Mr. Charles Parent (Quebec West):
Mr. Speaker, first I want to thank the hon. member for Peel (Mr. Graydon) for having taken us for such a ride without anybody getting hurt. He has presented a transportation problem to this house, and as he is a very popular member I am sure his remarks will receive the best possible consideration.
I do not intend to take up very much time, and I will limit my remarks to that part of
the budget address of the Minister of Finance (Mr. Abbott) in which he invited a greater participation in equity ownership in order to have the Canadian people participate in the industrial wealth of this country. That was wise advice and worthy of our great Minister of Finance. I had the privilege of coming to this house at the same time he did. Although I have grown older it seems that the more the minister works, the younger he gets. I am sure everyone will agree that he is one of the great ministers of finance Canada has had.
Undoubtedly it is to the benefit of all to participate in one way or another in building up our country. For some years I have been bringing to the attention of the authorities the lack of information given to shareholders by various companies. I believe the time has come to look into this matter. Because of the wealth of our country and the expansion that has taken place, in my opinion this is a major issue.
The value of the stocks listed on the Toronto stock exchange is $15 billion, while those listed on the Montreal stock exchange have a total valuation of $13 billion. The federal Companies Act has become outmoded. To use an expression used by the hon. member for Peel, it belongs in the days of the Yukon, in the days of the horse and buggy.
The investment dealers' association, the Canadian institute of chartered accountants and the association of Canadian advertisers investigated 700 companies in Canada and found that less than one-quarter went to the trouble of providing sufficient information to their shareholders in order that they might know if their money was being handled in a fair and equitable way.
I should like to give a few examples of what is going on in this country. The Minister of Finance has made an appeal to the public to invest money in Canadian enterprises, but I do not think one should do so unless he is sure that his money is being properly managed. I should like to quote an article which appeared in the Financial Post of January 6, 1951, as follows:
Why Should Companies Report on Subsidiaries?
Why should all companies issue a consolidated annual report or else separate annual reports for each of their subsidiaries? A good reason is seen in financial circles this week.
In the prospectus covering the offering of 319,548 common shares of Canada Iron Foundries Ltd., a consolidated balance sheet at Sept. 30, 1950 and a consolidated statement of the earnings of the company and its subsidiaries for the 10 years and nine months ended Sept. 30, 1950 are shown. These present a much better and more complete picture of the financial position of the company than the shareholders-the owners of the business-have
heretofore been able to obtain from the annual reports, which have been on a parent company only basis.
For example, total assets at Sept. 30, 1950 are shown at $21,597,192 on a consolidated basis as compared with $11,413,896 at Dec. 31, 1949 in the company's annual report, which carried shares in and amounts owing by subsidiary companies at $3,299,254. Further, the net profit for 1949 (which included dividends from subsidiary companies totalling $445,000) amounted to $728,286 according to the annual report but, according to the prospectus, on a consolidated amount basis amounted to $1,546,384 or over double the figure given to the shareholders previously.
The same applies also to one of the largest and most prosperous companies, which includes on its board of directors leaders of the financial world in Canada. For the first time in the history of that company, when they wanted people to put money into the company and were issuing convertible bonds, they came out with a consolidated balance sheet increasing their assets from $71 million to over $100 million and showing a surplus of nearly $23 million over what was given on the unconsolidated balance sheet. They showed earnings per share of $3.05 on the consolidated basis compared with $1.94 on an unconsolidated basis.
How can you expect people to invest money in companies if they are going to be at the mercy of the few who do not want to give them any information when they attend annual meetings? Most of the time the old answer that has been used for over 50 years is given, that it is not in the interests of the company that it should be divulged. In the United States you at least have consolidated balance sheets and quarterly statements because it is recognized that investing money is a science, and that you cannot invest money properly unless you have the facts.
I believe there should be some such provision in the Companies Act. Last October I had the pleasure of attending a conference of representatives of all provinces except Quebec who came here to discuss amendments to the Companies Act. Briefs were submitted by the Canadian Bar Association and the chartered accountants of Canada. They were unanimous in stating that our Companies Act is outmoded and does not give enough protection to the investor.
When we are just starting to scratch the wealth of this country, when we are opening up the oil fields of the west, when we are opening up the north, the Yukon, Labrador and Newfoundland, when these developments are going to bring money into Canada from the United States, why should we not as Canadians be given an opportunity to participate in these developments and at least let the one who wants to risk his money have the certainty that there is a law upon which $8108-165
The Budget-Mr. Parent he can rely in claiming his right to be told what is being done with his money? I know companies that have six or seven subsidiaries and the main companies, which are listed on the stock exchange, are practically showing deficits while the subsidiaries are making hundreds of thousands of dollars.
I have no hesitation in mentioning in the house the great Algoma Steel Company which issues an unconsolidated balance sheet from which you cannot get any information about its subsidiaries. Whether Sir James Dunn likes it or not, there are some subsidiaries of Algoma Steel which are making as much money as Algoma Steel itself. Yet this company has not paid any dividends to its shareholders for over 20 years, and I do not believe I am wrong in stating that on the basis of a consolidated balance sheet they would probably show earnings of $10 to $12 per share.
This is the state of affairs in this country. How can you expect people to participate in our industries unless there is a law to protect the investments of our people? Last night William H. Phillips, district superintendent of the Bank of Montreal, in speaking to the Canadian industrial editors' association, said that confusing terms and lack of information in companies' reports should be done away with, and that the people should be brought into the secrets of the companies in order to know how their money is being spent. I have been asking for a change for a long time. I have always thought this was a matter that might not be of interest to the people, but the Minister of Finance (Mr. Abbott) has brought the problem before the house and I congratulate him for doing so because it is absolutely sound that we should own our country before others own us. He should be congratulated on having made such a statement. I believe we should get all the information that is necessary to make sound investments.
As to the budget itself, I remember we were told once that the best way to judge the affairs of the country is to read the financial reports of all the big banking institutions in Canada. We were told they were honestly run and that their boards were composed of prominent Conservatives. If you read the annual reports of the banks this year you will see that they are practically unanimous in certifying that this country is well run and prosperous, that it is run on a sound basis, and that Canada has many great years of prosperity ahead.
To sum up what I have been saying I should like to quote something I read lately. It is as follows:
Consider this: Alone, among the major nations, your country has shown government surpluses for
2592 HOUSE OF
The Budget-Mr. Johnston the last seven years. Your national debt has been reduced substantially since 1946, and now stands at one of the lowest per capita rates of any country on earth. Your national income leaped ahead by $1 billion last year to make it the highest in history. Your gross national product increased 7 per cent to a record high of $23 billion, and wages and salaries advanced 12 per cent. And now, for 1953, your government has reduced your income taxes, your corporation and other taxes, and yet has budgeted for a record revenue and yet another surplus.
I recall the whispers of death of 1930 to 1935. Sometimes I do not like to hear those criticisms because I do not believe some of these people believe them to be so. In a young country such as ours, just starting on a major expansion, let us be inspired by these words of Lord Tennyson:
We sailed wherever ships could sail,
We founded many a mighty state,
Pray God our greatness may not fail Through craven fears of being great!
Indeed Canada is the champion country of the world.
Topic: THE BUDGET
Subtopic: ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE