The Magna Man: My Road to Economic Freedom
by Frank Stronach
Frank Stronach came to Canada from Austria with a few dollars in his pocket, a lot of hustle and a hunger to succeed. In a few short years, the young Stronach went from washing dishes to starting up his own tool and die shop in a rented garage, working long hours and sleeping on a fold-up bed next to his machines. He would build that small shop into Magna International Inc., one of the world’s biggest auto parts manufacturers, with 115,000 employees in 26 countries.
Canada’s greatest industrialist tells the remarkable story of how he overcame hardship and heartache to climb to the top of one of the world’s most competitive industries. And along the way, he shares the formula behind his company’s spectacular success: the unique business philosophy he created known as Fair Enterprise. It’s a can’t-fail formula that has fueled the company’s unstoppable growth and allowed Magna to share billions of dollars in profits with its employees, managers, shareholders and society.
Stronach wanted to entrench the company’s Fair Enterprise operating philosophy in a formal document with simple, straightforward principles; something transparent and clearly spelled out, so that everyone knew upfront what their share of the profit was. He came up with the idea of a Corporate Constitution.
Magna’s Corporate Constitution
Employee Equity and Profit Participation – Ten percent of Magna’s qualifying profit before tax will be allocated to eligible employees. These funds will be used for the purchase of Magna shares in trust for eligible employees and for cash distributions to eligible employees, recognizing length of service.
Shareholder Profit Participation – Magna will distribute, on average over a three-year period, not less than 20 percent of its annual net profit after tax to shareholders.
Management Profit Participation – To obtain long-term contractual commitment, Magna provides a compensation arrangement to corporate management which allows for base salaries comparable to industry standards, plus incentive bonuses, in total, of up to 6 percent of its profit before tax.
Research and Development – Magna will allocate a minimum of 7 percent of its profit before tax for research and development to ensure its long-term viability.
Social Responsibility – Magna will allocate a maximum of 2 percent of its profit before tax for charitable, cultural, educational and political purposes to support the basic fabric of society.
The concept of the Fair Enterprise system is brilliant. Giving the employees a piece of the profits encourages them to remain cost conscious and always stay efficient. The Magna Man is not only an inspirational story of business triumph and innovation, it’s an invaluable guide for anyone eager to start their own business, acquire the skills of a highly effective leader, or make a difference in the world around them.