The Canada Development Corporation
Publication:
The Empire Club of Canada Addresses (Toronto, Canada), 17 Feb 1972, p. 244-262


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Hampson, H. Anthony, Speaker
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Text
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Speeches
Description:
The Canada Development Corporation and some background as to its origins in the mid-1950s. Walter Gordon's Royal Commission on Canada's Economic Prospects. The issue of non-resident ownership and control of the Canadian economy. Changes in Canada's trade and balance of payments. The growth of exports vs. imports. Demand for Canada's natural resources. The Automotive pact. The legislative act governing the CDC and an analysis of it. Second mandate of the CDC: To operate in anticipation of profit. Size of the CDC. Six areas of concentration for the CDC: oil and gas; health care; the petrochemical-related industries; mining; pipeline and related northern transportation; venture capital. CDC launched by government but designed to be run by independent directors for the benefit of shareholders. 90% of shareholders to be Canadian private citizens.
Date of Original:
17 Feb 1972
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English
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The speeches are free of charge but please note that the Empire Club of Canada retains copyright. Neither the speeches themselves nor any part of their content may be used for any purpose other than personal interest or research without the explicit permission of the Empire Club of Canada.
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Fairmont Royal York Hotel

100 Front Street West, Floor H

Toronto, ON, M5J 1E3

Full Text
FEBRUARY 17, 1972
The Canada Development Corporation
AN ADDRESS BY Mr. H. Anthony Hampson, CHAIRMAN, CANADA DEVELOPMENT CORPORATION
CHAIRMAN The President, Henry N. R. Jackman

MR. JACKMAN:

Our guest today, the newly appointed Chairman of the Canada Development Corporation, comes to us as the Chairman of an organization which has had perhaps more than the usual number of birth pangs during the eight years since it was originally conceived. The day after the appointment of Mr. Hampson and his fellow directors were announced in the press, the Toronto "Globe and Mail" had a lead editorial which said in part:

"After eight years of keeping it tied up the Liberals are releasing their Caliban on the business community. Neither one thing nor the other, illogical and inconsistent, a confused and conflicting cross of economic ideologies, its destiny will be wrapped in its struggle with its own deformities. The danger is that the struggle will be damaging not only to it, but to the country and to all who are unable to keep out of the way. Its loyalties will be divided; its fears will be manifold; its objectives confused. Poor beast, it should be put to sleep rather than be unchained."

This editorial was entitled--"The Beast is loose".

In the event that some in our audience may have noticed that during this luncheon, Mr. Hampson, Mr. Crowe and I were looking with a rather anxious eye on the Press Table, it was only because we had some small worry that the account of this meeting in tomorrow's "Globe and Mail" might very well appear under the heading--"The Beast is Here".

That the Canada Development Corporation is controversial, goes without saying. The fact that after eight years of debate and discussion there still may be some confusion in the public's mind over the Corporation's objectives, highlights the importance of the role that Mr. Hampson has been called on by our Prime Minister to play.

Born in Montreal, he was educated at McGill and Cambridge University where he received his Masters Degree in Economics. After a few months with a Canadian chartered bank, he joined the Economics Policy Division of the Department of Finance in Ottawa. During this period, he was loaned to the Royal Commission on Canada's Economic Prospects, where, together with Mr. Douglas Fullerton, he co-authored a study of Canada's secondary manufacturing industry. His abilities were well recognized and in 1957, he accepted an offer from the Toronto investment banking firm of Burns Bros. and Denton where he served as Director of Research and Underwriting. The lure of government service remained strong and in 1961, he took a leave of absence to serve as Secretary of the Royal Commission on Banking and Finance which made an extensive study and review of Canada's financial institutions. In 1964, he joined Power Corporation of Canada as a Vice-President, becoming also a Vice-President of Capital Management Limited and served as a director and trouble shooter for several of Power Corporation's subsidiaries.

In 1968, Power Corporation went through a major change in ownership and direction and the decision was made to sell Capital Management. Mr. Hampson remained with the latter company becoming its President. It was also in 1968 that the Federal Government appointed him to be Chairman of the three-man board that supervises the General Adjustment Assistance Programme. A position he has filled with intelligence and distinction.

