Company Of Adventures - Merchant Prince Part 27

Joe Links

"Mr. Governor, I would go. I would go now.- Although double taxation was held out publicly as the main reason for the transfer, several other factors contributed to the move.. Despite the British board's

Keswick, who was knighted in 1972, later reminisced about that momentous day. "I had very mixed feelings. It was a bit like your child departing, you feel sad, but only momentarily because you know it's the right thing to do. I recognized that it should be done but didn't feel politically competent to handle the transfer to Canada. Politics is not my game. I'm just a dirty little merchant adventurer, with an eye on the main chance."

In fact, Tony CANADIAN AT LAST 453.

reservations about the quality of Canadian management, it was increasingly ludicrous to believe that an absentee board of part-timers could direct a modern retailing operation an ocean and half a continent away. It had become obvious that to stay in the race, the HBC would have to expand its retail operations significantly, which meant undertaking some serious public financing. In such transactions, the Companys dual citizens.h.i.+p was sure to depress credit ratings. Since no British trading company with a royal charter had ever moved abroad-and since the Canadian directors didn't really wish to lose that privileged status-some new corporate formula had to be discovered.

The nian who found it was David Guest, a senior partner at Blake, Ca.s.sels & Graydon, the Toronto legal factory, who drew up a new Canadian Charter (to be granted by Elizabeth 11 in her capacity as Head of State of the United Kingdom and Canada) that would simultaneously keep the Company incorporated under the Royal Charter of 1670 and turn it into a Canadian corporation, subject to nearly all the standard provisions of the Canada Corporations Act.* Outlining the effect of

Keswick would probably not have voluntarily sanctioned the departure of his beloved Company for foreign parts in a thousand years. He retired from the board not long after the fatal vote and sold all his stock but never left the Company in spirit. Of all the modern I IBC Governors, he alone magnified the grandeur ofthe I 113Cs past without using it to reflect glory on himself.

*The Queen granted a new Charter, the old one remaining but with a supplementary charter attached. The crucial work was done by the Clerk of the Privy Council in London. The Company's main exemption from the Canada Corporations Act was that the 1113C would never have to use the word "Limited" in its name, because it is not and never was just another incorporated enterprise with limited liability. In his search for precedents, Guest found that the Victorian Order ofNurses and the Dominion Drania Festival had been granted similar privileged status.

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Guest's approach, Murray wrote to Amory that it meant the "transfer is a historical move with certain economic consequences, rather than an economic move with historical consequences." That wonderfully meaningless phrase appealed to the Governor's sense of irony; he immediately wanted it translated into Latin and used on the crest of the new Canadian incorporation.

Before Guest had thought through his formula, both Michael Pitfield, the Clerk of the Privy Council in Ottawa, and Britain's Solicitor-General, the Right Honourable Sir Dingle Foot (eldest brother of Michael Foot, later leader of the Labour Party), had considered transfer impossible without winding up the Company in England first, which would have disrupted its continuity, cost much in new incorporation expenses and had dire tax consequences. When initially confronted by HBC officials advocating the transfer, the two men, who up to that time had not spoken, used the same metaphor to describe why they thought it could never be done. As if on cue, they said it was not technically feasible because it would be "like trying to reverse the immaculate conception." Following that rebuff, Murray recalled going to see Pitfield with the Guest opinion. "I had never met him before, and I stumbled into his office, as I often do, without having organized my sentences, but when I showed him Guest's letter, he read it, and like Rex Harrison in My Fair Lady telling Eliza Doolittle that she's got it, he said,'My G.o.d, he's right. Itcan be done."'

Prime Minister Lester Pearson had written a personal letter (drafted by Murray) to Prime Minister Harold Wilson advocating the HB(,s transfer, and most of the outstanding questions seemed to be resolved when a new issue came up. Sam Bronfman, acting through Harris & Partners, a Toronto investment dealer, launched a takeover attempt to acquire 100 percent of the 14BCs stock. Murray met the Bronfmans'

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intermedliary, Noah Torno, who had become a minor partner in the Seagram business when his Danforth Wines was bought out in 1948, and told him that on no account would the Canadian government countenance a takeover of the FIBC. Torno backed off, but the incident triggered a series of unexpected events.*

To prevent other takeover attempts, Murray started to lobby Ottawa for a special amendment that would not allow any investor to hold more than 10 percent of the Company's stock for a five-year period. A comparable owners.h.i.+p rule already existed for Canadian banks, but no other private-sector company enjoyed a similar privilege. The board had reluctantly accepted the notion, but there was one holdout: David Kilgour, who had succeeded Elmer Woods as head of the Canadian Committee in 1904. President of Great-West Life, son of a judge, father-in-law of a future prime minister and a pillar of the Winnipeg Establishment, Kilgour was debonair and worldly yet obstinately ambitious. During his three decades at Great-West, he had become used to behaving like a Chief Executive Officer and saw no reason to change his ways when he took on the HBCs Canadian Committee chairmans.h.i.+p. That quickly brought him into conflict with d.i.c.k Murray, who as Managing Director was charged with running the

*It was not the first time the Bronfinans had taken a run at the HBC. In 1952, Allan Bronfnian, Sam's younger brother, approached Governor Cooper to buy Hudson's Bay Oil & Gas for Royalite Oil, which then managed most of the family's energy investments. C ooper turned him down but described the encounter in his diary: "The Bronfinans, who began as bartenders and bootleggers, have made a fantastic fortune and they seem to buy new companies almost every day... I liked him and would have asked him to lunch, but Elmer Woods has advised me that Phil Chester hated him so much, he would have been most unhappy" [Alay 30, 1952].

