Volume 9, Number 4

NETWORKS CRITICAL OF BANK PROFITS

ON JANUARY 16, 1996, CBC'S HANA GARTNER introduced a "National Magazine" full-edition report on the question of corporate responsibility with the comment: "Well, Canadian companies do have something to crow about-just look at their profits . . . but what's in it for workers? Wages are not keeping up and unemployment is still high. Is this the way it's supposed to work?"

In recent months, the media, both in Canada and the United States, have assailed the public with reports, articles, and commentaries that question the logic of corporate downsizing. On February 26, 1996, Newsweek declared, "Corporate Killers: Wall Street Loves Layoffs. But the Public Is Scared as Hell. Is There a Better Way?" Macleans followed on March 11, 1996, stating, "Jobs: Cutbacks and Layoffs have Driven Workers into the Streets and Created a National Mood of Insecurity."

Surveys show that Canadians are indeed worried about the outlook for the Canadian economy, as well as their personal financial prospects. Consumer confidence, as of the fourth quarter of 1995, was at a level "normally seen only in the depths of a serious recession." [Conference Board of Canada (1996) "Consumer Confidence Back at Recession Levels," Survey Results, Winter.]

In comparison, businesses have enjoyed relatively prosperous times. Two prominent stories in the news have been the spectacular gains recorded on the Dow Jones and the TSE and the profits generated by the Big Six Canadian banks. Fuelled by public personalities such as Pat Buchanan, many media reports have suggested that business prosperity has been at the expense of the middle-class and the poor. This is due to a tendency in the media to present a multifaceted issue in a two dimensional victim/perpetrator framework. The perceived victim in this scenario is the middle-class. The media then asks, "Who's to blame?"

In this issue of On Balance, we assess television's coverage of corporate profits and jobs, beginning with Canada's banking sector. Are the billion dollar profits being reported as good news-a sign of the strength of Canada's financial sector at a time when global capital markets are becoming ever more integrated and competitive? Or were the profits reported as bad news-an indication of corporate greed and the rapacious quest to enhance the bottom line?

Record bank profits induce heightened media attention

On December 7, 1995, the CBC reported that the Canadian Imperial Bank of Commerce had earned over $1 billion dollars in profits in 1995. Hana Gartner introduced a CBC "National Magazine" with, "At a time when the economy is threatening to slide back into recession, when governments everywhere are slashing spending, the big banks are churning out record profits. But should they be? Or are they cashing in on the backs of borrowers?"

Eleven CBC and 6 CTV reports, between December 1, 1995 and January 31, 1996, reported or debated the banks and their profits. The majority of the statements on both networks were factual, neither praising nor reprimanding the banks (see figure A). For example, on December 5, 1995, CBC's Peter Mansbridge reported, "Another of the big banks is reporting big profits for the past year. The Royal Bank cleared one and a quarter billion dollars. That's a record for the bank. In fact, it's looking like a record year all around for the big banks."

The remaining statements were either critical or complimentary of the banking sector. On CTV, all assessments were critical of the banks, and comprised 43 percent of CTV's total attention to bank profits. On CBC, 82 percent of assessments were critical, and comprised 31 percent of total coverage. CBC provided more than ten times the coverage of CTV over the two month period of the study.

Most of the criticisms on the "CTV News" were contained in a report by Mark Sikstrom on December 10, 1995. The report focused on the fact that the banks earned profits on credit card payments of the GST. On the same newscast, Liberal MP John Nunziata stated: "Canadians are saying enough is enough. They want the banks to justify these outrageous fees and I believe that the government ought to look into this whole area as quickly as possible."

On CBC, banking profits were reported in a concise, neutral manner during the news component of "The National" with Peter Mansbridge, while analysis and opinions were saved for the "National Magazine." Over the two month period of the study, a total of 124 assessments of the banks were made on the CBC, of which 102 expressed a negative opinion. In other words, four in five appraisals criticized bank profits, fees, concentration, operations and other factors.

On December 7, 1995, CBC's Hana Gartner interviewed business analyst Richard Worzel and Professor of Finance Basil Kalymon. Their assessments of the Canadian banking industry were mixed.

Worzel contended that the banks had an oligopoly: "There are really only five and a half banks, depending on how you count the national bank, and depending upon whether you count Canada Trust. That is a tight little oligopoly. It doesn't allow much choice."

Kalymon asserted that the services being provided by the banks were inadequate: "My concern is, are they providing good service? And the answer I'm hearing from friends and particularly the small business market, which I serve, is `no.' They are not serving that market well."

The overall message on the networks, with all assessments on CTV and 4 in 5 assessments on CBC criticizing the banks, was that the bank profits were accrued unethically and provided minimal benefits to the Canadian public. The fact that many Canadians are direct beneficiaries of profitable banks was not mentioned on either network.

One-half of working Canadians are bank shareholders, either directly or indirectly through mutual funds, pension funds, and other investment mechanisms. These shareholders received over 40 percent of the $5.2 billion in profits generated by Canada's 6 largest banks, with the remaining earnings being used to expand and improve business operations. [Canadian Bankers Association, 1995 Earnings Report, December 18, 1995 (revised).]

Employees benefit from the profits as well. The Royal Bank Employee Savings and Share Ownership program has a nearly 90 percent participation rate, such that employees hold approximately 4 percent of outstanding common shares.

Leo Panich, a Political Science Professor at York University, was perhaps the most vocal opponent of the banking sector. He stated on the February 23, 1996 "National Magazine": "This country is being run by the banks, taking home staggering billions in profits. They would have been ashamed to have brought home a billion in profit in 1990. Today they're proud of bringing home four billion while another 13,000 . . . workers are losing their jobs."

CBC interviews CIBC executive

CBC's Hana Gartner interviewed Holger Kluge, CIBC's President of Personal and Commercial Banking, on January 12, 1996. She began the interview with the statement: "It's interesting. You announced that your bank has made a profit of over a billion dollars. That should be reason to celebrate. That's good for the economy, it's good for the country. It's a sign of health, yet people don't like you. They don't trust you. Bank has become a four-letter word. What is it that you're doing wrong?"

Although this interview was a small part of CBC's total attention to banking, Kluge did provide another perspective to many of the charges and claims made by other commentators.

The central issue of the interview was service fees. Mr. Kluge pointed out that: "forty-two percent of Canadians don't pay any service charges. If you're over the age of 60 you don't have to pay a service charge. If you're under the age of 19, you don't pay any service charges . . . after we had frozen service charges for two years and some of my competitors had frozen service charges for four years, we've reduced certain service charges by 70 percent."

The other issue was competition. Gartner asked, "If six banks rule the sandbox, you can pile the sand any way you want and create such a maze that your customers can't find their way out let alone find the bargain and the prices are going to stay high."

One-half of working Canadians are bank shareholders . . .

Kluge's response: "Open up a newspaper any day and especially on weekends. You have comparison shopping. It tells you what mortgage rates we charge, what the trust companies charge, and what the credit unions charge. You do have choices." He then pointed out that there are 135 deposit-taking institutions in Canada.

The Question of Corporate Responsibility

ON JANUARY 16, 1996, CBC DEVOTED A full-edition "National Magazine" to the question of corporate responsibility. In the introduction Hana Gartner stated, "Something just is not adding up. Many companies are making record profits. Interest rates are low, there's barely any inflation. Stock markets are looking good but, and this is a big one-there's almost no hiring."

The first segment of the show was a documentary entitled "Corporate Contradiction." It profiled a Northern Telecom employee who had been a casualty of downsizing. To set the tone for the documentary, CBC broadcast short segments of previous reports (see box 1).

Following the documentary, the "National Magazine" brought together a panel of labour experts to debate whether or not corporations have a responsibility to their employees. The panel was composed of John Crispo, a Professor of Industrial Relations at the University of Toronto, Arthur Donner, an Economist, and Bob White, President of the Canadian Labour Congress.

