General Motors’ notice to close multiple plants reminds us that corporate wellness does not produce long-term sustainable business. It’s a band-aid and a colossal waste of taxpayer funds. The government could apply those funds to help retrain workers, help them find new jobs, and minimize loss of income during the transition to their new situations.
Businesses create wealth and jobs
Businesses are those used by vehicle owners to create jobs and provide income for employees and shareholders to become consumers and sustain economic growth. A company must have the right people cooperating in the right time slots in the right direction. Its ability to pay its workers and shareholders comes from the production and sale of machinery, equipment, goods and services that people want or need.
We must encourage business owners to pay their employees well, be profitable, retain profits, reinvest in the business, and pay dividends to their owners. But we shouldn’t intimidate companies into keeping wasteful plants open. If there is no market, there are no sales, there are no funds available. A structurally flawed company must close early while treating workers fairly and respectfully.
Corporate wellness destroys jobs
Governments are not short of wealth-destroying tactics. Therefore, they give companies huge subsidies to “create jobs” or for other political reasons. They don’t see that this is just another major government waste outlet. Unfortunately, they don’t look at the results over time to see that their business wellness is anti-competitive and destroys jobs in the long run.
The role of governments is to create level conditions for businesses to prosper. They must develop favorable conditions for companies to want to operate in their jurisdictions. It is absurd and naive to believe that bribing companies with handouts is more than a temporary solution. According to the Fraser Institute:
Between 1961 and 2013, the federation [Canada] The industry department disbursed $ 22.4 billion to businesses … The top 10 recipients received just under $ 8.5 billion, or 38 percent of all money disbursed … [M]corporations or their parent companies receiving corporate welfare are anything but start-ups. Also, in many cases, the cash held by the parent company or company far exceeds the total amount of original welfare paid out. This calls into question at least one justification for the policy that allows subsidies to businesses: taxpayer assistance is necessary to make up for market failures and lack of capital.
Some front-line companies get corporate wellness
In the US, the beneficiaries of corporate wellness include Nike, Intel, Boeing. In fact, it is outrageous how governments arbitrarily distribute taxpayer funds to large corporations without consultation or accountability. Why not use these funds to reduce personal income tax? Here again is an example of a complacent electorate allowing government waste.
In my business experience in many countries, I saw several examples of corporate wellness, mainly because governments and unions did not want structurally flawed companies to close. Sadly, some of these businesses received welfare payments for years, but eventually closed.
Governments and the public must realize that structurally flawed companies will not survive. Therefore, the best approach is an orderly early closure that includes worker training and relocation, where possible. Encourage companies to close with great care and empathy for employees. The alternative of staying open provides false hope about the future of the company. If companies can survive only with the financial help of taxpayers, they have no future.
Corporate Well-being is Chronic
Since corporate wellness strategies don’t work in the long term, why are governments continuing them? The answer is obvious: corporate wellness produces positive short-term political outcomes. And above all, ignorance leads the electorate to believe in the propaganda of governments about the use of tax money to finance companies that lose. So who will educate the public about business reality? The government certainly will not. Therefore, companies must assume this role even if they start with a significant credibility gap. Sadly, some greedy and selfish CEOs get excessive amounts from their companies in different ways.
History will show that giving investment incentives to selected industries as the governments of Canada and the United States do is shortsighted. Indeed, Canada’s corporate wellness extends to the aerospace, energy, agricultural and automotive industries, but with this massive support, the auto industry is declining and will continue without further wellness. The alternative to corporate wellness is to eliminate special payments and incentives to companies, eliminate corporate taxes, eliminate unnecessary regulations, and allow companies to grow and create jobs.
© 2018 Michel A Campana