There are very few men in Canada whose experience and qualifications are so admirably suited to the task he has now undertaken.

I therefore have the great pleasure in introducing to you Mr. Anthony Hampson.

MR. ANTHONY HAMPSON:

In talking to you today about the Canada Development Corporation I find myself in a position similar to that of an adoptive parent of a rather lusty newborn infant. I have a certain, perhaps undue, affection for it, and high confidence that this very interesting and unusual child has the potential to make a most productive contribution to our society. At the same time, I am aware that those outside the immediate family don't fully share this view, perhaps because the circumstances of the child's paternity are somewhat in question! As its life has barely begun, we will have to await the record of achievement in the next few years to tell which attitude is right. All I can do today is describe for you the way we hope to point and direct this new personality on the Canadian investment scene, what we hope it can achieve and how, and what sort of troubles we hope to have it avoid.

Before doing so, however, I might remind you of some of the background to the Corporation's birth. Its origins go back to the mid-1950s and Walter Gordon's Royal Commission on Canada's Economic Prospects which, among other things, examined the question of non-resident ownership and control of the Canadian economy. Mr. Gordon's subsequent writing and speeches suggested that the Corporation would be particularly concerned with pre-empting take-overs, and acting as a Canadian buyer of last resort. This approach then worked its way into the platforms of some of the political parties and emerged virtually un changed in Mr. Gordon's Budget Speech of 1963, the famous Budget which featured the 30% takeover tax. As someone aptly put it, that tax was the guillotine and the CDC was the basket to be used to catch the dismembered heads! With the withdrawal of substantial parts of that Budget, the CDC dropped out of sight for a while, perhaps in part because shortly afterwards the Government found it necessary to seek exemption from the American interest equalization tax in order to ensure an undiminished flow of foreign capital into Canada! Obviously, against this background of balance of payments uncertainty, the time was not propitious to attempt to revive or replace the stillborn infant.

In the next few years, the underlying position changed considerably. The question of foreign investment in Canada receded somewhat from prominence for a variety of reasons as emphasis was put on other and more central strands of social and economic policy. Moreover, a number of specific measures were taken to deal with foreign ownership and control problems in selected areas of the economy, such as banking, life insurance, and the media of communication. Then, too, a number of published studies of foreign investment showed that the very real gains it brought to the Canadian economy in terms of employment and marketing and technical know-how did not involve as high a price in supposed lack of exports, research and purchasing in Canada as had been alleged. During this interval as well, there was a strong tendency for foreign-owned corporations to promote Canadian management to top positions, to elect more Canadian directors and to become more conscious of being good corporate citizens.

While all this was going on, a very fundamental change in Canada's trade and balance of payments was taking place; the growth of our exports substantially outpaced that of our imports because of the growth of demand for our natural resources, the improved competitive position and attitudes of our secondary manufacturing industries, and special factors such as the Automotive Pact. Our current account moved into overall surplus in 1970 and 1971, and the capacity of Canadian savings and financial markets to finance more of Canada's requirements expanded dramatically.

This is not to say that the foreign ownership and control issue is not significant in real terms in particular industries and areas, or that the issue lacks emotional appeal in certain areas of the country, perhaps most of all in Metropolitan Toronto. The recent upsurge of discussion in the press is testimony to that, as is the interest with which the Government's forthcoming pronouncement on the subject is awaited. However, as a background factor influencing the shaping of the CDC as it now is, the foreign investment issue was very much less significant than it had been some years earlier. Indeed it appears to me--and I should emphasize here that I had no "insider" role during this entire period that the CDC began to be seen at the end of the 1960s primarily in terms of filling such gaps as existed in the Canadian capital market for large-scale developmental projects. Put in another way, it began to be thought of as a positive force to create and back Canadian investment projects, rather than as a mechanism reacting to foreign acquisitions.

Although the idea of the CDC appeared in Government Throne Speeches in a number of years in the late 1960s, it did not--because of other legislative priorities--reappear as a proposed piece of legislation until early 1971 when the present Bill was laid before Parliament and was adopted with minor amendments in June of that year. You will see from my later remarks that the child has become very different from that originally conceived in that it was no longer a special kind of mutual fund charged with being an instrument of Government policy to pre-empt foreign takeovers.

What emerged was, in fact, a rather unique Special Act Corporation charged with the following objects under Section 6 of its Legislation:

(a) to assist in the creation or development of businesses, resources, properties, and industries of Canada;
(b) to expand, widen, and develop opportunities for Canadians to participate in the economic development of Canada through the application of their skills and capital;
(c) to invest in the shares or securities of any corporation owning property or carrying on business related to the economic interests of Canada; and
(d) to invest in ventures or enterprises, including the acquisition of property, likely to benefit Canada;

and these activities "shall be carried out in anticipation of profit and in the best interests of the shareholders as a whole".

Section 2 of the Act summarizes these objectives by saying that the Corporation "will help develop and maintain strong Canadian-controlled and managed corporations in the private sector of the economy and will give Canadians greater opportunities to invest and participate in the economic development of Canada". Our Directors have, therefore, determined that we should not invest in enterprises which would continue to be controlled by any level of Government or Government agency. So do not look for us to invest in projects like that of James Bay in northern Quebec. And do not expect us to prop up weak or declining companies; we were not established to buy losses or to watch our underlying investments stagger from layoff to layoff, a consequence which seems inevitably to follow this sort ef "bail-out" philosophy.

We are in fact very different from any other development corporation that I know of, either in Canada or abroad. And we do not intend to fritter away the advantages of our uniqueness by making the same mistakes as those other corporations. How are we different? I believe that our distinctiveness lies in four features: our independence from Government interference, our mandate to conduct our operations in anticipation of profit, our potential size, and the fact that a mechanism exists for Government participation in the Corporation to be scaled down by the Directors to not more than 10% at any time.

Envisaging the day when 90% of the shareholdings will be in the private sector, the authors of the Canada Development Corporation legislation provided that it not be a Crown Corporation, not require approvals of the Governor-inCouncil in any aspect of the conduct of its affairs (although, of course, the Minister of Finance must receive the approval of the Governor-in-Council before he invests any of the taxpayers' money in shares or debt of the Corporation), and not report to Parliament. Parliament, however, having set out the objects and capitalization of the Company, must affirm any changes in those objects or capitalization approved by the Directors and shareholders, a necessary and logical protection against the theoretical possibility that the intent of the Legislation could be turned on its head; and a provision in effect like that applying to other specially-incorporated Canadian companies such as the chartered banks.

Section 11 of the Act provides that, unless otherwise determined by a directors' by-law sanctioned by at least twothirds of the shareholders, the affairs of the Company shall be managed by its Board of Directors, consisting of not less than eighteen nor more than twenty-one persons. The Government made clear to these Directors upon their original appointment that it expected the affairs of the Corporation to be managed in a timely, flexible and creative way through an independent Board without interference from Government. The previous Minister of Finance also said publicly on a number of occasions that he meant the Board to be independent, expressing the hope that if they were ever directed to make investments with which they disagreed they would forthwith resign--with all the difficult political consequences for the Government which that would entail.

We are fortunate in having a strong Board of outstanding Canadians who have earned a high reputation for themselves, not only for their successful careers but for the calibre of their integrity and community service. You might note with interest that we have no lawyers, accountants, bankers, or stockbrokers on our Board, not because they would not qualify on the foregoing grounds, but because their services are always available through the normal market channels, and since it was thought desirable to obtain directors with the widest possible experience in industry. These Directors are responsible to the shareholders as in any normal corporation, the only distinction being that all Directors must be Canadian citizens and that four-fifths of the Directors can remove another Director from office, a feature presumably designed to enable the Board to deal with someone who has developed personal traits of such an embarrassing nature as to jeopardize the reputation or integrity of the Corporation!

It has been alleged in some quarters that a potential conflict of interest exists because of the business interests, directorships, or offices held by members of the CDC Board. Directors who are full-time officers of the CDC--the President, Mr. Marshall Crowe, and myself--are relinquishing all outside directorships, but it does not seem reasonable to expect other board members to give up their source of livelihood to serve as CDC Directors, particularly as the fees they earn from doing so would only serve to get them about halfway up to the poverty line! Surely, no reasonable person would expect a corporation in the multibillion-dollar size range to be run by those who have neither employment in this country's industrial life nor experience that fits them for the job. In the unlikely event that a conflict of interest arose (and this could only be through a firm with which a director is in some way associated looking at the same investment proposition as the CDC, since we certainly will not be buying into our directors' enterprises), the director concerned would follow the normal practice of declaring his interest, removing himself from the room and taking no part in the Corporation's deliberations on the subject. I can assure you that our Board of Directors is so keen to ensure that the Corporation be successful and enjoy the highest of reputations that they are leaning over backwards to avoid even the remotest suspicion of problems in this area.

Our Directors do not regard our second unique mandate, to operate in anticipation of profit, as merely a piece of window dressing. We are not aiming at a nominal rate of return, or vague hopes of profit at some indeterminate future time. The projects in which we will invest will have to offer a competitive return commensurate with the risks entailed, which will normally be higher than those accepted by other financial institutions. This approach is very much in line with the philosophy publicly expressed by Mr. Benson. What sets us apart from the others is that we are exclusively devoted to making equity investments of a developmental nature, and can therefore take a somewhat longer timehorizon than other institutions which are constrained by shareholder expectations or the nature of their liabilities to the public.

Some have suggested that this emphasis on profits will conflict with the object of developing Canadian enterprises in the long run, but we do not believe that this is the case: a sound, economic foundation is not built on losing enterprises; and one does not have to look outside the boundaries of Canada to see what happens to employment trends or the standard of living of whole communities when this is tried. Moreover, if the Government has some social, political, or welfare reason for putting money into a losing enterprise, it always has the option to do so through special subsidies or grants: that is a political judgment which should be made, not by the CDC, but by those charged with political office.

The opposite criticism of our profit mandate is sometimes made, namely that if we stress a competitive return on our investments, we will be in conflict with the existing private sector--in short, that everything that ought to get done on economic grounds will get done anyway and the CDC is therefore redundant. Our Directors do not share this view and believe that we have a role to play which complements, rather than conflicts with, the existing instiutions.

First, the CDC and its shareholders will be able to take a somewhat longer view than the shareholders of other financial institutions since longer-range development is to be our principal business. Second, there is no large institution specializing in higher-risk equity investments of a developmental nature, although there are many corporations which devote a proportion of their resources to this activity in their own particular field. We believe that the nature of the skills which we build up, the outlook and the temperament of our management, and the potentially large and diversified size of our operations will permit us to undertake this sort of activity with less risk, and better returns, to our shareholders than many other institutions. Third, there is an implicit assumption in this argument against CDC that our present financial market system is operating with absolute perfection, and this is clearly not the case. We have a very flexible financial system in which innovations take place constantly, and the fact that this particular innovation came from the Government sector does not necessarily mean that it is less valid than those arising elsewhere in the system. Finally, we can observe that the competition to finance worthwhile major projects is not always intense; the fact that the Government had to participate in the Panarctic venture to make it viable is one case in point. The large inflow of foreign investment into some segments of our economy provides further evidence that there should be room for the CDC, although I would be the first to agree that a large part of this inflow has stemmed also from gaps in Canada's managerial, marketing or technical skills. Yet these skills tend to develop when there is a market need for them, and a source of financing to turn that market need into practical reality, a role which we believe the CDC can play to some extent.

The third area in which the CDC is unique is in its potential size. Our authorized capital consists of 200,000,000 common shares, of which 2,500,000 were initially subscribed for by the federal government at a price of $10.00 per share. Even if one assumes that the shares will not appreciate in value in the years ahead--and we expect significant appreciation--the sale of all our authorized common shares would bring in $2 billion. In addition, there is $1 billion of authorized preferred share capital--which would be issued in convertible, participating or other forms--as well as a capacity to leverage this equity capital through borrowing to whatever extent the Directors deem prudent. If this borrowing ultimately reached $1 billion, we would be looking at a $4 billion corporation in the years ahead plus capital appreciation. This is a very sizeable sum even for today's inflationary age, and obviously we will only reach this size if we are successful in persuading the public that investment in our securities is a sensible and profitable way for them to employ their savings.

