening to them in the 1980s wasn’t directed at the corporate sector that Mulroney was so intently catering to, but against “government” and especially Mulroney himself. And so Mulroney was rejected, only to be replaced, with no break in continuity, by an administration self-righteously critical when in opposition, but once elected, committed to the closest imitation and even acceleration of Brian Mulroney’s policies.

But as business successfully discredits a role for government in addressing the inadequacies and excesses of the markets, government responsibility for our problems fades and that responsibility is shifted to the real source of power, the corporate sector. A few years ago, David Rockefeller remarked that “We [the transnational corporations] are now in the driver’s seat of the global economic engine. We are setting government policies instead of watching from the sidelines.” (CCPA Monitor, 1996)

What Rockefeller dared to state is now increasingly sensed by those being ruled. Business may be “winning,” but its failure to turn those same victories into a better life for ordinary people is slowly starting to raise questions about the corporate elite’s legitimacy and even competency to play such a dominant leadership role in society. How come we reward corporate executives and bankers so well, and leave them with so much power over our lives, when they deliver so little? Where are the jobs? Where are the social programs the BCNI promised in the run-up to the free trade election? Where is the security? What exactly is Canadian about “Canadian business?”

Over the last 15 years, the rate of asthma doubled among children and hospital admissions due to respiratory illness of children increased by 40%. What is the connection between our refusal to regulate the environment – the air we breathe, water we drink and soil our children play in – and the assumption that economic progress should include a steady improvement in public health?

How much is enough? In reporting that the Toronto Dominion’s chairman received stock options worth over $40 million, the reporter saw this as “a startling example of how rewards now include immense personal wealth, not just the power, prestige, private elevators and comfortable pensions with which previous generations have had to be content.” (The Globe and Mail, December 16, 1997)

Why, as author Doug Henwood asked, do governments in crisis borrow from the rich instead of taxing them and then pay them interest for the privilege of not being taxed? If the point of getting the deficit and inflation under control was to restore investor confidence, how come our dollar fell to the lowest levels in history after the deficit and inflation dragons were slain? Is there a link between the fact that since 1989 Canada’s deficit fell faster than any other G7 country, while our growth ranked last?

Is the international economy out of control? Why does money flow from those who need it to those who don’t? How did the International Monetary Fund get it so wrong in Asia so soon after the financial disaster in Mexico? Didn’t the IMF assure us a short time ago that “There is no doubt that globalization is contributing enormously to global prosperity” (World Economic Report, 1997), in the very same report that glowingly cited South East Asia, just months before it collapsed, as a model of development?

What about the bankers who echoed the IMF by investing all that money in Asia – did they know what they were doing? And where was all the corruption everyone now emphasizes, when “Business Canada” visited the region without even a whisper of any criticism or when we hosted the APEC Conference and actively silenced Canadian students daring to speak the truth?

How come no one cares much about the ordinary Joe’s mortgage problems but when the banks make a mistake, as they did in Asia, we’re so quick to bail them out and so comfortable using the ordinary Joe’s tax monies to do so, while also putting the squeeze on all the ordinary Joes in the Third World? Isn’t it interesting that, for all the talk about getting government out of our lives, when the big guys are in trouble it is governments they look to for help? I don’t know where this all takes us, but I do know that there is a frustration out there (and not just in Canada) that most of business has been too distant to notice and too arrogant to address.

In the US, The Washington Post (December 10, 1997), commenting on the defeat of Clinton’s attempt to fast-track the extension of NAFTA into Latin America, declared that “No longer do Americans take it for granted that an open economy makes everyone better off.” A columnist in The Los Angeles Times (December 28, 1997), considering the response to financial bailouts in both the US and Japan asserted that “the ordinary citizenry, in both the United States and Japan, is starting to figure out the abusive political economics involved.”

A New York Times poll (March 5, 1996) showed surprising numbers of people identifying themselves as “working class,” blaming “the economic system” for layoffs, and calling on the government to do something about layoffs. The strikes in France of 1995-96 were significant, not just for the support they had from workers, but the overall national support they had in spite of the inconvenience they caused. Reporting on one poll, the writer summarized: “Gone was the optimism of the mid-80s, especially among young people, who now said they distrusted private employers. There was a loss of faith in business.”

Canada, the protests across the country over the last few years, the recent “Days of Action,” and the Ontario teachers’ strike revealed a mood of resistance that no one anticipated. The Canadian banks have been embarrassed enough – and nervous enough – to respond with an advertising blitz to “educate the public.” But the patronizing use a small fraction of our own money to “re-educate” us into accepting a status quo that has failed us, is more likely to ignite anger than gratitude.

The ultimate response from business and its spokespersons to all of this is that at the end of the day “there is no alternative.” This may work for a while. It has worked so far. But I can’t imagine that it’s sustainable. It essentially admits that capitalism has no solution to our problems and so seems to condemn our current system, rather than defend it.

Capitalism has, historically, demonstrated many of the potentials of what humans can achieve. I happen to believe that what we have today isn’t the end of that story of human and social development. If the best we’re offered is that “there is no alternative,” then I suspect people, and especially young people, will eventually rebel as pent-up anger and frustration accumulate over the system’s inequity and hypocrisy, its failure to mobilize human potential, its steady erosion of any scope for actually influencing our lives, its increasingly irrational and fragile – and its general – small-mindedness. Any comfortable complacency is dangerously misplaced. At some point, the message a frozen status quo forces on people is that they “have no alternative but to radically change the system.”

I’m certainly not making any predictions about if and when this might occur, or, if it does, what form it might take. But if it does happen, I certainly won’t be surprised – and neither should anyone in this audience. For those of us in opposition to current trends, the immediate issue is to maintain and strengthen the checks that keep alive values and priorities broader than “competitiveness.” For others not quite on the same wavelength, there are still reasons for sensitivity to such concerns, whether out of self-interest over longer-term stability, or out of a genuine concern for what is happening in our society.

If anything is clear today, it is that a meaningful democracy demands institutional counterbalances to corporate power in the workplace, the community and in society as a whole. Among other things, this implies the deepening of unionization as well as more effective and active unions, opening up the increasingly monopolized media and communications, and greater thought to making all levels of government more accessible and responsive as instruments for addressing the needs, and developing the rights, of all its citizens.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Paul M. Tellier
President & CEO, Canadian National Railway

Annual meeting of the Canadian Chamber of Commerce, Calgary, September 21, 1993
Published in The Corporate Report No. 4 (December 15, 1993)

You have asked me to speak about our general political situation from an insider’s point of view, as if I were the prime minister. Allow me to say that I am a bit overwhelmed by this intimidating task. I have no doubt you will understand my reasons.

First, I have been privileged enough, having worked directly for three prime ministers, to observe the job from very close range and to understand it, hopefully, better than most Canadians. I have also come to know the difficult and complex character of the function. It calls for the wisdom and courage of the leader, the skills of the diplomat, the vigor and instincts of the politician, the understanding and compassion of the decision-maker and the indomitable will of the winner. The fact that we are in the midst of an election campaign also renders my task difficult. And finally, having had an extraordinary opportunity for seven full years to advise the former prime minister you may feel that I haven’t perhaps made the most of it.

Therefore, please bear with me, as I speak more in sorrow than in anger!

There is one further observation I wish to make at the outset, about excellence in politics. There were days when excellence in Canadian politics could only be attained through compromise. Times have changed and I am afraid that excellence in our political economic and social situation will owe more to policies that call for bold, vigorous and comprehensive actions.

There is another way to put it. In the next few minutes, I will sometimes be stating the obvious, putting forward some pretty “motherhood” proposals. Nevertheless, I am quite convinced that these proposals would appear most radical to a great number of Canadians. That is an indication of how difficult it will be to travel the road that lies ahead, and to develop a consensus about anything in this country.

Now what would be my priorities if, God forbid, I were prime minister? The following, not necessarily in this order:

1.  I would ensure full protection of medicare.
But don’t get me wrong. I am not saying that we should not reduce the cost of the program. Quite the contrary. I’m saying we must uphold, promote and protect the cornerstones of the program, the five key principles of universality, portability, comprehensiveness, public financing and public administration. They have become, as they should, part and parcel of our system of social values.

To paraphrase some famous last words of the Royal Commission on Broadcasting: “The rest is housekeeping.” In this case, housekeeping calls for a great deal of attention, infinitely more control than in the past, a formidable dose of imagination and a steely will to recruit the provinces’ help and that of the medical professions in containing the costs of the program.

We all know that old ways will not breed new and different results. So this is a tall order that calls for strong convictions, good communications and superb management skills.

2.  I would strive for a balanced budget.
This would be a very tough achievement, particularly since this goal should be pursued strictly through a reduction of government expenditures. We all know why this is so:

•  Total tax revenues in this country now equal more than 37% of GDP

•  That is about 10% more than in the United States, higher than the OECD average, and well above the levels in countries such as Britain, Japan and Germany. So there simply is no more room to maneuver.

The alternatives to raising taxes have been the focus of many government reports and initiatives, task forces and briefs. They include:

•  A freeze on new spending

•  A freeze on new or higher taxation

•  A freeze on reductions in transfer payments to the provinces, or to individuals

•  Elimination of many government programs and much greater productivity in many others

We have no choice:

•  Our debt-financing costs are already high

•  A significant part of our debt is foreign-held

•  Our current account deficit is on the rise

•  Our credit ratings are under pressure

We are in a bind. Not only aren’t we doing enough about it, but we are also failing to tell the story as dramatically as it should be told.

3.  So, I would also have to reduce the size of the public sector.
This may sound surprising given my previous incarnation. My main regret as the former top public servant is not to have advised deeper cuts. The huge size – 20-some departments and more than 300 corporations, councils, boards, agencies and other institutions – is a massive drain on the federal budget, never mind the economy, and in more than one way. Unfortunately, government bodies sometimes have a tendency to feed on spending. As these bodies multiply, control of expenditures becomes more and more difficult. It nurtures over-regulation, which affects competitiveness and stifles competition. (More on that in a moment.)

One other thing about the public service: we must do away with its right to strike and replace it with more flexible means to maintain stimulating working conditions. We should have a good hard look at binding arbitration.

Don’t get me wrong. Most public servants are often overworked, underpaid, highly motivated and very professional. I am saying that there are too many of them and that we must do away with excess weight.

4.  I would foster competitiveness.
I would do this in two ways. First, through what some call “framework policies” to help build a proper business environment:

•  Through strenuous efforts to do away with interprovincial barriers, which, according to your own estimates, cost any four-member family approximately $1,000 a year, and the country $6 billion per year, or 1% of Canada’s GDP

•  Through “sunset laws” or mandatory annual deregulation reports to the Commons

•  Through reform of the Unemployment Insurance system, with the twofold objective of returning it to its original purpose as an insurance program and bringing it under stringent control

And second, I would foster competitiveness by investing in infrastructure:

•  In our physical infrastructure – our roads, our bridges, airports, and our high technology communications systems

•  And most important, by investing more effectively in our human infrastructure – our people

To do this, the federal government needs policies to revamp this country’s education system, taking into account, among numerous factors, the following:

•  The general weakness of our secondary education system

•  The redundancy or duplication of many university programs across the land and within provinces

•  The fact that Canadian industry spends less than half as much on training its employees as American industry does, a fifth as much as is spent in Japan and an eighth as much as in Germany

•  But most important, the fact that to maintain our standard of living, our economy has to become knowledge-driven

5.  Then, if you will allow, I would fix the transportation system.
There are two key factors needed to do so. The first is deregulation, to bring about greater freedom to the industry. The second is government and public support so that the industry can use this freedom in the most responsible way. The timid Canadian deregulation, as compared to that in the United States, has pitted our industry against fierce and barely sustainable competition. The main goal is to do away with the over-capacity that is inflicting tremendous losses to the entire sector: road, air, railroad, water and high-seas transportation. If the new prime minister were to agree to what is suggested here, there is no doubt in my mind that senior management at CN would rapidly succeed in turning the situation around.

6.  I would reassess and reposition Canada’s foreign policy.
Two of the traditional pillars of our foreign policy, the UN and NATO, are being shaken by recent world events. The UN is painfully trying to adapt to the post-Cold War era. It is quickly losing credibility while seeking a new and useful role. Its lack of effectiveness in Somalia and Bosnia has been shameful.

While strongly pursuing its bilateral interests, Canada must return to the very foundation of its foreign policy and promote the reform and strengthening of the UN.

The case of NATO is no different. It is in search of a role, perhaps more politically encompassing and less military. Here again, the debate is ongoing. Is the political West a concept of the past? Does the future of the Alliance lie in an expansion to the East? Or, as Foreign Affairs puts it, “Should the West go East?” We must play a key role in these debates.

7.  I would use every possible means to help improve media quality.
Despite its best effort, I consider that the quality of our media is not up to the importance of our needs.

•  It is generally longer on freedoms than on responsibility.

•  It is often more entertaining than informative.

•  It is overwhelmingly attracted to perceptions, as we seek to grope with realities.

•  It is more eager to publish opinion pieces than factual reporting. And it is big on gossip, small on context.

•  Although potentially one of the most powerful institutions in a democratic society, it is also one of the least accountable.

I am not advocating regulation of any kind. But government must go out of its way to help the public contribute to a stronger and better media. It should support training. It must encourage every effort to strengthen press councils and journalistic foundations. It must debate and challenge the media and, if warranted, facilitate the establishment of media-watch foundations. All of this can be done in the fullest respect of what the media considers its sacred trust. Finally, I would expect a number of you to become active members of press councils and foundations and to support them financially.

8.  The driving forces.
There are two inescapable conditions to drive home such a program or, for that matter, any program of the sort. They have just as much to do with context as with content. I would devote tremendous energy and enthusiasm to what I consider two of the most imperative challenges facing this country:

•  Restoring credibility to the Canadian political process

•  Convincing my fellow citizens that Canada is a wonderful idea, a fabulous country, worthy of their energy, deserving of their passion, and open to their ambitions

Ethics is the key to restoring credibility to the political process. And ethics is being undermined by opportunism, ambition, the quick fix, a taste for money and social climbing, and occasionally, some pressure groups and lobbying tactics. It is falling victim – temporarily, one hopes – to the clash of changing value systems.

The lack of ethics is evidenced daily in the political process, the business sector, the education system, the professional services, social programs, the fiscal burden and sometimes, most unfortunately, even the affairs of church and justice. This is, in my view, one of the most corrosive problems of modern Western societies.

We must turn the tide. If programs and policies will help, we should adopt them. But attitudes and behavior will go a longer way to restore ethics not only to policy-making but also to the content of policy. The government must become the unfailing proponent and practitioner of these attitudes.

The driving force of my program: love of country.

Canada is a worthwhile ideal. It calls for the best from all of us: generosity, tolerance, a sense of sharing, a taste for adventure, a longing for excellence. It is also, or should be, a permanent and exhilarating exercise in nation building.

Any credible opinion poll will reveal that deep down, in all parts of Canada, bar none, love of country supersedes regional loyalties.

We must build on that rock. Love of country is nurtured by knowledge of country. We must devise policies, which will give our children opportunities to travel and experience the breadth and range of Canada. We need to develop national and international exchanges and to encourage every Canadian to visit the National Capital once in a lifetime.

We must promote the very values that are at the core of Canadian life. We must extol the wealth of our cultures, the variety of our social fabric, the complementarity of our regional economies, the stirring beauty of our geography, the wonderful privilege of our way of life.

To all Canadians, we must show the flag of this vibrant country.

In these endeavors, I wish our new prime minister courage, wisdom, strength, the best of luck, and your important and energetic support!

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Paul M. Tellier
President & CEO, Canadian National

The Board of Trade of Metropolitan Montreal, November 8, 1994
Published in The Corporate Report No. 10 (February 15, 1995)

In 1850, CN’s predecessor, the Grand Trunk Railway, was already established in Point St. Charles, with shops covering an area of 30 acres. And the first railway ever built in Canada, the Champlain and St. Lawrence, linked Saint-Jean on the Richelieu River, not far from here, to the St. Lawrence River as early as 1836. Today, Montreal can still boast, and rightly so, of being the railway capital of Canada, as the country’s three major railways moving freight and passengers are headquartered here.

CN is today a major economic force in the Montreal area and elsewhere in Quebec. We contribute $1 billion to the Quebec economy: $500 million in salaries and benefits, $300 million in purchases, $100 million in taxes and $100 million in pension benefits.

Thirty percent, or 8,000, of CN’s 28,000 employees are employed in Quebec, and of these, more than 7,000 live right here in Montreal, which has been home to our headquarters since 1923. Roughly 30% of our Montreal employees are professionals. And approximately 68% of CN’s management staff is based in Montreal. The company ranks 25th among Canadian corporations, with revenues of $4.2 billion.

A number of you are CN customers or suppliers, and the future of CN may have direct consequences on the success of your own businesses. I know that many of you, like millions of other Canadians concerned about our national railway and rail transportation in general, are wondering about the future of one of the largest and oldest employers in this city.

Today, I would like to tell you, in the most direct and honest way I can, about Canadian National’s situation when I took the helm two years ago, and about the radical recovery plan that we have been working on since then to ensure the long-term profitability of the corporation.

We had to quickly find solutions to several pressing problems, including:

A management philosophy:

•  That was focused more on deliberation than action

•  That had little innovation or initiative

•  And that was very hierarchical and inward-oriented

Fixed costs that were too high:

•  Too many employees, accounting for 48% of our labor costs in Canada and 40% in the US

•  Under-utilization of our network, 45% less than in the US


•  Inadequate customer service

•  Strained labor relations and rigid collective agreements

To solve these problems, we have taken some aggressive measures, among them:

•  A senior management restructuring beginning in January 1993 and including the elimination of five vice-presidencies

•  A reduction in the number of management levels. Where there used to be 11 levels, there are now no more than five levels between the executive level and any employee, which has considerably improved internal communications and the decision-making process.

•  The elimination of 11,000 positions over three years, announced March 1, 1993. Now in the second year of the program, we are right on target, and 70% of the announced cuts will have been made by the end of this year.

•  The rationalization of our network through the sale or abandonment of money-losing feeder lines, which, in many cases, could be more efficiently and economically run by short line railway operators.

We’re not out of the woods yet, but I am very proud of the progress we have made so far, and I am very encouraged by our financial results for the first nine months of this year. Compared to a loss of $41 million during the first three quarters of last year, CN has recorded a $186 million profit for the same period this year. Our net income for the third quarter was $95 million higher than for the same quarter last year. I am confident that this trend will continue and that we will record a very impressive profit this year.

Productivity is also up by more than 7%, which is the equivalent of a $70 million reduction in expenses, and this is another source of pride for all CN employees. Although these results are insufficient to ensure long-term profitability, they clearly indicate that we are on the right track.

As you have probably guessed, this dramatic recovery – a $227-million turnaround in just one year – did not happen on its own. It is, of course, not only the result of the improved economic situation in North America in general, but also of the sustained and dynamic efforts that have been made over the past two years. We shall continue to make these efforts with the same degree of determination until we are sustainably profitable.

Over the next few years, we will also be faced with other serious problems that will require forceful decisions. Our two biggest priorities for the time being are improving competitiveness and controlling costs.

To address our first priority, improving competitiveness, our efforts will be dictated by the laws of competition, notably by the new forces which have considerably changed and which will continue to transform the international marketplace.

Canadian National is the largest railway in Canada and the sixth largest in North America in terms of freight volume. We serve approximately 15,000 customer locations and move roughly 130 million tons of freight yearly over an average distance of 1,300 kilometers. CN hauls one half of Canada’s wheat, coal, and potash exports, a value of $7 billion, and some $40 billion worth of other export products, or 30% to 40% of the shipments of Canadian manufacturers. These include pulp, newsprint, aluminum and cars.

The efficiency of our services thus directly impacts on Canada’s balance of trade and on the success of thousands of Canadian exporters who depend on low-cost, on-time delivery of their goods.

For many years now, Canada’s various levels of government have put considerable effort into expanding our access to world markets, particularly our largest market south of the border. Canadian businesses have, for their part, reoriented their strategies in order to benefit from the new possibilities opened up by global trade liberalization.

To adequately serve our customers and help boost Canadian exports in this new competitive environment, Canadian National must offer the most reliable, efficient, and economical service possible, which is the fundamental objective of our overall recovery plan.

Our second priority, reducing costs, is an important factor in improving our competitive position. Between 1983 and 1993, weekly salaries paid by Canadian railways jumped by 66%, one of the highest increases in Canadian industry. Average weekly salaries of railway employees are also considerably higher, by more than 50%, than their counterparts in the trucking industry, our direct competitor. And despite a significant increase in productivity, our collective agreements are, in many instances, so rigid that they hinder our efforts to develop greater versatility among our employees.

To achieve these two immediate goals, we have developed and begun to implement a strategy that includes the following:

•  Reducing costs by $100 million over each of the next two years

•  Converging all our activities towards a customer-driven focus

•  Investing heavily in intermodal transportation services

•  Building a new tunnel under the St. Clair River, which will shave 12 hours off the Toronto-Chicago trip time

•  Implementing a new $100-million information system that will allow us to track customer shipments at all times and at all locations on the network

•  Completely realigning our marketing approach

Many of these initiatives require the close cooperation of our employees and their representatives because they directly affect traditional CN work methods and are aimed at instituting a new customer-oriented culture. We hope to avoid the futile labor confrontations that have hurt us so badly in the past and develop a new cooperative and trusting relationship with our unions, based on our mutual interest in the long-term survival of CN.

We particularly hope that this approach will enable us to negotiate new collective labor agreements that will give us increased flexibility in the assignment and optimum use of our workforce.

The success of our financial and operational recovery efforts, along with new growth in the railway industry, lead me to believe that, among all of the options available to us, privatization is the best solution for CN, its employees and its customers.

In just two short years, we have demonstrated that we can put CN on the road to sustainable profitability and offer leading-edge service to our customers. I am determined to make CN the most efficient and economical rail system in Canada.

I am pleased by the federal transport minister’s decision to assemble a parliamentary task force, which is currently studying the possibility of privatizing CN North America and the feasibility of employee ownership. In my opinion, this latter option would be an excellent way to build a more solid partnership with our employees.

I am also pleased that the task force will allow all individuals and groups interested in the future of CN to voice their opinions and suggestions, and I strongly encourage the Chambre de Commerce de Montréal to take part in the task force’s activities. I, for one, firmly intend to continue expressing and implementing my profound conviction that we can transform Canadian National into a company that all Canadians can be proud of and rely on.

CN is a national institution with close ties to this country’s history. It has played an important role in the economic security of several generations of Canadians. I am constantly reminded of CN’s glorious past and its contribution to the prosperity of countless Canadian families every time I meet people who tell me that they are second or third-generation CN employees.

It is out of respect for this heritage and in order to continue the work of the thousands of men and women who have given their best over the years that I am determined to make CN the best railway in Canada.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Paul M. Tellier
President & CEO, Canadian National

The Vancouver Board of Trade, September 12, 1995
Published in The Corporate Report No. 14 (October 19, 1995)

The fortunes of CN and Vancouver are intimately intertwined. With an ocean in front of you and five railways at your back, you have become the third highest tonnage port in North America, and the highest tonnage port on the West Coast. Vancouver does not measure its success simply as a major Canadian city. You must be a major Pacific Rim city: the best, in my view, of any on the West Coast of North America.

Vancouver is most critical to the success of CN. We earn about $700 million in revenue from goods we ship to and from this city, everything from grain and forest products to coal, sulfur, potash and intermodal. Almost three-quarters of these products are bound for Asian markets. You are the link to the booming markets of the Pacific Rim. For CN, Asia begins here. Like you, CN must also look beyond parochial borders to measure itself. We cannot rest on our laurels as the largest railway in Canada. We’re a North American company, with 38% of our traffic moving across the border with the US. Our customers compete in a global economy, and to help them compete, we must strive to be among North American leaders in providing low-cost, reliable rail transportation.

And in this regard, CN is about to embark on a new era in its 75-year history. This is the first occasion I have had to speak to an audience about how we have been preparing for the future, and Vancouver is one of the best places in the world to share these thoughts. This is, after all, perhaps the most outward-looking city in Canada. Here, at the edge of the Pacific Rim, you contemplate the economic prospects on the eve of a new century – a Pacific century.

Before I describe for you what we have done to prepare CN for privatization, let me first say a word about why competitive railways are important for you. Vancouver’s Pacific gateway loses a great deal of business to the competition in the United States. Even Canadian shippers – especially intermodal shippers – use American ports of entry like Cherry Point and Seattle/Tacoma. In fact, over half the intermodal containers from Asia destined for Eastern Canada enter through American ports and use American railways.

There are a number of reasons why. One of the most important is the quality of the American rail system. Since 1980, when the United States deregulated its rail industry, American railways have made the investments and the strategic decisions necessary to renew and revitalize.

For years, the Canadian rail system has operated at a significant disadvantage. The regulatory playing field has been tilted against us. This not only affects the railways themselves. It affects the shippers who need efficient, cost-effective, reliable rail transportation to compete. Canada’s railways need the flexibility to make the tough decisions necessary to renew and revitalize our networks. Otherwise we’re not going to be able to compete effectively with the Americans – and neither will Canadian shippers.

Let me give you one example of how Canada’s regulatory framework creates problems. Our line abandonment regulations make it exceedingly difficult to sell feeder lines to short-line railways. Our core network carries 92% of our total volume, but includes only 39% of our total trackage. We must divest some of our light-density feeder lines. Many could be run at a profit by short-line railways.

But the regulatory environment in Canada makes it so difficult to divest lines that, where the American railways have converted more than 20,000 route miles to short lines over the past decades, Canadian railways have converted less than a thousand.

Significant regulatory reform will enable CN to complete our program of restructuring. We need changes to the regulatory environment to cut costs and improve efficiency. We need the freedom and flexibility to provide customers with the low-cost, reliable service they require to compete. We must be allowed to earn our cost of capital.

I am very pleased that the minister of transport has introduced regulatory reforms that will help us approach parity with the competition in the United States. Regulatory reform is good for the Canadian railway system. And it’s good for Canadian shippers who need a modern, efficient railway network.

The minister understands this. He deserves the support of Canadian industry in his efforts, and I hope that the business community in Vancouver will see the importance of his regulatory reform to the future of this city.

The regulatory reforms have been long overdue. They come at a time that corresponds with the end of one chapter in CN’s history, and the beginning of a new one. The old chapter began at the end of the First World War when several Canadian railways were amalgamated into one Crown corporation, the longest railway network in North America. The new chapter will see us build upon the strengths of the past 75 years.

We will, of course, continue to be the only railway to serve Canada from coast to coast. And we are determined to continue to be a source of competitive strength for our customers in a global economy. Above all, we are dedicated to completing our turnaround strategy of reform and renewal. The strategy has three core objectives:

•  Reduce costs

•  Improve customer service

•  Target capital spending to support the goal of developing a low-cost, highly reliable railway

To implement the strategy we have reduced employment by 11,000 – one third of our workforce. We have shrunk our management layers from eleven to five, and our regional headquarters from five to two. We have signed new agreements with our unions that give us more flexibility to build a workforce for a modern, efficient rail industry. We have signed strategic alliances in the transportation industry, so that, together with trucking firms and other railways, we can offer door-to-door delivery throughout North America. We have improved customer service by offering scheduled service on some routes. We expect to implement fully scheduled service across the network by the end of next year.

Our targeted capital spending has included building the most advanced computer railway system in the world, as a first step in managing scheduled service. It has also included $40 million to handle double-stack container traffic to and from the lower mainland and the Port of Vancouver. We built our Vancouver Intermodal Terminal, which we are now expanding with an additional $4 million. Our intermodal volume increased by 77% since we opened the new facility in the fall of 1992. So far in 1995, we’ve enjoyed a further 25% increase in volume. We are also an active partner in the development of the new $226 million container terminal at Deltaport to be opened next year.

The three-pronged strategy – cutting costs, improving service, and targeting our capital spending – has yielded results. On the strength of our turnaround, CN achieved the best profit improvement in the North American rail industry in 1994 – from a loss of $79 million in 1993 to a net profit after tax of $245 million in 1994. Our productivity shot up 8% and we cut our operating ratio to below 90%.

This is the situation at the end of one chapter in CN’s history. It is a chapter that leaves the company in a stronger position than at any time in our history.

In last February’s budget, the Government announced its intention to sell CN. In preparation for the initial public offering, we announced two weeks ago our plans to restructure the company’s finances. They include:

•  First, a write-down of $1.3 billion in CN’s balance sheet assets, based upon a re-evaluation of the book value of our network in Eastern Canada

•  Second, a reduction of more than $1.4 billion in CN’s long-term debt

The restructuring leaves CN with a debt-to-capital ratio of about 40%, which sends a strong signal that CN is poised to take its place with a solid financial footing among the private-sector railways of North America. The restructuring is good for the company. Above all, it’s good for shippers who count on the future of a viable rail industry.

We are reducing our long-term debt by $1.4 billion. We are accomplishing this by the sale of non-core assets and transferring to the Government various commercial real estate assets, including Toronto’s CN Tower. This gets us out of the real estate business and enables CN to focus on our core business: running a financially sound railway. In the parlance of the industry, it makes us a pure rail play.

CN’s privatization helps us get on with the job of competing in the North American economy. We’re getting ready to go toe-to-toe against the Class 1 railways in the US.

The proceeds of the sale of CN will go to the Government of Canada. This is the context in which Canadians should examine the Government’s decision to reduce CN’s debt. This is a sound business decision. The Government is counting on earning back what it has paid – and more – from the proceeds of the sale, and Canadian taxpayers will be further ahead as a result.

Unlike the sale of Air Canada in 1989 or Petro-Canada in 1991, the Government will not retain any holdings. We will become a private-sector company, straight and simple. Furthermore, the Government has not placed any restriction on foreign ownership of CN, as it had with its previous offerings of Crown corporations. Our restructuring program was announced together with the financial results for the first six months of 1995. The operating figures show that our revitalization is well on track. Without the write-down and other special charges, CN’s income statement would have reflected a growth of 14.2% in its operating income for the first six months. Traffic levels rose by 3.4% and revenue increased by 2%. Most importantly, labor and fringe-benefit costs decreased by 6.1%. This saving of $50 million reflects our efforts over the past three years to cut 11,000 jobs from the payroll.

The company’s operating ratio improved to 89.1% for the first six months, compared with 90.3% for the first half of 1994. We were able to make this improvement in spite of the effects of the nine-day work stoppage last March. This shows improvement, but it is not yet to the performance level of Class 1 railways in the United States. We are starting to close the gap, and that is why, as part of the announcements made two weeks ago, we gave notice that the new, privatized CN will tie management compensation to performance. We also announced that all of CN’s employees will have the opportunity to participate in ownership of the company. CN’s share-purchase plan will help eligible employees obtain equity in the company that they have helped to build.

We’re proud of our railway. We know its value to our customers. These customers range from coal and forest products to grain, fertilizers, and chemicals, petroleum and automotive products to intermodal containers. These customers have grown to count upon our ability to deliver throughout the continent, thanks to our strategic alliances. They value our reputation as one of the safest railways in North America.

I am confident in CN’s future. I believe in the future of railways as profitable, durable businesses. I believe that railways are in business for the 21st Century. I believe that railways are part of the competitive strength of any Canadian business that relies upon efficient, cost-effective transportation.

CN’s success in the private sector will depend upon four key ingredients:

•  A reasonable and stable labor regime

•  A sound capital structure

•  A good, profitable business plan

•  A fair regulatory environment

We have addressed the first three ingredients. We hope that the Government will soon provide the fourth. Our restructuring, combined with the anticipated reform of rail regulations, clears the tracks for CN’s future. We’re looking forward to what that future holds. And here, at Canada’s gateway to the Pacific Rim, I can feel the pulse of Canada’s trade with the world, and I know that our railway and your city will be partners for many years to come.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Paul M. Tellier
President & CEO, Canadian National Railway Company

The Canadian Public Relations Society 1998 Conference Montreal, May 25, 1998
Published in The Corporate Report No. 25 (August 31, 1998)

AS YOU MAY be aware, public relations owes much of its origins to the rail industry. At the turn of the century, railways in the United States turned to the first modern communications professional, Ivy Lee, to help turn around public perception of their safety record. At the time, the railroad policy was to refuse information to the public about rail accidents. Lee persuaded management to try transparency: facilities for the media, distribution of information for the public, access to the site for reporters. Many railroaders considered this to be “reckless indiscretion.” Later they had to admit it produced fair comment. Lee was on his way to building a legend as a public relations man, and railways were on their way to a new era of communications.

Four strategic principles that Ivy Lee laid down seem as relevant at the end of this century as at its beginning.

•  First, align yourself with the public interest

•  Second, flow your communications from the executive level, and insist on the support and contribution of managers

•  Third, maintain open communications, particularly with the media

•  Fourth, build relationships with all stakeholders

Today, these premises seem self-evident to your profession. When you look back over half a century of your organization, the basic principles remain the same. The challenge is still to deliver the right message to the right people in the right order at the right time. And yet, the environment has changed. Modern public relations is subject to the same forces that have created a global economy. Time is compressed. The number of audiences is expanding. More must be done, and done faster. And the speed and reach of communications makes the penalty for failure higher. It is very difficult to counteract misinformation. Correcting wrong information is next to impossible when it is stored in electronic databanks around the world. But when communications is done right, it can also sustain its own momentum.

Today I would like to provide you with a case study that involves two recent announcements by CN. The first was the CAD$3-billion merger signed last February with the Illinois Central Railroad – IC. The second, a combined announcement of a marketing alliance between CN, IC and the Kansas City Southern Railroad, and an access agreement with Kansas City Southern. The announcements took place at a time when railway mergers have been very much in the news in the United States. The industry is consolidating. At the beginning of the 1990s, there were seven big American railroads. There will soon be only four: two east and two west of the Mississippi.

Concerns have been raised about these mergers. To avoid being stalled or sidelined, we had to make sure that our message was well understood by customers, regulators and our peer railroads in North America. This brings me to the first principle I mentioned earlier: align yourself with the public interest. We had to demonstrate that our merger and alliances were in the public interest. We had to convince the various stakeholders using a simple story line. We explained that the CN-IC merger was the perfect fit at the perfect time. The perfect fit, because the two railways complement each other end-to-end, meeting in Chicago. The perfect time, because it gives customers the opportunity to take advantage of growing north-south traffic patterns. The CN-IC merger is about growth. It combines strength to strength in the two railways, and is driven by the needs of our customers. We knew our merger and alliances were in the public interest because they promoted competition. The challenge was to ensure that these simple messages formed the basis of our story line.

The second principle is to flow communications from the top. This idea has been around for a long time. In practice, however, it too often results in executives reciting lines produced by their communications professionals. I believe the process must go further. Modern CEOs must be intimately involved with the messaging. They must be able to speak with the conviction of the head and heart. They must apply their own values and perceptions to the story line. They must provide their unique understanding of the issues.

Getting our merger and alliance messages right and delivering them to the right audiences required the commitment of the most senior people. In fact, the night before the alliance with IC and KCSR was announced, I sat in a room in Washington with my colleagues, the CEOs of the other two railroads. Together, we three produced the key messages we were to deliver the next morning. We had the advice of public relations professionals. We had the help of a facilitator. But in the end, it was up to the three of us to boil down the communications package to these simple, positive messages each of us could state with conviction. First, the alliance provided greater reach for our customers, from the Atlantic to the Pacific to the Gulf of Mexico. Reach that gave our customers access from Montreal to Mexico City. Second, the alliance reinvigorated the industry by providing more competition. And third, it created more capacity in the industry, and less complexity for our customers. These messages were supported by detailed communications for customers, media, and government officials, as well as extensive Q&As. This backup material came from professionals. The key messages came from the top.

The third principle is to maintain open communications. Openness and transparency should be more than communications strategy. They should become a core value for a corporation. The speed of modern communications technology places tremendous pressure on open communications – and on the need for discretion until the time is right. If you don’t get your message out quickly to all your target audiences, someone else will beat you to it. Their spin will be different than yours. You’ll be left with a communications nightmare, simply to clean up the misinterpretations. And so, in the case of our two announcements, we made sure that, beginning on announcement day and carrying over to day two, we talked to all our target audiences. We talked to them in person. Among the calls made in the first 48 hours following the announcement were conference calls to both CN’s and Illinois Central’s employees. We also made a 1-800 number available for employees who had particular questions. This is in keeping with the fourth principle: build and maintain relationships with stakeholders.

To illustrate stakeholder relations, let me give you an idea of the rollout plan for the announcement day of the proposed IC-CN merger on February 10, 1998. That morning, we finalized all press material and I met with my executive committee at 9:00 a.m. here in Montreal. In the afternoon we issued a media advisory. At the close of market, we placed calls to selected government officials – both elected and non-elected – in Canada and the US. When the stock markets closed at 4:00 p.m., we issued our news release by fax and on our website, and we called the relevant stock exchanges. Our televised press conference with Montreal media took place at 5:00 p.m., followed by a conference call for US and other Canadian media. The call attracted journalists from New York, Washington, Chicago, Memphis, New Orleans, Vancouver, Toronto, Edmonton and Montreal. We reached all the people we needed to reach.

Then from 6:00 p.m. until 8:00 p.m., CN and IC public affairs professionals and customer account managers were on the phone to key contacts in both Canada and the US. We talked to all key customers, all levels of government in both countries, union leaders, and media in Canada, the United States and overseas. That night I flew to New York City. By 5:30 the next morning, we saw that we had two articles in The Wall Street Journal, and we had made The New York Times, The Financial Times of London, and every major daily in Canada and the United States.

By 6:30 a.m., I was in the New York studios of CNN for a live interview. At 8:45 a.m. we were briefing financial analysts and taking questions from those in the room and those connected on an open phone line. Immediately afterward, we moved to breakout rooms for one-on-one meetings with major shareholders. By 11:30 a.m., I was on a conference call with the top 200 officers at CN to discuss the merger and again take questions. That afternoon we flew to Washington, where we met with senior officials. Then in the evening we flew back to New York. The following morning we held one-on-one meetings with major shareholders. Over the noon hour, I was in the offices of The Wall Street Journal explaining our position in detail. That afternoon we met with the bond rating agencies.

That was the rollout for the merger with Illinois Central last winter. The announcement last month of the alliance with Illinois Central and Kansas City Southern followed a similar agenda. The major difference was we initiated our rollout in Washington.

Was our rollout strategy successful? The first indication that it worked was the positive response from the stock market. The second indication was the positive response from CN and IC employees and our customers. And the third indication is that the media have universally reported positive stories about the merger and alliance that use our basic messages and story line. These stories continue until this day.

The final test will be whether we have achieved the momentum that will see our projects through the regulatory process in the United States. This will take another year. But in the meantime, I am confident that we used communications to our best advantage. We took control of the messaging. We stuck to the messages.

What lessons can be drawn from our experience?

First, because information today moves at blinding speed, the rollout of an announcement must cover all key audiences within a very short time. We touched all our bases within 48 hours.

Second, the messages must be distilled into their very simplest form – their essence – and must be communicated in a compelling story line.

Third, announcements are not regional or national any more. They’re global. It matters what The Financial Times of London reports. It matters what the investment communities across the continent think.

And fourth, perhaps my most important message today, communications must engage the most senior levels of the company. Without their full commitment and cooperation, the message will not be delivered in a credible way.

Communications is not an afterthought to a transaction – a way to explain it to outsiders. In the 1990s, communications has become the transaction. Needless to say that a business story cannot be told effectively unless it is based on impeccable logic, good economics, and rational arguments.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


David P. O’Brien
President & COO, Canadian Pacific Limited

The Canadian Club of Montreal, February 19, 1996
Published in The Corporate Report No. 17 (April 30, 1996)

The prosperity of Canadian Pacific remains closely linked to the prosperity of Canada. My job is to ensure that CP continues to prosper, and so help Canada to prosper. As an energy, transportation, real estate and hotel company, CP reflects conditions throughout the Canadian economy. Our revenues and profits are directly impacted by public policy decisions on taxation and trade, monetary policy and currency exchange rates, regulation and deregulation, privatization and investment regimes.

Canadian Pacific has had links to Montreal since its founding in 1881. It used to be said that you could come to Montreal on a CP passenger ship, stay in a CP hotel such as the one in which we’re meeting today, send a telegram via CP telegraph, and take a CP passenger train or plane to your next destination. The story is even told of a tourist checking out of a CP hotel who asked the time in Vancouver and was told: “It’s 11 a.m., Canadian Pacific Time.” His rather startled reply, “Good heavens, don’t tell me you own that here, too.”

CP Limited is a very different company today. If you arrived on a CP ship today, you would be a crew member of a cargo vessel coming into our thriving container terminal in the Port of Montreal. You’d be a welcome guest here at the Queen Elizabeth. Out your hotel room window you could see several modern Montreal office towers owned by our Marathon Realty subsidiary, including 1250 René-Lévesque (the tallest office building in Montreal), l’Édifice La Laurentienne next door and Place du Canada. You could walk across Place du Canada to the new Molson Center, built on CP land.

