Does the probable buyout of BCE Inc. by private-equity players signal the tipping point for average Canadians being able to continue to invest in major Canadian companies?

This is a question about which financial advisors should be thinking and one that Canadians should be asking their financial advisors. The answers will probably have major ramifications for many financial plans and necessitate a fundamental review of those plans.

Although BCE is only the latest target in a long line of well-known Canadian enterprises that have been bought out by foreign companies, hedge funds and private-equity players, the impending sale has focused the attention of Main Street on what is happening in Canadian equity markets. BCE (or “Bell,” as it’s often called) is a household name through stock ownership or telephone service, or both. So, it was a shock to most people to learn that it was going to be bought up and dismantled in the name of maximizing shareholder value.

Leaving aside the question of whether BCE could be better managed, the reported buyout proposals raise troubling public-interest concerns.

How appropriate is it for a pension fund to use its assets to break up a company as a going concern and sell off the parts in the name of maximizing shareholder value?

“Maximizing shareholder value” has become the mantra of the day, and anything done in its name receives an automatic bye. But what does it really mean and whose value is being maximized? Is one group of shareholders being preferred over another? Is one group of shareholders freezing out another?

Pension funds traditionally are long-term investors that do not invest for the purpose of exercising control or management. This pension fund move smacks of short-term opportunism. How appropriate is it for pension fund management to utilize plan assets in this way?

It’s another example of the “short-termism” that permeates so many of today’s attitudes and has encouraged the problematic behaviour of businesses and their executives.

The effect of the buyout will be to preclude or, at least, restrict public ownership of a major Canadian corporation. Ordinary investors will not be able to continue to participate in the company through stock ownership.

This is a concern for people who are trying to provide for their retirement. The situation is aggravated by the number of Canadian blue-chip corporations that have been privatized, leaving ordinary investors with reduced investment opportunities unless they take on added risk.

Not only is the trend to privatization reducing the number of investment opportunities for ordinary investors, it’s also converting the marketplace into a thinly traded “pro” market. And it’s forcing ordinary investors into high-cost structured products whose underlying investments may be of higher risk or into opaque, high-risk offerings of private equity or hedge funds.

While there are many arguments both for and against economic nationalism, the Canadian trend in recent years has been to reduce or eliminate foreign investment restrictions. Perhaps the pendulum has swung too far, with so many of our resources and major industrial enterprises and the corresponding capital flows having passed into foreign hands.

What control will Canadians have in ensuring we have the essentials to live on and to keep the country functioning as a nation? Will we have any control over our telecommunications? Will we have any jobs in Canada? Will we have any productivity in Canada? There are a lot of implications for the marketplace that need to be thought through.

Those who have benefited or stand to benefit from the break-up of Canadian companies say Canadians are too focused on their domestic market and should look to foreign markets for their investment opportunities. Is it not ironic that foreign investors are looking to Canada for their investment opportunities? Have we allowed ourselves to be sold short? IE