This in turn will depend on the success of our investments. The average size of these will be large, because we intend to concentrate on enterprises which are significant for Canada and which can compete in the growing international market. Obviously, these investments must also have unusual growth prospects to compensate for the risks involved. While not setting ironclad standards at this stage, we would want the profitability of our companies to grow at about double the anticipated annual growth rate of GNP in current dollars, which is of the order of 8%. These investments will not be selected out of regional considerations, but there should be opportunities to invest in each of the principal regions of Canada; indeed, of the dozen serious projects which have so far been identified from the veritable flood which has poured in since the doors opened, there is a surprising degree of regional balance.

We will not be attracted to a proposition simply because it offers an opportunity to "buy back" a company currently in foreign hands or because we are a "buyer of last resort" in the mind of the would-be vendor. Such propositions will be treated exactly like any other opportunity; if they meet our standards, we shall invest--but we shall not buy them simply because somebody is waving the threat of selling to non-residents at us. Incidentally, foreign takeovers have been a minor part of foreign investment in Canada since the war, with the total unlikely to have exceeded $1.5 billion, less than 1 /20th of the present total outstanding. There is a good case to be made--despite the probable disappearance of Canada's current account surplus in 1972--that the share of foreign capital in Canada's industry generally is peaking out as Canadians increase their investment in equities. In any event, our role is to use our limited resources to best advantage, which will normally entail investing either in new ventures or in significant expansions of existing ones rather than merely transferring ownership of existing enterprises--which may be for sale precisely because they have lost their growth characteristics.

Even though our resources are potentially large, they are clearly not large enough to do everything. Put in another way, we must try to develop our own mini-industrial strategy and avoid the pitfalls, common to conglomerates and governments alike, of scattering resources too thinly in too many directions and thus losing both effectiveness and control. Rather, our mandate is to reinforce strength in selected areas, and to identify unusual growth opportunities where a unique Canadian competence can be developed or encouraged.

Initially, our Directors have identified six areas in which we should concentrate our efforts: these are: oil and gas; health care; the petrochemical-related industries; mining; pipelines and related northern transportation; and venture capital. Each of these areas offers excellent growth prospects and permits us to expand the investment opportunities open to Canadians. By participating in the venture capital industry, either through forming a new enterprise or by making an investment in one or more existing enterprises, we can help to play a creative role in the financing of smaller, high technology business without getting directly involved in the specialized business of vetting and monitoring many smaller enterprises. Indeed, our legislation directs us not to make investments which involve less than $1 million, and in practice they would be even larger; otherwise, we would ultimately hold an enormous portfolio requiring a vast bureaucratic apparatus to supervise. There would be no faster way to kill the positive and imaginative attitudes which we hope will characterize the Corporation.

Generally speaking, we hope to make our investments in each of the fields mentioned through "vehicle" companies which would have their own skilled staffs and specialized operating management. This will enable us to keep a small, flexible and creative central staff--making good use of qualified consultants where required--to direct the general policy of the vehicle companies, to maintain appropriate financial controls over them, and to ensure that they remain innovative and growth-oriented. This structure should also be useful in bringing about mergers where larger scale and more specialization will genuinely enhance the competitive strength of Canadian industry.

Initially, we aim to have a sufficient shareholding in each enterprise--either alone or together with major and reputable partners--to achieve effective control of those enterprises. This does not mean that we must always have 51 % or that there will not be times when we shall aim at 100%; the numbers are not so important as the ability to have a positive and constructive influence on the policy and operations of the underlying companies. The CDC is quite prepared to undertake joint ventures with others in the private sector, including non-resident-controlled companies, but not when control will lie with foreign interests.

The CDC, then, might be described as aiming to operate midway between the styles of a multi-division operating company and a merchant banker. There is no desire to interfere in the day-today operations of underlying companies (indeed, CDC would hopefully make investments only when good management was in place or obtainable). CDC's prime concern would be working out the basic strategy of those companies in concert with management, but always being prepared--if management proved weak or inadequate--to replace it. This is, or should be, the position that any normal major shareholder takes--as contrasted to a lender's approach, which would clearly not be appropriate to the CDC since it will not invest in debt securities.