Though CP Rail is moving its headquarters to Calgary, the Eastern Operations will be consolidated at Windsor Station. The separate Eastern Operating Unit will have as its mandate to turn a money-losing operation back to profitability. Among the issues that need to be addressed are duplicate infrastructure with CN, high labor costs and high levels of taxation. A railway runs on capital investment. It has to earn the cost of capital in order to justify the hundreds of millions of dollars of new investment that it requires each year. Our railway has not been doing that.

Ian Sinclair, a former chairman of CP Limited, was known for his directness and his focus on business issues. As he told an annual meeting in the mid-1970s: “The principle that business cannot remain healthy without adequate returns remains as valid as it was nearly a hundred years ago.” The reorganization of CP Rail System has been ongoing for the last five years. Its management structure has historically been hierarchical, even militaristic. We’ve reduced 12 layers of management to a maximum of six and we’re focused on productivity and efficiency across our network.

There have been two issues that have plagued the prospects of Canada’s railways. One is chronic over-capacity, especially in the East. Too much track and other infrastructure for too few customers and too few goods. The other is the issue of public versus private ownership. The question of CN’s privatization has been around since its Grand Trunk days in the First World War. As long ago as 1919, the great CP Chairman Sir Edward Beatty observed: “Nationalize in haste, repent at leisure.” It was not until 1995 that CN was finally privatized, so government clearly repented at leisure over the last three quarters of a century, and at a great cost to the Canadian taxpayer.

But today I say to Paul Tellier: welcome to the private sector, congratulations on a job well done in taking CN’s share issue to the equity markets, and we look forward to healthy competition now that CN is subject to market disciplines. The one issue that privatization did not resolve was the continuing problem of over-capacity in the East, and both CN and ourselves will need to examine how to rationalize the Eastern network in the most sensible fashion.

The issues for both railways are competitiveness and productivity, and in a North American context. Deregulation and the market forces of free trade are very much in play in the railway business and our other businesses as well. That’s not just an issue for Canadian Pacific, but for Canadian business as a whole. Canada has doubled its merchandise exports to the United States in seven years under the Free Trade Agreement and the NAFTA, from just over $100 billion in 1988, to over $200 billion in 1995. Quebec more than doubled its exports from $16 billion to $33 billion. Ontario exports rose from $56 billion to $109 billion. In the critical automotive sector, exports of passenger cars to the US virtually doubled from $16 billion to $31 billion in three years alone from 1991 to 1994.

These numbers will continue to grow. When I graduated from what is now Concordia’s Loyola campus and entered McGill law school in the early 1960s, Canada exported only one-sixth of its output. Today, our country exports more than 35% of its GDP, and the value of trade is forecast to exceed 40% of output before the end of the decade. Canadian Pacific is a trading company within a trading nation. About 55% of Canadian Pacific Limited’s revenues are derived from trade. About 70% of CP Rail’s revenues are generated in the US or from moving goods destined to export markets. In value, the goods carried by CP Rail and CP ships are worth about $25 billion.

In volume, PanCanadian Petroleum now exports about half its natural gas production and fully 66% of its crude oil output of over 140,000 barrels a day. PanCanadian’s exports to the US have more than doubled under free trade. And Fording Coal exports virtually all of its shipments of some 12 million tons of metallurgical coal. At CP Hotels, Canada’s largest hotel chain, over 40% of the business is from non-domestic visitors. It has always been that way. Sir William Van Horne, who pushed the railway through the Rockies to the Pacific, knew this when he said: “If we can’t export the scenery, we’ll import the tourists.” Across the board, CP is doing things that are contributing to the economy, contributing to the ability of Canadian industries to compete and flourish in world markets, and creating value for Canada and Canadians. So a healthy Canadian Pacific is indeed synonymous with a healthy Canada. But like Canada, Canadian Pacific has had to adapt to changing circumstances.

The last 10 years have been demanding for CP, but we are better positioned today than any time in recent memory. We are proud of our history, but focused on the future. We’ve transformed ourselves from a broadly based conglomerate overseeing disparate groups of businesses into a more narrowly based company focused on transportation, energy, real estate and hotels. During the Sinclair era, CP diversified into a wide range of businesses. During the decade that Bill Stinson has been our Chairman and CEO, the business has been transformed again as economic realities required that we focus on our strengths.

In the last few years, we’ve got out of the airline, forestry, steel, metal mining, food processing, telecommunications and trucking businesses. We’ve also significantly reduced our exposure to real estate, where we are now focusing on Canada’s three largest cities: Montreal, Toronto and Vancouver. Equally important, but less obvious, are the measures we have taken, including huge capital investments, to bolster the competitive positions and prospects of our remaining businesses. This has been the more hidden component of our restructuring.

We’ve built a family of strong operating units by focusing on competitive strengths, low-cost operations and improved productivity. Today our subsidiaries all have solid management teams, strong financials, leading competitive positions in their industries, and solid strategies in place to prosper in a world of free trade and globalization. And, we are now focused on building shareholder value by getting more out of what we’ve got. What we’ve got, in transportation, energy and real estate and hotels, is one of the strongest business portfolios in the Canadian economy, with assets of $16 billion, sales in 1995 of about $8 billion and operating income before unusual items of $1.2 billion.

In the transportation segment, CP Rail and CP Ships are well positioned to profit from trade liberalization and globalization. CP Ships is a niche player, focusing on the Port of Montreal as its North American gateway. And what a niche player it is! It has tripled its capacity and cargo, so far in the 1990s, to become the largest container carrier between North America and Western Europe and one of the most profitable shipping companies in the world.

Similarly, in the energy sector, PanCanadian Petroleum and Fording Coal are poised for significant growth in the remainder of this decade and into a new century. PanCanadian, where I spent five years as CEO before joining CP Limited just one year ago, is one of the premier growth companies in the Canadian energy industry. It has doubled production in the last four years, becoming the second largest producer of crude oil and natural gas in Canada, and ranking second only to Imperial Oil with a market equity value of over $6 billion. To put it in context, Petro-Canada has a market value of $4 billion, some 50% less than PanCanadian. Just the additions to proven reserves in 1995 alone were equal to the total reserves of Canada’s fifteenth largest oil and gas company. With proven reserves equivalent to more than 900 million barrels of oil, PanCanadian is positioned for significant long-term growth.

Fording Coal Limited is Canada’s largest producer of metallurgical coal for export. Fording ships over 12 million tons of coal annually, almost all of it on CP Rail, to the Port of Vancouver. Most of Fording’s export production is to Japan and the Pacific Rim, but it also has growing markets in South America, Europe and the Mediterranean. Fording hallmarks are cost competitiveness, sustained profitability and strong growth. It has more than doubled its productivity in the last 10 years, and production is increasing at a rate of 10% to 15% per year. As one of the most cost-efficient coal producers in the world, it has sustained increasing profit levels despite generally declining coal prices.

Just last month, Fording finalized plans to build the world’s largest wollastonite mine and processing plant in Mexico at a cost of more than US$100 million. Fording, through its NYCO subsidiary in the US, is already the world’s largest producer of wollastonite and has a dominant position in the high-end of the market. You might ask, what is wollastonite? It’s a mineral with a unique crystal structure that is finding rapidly growing uses in the plastics industry, like the plastic trimmings on your car.

PanCanadian, and particularly Fording, aren’t as well known as they might be here in the East. That’s understandable. They don’t operate here. But believe me, we know their value in the CP portfolio, and we know their potential in a world that demands increasing amounts of energy, and in a world of ever-growing export markets.

CP Hotels has invested hundreds of millions of dollars in upgrading our heritage hotels and resorts across Canada, including the Queen Elizabeth and the Château Frontenac here in Quebec. On the resort side of the business, we’re involved with Intrawest in the development of a 308-room conference hotel at Mont Tremblant that is scheduled to open in time for the 1996-97 ski season. And we shouldn’t forget the Château Montebello, described by CBS News anchorman Dan Rather, when it hosted the G7 economic summit, as “the world’s largest log cabin.” All in all, our hotels play an important role in Quebec’s tourism industry.

In summary, Canadian Pacific Limited and its six operating companies – CP Rail, CP Ships, PanCanadian, Fording, Marathon Realty and CP Hotels – represent a strong business portfolio and the market is starting to recognize this in our share price which has risen some 33% since this time last year. When you look at CP’s results, and at our business plan, you get a pretty good picture of the Canadian economy, and a pretty good idea of where it’s going. In some ways, Canadian Pacific is a mirror of the Canadian economy. Canada’s prosperity means our prosperity. And our prosperity means not only profits for our shareholders, but good jobs for thousands of Canadians.

The shareholder value of companies like Canadian Pacific is determined by many things. But at the end of the day, the value of any company is closely related to the prospects of the country in which it is located. That is the bottom line. Canadian Pacific has existed for almost as long as Canada itself. We’ve changed, adapted and transformed ourselves, especially in the last few years. By facing reality, by focusing on our strengths, we’re now positioned for growth. We need to do more of that in Canada, in Quebec and particularly in this city of Montreal – face up to the reality of our situation, address our structural weaknesses and focus on our strengths. The prosperity of Montreal, Quebec and Canada depend on it.

A reality check may not always be politically correct. But political correctness is often far from reality. Only by acknowledging the facts of our situation can we address the challenging issues we face. One undeniable fact is that some of our economic problems have been decades in the making, and they won’t be resolved without pain or in a short period of time. Politicians at all levels must face the problems head-on as our economic strength more than any other factor will determine our future. One thing is certain: as corporate citizens and as private citizens we are all in this together.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Lise Lachapelle
President & CEO, Canadian Pulp and Paper Association

The Canadian Club of Montreal, September 18, 1995
Published in The Corporate Report No. 14 (October 19, 1995)

It was exactly one year ago today that I joined the Canadian Pulp and Paper Association. In this, my first year, I have learned a lot about the industry, and in the process have gotten rid of a number of misconceptions. Today, I would like to share with you some thoughts about this first year. I would also like to give you an insider’s idea of what the future holds for the Canadian pulp and paper industry. It would be easy to quote known statistics:

•  Sales of nearly $50 billion in 1995, according to our data

•  $3 billion in profits

•  1 million workers directly or indirectly employed

This industry is, by far, the number-one contributor to Canada’s trade balance, with net exports of over $25 billion last year. More than 350 communities across Canada depend on our industry.

