If a company operates in Canada and employs Canadians, does that make it a Canadian company?
Not necessarily.

Almost all service businesses in Canada, with the exception of sole proprietors, operate through corporations registered either provincially or federally. That is where the crux of the issue begins when we talk about what makes a company truly Canadian. A company can be incorporated in Canada, employ Canadians, and operate entirely within our communities without actually being owned by Canadians.

This is where the distinction between Canadian-owned and Canadian-operated becomes important.

Many service companies that operate across Canada fall into this category. They employ Canadians, invest in local operations, and often have Canadian leadership teams. But the ownership of the business sits elsewhere. When that happens, the profits and long-term value created by the company ultimately flow back to the parent company and its shareholders outside the country.

Foreign-owned companies are clearly important to the Canadian economy. They bring capital, create jobs, and contribute to economic activity. I am not advocating for the exclusion of foreign ownership. What I am advocating for is a clearer definition of what is Canadian-owned versus Canadian-operated so that consumers can make informed choices about where they spend their money.

We have already accepted this principle in other areas of the economy. Grocery stores clearly label the country of origin for many products so that consumers can decide whether they want to support Canadian farmers when purchasing strawberries, garlic, or wine.

We have spent a great deal of time and effort making sure consumers understand where their food and their airplanes come from.

But when it comes to service businesses, we have not given consumers the same clarity.

In fact, tracing ownership can be extremely difficult.

While researching one of my major competitors, understanding the ownership structure required the involvement of a lawyer, multiple information requests, and someone to explain complex corporate structures such as LLCs and ULCs. For reference, a ULC (Unlimited Liability Corporation) is a type of corporate structure permitted in a few Canadian provinces and often used in cross-border investment structures. While it operates like a normal corporation in Canada, it can be treated differently for tax purposes in the United States, which makes it useful in certain international ownership arrangements.

The result is that tracing the ultimate ownership of a company operating in Canada can be far more complicated than it appears on the surface and is not a reasonable expectation for most consumers.

So how do we expect consumers to make informed decisions when the ownership trail of these companies is so opaque?

To address this challenge, governments have applied varying definitions of what qualifies as “Canadian.” In many cases, the definition focuses on whether a company operates locally and employs a certain number of people within the country.

The problem with this definition is that it focuses on where the work takes place, rather than where the value created by that work ultimately flows.

As I mentioned in my article What Are We Actually Fighting For?, service industries are unique. Almost all of the work happens locally. A technician, producer, or event crew arrives to do the job regardless of who owns the company.

From a customer’s perspective, hiring a Canadian-owned company or a foreign-owned company can look exactly the same. The work is done by Canadians, in Canadian communities, delivering the same services.

But the underlying economics are different.

When a Canadian-owned company generates profit, that capital is more likely to be reinvested within Canada through ownership, investment, and long-term growth. When a foreign-owned company generates profit, those earnings ultimately return to the parent company and its shareholders elsewhere.

The activity remains.

The work continues.

But over time, our underlying economic productivity erodes as the value created by that work leaves the country.

And that is why the distinction between Canadian-owned and Canadian-operated matters.

Because in a service economy, the question is not who does the work. It is who owns the value created by that work.

Read the full perspective in:
Why Canadian Ownership Matters in a Service Economy