Strategy

The CEO Poll: Foreign ownership reviewed

Increased fed scrutiny of acquisitions by foreign, state-owned firms meets with wide applause from Canada's CEOs.

Business leaders give the federal mini-budget high marks.

Industry Minister Jim Prentice announced a new policy in December of increased scrutiny of foreign state-owned firms when they seek to acquire Canadian companies. And that has earned him high praise in a web survey of Canadian CEOs and business leaders conducted by COMPAS Inc.

The 122 CEOs polled awarded Prentice a grade of 76% for establishing guidelines, one of the highest scores a politician has ever received in a COMPAS poll. The new policy is short on specifics, but consists of general principles for foreign enterprises to follow. Such firms must clarify the extent of control by their government, corporate governance and reporting practices, and whether the targeted Canadian company will continue to operate commercially.

The CEOs surveyed are most concerned about state-owned enterprises from countries that sponsor terror or encourage violence. But they also want government to take special care in reviewing buyers from places that are undemocratic, and those that are less open to foreign investment than Canada.

Not all are satisfied with Prentice’s move. “It is not possible to start putting restrictions on foreign ownership unless we close all of our doors to foreign ownership,” wrote one respondent. Prentice was careful to stress in announcing the guidelines that they were not meant to discourage foreign investment but to clarify what is expected of foreign state-owned firms.

Of course, guidelines are no guarantee that a company won’t change its operating procedures after acquiring a Canadian company. “It is not sufficient to have scrutiny prior to purchase,” wrote one respondent. “What happens if the purchasing state is clean according to the criteria, but after purchase begins to exert influence on their Canadian assets that is considered inappropriate?”