This is a far cry from the image that many people had or have of this industry, myself included. If you still think of lumberjacks chopping trees with axes or riding logs down a river, it’s high time to update your thinking! This folklore has little in common with the forest industry of today. But some fascinating contradictions remain. Of course, it is still a natural-resource-based industry, but it is increasingly making use of high technology.

Since 1989, the industry has been updated. Some $14 billion has been invested in replacing old machinery and incorporating state-of-the-art technology. You may say that we had no choice if we wanted to maintain our leadership as a world pulp and paper exporter. I agree. But these investments had other positive impacts. Forest and paper workers have become more efficient; faster, more accurate decisions are made and accident prevention has been maximized.

For example, thanks to our information technology investments, we can calculate the best way to cut a log to maximize use of the material and minimize waste. We use everything: to manufacture paper products, we recover chips, shavings, sawdust and all sawmill residues. Satellite surveillance systems make it possible to optimize forest management and harvesting methods. High-speed computers are also installed in feller-slashers to facilitate their operation. Automatic mill process-control systems translate into improved quality and higher productivity. Data communications enable Japanese customers to monitor production of their pulp without leaving their offices in Tokyo.

This industry is as old as Canada and yet it’s way ahead of most industries in the global marketplace. We already sell to tough markets in Japan, China, Asia and Latin America while other Canadian industries are just starting to knock at the door. Eighty per cent of what we produce is sold internationally to nearly 100 countries around the world. That’s why, and let me repeat myself here, forest products are the number-one contributor to Canada’s trade balance, to the tune of $25 billion last year. That is the equivalent of all other manufacturing sectors combined.

This is also an industry which has faced the most critical environmental challenges of any industry and has responded swiftly and effectively. We spent billions of dollars to successfully reduce effluents and keep toxins out of our rivers and streams. And if there’s one thought I would like to share with you today, it’s this: the pulp and paper industry is cleaning up its act big time! In fact, these days when I talk to our mill operators, they often complain to me about other polluters in other industries who are ruining their environmental efforts! That’s what I call a turnaround.

In short, ladies and gentlemen, this is an industry which will surprise you in the next few years. Canada’s pulp and paper producers will be leading our resource sector in the next century in terms of products, environmental initiatives and marketing. Our industry’s current renaissance can be explained by a very simple fact. We are increasingly on the same wavelength as our customers, be they across the street or on the other side of the world. More than ever, our business is driven by our customers’ needs and preferences. Over the years, we have changed our forest management practices, our pulp manufacturing processes, and our range of value-added paper and board products. Our customers’ influence is particularly evident in the diversity of our products. Psychologists may call this a multiple-personality phenomenon.

Our customers do have multiple personalities. As well as being businesspeople, they are environmentalists. Heads of companies, they are also tourists. As consumers, they also worry about conservation. When they buy forest products, they want the best quality at the best price. But they are also interested in where the product comes from, what species of trees we use, where the trees were cut and how many. They want to know what we are doing to regenerate Canada’s forests.

I can already tell you that the industry is very careful in its annual fiber consumption. Harvesting is limited to one quarter of 1% of the total area of Canada’s forests. In fact, on the whole, as many Canadian trees are destroyed by forest fires and insects as are harvested. Reforestation is the other important element. For every tree cut, at least one is generated. We have been doing this for decades. This data is certainly not new, but we have taken for granted for too long that the public was aware of what we were doing. This was obviously not the case: our efforts have often gone unnoticed. Nevertheless, the statistics are impressive: Canadian forest products companies plant more than 800 million seedlings annually. This restocks half of the area harvested every year, and natural regeneration takes care of the other half. This is tremendous, but we still don’t think it’s enough. In fact, our ongoing concern for the sustainability of this resource has led us to push for concrete standards for forest management practices. We’re working on this now through the Canadian Standards Association here in Canada and the International Standards Organization internationally. Once these standards are established, it will mean you and I – and every one of our customers around the world – can buy our products with confidence and assurance. Why? Because you will know these products come from forests which are being managed sustainably.

We’re doing all this today because we want our industry to be in good shape tomorrow. Some will say it is self-serving. I don’t disagree, but let us concentrate on the results rather than on the motive. Customer concerns are also reflected and addressed in the industry’s pulp and paper mills. Between 1989 and 1996, pulp and paper makers will have invested $6 billion in pollution-reduction measures. This investment was made in spite of downturns in the economy and rock-bottom prices for our products – and worth every penny. You may remember reading about furans and dioxins in the newspaper. You don’t hear about them much anymore. Why? Because we have virtually wiped them out through new technologies and practices.

I’m anxious to see the pulp mill of the year 2000. I know the research and testing we are doing now will ensure that those mills will be environmentally-friendly, using much less fresh water and much less energy. The Pulp and Paper Research Institute of Canada (PAPRICAN), which is our industry’s research and development arm, has begun a five-year $40-million program to develop a closed-loop technology that minimizes pollution during the manufacturing process rather than attempting to minimize the impact of toxic substances at the end of the pipe. With regard to products, our industry has also made great strides in adapting its product lines to consumer preferences in the year 2000.

You will remember that not long ago, a paperless society was predicted. Many people believed this, including some papermakers who feared that theirs was a sunset industry. Fortunately, the predictions were wrong. Due to the development of new products and the creation of new markets, the sun is shining stronger than ever on the paper industry. This can be attributed to the demand for new products. Think of the new fax paper, computer paper, self-adhesive papers, carbonless copy paper, and so on – none of which existed five years ago. As for the Information Highway, here again all sorts of dire predictions have been made. A recent North-American study calculated that every day in North America, 1 billion documents are generated, with an average of 19 copies! You have surely noticed, as I have, the proliferation of books and magazines dealing with the Internet. Instead of decreasing, paper consumption has doubled in the past 20 years and is expected to double again by the year 2010. Developing economies in Asia and Latin America will spearhead this increase in demand, with an annual growth rate which is expected to be as high as 10% in the coming years. What we are now discovering is that the role of paper is not declining, it is simply changing because it is now used in ways that could not even be imagined only a few years ago.

In reality, this is an industry of opportunity. Companies that can satisfy customer preferences will find plenty of business in new and developing markets. Every day brings a new challenge. At 7 a.m., you want the ink to stay on your morning newspaper rather than on your hands. Half an hour later, however, environmentally-conscious consumers want companies to be able to de-ink newsprint more easily for recycling. Our industry is currently working flat out to meet the consumer demand for recycled paper. Right now, more than 60 mills in Canada use recovered paper to satisfy a portion of their fiber requirements – in some cases 100 per cent – and $1.2 billion has recently been invested in recycling and de-inking facilities. We used 4 million tonnes of recovered paper in 1994. Quite simply, we can use as much as we can get our hands on. But we need the raw material from consumers to make it work.

I recently wrote a column in the Montreal Gazette where I pointed out that Canada has the distinction of being the largest importer of recovered paper in the world. Last year, we imported 1.8 million tonnes of waste paper. That’s because our country, with its relatively small population, simply doesn’t consume enough paper to generate a stream of recycled fiber sufficient to meet the demands of our producing mills. Compounding the problem is the fact that, while many communities have introduced ambitious recycling programs, many have not. It’s a problem which hits close to home. Right here in Montreal, our own Miron Quarry dump is 34% filled with paper. That should not be. It is a problem we need to address with more aggressive recycling programs all across Canada.

As the industry becomes more responsive to consumer preferences, environmental or otherwise, it continues to benefit from an economy which will also be rewarding for Canada. We are optimistic about our industry’s ability to compete in the global market. The question is how to maintain and even increase our competitive edge.

We know that we have to perform as well as our competitors in Indonesia, Brazil and Chile. That means that, like them, we have to control our costs and increase productivity in our mills. We must invest in research and development and learn to use new technology. Our objective is to improve productivity and provide the means to manufacture more high-value-added products and enhance our environmental performance.

We know that we have to continue to push for free trade in both our established markets and emerging ones. Right now we face tariffs of up to 70% in some countries. This is one of the reasons why the Canadian Pulp and Paper Association is actively promoting free and fair trade agreements for all pulp and paper products.

We have demonstrated our concern for the environment by making a firm commitment to sustainable forestry. This is precisely what we are working on now through our support for the development of ISO-type forest management standards to be applied in Canada and worldwide.

But to achieve our various objectives, we need your understanding and support. Canada’s pulp and paper producers have gone through some difficult times. I will be the first to admit that in past years we have been too introspective, too defensive, too insular and too polarized with respect to our critics and environmental issues. We shouldn’t have to force people to choose between the economy and the environment. That attitude has to change – and it is. In its place, we find an industry which has never been more open to the interests and concerns of all consumers at every phase of its operations.

We don’t tell people how the forests should be used. The people of Canada make those decisions as they should. Public participation has become the hallmark of forest management across Canada and particularly here in Quebec. When we harvest timber, our five-year plans are open for public review before approval by provincial foresters. If we were in Rimouski, instead of making a speech, I could show you how we harvest fiber in 1995, how we preserve the forest, protect wildlife and fight soil erosion. And I could prove to you that we are just as concerned as you are about the future of Canada’s forests. The very success of our efforts to prepare tomorrow’s forests depends on how well we keep the public informed about what we are doing and why. We also have to make people understand that we do listen to their concerns.

Our biggest challenge is effectively communicating our progress to the public. But this challenge also constitutes a tremendous opportunity for dialogue. At stake are one million direct and indirect jobs in Canada’s forest industry. Whether you’re an economist or an environmentalist, that’s a huge chunk of the economy. We’re working hard to maintain those jobs in Canada and keep earning revenues here in Quebec and across the country.

Our progress to date has improved our competitive edge both economically and environmentally. Our actions support our belief that only sustained, continuous environmental and economic improvement will bring long-term success. And it is with this conviction that we look forward to success in the next millennium.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Mac Evans
President, Canadian Space Agency

Conseil des Relations Internationales de Montréal, April 4, 1995
Published in The Corporate Report No. 13 (August 7, 1995)

The Canadian Space Agency is an important laboratory of dreams…but it is more than that. By all accounts, it is a strategic sector of the Canadian economy as we move from a resource-based economy to one that relies increasingly on knowledge and innovation to create wealth. Presently, the space sector in Canada sustains more than 3,500 high-skill jobs in all areas of the country, of which Montreal has an important share. In the years ahead, I have every reason to believe that the number of firms involved in space-related activities will grow, as we provide greater opportunities for Canadian companies to forge new partnerships with us.

