Back during the peak of the high-tech mania, I found myself fairly frustrated with then-Nortel-CEO, John Roth. When he was most influential was also when he was at his most arrogant and annoying.
The low-point, for me, occured when a publication (I can't remember which -- maybe Time, maybe ROB magazine, maybe the National Post) named him Canadian of the year. He had a full page article in which he berated Canada and the sorts of policies we favour. He informed us, with great authority, that we had to change or he and the rest of the world was going to leave us behind. Our taxes had to be slashed, social services eliminated, and we needed to conform to the corporate program.
Here's a sample, from Time magazine, in 2000:
|John Roth's Vision for Canada|
Roth has been a nagging presence all year for Canada's decision makers, warning that the country risked becoming a second-rank economic power unless it changed its wealth-crimping tax policies and supported high-tech winners. He put his credibility behind the notion of a "brain drain" caused by high income and capital gains levies, and argued for better tax treatment of stock options to encourage entrepreneurship. "Policies and business strategies that worked well in the industrial era are a recipe for stagnation and decline in the new economy," he declared in a speech in April. Roth warned repeatedly that Nortel's Canadian workforce of 25,000 — now just 30% of its worldwide staff — would drop even more unless Canada encouraged homegrown talent to stay.Roth has since been revealed to be a huckster in charge of a penny-stock operation.
Now it has also been revealed that not only was Nortel's tremendous growth greatly fueled by loans from the Canadian government -- made to Nortel clients, and still unpaid -- but that Nortel now relies further on Canadian credit for its own well-being.
From Mathew Ingram in today's Globe and Mail, first the history:
As it grew through the late 1990s to become one of the world's largest providers of telephone and networking equipment, many of its deals with foreign customers were financed directly or indirectly by EDC, which provided loan guarantees and other arrangements that made Nortel's products more attractive to purchasers — just as EDC has done for Bombardier's airplane customers.
That's all well and good, but as the expansion in telecom and networking gear reached a fever pitch, more and more of the sales Nortel and its competitors were racking up consisted of "vendor financing" deals, in which the company selling the product loaned the customer most of the money required to buy it. Many telecom and Internet companies were happy to sign up for this kind of program, which allowed them to effectively buy as much as they wanted and then stick Nortel with the bill.
At one point late last year, almost half of the $21-billion portfolio of loans and loan guarantees held by Export Development Canada was composed of commitments related to Nortel and Bombardier. Many of those commitments were likely made to companies that are now either defunct, in bankruptcy protection or at the very least in serious financial straits — although the details are difficult to come by, because EDC doesn't release much in the way of specific information on its portfolio.And here's what Nortel is doing today (from the same article):
Unable to meet the financial targets set out in some of its loan agreements, Nortel Networks recently cancelled almost $3-billion (U.S.) worth of financial arrangements with a number of lenders. But doesn't Nortel need the kind of financial backstop those agreements represent? It sure does. Fortunately for Nortel, an old friend was there to pick up the slack — the federal Crown agency Export Development Canada.So, I think Roth's vision for reforming Canada is clear. We need to cut social spending, health, and education so that the government can divert our taxes towards propping up large corporations. The main benefit of this, of course, is that said corporations will then be able to reward their CEOs with massive stock-option booty.
Or, at least that's how this stockholder and taxpayer sees it.