The central issue of the debate was the high level of unemployment presently being experienced in Canada. John Crispo maintained that economic growth was the key to job creation. "Talk about competitiveness. Competitiveness is the key to full employment. It is the key to growth. It is the key to a higher standard of living. It is the key to help the people like the Smiths," he said.

Bob White railed against free trade and jobs being exported to developing countries. He said, "It's not just a question of downsizing. Some of these corporations are going to other countries of the world exploiting workers at much lower wages with very few social conditions and maximizing their profits."

Arthur Donner argued that downsizing was based more on fear than an attempt to enhance efficiency and has now become counter-productive: "All the evidence suggests that corporate restructuring has gone too far . . . I mean there comes a point at which you've restructured so far, that the people you leave behind, their morale is shattered [and] it doesn't improve over time."

None of the commentators questioned the premise of the report, that burgeoning corporate profits were being reaped on the backs of the unemployed. A longitudinal study of corporate profits shows that profits are not burgeoning-they are simply returning to pre-recession levels. Profit margins in 1992 were 3.5 percent, their lowest level in 15 years. [Statistics Canada (1994), cat. 61-219P, annual, p. 16.] It is a matter of mathematics that from this depressed level the annual percentage growth in profits would be robust. However, according to Statistics Canada, "after-tax profits in 1995 remained below the 1988 results." [Statistics Canada (January 1996), cat. 61-008, p. 8.]

Third World fear

Two facts were established early in the debate: one, that employment insecurity is a worldwide phenomenon, and two, that Canada's export sector is the only sector of the economy which is presently expanding. So, the debate turned to globalization.

Gartner and White appeared to interpret trade as an arrangement which would result in a reduction of living standards. Gartner asked, "Will [there be] trickle down, or are we going to become a third world country?"

. . . productivity has little to do with how hard you work, but rather how well you work.

Bob White, in response to a comment made by John Crispo that German wages were uncompetitive, asked: "So the answer to this, John, is to make Germany a third world country?"

Statements such as these show a basic misunderstanding of the impetus for trade-sectoral differences in productivity such that trade results in a gain for both partners. Trade with the so-called third world-a term badly in need of redefining considering Hong Kong and Singapore have a per capita purchasing power greater than the OECD average-is only a threat when the developing country has lower unit labour costs. [The Economist (1996), March 9, p. 108.]

A recent study conducted by Stephen Golub shows that Malaysia has higher unit labour costs than the U.S., even though Malaysian workers are paid less than one-fifth that of their American counterparts. The reason is because the productivity of Malaysian workers is about one-sixth that of Americans. [The Economist (1996), "Not so absolutely fabulous," Nov. 4, p. 86.] Further, productivity has little to do with how hard you work, but rather how well you work. Decades of investment in productivity-enhancing technologies, skills and infrastructure, with continued investment today, works to preserve the high wages enjoyed by Canadians.

As for the workers in the emerging economies of South-East Asia, wages have been rising at an even faster rate than productivity, resulting in an increased standard of living for these workers and a decreased threat to Canadian companies involved in the same enterprises as the unit labour costs converge.

New jobs-the numbers game

On that same CBC program a set of figures appeared on the screen before a commercial break: "New jobs in 1995-88,000; Of those, part-time jobs-80,000."

In contrast to the CBC's figures, Finance Minister Paul Martin stated in his March 6, 1996 budget that, "In the last 13 months, 263,000 jobs have been created. Since November alone, 123,000 such jobs were created, the majority of which were full-time."

Globe and Mail Columnist Terence Corcoran reports, "Since 1992, Canadian employment has increased by more than 700,000, with growth of 170,000 since last July." [Terence Corcoran (1996), "Jobs, jobs, jobs despite downsizing," Globe and Mail, March 9, p. B2.]

Obviously, at least one of these sets of figures is incorrect. While it may be difficult to count new jobs, recent figures do indicate that both the Canadian and the American economies have begun producing substantial job growth-705,000 new jobs in the U.S. and 44,000 in Canada. [Globe and Mail, March 9, 1996, pp. B1, B4.]

