Bombardier reminds us how easy governments make it to forget taxpayer investments: Don Pittis

Gigantic pay packages for corporate executives always come with an intricate set of justifications, especially after they've generated public outrage.

"Today, Bombardier is a $16-billion high-technology company on a growth path to $25-billion by 2020," Jean Monty, head of the group that decides how much Bombardier executives deserve, declared Sunday. Monty himself raked in multimillion-dollar salaries at Nortel and Bell Canada so his opinions are not exactly those of the common working stiff.

Bombardier is actually a $4-billion company, measured in the standard way based on capital value, but in his urgency to convince us that paying executives so much is essential, Monty forgets several things.

The unsung taxpayer

Rather than crediting the current set of execs, it is much easier to make a case that repeated investments by Canadian taxpayers created those billions.

This is not a uniquely Canadian phenomenon.

Despite the country's celebration of the free enterprise spirit, the United States has a heavily taxpayer-subsidized private sector.

• Bombardier defers executive pay plan after backlash
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The term "privatising profits and socializing losses" is so widespread it gets its own entry in the U.S. business definition site Investopedia: "businesses and individuals can successfully benefit from any and all profits related to their line of business, but avoid losses by having those losses paid for by society."

In the U.S., outrage over corporate bailouts has come from the right-wing Tea Party movement as much as from anyone on the left.

The Flaherty model

Here in Canada, it was Conservative leadership candidate Michael Chong who made the best case for putting conditions on government bailouts to companies like Bombardier, saying it would have been better to follow the model of Tory Finance Minister Jim Flaherty, who in 2013 made concessions to Air Canada, granting the company more time to finance its pension fund, which was in deficit at the time.

"The badly needed break was accompanied by strict regulations banning special bonuses, dividends, share repurchases and tying salary increases to the rate of inflation," Chong said in an email to supporters.

In the current fuss over Bombardier, most of us have probably forgotten Flaherty's help to Air Canada. Most of us have forgotten the many, many bailouts to private sector corporations that have prevented their collapse or sale to foreign companies.

Air Canada and Bombardier are not alone. But in Canada when we read about the success of our private-sector titans and the captains of industry that lead them, the helping hand from taxpayers is almost never mentioned.

Invisible handout

We hear about the free market's invisible hand that propels private-sector companies to success, but we hear little about the invisible handout from taxpayers.

From its days as a money-losing snow tractor company, Bombardier has been helped so many times by now-forgotten taxpayer infusions that in many ways it is a creation of the Canadian government, funded by your taxes. A CBC article from three years ago outlined some of that history.

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Air Canada, a literal creation of the federal government, has been given taxpayer help many times since. CN Rail is similar. Telus was once a government-created and owned company. So was Potash. It is seldom noted that the Alberta Energy Company that developed the oilsands was a taxpayer creation. 

These are not exceptions. Taxpayer support for Canadian industry has been the rule.

Carmaker General Motors got an enormous bailout from the Canadian and Ontario governments after its bankruptcy in 2009 and the previous Conservative government sold off the shares it had taken in partial compensation at a loss.

Making taxpayers proud

And it's not just the bailouts. Jean Monty's BCE became a giant because of its original status as federally regulated monopoly. 

Canadians have every reason to be proud of the investments they have made in creating our business giants.

But when it comes to taking the credit, the office in charge of justifying the bosses' pay is always well funded.

There are plenty of reasons given: bosses elsewhere are paid more; the current bosses are irreplaceable; they might run off to get more money someplace else.

If the Bombardier raises — which have been partially delayed but not reduced in the face of the backlash — don't go through, will the executives abandon their rich pay packets?

Such justifications are often suspect. At Postmedia, for example, several executives got retention bonuses and left shortly afterward all while the company was losing money and laying off staff.

• Bombardier defers executive pay plan after backlash
• Canada's top CEOs earn 193 times average worker's salary

From their positions of power, company executives always seem convinced they deserve to be paid more regardless of whether the company is failing or boosted by good luck.

Unless government handouts come with strict rules that prevent giant pay hikes, company bosses seem prone to assuming the improvement in business conditions that follows is simply evidence of their cleverness and hard work.

Follow Don on Twitter @don_pittis

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