Head-office jobs rise, StatsCan study says; 10.7%
increase across the country Toronto's number rose by 19.2%
The Toronto Star
Fri 14 Jul 2006
Page: F1
Section:
Business
Byline: Tony Wong
Source: Toronto Star

Despite rising concerns that foreign takeovers may lead
to a hollowing out of corporate Canada, there is little evidence of that
happening, says a study by Statistics Canada.

Head office employment - defined as the number of people employed at Canadian
corporate headquarters - actually increased by 10.7 per cent from 1999 to 2005.
Toronto's total rose by 19.2 per cent, while its share of head office employment
across the country also edged up, according to the study released yesterday.

"The effect of foreign takeovers has not reduced the number of head offices
in Canada or affected employment," Mark Brown, the co-author of the Statistics
Canada study, said in an interview. "In fact, what we're finding is that many
foreign firms add staff because they do as much, if not more, research and
development than domestic firms."

The study counters the arguments of nationalists who say Canadians should
take a more protectionist stance against foreign corporations that are eyeing
our most prized assets.

In the latest of a string of iconic Canadian companies to be pursued by
non-Canadian suitors, Phelps Dodge Corp. has proposed the largest takeover in
Canadian history - a $40 billion merger that would see Inco Ltd. and
Falconbridge Ltd. fall under American control. Other companies that have been
pursued by foreign corporations include Hudson's Bay Co., Dofasco, Inc. and
Fairmont Hotels & Resorts and Molson Inc.

Reaction has been so strong to the string of takeovers that some of Canada's
top corporate leaders such as Peter Munk, chairman of Barrick Gold Corp., and
Gerald Schwartz, CEO of Onex Corp., have expressed concern that it would be
against Canada's best interests to see an exodus of corporate head offices.

"In some ways there is a little emotion involved in all this, especially when
you talk about companies that have been part of the Canadian landscape forever,"
Yvan Guillemette, policy analyst at economic think tank
C.D. Howe Institute said in
an interview. "But really this is now just the normal flow of investment in a
globalized world. The reality is that we aren't losing."

According to the Statistics Canada study, firms that shifted from domestic to
foreign control actually opened more head offices than they closed, which
created a net increase in employment. "It is just as likely, or more likely,
that a foreign firm might establish a new head office or expand its existing
head office after a takeover," said Brown in the study.

Toronto reinforced its position as the head office centre of Canada - with 34
per cent of head office employees, up from 31 per cent in 1999. Montreal is in
second spot with 21 per cent, down from 23 per cent.

Calgary's share rose to 11 per cent from 7 per cent, while Vancouver's fell
by the same amount - to 7 per cent from 11 per cent. For Vancouver that
represents a 29 per cent decline in employment, while Calgary saw an astonishing
64 per cent growth.

Turnover in head offices during the six-year study period was considerable,
with 37 per cent of offices present in 1999 closed by 2005. However, the vacuum
was filled with new entries.

And while some foreign firms chose to close offices, others simply reduced
employment levels as a portion of management functions were moved abroad. In
some cases they expanded their management functions in Canada to deal with
growing operations, said Brown.

"I think we're in a very different world where it's not as simple as saying
foreign takeovers lead to widespread job losses. The implications are much more
subtle," Doug Porter, deputy chief economist at BMO Nesbitt Burns said in an
interview.

A paper co-authored by Porter and economist David Watt to be released today
argues that in future Canada will be "more of an acquirer than an acquiree."

© 2006 Torstar Corporation

Edition: ONT
Length: 634 words