This year is a pivotal year for the Canadian Space Program. It marks the boundary between the old and the new: the Long-Term Space Plan I begun, almost 10 years ago, and the Long-Term Space Plan II, approved by the federal government in June, 1994. It is a decisive moment in the history of the Canadian Space Agency: after several years of planning, preparation and negotiation, we are now beginning to operationalize our programs and turn the blueprints into reality.

In the broader context of the Canadian Space Program, we shall see the two fundamental principles that have governed Canada’s space activities – meeting national needs and developing an internationally-competitive, export-oriented industry – taken yet a little further.

I have been involved in the Canadian Space Program for more than twenty years. And, at no other time during this period has one year, 1995, been the showcase of so many Canadian achievements in word-class technologies. Consider for a moment the milestones Canadians will witness over the course of the next ten months: Radarsat, Canada’s first remote sensing satellite will be launched in September; MSAT, scheduled for launch later this year, will provide instant, portable communications to Canadians anywhere in Canada; STS-74, astronaut Chris Hadfield’s mission on board space shuttle Atlantis, with a launch date of October, will be Canadian technology used to dock the American orbiter to the Russian Space Station Mir.

These highly visible events, events that will command considerable attention, events that reflect the dreams of a generation of dedicated men and women, events that translate into economic growth. In this fashion, we will build on a dream and pursue a strategy that began more than thirty years ago – some of you will recall the launch of Alouette I in 1962 – making Canada the third country to orbit a satellite. And so, this year, we will push back the frontiers of space still a little bit further.

I come now to the international dimension of space activities. I will use the International Space Station as the program that best represents the international cooperation required today to carry out space activities, and the major role Canada is playing in helping make this monumental venture a reality.

I am persuaded, as indeed are many others, that the great turning point of contemporary history, is the end of the Cold War, ushering in a new era of cooperation among the peoples of the world.

For nearly 40 years, two superpowers, two opposed political systems, two technologically different economies, governed and imposed their will on space. There is no doubt that the ideological paradigm that held dominion over the world shaped the terms of reference of the Space Age for nearly half a century. That is now history. A new paradigm has emerged, characterized by partnerships on a world scale, and is exemplified by the International Space Station.

The notion of having a permanently inhabited laboratory in space reaches deep into the psyche of humankind. It began to take shape in 1984 when the United States invited Canada, Japan, and ten member states of the European Space Agency to participate in the single largest international scientific endeavor ever undertaken. In 1993, the United States invited Russia to join the International Space Station Partnership.

Over the years, the focus of the orbiting platform has changed. There have been no less than five design changes. At first, it was to serve as a stepping-stone from which far-off space missions could be launched. While learning how to live and work in space for long periods of time remains a strong element of the program, the Space Station will now also serve as a laboratory that offers a very unique research environment where there is no gravity, and in which experiments can be carried out that will help us better understand earthly phenomena. We already foresee that experiments done by astronauts living on the Space Station will yield a better understanding of diseases like osteoporosis, or of the causes for the kind of muscular atrophy that here on earth strikes victims of cystic fibrosis and, in space, affects astronauts.

The station will comprise crew quarters and advanced laboratory modules. Canada will provide the Mobile Servicing System, a new-generation Canadarm – that will be used to assemble and maintain the station.

When I think of the International Space Station and how it came to be, I am reminded of the challenges and potential of space today.

With the fall of the Berlin Wall, George Bush spoke of a new world order…to which some cynics replied “a new world disorder.” But the kind of collaboration and teamwork we have seen in establishing the Space Station clearly shows the potential and possibilities for international cooperation and understanding.

This is not to say it is not without challenges.

Although I wasn’t able to attend when CORIM hosted Major General Romeo Dallaire last February, I would guess that in his speech on “Lessons to be Learned from the Rwandan Crisis,” he would probably have mentioned that, as head of the UN peacemaking forces, he encountered the same sorts of difficulties the international space team has to contend with. These are the difficulties you must deal with when you choose to get an international team to do a job.

As you can well imagine, the level of collaboration required to accomplish something like the Space Station did not come about easily. Issues went back and forth. Which language should communications be in? Each country has its own legal framework. Which legal system would apply, if for instance, a Japanese astronaut hits a French astronaut with a Canadian wrench, albeit a robotic one, in the American module? Will we use imperial or metric measures?

Who has final say in taking decisions? And that is the most fundamental question – the safety of the crew depends on it. In the end, someone has to be in charge.

Every partner in the International Space Station brings a particular expertise, a different angle from which to tackle the common problems. Everyone is valuable. The United States, because of its commitment to, investment and experience in space, has been chosen to provide the leadership an undertaking of this magnitude requires.

I said earlier that the International Space Station is the largest science and technology project ever undertaken. And Canada has a wealth of experience in space science projects of an international nature. Indeed, every space program we have had has been conducted with other partners. Our experience has served us well and it will continue to stand us in good stead.

Canada has been particularly effective in ensuring that we not only contribute to the building of the Space Station but also profit from it. Building the space station is not like building a skyscraper. Its various modules have to be put together here on earth, transported into space and then all assembled – very much like a giant Mecano set. Whereas for your skyscraper you might use a crane to do the assembly, in space we will need an effective, proven robot.

While Canada’s experience with the Canadarm would seem to make it the obvious choice to provide this technology, securing our role was no small task. The issue was not whether Canada would remain a partner but rather who would be in charge of the robotics. Several countries offered various proposals to meet the space robotics requirements. Canada countered by capitalizing not only on its proven past experience with the Canadarm but also by demonstrating its continuing adaptability, to meet requirements throughout each of the Space Station design changes. Thanks to this adaptability and experience, today Canada is the lead agency in robotics for the space station.

I would add that Canada is providing an essential component of the station. Without Canada’s robotic system, the orbiting laboratory would not be assembled.

Despite all these difficulties, the Space Station is on its way to becoming a reality. The first components are scheduled to be launched in 1997. With this unprecedented project we are breaking new ground in how we live and work together…and to get there, we have had to agree on a whole new management regime by consensus, which may well become a model for future multilateral partnerships.

And perhaps this is the point to be made: international cooperation is no longer a luxury, it is increasingly necessary for the successful achievement of major projects.

Limited budgets, more and more technologically sophisticated projects…these factors and many more conspire to increasingly push us towards one another and force us to work together.

This new interdependence does not, however, mean that national interests – particularly economic interests – are forgotten. Canada has recognized that it cannot afford to go alone, but also that to sustain its dynamic economy, it must continue to invest in space technologies whose applications will have strong economic returns.

There are three major new initiatives that will become a reality this year. I think they illustrate well how, using international cooperation, Canada will be securing a prosperous future for itself.

In September, the eyes of Canadians will be fixed on the launch of Radarsat, Canada’s first remote sensing satellite and the Canadian Space Agency’s first satellite. Like the Space Station, this, too, is an international project, one we have undertaken with the United States, who, in return for a share of the data, is providing the launch vehicle that will put this unique Canadian satellite in orbit some 800 km above the Earth.

With Radarsat, we intend to launch a global business in selling satellite data to decision makers all over the world. Radarsat is a global system that will benefit Canadians to be sure, but all of mankind as well.

The data applications of Radarsat are far too numerous to fully list here, but let me point out some fields that will be enriched by Radarsat data: ice reconnaissance, coastal surveillance, shipping, ocean research, environmental monitoring – think, for a moment, of the potential sales of Radarsat data to industry as it strives to efficiently manage our agricultural, oil, gas and forestry resources. I believe that Radarsat will be a primary example of Canada moving into the new economy.

The same could also apply to MSAT. Here, using a French launch vehicle, Canada will put a powerful communications satellite into space that will also ease our entry into this new economy.

What this new satellite will permit us to do, is to ensure that MSAT phone users will be able to receive and send calls from anywhere in North America instantly. In areas of Canada already covered by cellular-phone networks, a ground-based grid will ensure hook-ups at lower cost. In areas that are remote – the Arctic, the mountains, or a sea hookup to the satellite will be done with the flip of a switch.

And finally, a few words about Chris Hadfield’s mission on board the shuttle Atlantis when it lifts off the pad at the Kennedy Space Center in October 1995. This mission, one of the most technically-challenging missions ever undertaken by NASA’s shuttle program, will see a Canadian operate the Canadarm for the first time in order to put in place the docking adaptor that will allow repeated shuttle missions to Mir. Major Hadfield will also be the first Canadian to enter the Russian space station.

Once again, Canadian technology – the Canadarm and the Advanced Space Vision System – will bridge two cultures in a show the world will witness, much as it did during the Hubble repair mission in which the Canadarm played such a critical role.

A Canadian coined the phrase first: we are living in a Global Village. In fact, we, in the Canadian Space Program, may well exemplify Marshal McLuhan’s prophecy. From the very beginning, everything we have done in space has been based on international cooperation. Whether it be building the Space Station, flying an astronaut, launching a satellite, using space as a laboratory to build better crystals or understanding the causes and the effects of ozone layer depletion, the exploration of space must be a cooperative adventure. The new ground we broke some thirty years ago may well have served as a model for the kind of international partnerships we are witnessing today. The Global Village has extended its frontiers to space.

Our task at the Space Agency is to continue to lead the way. The example of international cooperation we have in space is an example to emulate in our building of a peaceful, sustainable, Global Village. I can think of no more appropriate end to my remarks than this quote by Tennyson: “to seek, to strive, to find, and not to yield.”

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


Donald V. Fites
Chairman & CEO, Caterpillar

Business Week CEO Summit, Washington, September 24, 1998
Published in The Corporate Report No. 26 (January 31, 1999)

Business Week magazine, as you may know, has predicted that the path leading from the new economy of the 1990s to the 21st-century economy will likely be a bumpy one. I believe there’s much to be shared during this summit that may help smooth that way for all of us.
The subject of my remarks today was advertised as “Retooling for the new economy: The case of Caterpillar,” with a subtext of “How a capital goods manufacturer, operating from a largely US manufacturing base, can remain the global industry leader.” That’s a big assignment – with a 10-minute time limit – so let’s get right to it.

Every company’s success is predicated on its culture and experiences. Not surprisingly, Caterpillar’s history is rich with fact and folklore – with stories of our participation – throughout the decades of the 20th century, in the world’s larger-than-life construction projects. Less talked about, but much more important, is the contribution our products make to the world’s economic well-being through many of the things each of us takes for granted every day, such as electricity, water, transportation, energy, food and commodities. I’ve lived through over 40 years of those experiences with Caterpillar – residing on five continents – and while it is tempting to share some amazing stories with you, time just will not permit that. So let’s fast forward to the present – and put some dimension to who and what we are.