Contrary to the messages of many CBC commentators, these figures lead Corcoran to believe that, "In the long-run, the large corporate layoffs will be seen as a sign of strength rather than weakness . . . the layoffs of the 1990s are performing a vital economic function-preparing for change, growth and future employment."

North America beats European and Japanese labour markets in job creation

In a Globe and Mail column, "The Big Picture," Donald Coxe concludes that the recent job growth is proof of "another American victory in the continuing global competition to establish which system works best for workers. Donald Coxe (1996), "Are jobs bad for capital markets?" Globe and Mail, March 18, p. B6.Note He then cites a study by the Washington-based Brookings Institution which compares American, European and Japanese labour market approaches.

The study, according to Coxe, concluded that the Japanese cannot continue to provide lifetime employment to workers and are exporting production to other Asian countries. The Europeans, who have attempted to deal with high unemployment through increased minimum wages, stronger unions, and generous unemployment insurance benefits, are exporting their production to Eastern Europe. The Americans, with "the most heartless corporate culture, the most passionate love affair with computers, the weakest social safety net, and the weakest unions within the Group of Seven [has the] fastest job growth in the industrial world."

Student Riots Top Story on CBC and CTV

CANADIAN STUDENTS, PROTESTING CUTS TO POST-secondary education, rallied across the country on February 7, 1996 in a "National Day of Action" sponsored by the Canadian Federation of Students (CFS). The protests made headlines because the students broke the rules. In the top story of the newscast that night, CBC's Reg Sherren reported: "At Ontario's legislature . . . over 1,200 students broke through the barricades, smashing out windows as they went. Students say while colleges and universities are being savaged, big business is enjoying record profits, and it's time for them to pay their fair share."

Student Elizabeth Carlyle was then quoted: "The debt and deficit in this country is largely due to unpaid corporate taxes." In the CBC report of the student protests there was no alternative voice to counter the opinions of the student leaders.

One of the leaders, Brad Lavigne, the incoming Chair of the CFS, was interviewed on CBC Newsworld's "On the Line" on February 10, 1996. Lavigne argued that, "[The students] are taking on two fundamental myths that are being promoted by the federal government. The first is that social spending needs to be reduced to bring down the federal debt, which is not true. And second of all, that there's no wealth left in this country, to support social programs and in particular post-secondary education, which is yet another myth." According to Lavigne, a large component of this untapped wealth is unpaid corporate taxes.

CTV's coverage of the student protests focused almost exclusively on the violence and the debate over who should pay for higher education. Unlike CBC, the protests were not framed within a larger social context, with the exception of the statement given by Lloyd Robertson: "In Montreal, 2,000 marched through the city's downtown, asking why they should have to pay for a debt they didn't create."

Tracking the News

IN JANUARY 1996, ALL reports on "The National" and the "CTV News" were tracked according to topic and length (see figure B). On CBC, Prime Minister Chretien's Team Canada trade mission to Southeast Asia was the top story in January, and accounted for 24 minutes and 3 seconds of coverage. On CTV, National Unity was the top story, with Bouchard's comment that Canada is not a real country, and Chretien's response-if Canada is divisible, Quebec is divisible. CTV's National Unity reports accounted for 23 minutes and 17 seconds of coverage.

Winter Storms, which occurred primarily in the eastern United States, was January's fourth story on both networks. On CBC, Winter Storms received 21 minutes and 28 seconds of coverage, beating out the federal government's Cabinet Shuffle. On CTV, Winter Storms received 17 minutes and 22 seconds of coverage, more than Chretien's Team Canada and more than the Cabinet Shuffle.

The Royal Family was the tenth story on CBC, accounting for 6 minutes and 31 seconds of coverage. Developments in the Airbus Scandal was CTV's tenth story and received 7 minutes and 6 seconds of coverage.

Methodology

Results of bank profits are based on 8 "The National" and 3 "Sunday Report" stories, as well as 6 "CTV News" stories, from December 1, 1995 to January 31, 1996.

All stories appearing during that time were analyzed, representing a total population rather than a random sample of stories.

Further information or details on the coding design and methods may be obtained by contacting the National Media Archive.

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