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Canadian operation. The rift between the two men soon widened beyond repair.* Operational difficulties aside, their positions had hardened on the 10-percent owners.h.i.+p rule. Murray was now dedicated to achieving the five-year limit, while Kilgour had dug in at a full ten years and was personally lobbying John Turner, then the federal minister of 3ustice, who had married his daughter Geills.

That not only subverted Murray's efforts at working through the proper Ottawa channels but also roused the ire of Amory because lie and other board members were convinced Kflgour's real motive for backing the longer term was to guarantee himself a quiet decade as the HBCs first Canadian Governor. Amory had already indicated that a Canadian would be named to head the Company immediately after patriation, but no one had yet been picked. K-ilgour considered himself the ideal candidate, being familiar with the HBCs Canadian workings-and being dangerously close to the end of his stewards.h.i.+p at Great-West I~Ife. (Control of the Company had been purchased by Power Corporation in 1969, and Paul Desmarais, the Montreal conglomerate's chairman, was known to be unhappy with Kilgour's style of management.) After Kilgour had been involved in several minor attempts at trying to usurp the authority of both the Canadian Managing Director and the British board, Murray's patience broke, and on February 14, 197 0, he wrote to Amory requesting that Migour be immediately dismissed because he "had not only failed in his

*Their relations.h.i.+p turncd so nasty that Amory called a special board meeting in the viceregal suite of the Windsor Hotel in the autumn of 1969 to discuss the impa.s.se. Most of the directors backed Murray. The two men reluctantly shook hands; but nothing was really resolved.

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responsibilities as a director and as Chairman of the Canadian Committee, but had indeed violated the trust placed in him as the premier of the Canadian directors charged with special responsibilities for loyalty and cooperation with the Governor of this Company." Two weeks later Amory wrote to the Canadian Committee Chairman, demanding that he submit his resignation at a forthcoming Montreal board meeting because, as he put it, "not only is there a lack of mutual confidence between you and the Managing Director but increasingly between you and me." Kilgour refused to quit. Amory got tough. He sent a cable informing the recalcitrant Chairman that if he didn't offer his resignation he would be retired involuntarily. Kilgour kept his peers on edge until the last minute. They had misjudged their man. He may have overreached himself, but he was too proud to be humiliated by the swarm of former colleagues now baying for his blood. So as the first order of business at the March 6, 1970, directors' meeting he resigned with a flourish, wis.h.i.+ng the Company a long, happy future, and walked out.

Not quite. A week later he wrote a stinging rebuke to Amory, denying all of Murray's accusations. "We reached exactly the right conclusion," he wrote, "but I was unhappy with the 'saturation bombing' you felt was required in getting there.... There was an amusing cartoon in the New Yorker a few years ago of a mild little man sitting at a Board room table with about a dozen big, redfaced, bl.u.s.tery Directors. He was shown breaking into their debate with the remark, 'Haven't you forgotten that I own 51 percent of the stock?' Some of us at times forget that in the Hudson's Bay C ompany Britishers own over 90 percent." Amory, ever the gentleman, replied: "During the unheroic years in which I served in the Army, I was taught that when in doubt deploy maximum fire power! However, I hated doing it and if I did 458 MERCHANT PRINCES.

overestimate, I can only ask you to forgive me.... It was, I think, one of your fellow countrymen who said that'the British have the rigidity of red hot pokers without their warinth."' Both men agreed to consign their vitriolic exchange "to the flames" so that it would not, someday, turn up in the Company Archives. When Amory made that request of Murray, who had been sent copies of the correspondence, the Managing Director enthusiastically agreed. "Your 'for the fire and ashes' exchange of letters with David Kilgour was waiting for me when I got home. Thev are returned for shredding in Mrs. Harron's hungry fittle machine," he wrote to the Governor.

There remained only the matter of choosing an appropriate farewell gift to the departing Canadian Chairman. Having been asked what he would prefer, Kilgour suggested a Canadian painting and a trip to the Arctic with his wife, Mary. In response, Murray immediately set a $2,000 limit on any canvas that might be purchased and had cost accountants do runs on what kind of expense would be involved in the northern expedition. "I am not too happy to have Mr. and Mrs. Kilgour go on a working trip," he wrote to Amory, "since [his] views on the English directors are so embit- tered. . . . I would prefer to see him go on a goose hunt in our Grumman Goose."

Kilgour was not thrilled about the wild-goose chase because he was told he couldn't take Mary along, and suggested that the two of them accompany a regular northern inspection trip. That idea threw Murray into a total panic. "It is incredible," he wrote to Amory, "but he can be as difficult (almost) in retirement as he was before. He has written to request a trip to the North with his wife-we thought we had gone rather far with the Goose Hunt offer."

Murray eventually got an auditor's opinion that any northern journey by the retiring chairman would be a CANADIAN AT LAST 459.

taxable benefit, and In a curt letter on July 8 he withdrew the offer.

Kilgour replied in kind: "G.o.d forbid that I should be involved in over-generosity by the HBC. I am going north, but completely happily on my own, and a painting from HBC would, on reflection, not be something I would welcome-so please forget it."

Kilgour's stormy departure left open the issue of who would succeed Am~ory and become the Company's first Canadian G overnor. The clear choice of board members had been Donald Gordon, the dynamic former Bank of Canada deputy governor and chairman of Canadian National Railways, who had joined the HBC board in 1967. But he died within two years of his arrival, and the Bay insiders had to look elsewhere. In 1970, after only three hundred years, the Hudson's Bay Company recognized the existence of Toronto and appointed its first director from that trading post, A.J.

MacIntosh, a senior partner in Blake, