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The Purpose of Business

My first experience in “industry” as opposed to the “profession” of chartered accountancy was at Winnipeg and Central Gas Company. One of the senior executives there made the statement that, “The purpose of business is to make as much money as possible this year without spoiling the chances of making more next year.” That can be a useful guideline in most situations, crude though it may seem if taken the wrong way.

One of the easiest ways for a corporate executive to increase profits by ten percent is by reducing corporate taxes by ten per cent. So businesses put on great pressure for governments to do so. One of the happier occasions of my life was having to pay corporate taxes. I continue to be quite satisfied to be a taxpayer.

There is a line to be walked between making too much money by taking risks and not enough by being cautious which is what the executives of Winnipeg and Central Gas were saying.

Currently, pure, naked greed seems to permeate management of larger businesses. Before the 2008 financial crisis there was a drive for profits no matter what the costs. The result was huge pain for shareholders, governments, employees and the general public. The British Petroleum disaster in the Gulf of Mexico may have resulted from a drive to get the news of a major oil strike into the next quarter results, regardless of risk to life, property and the environment. Management bonuses would be directly affected. The gamble failed and huge losses resulted.

I recall in the early nineties, when Canada was experiencing a significant recession brought on by the free trade agreements with the US accompanied by a high dollar. It became fashionable for large businesses to claim large layoffs. One executive of an Alberta oil industry company boasted he had just laid off 800 employees he didn’t need. No one thought to ask why he employed so many people that were not needed.

In a contrasting situation in the early 1960’s, Bob Scott manager of the steel fabrication division of CESSCO, a company of which I was the comptroller, had to lay off a number of employees. Bob went to the bathroom and threw up, then went to the shop and did what he had to do. Bob was ensuring the survival of the jobs of the remaining employees. By making a hard and very unpleasant decision he maintained the business in good condition and eventually was hiring those employees back again.

Another instance involving making (or not making) money occurred when I was employed as a comptroller of a firm of architects. Here you had the conflicting demand of professional practise and operating a business. The necessity of professional conduct has to supersede business demands. You cannot have buildings collapsing because the designer could save money scrimping on structural or other design aspects. But the ebb and flow of demands for their services makes for very hard business decisions by professionals such as architects. Since the choice of architects by governments is not a cut and dried best bid process, work is often politically influenced. i.e. Influenced by who donates to which party. The rule of thumb was that the architect contributed 10% of the fees received from the political party awarding the contract. Generally, the firm could make a pre tax profit of 20% of its revenues. The tax rate was roughly 50 per cent of profits so the after tax profit was 10% of revenue. The political donations were not tax deductible so in effect there was no profit in government works. Nevertheless, these professionals who spent many years training for the more exciting government jobs and who had many employees dependent on their obtaining such work, were willing to sacrifice profit for professional opportunities. They also sacrificed principals. Obtaining breaks because of what were really under the table payments was deeply disturbing. But they felt compelled to do so because it was “the way things worked.”

We often hear comments that it is necessary to maintain a business climate that serves the interest of business. I see it differently. Businesses are given their charters by government which should be doing so because it is the public the business serves. The businesses therefore should be serving the public interest before any private interest. In fact, if it is not doing so, why do we need it? To me a business owes its first duty to the public. Second comes its employees, third its founders and last the shareholders. Successful business will thrive with these priorities. Unfortunately, so do some who have their priorities reversed.

As for entrepreneurs (as opposed to established businesses) profit is not usually the motivator at all. The motivation here is the urge to build something where nothing like it exists. It can be a new idea or filling a vacuum in community needs. Profits must eventually accrue or the business will not survive. But they are a measure of success, not the success itself. I recall that after 10 years of hard work and borderline profits and losses, Comcheq finally made a significant profit. I was elated when I realized we finally had to pay taxes. Not only were we secure in our own future, we were making the added contribution to society in general.

Becoming financially secure is certainly a welcome circumstance. Eventually, though, being usefully occupied is is the true elixir of life, especially if you are financially secure.