Caterpillar has posted record profit in 16 out of the last 18 quarters. 1997 sales totaled US$19 billion, with exports from the US of $6.1 billion – and with a profit of close to $1.7 billion. Our results so far this year are no less outstanding. During the first half of 1998, we achieved record sales of over $10 billion and a record profit of nearly $900 million. We expect that well within 10 years, we will be a more-than-30-billion-dollar company – and by the year 2010, more than 75% of our total sales will come from countries outside the United States – and that our US exports will reach over $10 billion.

We are, and intend to remain, the global industry leader and world’s number one manufacturer of construction equipment, mining equipment, forestry equipment, natural gas engines, diesel engines and industrial gas turbines. We’d like to add agricultural equipment to that list sometime in the future. We are globally successful and globally competitive primarily from a US manufacturing base. We are one of this nation’s largest net exporters. Although we expect sales outside the United States to be in excess of $15 billion a year, early in the next century, the majority of our manufacturing assets – some 70% – are, and will remain, in the US. Our facilities are capital-intensive and high-tech, and most of the individual products we build per year usually number in the hundreds, not thousands. It doesn’t make economic sense to duplicate manufacturing operations for many of our products. And from a political-risk standpoint, in our opinion, the US remains the best place to invest.

But in today’s world – and certainly in the world of the 21st century – hard assets can be copied, and indeed often are, in shorter and shorter periods of time. Manufacturing and technical expertise can be studied – and duplicated. For that reason, we believe the real key to Caterpillar’s future success lies in distribution. For many industries, I would strongly suggest that in an increasingly global economy, it is distribution that will separate the winners from the losers. Let me elaborate. Caterpillar’s distribution system, which is a well-established worldwide network of independently owned dealers, is usually cited as our most distinctive competitive advantage. Why? Because each one of our dealers – almost 200 of them – provides real value to our customers.

Dealer employees – some 80,000 of them – are well skilled in providing services to users of our growing product line. With more than 1,200 facilities worldwide, Cat dealers are well positioned and equipped with the latest tooling and diagnostic equipment. Their machine and parts inventories provide high levels of product support. And that’s important, because in our business, overall product life-cycle value, not initial price, is usually the deciding factor in a customer’s buying decision.

Our products have to perform in all types of conditions, be reliable and be designed so they can be economically repaired. All these factors contribute ultimately to residual value – a key ingredient in the product life-cycle equation for customers. We don’t need to be the low-cost producer. But we must be the high-value producer in the eyes of our customers – who make their buying decisions based on the features and quality of the product we manufacture and the value-added services which our dealers provide.

Cat dealers around the world create a significant competitive edge for us – and we view each other as partners. We expect them to provide superior sales and after-sales services. They expect us to provide them with consistently high-quality, state-of-the-art products. To make sure we can hold up our end of this bargain, we’ve invested billions to bring our factory systems and processes into the realm of high technology and, in doing so, changed the focus of our manufacturing operations from push to pull – from building inventories that customers might order to building products that customers have ordered. We streamlined material flow, pulling through in-process material. Huge high-rise storage facilities – which were thought to be vital to operations – became obsolete. Logistical control of in-process material became the heartbeat of our operations.

Best product value success also demanded, and will continue to demand, flexibility of labor and maintaining an effective, well-trained workforce. We had to articulate to our employees – and, as it turned out, to the nation in general – that in order to provide high-paying, high-tech jobs in a global economy from a US manufacturing base, companies such as Caterpillar must have labor efficiency and labor flexibility.

So just to be allowed on the global playing field, all of our products and services must offer high quality and optimum performance. But to be the continuing world leader in the industries we serve, distribution, in its broadest terms, will be the key. And it will be harder and harder to hide any weaknesses. In a borderless, global marketplace, our credo is that if you’re not competitive everywhere, you’re not competitive anywhere.

Some argue that the internet will make obsolete all traditional distribution channels. We don’t buy that, certainly not in terms of our overall distribution operations. In our business, not all products are created equal, nor are they supported equally once they’re in a customer’s hands. Our customers value quality, performance and lowest total cost per unit of work. We wouldn’t have it any other way. The internet is changing, and will continue to change, the way (and the speed at which) we communicate and the amount of information we have available. How we use that information to add value to our distribution is the critical question.

There will be change at Caterpillar – significant change. Our current greatest challenge involves the evolution of Caterpillar into what we’ve termed a high-velocity company. By that, I mean a company capable of responding to customer needs with speed and accuracy – faster than our competitors. We’ll create competitive advantage by real-time, global online linkage of customers and our products with Caterpillar dealers, with our internal operations and with our suppliers.

Our high-velocity vision includes dealer salespeople linked worldwide by their ability to immediately access complete information. To determine product selection. To quote the right configuration and attachments. To know availability. To provide financial and credit terms. To offer product support programs. And to complete life-cycle-costing studies. Rental options, used equipment and other product alternatives will be readily accessible and considered.

Our machines and engines themselves are a primary component of this high-velocity vision. They will, for example, monitor their own vital signs, diagnose their own performance, and even predict their own problems before they occur. The result for our customers is the reduction or elimination of machine downtime and repair costs – and an increase in their realization of value that is directly reflected in their bottom-line success.

We’ll accomplish our high-velocity objective by continuing to stress a flexible, results-oriented corporate organization: one that pushes responsibility and accountability down, nurtures a culture which gives employees ready access to information, allowing them to make well-informed decisions – and rewards employee performance with excellent compensation.

To put it plainly – as we usually do in Peoria, Illinois – Caterpillar intends to remain the global industry leader we are today – by being the high-value producer from a largely US manufacturing base, even as we see sales outside the US growing to reach as much as 75% of our total. Engineering excellence, manufacturing flexibility, financing skills, and outstanding quality will be prerequisites to play in the major leagues of the global economy. But superior distribution will ultimately separate the winners from the losers.

This edited online version copyright © 1993–2010 by Lawrence Creaghan. All rights reserved. ISSN 1208-5561.


G. Yves Landry
President & CEO, Chrysler Canada Ltd.

The Calgary Chamber of Commerce, February 28, 1996
Published in The Corporate Report No. 17 (April 30, 1996)

Chrysler Canada is the fourth largest company in the country, ranked by 1994 revenues of some $15.6 billion. In 1994, Chrysler Canada produced a record 695,000 cars and trucks in our three assembly plants. In fact, we set the Canadian industry standard by having the best production-to-sales ratio. We build nearly three vehicles for every one we sell in Canada.

While buying some $7.2 billion of goods and services from Canadian suppliers in 1995, it was basically a year of major adjustment for Chrysler Canada as we launched our third generation of minivans with the massive investments and downtime that it brings about. We’re on track now, and we are poised to break new records in 1996 and beyond.

As you can well imagine, we’re very proud of the role our company plays in the Canadian economy, and that’s why we often say, “At Chrysler Canada we’re not just building cars and trucks, we’re building Canada.”

While the automotive industry has played a major role in the lives of Canadians, the continued success of the Canadian auto industry cannot, and must not, be taken for granted by either management, labor or government. These last few years, the North American automobile industry has lived through an important and essential transformation to ensure its survival with the import growth and the damaging North American production over-capacity of the late 1980s, the global markets, the recession, a stagnant domestic economy, free trade and a market that is brutally competitive. The domestic auto industry was in trouble, and we had to do something.

We had to take our cue from these recent events. We had to learn from the past so as to influence the future. We had to become far more efficient and competitive. We had to seek excellence and competitiveness.

Being competitive is a way of thinking and doing things. And this was at the origin of a true cultural revolution at Chrysler. It started a few years ago. Since 1987, our corporation has literally reinvented itself. We have completely restructured our company. We’ve reduced our annual fixed cost base by some $4 billion. We have lived through a quiet revolution in our ways of developing and building cars and trucks, in our ways of thinking and doing things. And it all started with a renewed commitment to total quality and continuous improvement. Our biggest challenge was to find a way to bridge the gap between the company and our unionized workers. We had to give the workers their self-esteem as car builders. We had to create a proper environment for their willing, and hopefully enthusiastic, participation.

The process of quality is the willing participation of the workers. It’s a function of the soul. It has to be given. Only then came the realization that we also had to change. Perhaps more than our employees. We had to come down from our ivory tower. We had to create a climate that encourages participation. We had to learn how to listen. We had to measure progress and recognize the most deserving employees. We had to assess employee and union input on the basis of what made sense, instead of did it fit within the established rules. We had to cut plant bureaucracy and give more authority to our workers. That is empowerment.

It was really all part of building a new modern labor/management relationship. For 25 years, until 1990, we could never negotiate a new contract without a strike. Whether declared the industry target or not, inevitably a work interruption would follow. I give credit to the C.A.W. and the workers to have understood there was no need for this in the competitive atmosphere of the nineties. We had to form a new partnership built on candor and open communications on all issues. A balanced approach which deals with the legitimate concerns of both business and labor and includes a thorough consultative process with those involved. And we did. The barriers came down, and all this contributed greatly to bringing us much closer to our workforce and resulted in a healthier and more stable relationship. The results: we’ve been strike-free (including the 1990 negotiations) with major improvements in quality, productivity and production costs, and a reduction in lost time, accidents and W.C.B. claims.

There are still many issues (philosophical or otherwise) that we will continue to disagree on. And that will probably never change. What’s important is to avoid going back in time to the confrontational practices of the past, and to understand that the long road to total quality is a never-ending process.

Another key element of our restructuring has also been Chrysler’s new platform team approach to vehicle design. Which brings all the disciplines associated with vehicle development together at the genesis of the vehicle to radically shorten lead time, reduce costs and ensure world-class quality. We have literally knocked down walls to improve communications between our people, and they work in the finest research and development facility in the world: the Chrysler Technology Center, now the benchmark for the whole industry.

Since the early 1990s, with our four platform teams, vehicle development can be done at lower cost, faster and with higher quality thanks to:

•  Reduced development cycle time

•  Reduced engineering development costs have given us a definite competitive advantage in the marketplace and the impressive list of awards and recognition that we have received these past few years, including what we call the triple crown of automotive awards for our Windsor-built minivans:

1.  The 1996 Motor Trend Award

2.  The 1996 Automotive Journalists of Canada Award

3.  The 1996 North American “Car-of-the-Year” Award

No new product has ever made such a clean sweep of all of the top three US, Canadian, and North Amer