THE BLOG

Good Corporate Citizens Don't Take Cash From Taxpayers

11/25/2013 03:54 EST | Updated 01/25/2014 05:59 EST

Can a company truly be considered a good corporate citizen while taking money from taxpayers through corporate welfare?

Corporate welfare happens when a government makes a political decision to use tax dollars to favour one company over another. While all of us understand we need to pay taxes to fund societal benefits like hospitals, schools and infrastructure, most feel government should not use our money to pick winners and losers in business by handing out grants to specific companies.

Further, when a business pays its taxes, it shouldn't have to worry about a government turning that cash over to a competitor across the street. Yet in Canada, this has become a common occurrence.

Author Mark Milke notes that between 1994 and 2007, more than $200 billion was paid out to companies by federal, provincial and municipal governments. However, very little of it is ever disclosed by the companies. We often don't know if the businesses we frequent are being good citizens by refusing to take corporate welfare.

A relatively new benchmark used by companies to determine their contribution to society is a corporate social responsibility (CSR) report. These CSR reports focus on a company's environmental efforts, charitable donations, employee well-being and contributions to the communities in which they work.

But there is an important performance measure missing in the vast majority of companies' CSR reports -- the amount of corporate welfare received by a company.

Taking money from taxpayers is an abdication of a corporation's social responsibility to be a positive contributor to society -- it is pulling money away from the proper societal priorities that should be funded by taxes. This should be a key piece of CSR reporting, and weighed by stakeholders when assessing the strength of a company's corporate citizenship.

Unfortunately, such a transparent approach to corporate welfare rarely happens. (Full disclosure: the Canadian Taxpayers Federation has never taken a nickel in money from the government, and never will.)

Corporate Knights magazine puts out an annual list of the "Best Corporate Citizens in Canada," but does not include corporate welfare as one of their 12 measures of social responsibility. This helps explain why Bombardier finished 11th on its list in 2013.

That's the same Bombardier which, according to Milke's book Tax Me, I'm Canadian, has taken the second-most corporate welfare of any Canadian business since 1961 - $1.1 billion in 2012 dollars, spread over the past five decades, from Industry Canada alone. But that fact doesn't get mentioned in Bombardier's CSR report.

Loblaw Companies ranked 47th on the Corporate Knights list, yet this company employs 135,000 people and has never taken Industry Canada corporate welfare. Their self-reliance should push them up any list talking about being a strong corporate citizen.

When corporate welfare is publicized, companies go to great lengths to spin the results. Take Pratt and Whitney Canada (P&WC), for example. According to the company's CSR website, the federal government has "invested" $1.5 billion in P&WC research and development -- and some $449 million has been paid to the government in "royalties" from that "investment."

Are taxpayers really supposed to be pleased that we are only a billion dollars down? Milke's research indicates that the total Industry Canada payout to P&WC is nearly $3.3 billion in 2012 dollars. Taxpayers have been cutting cheques to this company for four decades.

But the math is shocking. P&WC note they employ 6,200 people across Canada. Take that $3.3 billion in corporate welfare, divide it by 6,200, and it comes to $532,258 per head.

Governments should get out of the corporate welfare game, and stop trying to pick winners and losers with our tax dollars. But government's foolishness does not absolve companies of their corporate social responsibility in this.

One of the key hopes behind CSR reporting is to use it to modify corporate behavior. Perhaps if CEOs were forced to reveal just how much money they were taking out of taxpayers' pockets, it would prompt them to lean less on government handouts.