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Computers and Me

Computers and Me
My first acquaintance with something close to a computer came in 1950. I was assigned to work on the audit of TransCanada Airlines (now Air Canada). Their new accounting office was at the airport in Winnipeg. They had a large installation of what was a coded unit record equipment to aid in accounting for airline tickets, payrolls and general expenditures. The equipment consisted of punch card sorted, card readers and printers. Of course elsewhere there were keypunch machines and operators who keyed the information onto cards. Holes punched in the cards created a coded record that could be dated back to the beginning of the twentieth century.
The equipment was programmed in the sense that a plug board could be wired so that the functions of the readers could produce different reports from the same punched cards. Also, different information could be obtained by sorting the cards first. For example sorting hours worked by employee numbers and merging that information with the employee’s rate card could cause a printer with multiplication capability to calculate the employee’s wages. By a series of steps a payroll could be calculated. More and more elaborate procedure, plug boards and calculating units could come close to emulating what we eventually came to know as the programmable computer. At the time there were few such machines and IBM took the position that they had few practical applications in the business environment. By the end of the decade, they had changed their minds and were to become the dominant player in the computer field.
Around 1960, I took an evening course at the University of Alberta on programming a computer. The computer used was an LGP30. It had its origin in the late forties or early fifties. It used a magnetized drum for storage of programs and data. Input was in the form of ticker tale, the kind used in the telex machines. Output was also ticker tape and a telex type of printer. As the drum rotated instructions were read and executed sequentially.
For programming the machine you could use a computer that was called SPS (Simplified Programming System). Simple it was not, but it was better than, but still close to, machine language. Machine language is a series of ones and zeroes. The compiler took our decimal instructions and turned them into one and zeroes that the machine could understand. The same process is used today though the compilers are much more elaborate and more efficient. It was a good place to begin though because it forced you to understand exactly what the computer had to do. Operations of computer have not changed from that fundamental approach.
About this time I read a book titled “Stonehenge Decoded”. We had been told that the first computer was designed by Charles Babbage. But this analysis of practical uses that Stonehenge could serve made me think of it as a kind of celestial computer. Here was a thirty five hundred year old “machine” that could predict not just equinox but eclipses of the sun, earth and moon and other events. Unfortunately it had no operating manual so the names using it were forgotten. It is an early example of a system that was so complex that no one was able to figure it out what it did. We now have many “legacy” computer systems that are in the same state of limbo.
In Stonehenge’s case it became an object of worship for 3500 years until someone with the aid of a computer, came along and figured it out. Readers may recall the news panic situation as we approached the year 2000 when it was found out many computer systems would crash. The systems departments weren’t able to analyze their programs with sufficient certainty to be able to tell what might happen. Nothing much did happen so their computer programs continue to run and many continue to have programmers praying the will not crash.
To have a long life, systems have to be simple. That in fact is the purpose of “system”. Instead, IBM particularly has been guilty of developing a mystique around what is really a very simple machine. The education system has added to the problem, by teaching complex approaches where simple solutions are easily available. You can bet that the frequent stories of factual computer systems stem from this idea that is windows computers it must be complex.
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Internet gods!

I can hardly believe it. Here I am, the last person in the world to know anything about social media. I am guided step-by-step in this process of providing little tales about my experiences and, low and behold, I have already offended the internet gods! Facebook has found last week’s blog offensive enough to deserve its censure.  Well, at least their new regulations require me to prove that I am who I claim to be before I can use any paid advertising.  (See explanation note below.) 

As it happens, on the very day you may have read my last blog, I was reading a US newsletter,, that described a decision by a South Dakota court that individual US states could assess taxes on the very online sales companies that Canada is planning to tax. So does Facebook feel my blog should not be promoted beyond its current modest readership?

So does Prime Minister Trudeau intend to honour his election promise and join the US so Canada can also tax these freeloaders? Politics can create strange bedfellows but Americans need to elect better presidents before we will throw in the towel on that matter.  Besides where would the US find a state among its 52 states, that is more docile than Canada?

Kidding aside, it is really an affront to our intelligence for those companies to think they should be allowed to operate tax free in any country they choose to do so.  Maybe we should revisit that Trans Border Data Flow issue again.

With Cyber Monday coming up and consumer online sales expected increase over 400% from any other Monday, its good to think about how this economy is taking advantage of our country’s slack tax laws.  This year it might even be a bit worse as the exchange rate favouring Canadian retailers so we should be the ones to attract more American business.  

If you are thinking about shopping online for Cyber Monday or online shopping at anytime please also see Online Safety Tips written by Telpay IT Systems Manager Jack Slawik:


According to Facebook:

“Ads about social issues, elections or politics that appear on Facebook or Instagram should include a disclaimer provided by advertisers that shows the name of the person or entity that paid for the ad. This is a list of top-level issues that will be considered in determining which ads targeting Canada require authorization and disclaimers:   civil and social rights, economy, environmental politics, health, immigration, political values and governance, security and foreign policy.” 

Disclaimer:  So to make it clear, I, W.H. (Bill) Loewen through my company Telpay, am paying for this Facebook account and any ads that appear here. 

“On Innovation” is a corporate blog by W. H. (Bill) Loewen, founder, Comcheq Payroll Services and Telpay Bill Payment Services, exploring the impact of current innovations in the financial services industry and reflections from his past 50 years of business experience.  In his spare time, Bill likes to spend time with family and friends, play bridge, dabble with woodworking and is a passionate classical music lover. 

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Online Safety Tips

Online Safety Tips

We’ve all heard the best tips for staying safe online . While strong passwords , antivirus software and firewalls are a good start , here are 3 not so common tips that will help protect you and your data online.

Enable Two-Step Authentication where available

Also known as multi- or two-factor authentication or login approval – two-step verification provides an extra layer of security beyond your username and password to protect against account hijacking. When using this security mechanism, you will log in using your password and then be prompted verify your identity again. This second verification is usually done by receiving a security code to your mobile device.

Many websites and companies offer two-step verification, and they make it easy to set up this second layer – usually found in the settings section of your account. Using two-step authentication can help you feel more secure, especially for sites containing your financial information.

Check a Site’s SSL Certificate

Whenever you’re shopping online and entering credit card or bank information, it’s important to make sure that website is secured to protect against hackers trying to steal your info. You can find out if a website is secure by checking its SSL (Secure Sockets Layer) certification. While this process sounds complicated, it’s actually one of the simplest and quickest things to do for your online security.

When on a website, check the URL. Does it start with “http://” or “https://”? If you notice an s at the end, that means your connection is encrypted and secure, so any data you enter is safely sent to the website. Not all sites have SSL certification. While they may be fine to browse, avoid sharing any financial or personal information on websites without this added layer of security.

Don’t Save Financial Information on Shopping Sites

Even sites with SSL certification can be hacked. While there may not be a way yet to completely safeguard your data from hackers if you shop online, you can secure your financial information better by removing it altogether from shopping sites.

Many shopping sites let you save your credit card information in your online account. This setup makes it easier to make purchases in the future, as your billing and shipping addresses and credit card information are stored. However, if you can access this information, so can hackers. Rather than store your credit cards and addresses in your accounts, spend the extra minute to enter your information each time you make a purchase.

Jack Slawik, IT Systems Manager

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An Echo from the Past

Last Saturday, the Globe and Mail ran an article about large American firms lobbying the US government to discourage the new Canadian government from keeping its election promise to raise income from internet service providers who earn income from their users in Canada.  (U.S. business groups claim Ottawa’s digital tax plan could imperil USMCA, ask White House to intervene, Nov. 16)

It took me back to to the 1970s and 80s when a phenomena called Trans Border Data Flow (TBDF) was a bit of a hot potato. Data processing service bureaux were thriving at that time, at least in terms of investment. Datacrown, Canada Systems Group, Computel and others with backers such as Crown Life, Stelco, Eaton’s and so on. They were boasting how they were going to grow into the lucrative US market. They had an industry association called CADAPSO – Canadian Data Processing Services Organization. I had lead a group of small firms by forming CICS – Canadian Independent Computer Services, in an effort to stop banks from moving into the data processing field. The two groups became rivals. I recall a dinner put on by the Ontario government to which I was invited as were many heads of the large data processors. We each had to introduce ourselves. The head of CADAPSO boasted that his organization represented 90 per cent of the revenues generated by the Data processing industry. I desperately wanted to say that our organization represented 90 per cent of the profits of the industry. As an out of town guest I felt I should mind my manners and passed the opportunity. It wasn’t that long until they had all disappeared and, as it happened, so did all their parent companies.

At the same time the Canadian telephone companies were building cross border communication facilities to make it easier to move data across the border. As described by a friend of mine  “We have built the highways for our conquerors chariots”.

Some Canadians have long been concerned about the high degree of foreign investment in Canada. I had thought the data processing industry, being new and Canadian-owned at that time, should remain an exception to the many industries that were foreign-owned. Some of us tried but failed.  Even when selling Comcheq I turned down an offer from ADP and sold to CIBC on terms that I hoped would see Comcheq remain Canadian-owned. I thought the banks were in the payroll business forever.  How naïve I was!  At the very first opportunity, CIBC sold to a US firm.

The federal government had, some time earlier, passed the Foreign Investment Review Act. Under that act, all larger corporations had to provide their annual Canadian financial statements. With that information it was easy to see the degree of control and even profits of foreign-owned businesses. Even then it was apparent that American-owned companies had higher levels of employment per million dollars of revenue in the US than in Canada. With open borders for movement of data there were many more opportunities to provide head office functions on one side of the border, exactly as the opponents of TBDF had predicted.

Today, US firms dominate the internet.  Not only do they want all the resulting jobs, they want the revenue they generate in foreign countries to be free of any taxes imposed by  those countries. Local companies such as Telpay generate employment, pay taxes on their profits and collect taxes on their sales and, for my part, I am happy to do so. To paraphrase Mae West, “I have not had to pay taxes and I have had to pay taxes. Paying taxes is better.” These US companies want none of that. They want a free ride in Canada.  Any bets on whether they will get it? 

Today’s mantra is cloud processing.  Probably 90 per cent or more of Canadian cloud processing is done in the U.S.  Where we go from there is anyone’s guess. Those of us who believe that sovereignty matters, have lost a lot of battles.  Have we also lost the war?

“On Innovation” is a corporate blog by W. H. (Bill) Loewen, founder, Comcheq Payroll Services and Telpay Bill Payment Services, exploring the impact of current innovations in the financial services industry and reflections from his past 50 years of business experience.  In his spare time, Bill likes to spend time with family and friends, play bridge, dabble with woodworking and is a passionate classical music lover.