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December 25, 2000, Vol. 156 No. 26

John Roth

Canada's government suddenly woke up this year to the competitive challenges of the high-tech world. Finance Minister Paul Martin put forward a mini-budget in March that offered tax cuts and incentives to spur entrepreneurship and keep Canada's high-tech talent at home. And the Liberals began pouring money into research and development, as well as other support for Canada's under-funded institutions of higher learning. The moves were obviously intended to steal thunder from Canadian Alliance leader Stockwell Day and win a third election term. But in a deeper sense, the change marked the triumph of ideas forcefully argued by the most successful businessman in modern Canadian history: Nortel Networks ceo John Roth, 58.

Roth has been a nagging presence all year for Canada's decision makers, warning that the country risked becoming a second-rank economic power unless it changed its wealth-crimping tax policies and supported high-tech winners. He put his credibility behind the notion of a "brain drain" caused by high income and capital gains levies, and argued for better tax treatment of stock options to encourage entrepreneurship. "Policies and business strategies that worked well in the industrial era are a recipe for stagnation and decline in the new economy," he declared in a speech in April. Roth warned repeatedly that Nortel's Canadian workforce of 25,000 — now just 30% of its worldwide staff — would drop even more unless Canada encouraged homegrown talent to stay.

Roth has replaced the traditional rota of banking ceos as the spokesman for the commanding heights of the private sector. The former engineer has become a corporate superstar since he took over Nortel in 1997 and transformed it from a successful telecommunications equipment supplier into a $120 billion Internet powerhouse that operates in 150 countries and challenges Cisco Systems for world supremacy. At times during the year Nortel seemed to be the entire Canadian economy, accounting for as much as 36% of the value of the tse 300. On the way back down, Nortel was also a leader: an Oct. 25 sell-off of its shares sent the tse plummeting 840 points. Characteristically, Roth used the roller-coaster ride to argue that Nortel's dominance reflects a failed industrial policy that shelters enterprises from global competition. "We desperately need to create a culture of winners," he declared.

Roth has put his money where his mouth is. Nortel spent millions this year upgrading science education at schools around the country, and Roth serves as co-chairman of the E-Business Opportunities Roundtable, a public/private initiative that promotes high-tech entrepreneurship. In January, the group called for e-commerce tax breaks and federal support for an enlarged venture capital market.

And Roth intends to keep pushing Ottawa to meet future challenges. "If I were in government I'd be conducting exit interviews of all the Nortel execs to find out why they leave Canada," he says. So long as Roth keeps speaking out, the feds don't have to.

— With reporting by Leigh Anne Williams/Toronto

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