Section 39 of the Act authorizes the government to sell to the CDC its interests in Polymer Corporation, Panarctic, Northern Transportation, and Eldorado at a fair and reasonable price; however, there is no obligation on the part of the CDC to acquire any or all of the corporations. Some observers have come to the erroneous conclusion that this section was put in the bill to make the CDC's earnings look good in the early years of its operation. This is certainly not the case; in fact Eldorado and Northern Transportation have both lost money in recent years. It is virtually certain that we will not acquire Eldorado in view of the weak demand for uranium, its high mining costs in relation to today's prices, and its heavy stockpile. The decision on Northern Transportation is still open, and will depend upon the outcome of our studies of its future profit potential.

Panarctic, of course, does not have any profits, either, since it is an exploration and development company; indeed, it will require significant infusions of new capital for some years. Polymer's profits have shrunk dramatically in recent years because of the conditions in the synthetic rubber industry. This company earned a very modest amount of money in 1971, although it expects to earn more in 1972 and succeeding years as its diversification program begins to bear fruit. However, to achieve these improved earnings it will require substantial infusions of new equity in the next 1224 months.

Nevertheless, we take a positive view of the prospects of both Panarctic and Polymer and have come to the conclusion that both these companies could fit into our own strategy. Incidentally, at this stage in their development, continued direct government ownership could involve delays and uncertainties in reaching the important business decisions they must make. In the case of Panarctic, the Department of Indian Affairs and Northern Development has conflicts of interest since it is responsible for the balanced development of the North, for protection of both the rights of the native people and the ecology, and for the granting of permits to all oil and gas companies, while at the same time being a shareholder in the largest company operating in the Arctic Islands.

In any event, our Directors have determined that we should be prepared to make a bid at fair and reasonable values for both Polymer and Panarctic. Even though these two companies would in effect be going only from one pocket of the government to another at this stage, through the issue of more CDC shares to the government--with the actual value realized by the government dependent upon the value of the CDC's shares when they are first offered to the public--both sides are putting great stress on arriving at a market price, a price at which a willing buyer and a willing seller would normally meet. This is not easy to do since neither company has a history of stable earnings and there are no other companies with which a comparison could easily be made. Nevertheless, both sides wish to be realistic, the government for obvious reasons, and we because we do not wish to be regarded as "marks" who have paid too high a price under the influence of government or as weaklings requiring some sort of favour from government in order to survive. In any case, it is an encouraging and constructive development that Parliament can envisage companies moving out from under government ownership, since too often in the past there appears to have been a rule that when a government gets into something it should never let go of it.

This brings me to the fourth and final unique feature of the CDC's legislation, namely the provision in Section 36. 1 (b), which gives the Company the sole discretion to redeem for cancellation at net asset value any number of common shares held by the government--or agents of the government--in excess of 10% of the total. This feature has been very much overlooked in discussions of the CDC; it represents a genuine attempt by the federal government to regard itself as the minority partner of a joint venture with individual Canadians to promote the growth of strong, domestically-controlled corporations in the private sector. For too long Canadian business and governments, or governments and private citizens, have adopted an adversary position towards each other, a position of mutual distrust--well-merited in some cases--instead of working together toward a common goal--the economic, social and political betterment of our country. We must all hope that the intended spirit of co-operation between government and private citizens as shareholders in the CDC will lead to a new attitude which will spread far beyond the boundaries of that organization. If for no other reason that this, the role of the government in the CDC, including its willingness to sell the Crown Corporations at realistic market prices, should be followed with a close and intense interest by you and by all Canadians.

How quickly government's percentage ownership of CDC will decline depends upon the timing and acceptability of public issues of CDC securities, whether those be common shares, convertible preferred, debt with warrants, or some combination of the above. It is the Directors' intention to make such an issue as soon as possible after a reasonable portfolio of investments has been built up and is making satisfactory progress. The aim is to make the shares available to the widest possible range of Canadians, whether by way of warrants or in some other fashion, so that they may have an opportunity of investing at what is relatively a "ground-floor" stage. Although the risk will be somewhat higher at this earlier phase of development, and this fact will be emphasized in any offering, we believe that each potential shareholder should have the possibility of making his or her own decision as to whether or not to buy them. The Canadian public may also be offered a chance to participate directly in some of our underlying investments from time to time, particularly when we sell holdings which have matured and become acceptable to more conservative investors, in order to free our resources for more aggressive investments.

