The Caterpillar fiasco is another example of the failed relationship between government, corporations and community. Rather than get lost in the minutiae of the Caterpillar story, a wide angle lens reveals a disturbing picture of corporate greed, negotiating in bad faith, the free market economy at its absolute worst. We can debate certain points all day, but the notion of a company making record profits, upper management receiving record pay contrasted with demanding employees take a 50% wage cut, demonstrates obscene disconnect. This wasn’t a GM or Chrysler- companies teetering on extinction require deep worker sacrifice- this is a company flooded with cash, a historic high water mark, running on all cylinders, giving the SHAFT to the people who contributed to its success.
The federal and provincial government have assisted Caterpillar, not the least of which corporate taxcuts. The wider story, corporate taxes have failed to deliver as advertised, chose your empirical measure, one is hard pressed to justify, left to future theoretical proclamation. Perhaps the Caterpillar story highlights the need to have “strings attached” to government initiatives which benefit corporate Canada. Perhaps corporate taxcuts require certain criteria to qualify, this type of regime is quite common with other government allocations. Rather than a blank check scenario, wherein government is left to HOPE, money should be tied to commitments, thresholds, tax breaks a function of a credible plan to incorporate those savings.
Is it so offensive to say to Corporation A, you can qualify for a certain corporate tax rate if you demonstrate reinvestments, if you can show productivity gains, if you address employment? Should said corporation show no interest in meeting certain thresholds, they simply don’t qualify for the “break” and they lose the opportunity to redeploy DIRECTED capital within their organization. Given all these stipulations still ADVANCE corporate SELF INTEREST, where is the downside to said corporation, within a qualification system? Again, review many, many government programs and you will see merit based systems, you will see money doled out if certain requirements are met, quite common, quite fair as well.
Caterpillar represents a scenario where everyone except the corporation has acted in “good faith”. Government has assisted, helping that corporation operate in a more healthy business climate. The employees have assisted, helping to make the corporation incredibly profitable, part of the success no question. Caterpillar in turn has said, thanks for the public money, the tax breaks, thanks for making quality product employee, but we’re out of here, despite RECORD profits, despite a JUGGERNAUT company with more cash than it can spend, we flip you the BIRD. This whole story highlights the desperate need for corporate responsibility, the missing variable in this entire equation.
The Caterpillar example is sensational, but it is also symptomatic of a larger problem with the way governments approach corporate “citizens”. The time has come for “show me” regimes, wherein corporations who want the benefits of government measures must demonstrate where that money will be redeployed, provide detailed plans to show how corporate taxes will benefit the company, as well as achieve the benefits these measures were intended to provide. Rather than Jim Flaherty expressing “frustration” that corporations aren’t reinvesting as hoped, we have concrete assurances tied to certain tax rates. A strings attached system would garner the wanted reinvestment, employment, productivity, because there is still self interest, the company still benefits through compliance, the alternative is less attractive. It’s time for society to take back the reigns, rather than rely on incapable entities to do the right thing, we should leverage some control, in a way that allows benefit, but also brings responsibility.