RIM and Microsoft - should Ottawa intervene?

RIM stocks were up today due to a rumour floating around Bay Street – Microsoft might be interested in buying RIM.

Oh God, not RIM. Could it be? Could the “darling” of Canadian tech companies really fall under foreign ownership? From the CBC:

"Microsoft has been mentioned as a possible buyer," Frederic Ruffy, an analyst at options education firm Optionetics, told Reuters. "According to speculation, the software giant might be interested in RIM in response to Google's recent announcement that it is interested in making its own mobile phone operating system, which would compete with Windows Mobile."

Of course, this likely won’t amount to much, and similar rumours have floated around in the past. One analyst said told reporters, "I can't even count the number of times we've heard that over the last three years.'' So it's probably nothing. The markets have been too responsive to speculation lately.

Still, it gives one pause. Last week, Stelco, the last remaining plant of the “independent Canadian steel industry” was sold to become a subsidiary of U.S. Steel. I seem to read quite often about Canadian companies being bought-out by larger U.S. or Chinese conglomerates, though I rarely read about ownership papers floating Northward. Should we be concerned about this?

Maybe. After all, the Canadian government loses important legislative authority over the corporation if its headquarters moves from Waterloo to New York City. We might reasonably suppose that a U.S.-owned RIM would be less likely to hold down roots in Waterloo, or even in Canada as a whole. Then there’s the whole question over whether Canada should retain sovereignty over its finite natural resources. And we certainly don’t want Canadian firms to make selling-off to foreign interests their ultimate business strategy.

But on the other hand, it’s not like Canada loses everything in a foreign takeover. The now-foreign-owned company will still employ our citizens and pay taxes on assets in our country. And as long as we strive to keep Canadian worker’s competitive in the global economy, that’s not likely to change. And in fact, previously Canadian-owned companies might do even better under foreign ownership, thus benefiting Canadian workers and industry.

But the more important consideration is this: do we really want the government to step in and forbid shareholders from selling their own companies? Business owners invest a lot in their companies. They own them. Shouldn’t they be able to sell their assets if they think the price is fair? Aren't our financial markets based on this concept? Think about what would happen to investor confidence if Ottawa suddenly began stepping in to deny majority shareholders their right to sell. Are we comfortable with this?

I’m bothered by foreign ownership of Canadian companies, but not to the point where I think the government should step in and forbid such activity. Loss of national control is one of the tradeoffs of the global economy – you surrender some control, but gain some efficiency. It might make us uneasy, but remember that foreign ownership does not imply the deterioration of the Canadian economy, or the exporting of Canadian jobs.

The gist, in my view: asking the Canadian government to step in, freeze assets, and forbid the sale of Canadian companies could seriously undermine our financial markets and our reputation as a world-class economy. We should think long and hard before going down this road. I’m not sure this type of intervention is good, or warranted, even though the prospect of losing a company like RIM to foreign ownership makes me uneasy.