Before any public offering of the shares, CDC's operations will be financed by share purchases by the federal government, which has publicly indicated that it will subscribe $100 million in the first year of the Corporation's life, followed by $75 million in each of the next two years; there is also provision for a loan of $100 million from the government. The shares may prove to be of unusual interest to Canadians, not only because of the nature of the Corporation's activities, but because the Corporation has the power to purchase its own shares for cancellation (Section 23 of the Act) by a specific resolution of its Board. This feature, together with the issue of appropriate warrants perhaps on a revolving basis--should help to avoid the discounts which commonly characterize closed-end investment companies. Otherwise, our share characteristics are similar to those of any other company, although only Canadian citizens or residents of Canada may purchase voting shares and no person may hold more than 3% of the total. This latter restraint is rather academic, and is aimed at preventing the Corporation being taken over by a single private group.

Summing up briefly, then, the CDC is a unique cooperative venture launched by government but designed to be run by independent directors for the benefit of all the shareholders, 90% of whom will ultimately be Canadian private citizens. It is large enough to have a worthwhile influence--both directly and as a catalyst--in helping to get profitable and constructive things done by Canadians things that would not otherwise get done, or get done so fast. It aims to work in a close and creative, yet competitive, spirit with other private sector corporations to accelerate our country's progress. And its philosophy is to take a constructive view of the potential that lies ahead; to shape the future rather than recapture the past.

Mr. Hampson was thanked on behalf of the Empire Club of Canada by Mr. Joseph H. Potts, C.D., Q.C.

EDITOR'S NOTE: On November 29, 1971, the Federal Government announced the appointment of the first twenty-one directors of the Canada Development Corporation including the appointment of Mr. H. Anthony Hampson as Board Chairman and Mr. Marshall A. Crowe as President.

His Address to the Empire Club was the first major speech given by either of the two senior officials of the CDC since their appointment and was thus anxiously awaited by the financial community and by Canadians generally. In this Address, Mr. Hampson did much to allay the fears of those critics of the CDC who felt that it might become simply an agent of government policy.

Mr. Hampson disassociated himself and the CDC with the current political debate on the foreign ownership question, stating that the CDC would act "as a positive force to create and back Canadian investment projects rather than be a mechanism reacting to foreign acquisitions."

Mr. Hampson did not appear to share the concern of many Canadian nationalists or the Committee for an Independent Canada, stating that "the share of foreign capital in Canada's industry is peaking as Canadians increase their investment in equities and that "as a background factor influencing the shaping of the CDC as it now is, the foreign investment issue was very much less significant".

In the five months following this Address, Mr. Hampson announced, on behalf of the C.D.C., the purchase of the Connaught Laboratories, a manufacturer of Salk vaccine, insulin and other medical products. As predicted, Polymer Corporation was purchased from the Federal Government and Mr. Hampson reaffirmed his desire to acquire the Federal Government's interests in the Panarctic Syndicate and the Northern Transportation Company. Mr. Hampson also announced that the C.D.C. would invest in three venture capital firms in Toronto, Montreal and Vancouver and indicated the C.D.C.'s desire to participate in the financing of the new $6-billion natural gas pipeline in Northern Canada.

The sheer size of the CDC with authorized capital of three-billion dollars assures the importance of this Corporation in the future economic development of Canada.

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The Canada Development Corporation


The Canada Development Corporation and some background as to its origins in the mid-1950s. Walter Gordon's Royal Commission on Canada's Economic Prospects. The issue of non-resident ownership and control of the Canadian economy. Changes in Canada's trade and balance of payments. The growth of exports vs. imports. Demand for Canada's natural resources. The Automotive pact. The legislative act governing the CDC and an analysis of it. Second mandate of the CDC: To operate in anticipation of profit. Size of the CDC. Six areas of concentration for the CDC: oil and gas; health care; the petrochemical-related industries; mining; pipeline and related northern transportation; venture capital. CDC launched by government but designed to be run by independent directors for the benefit of shareholders. 90% of shareholders to be Canadian private citizens.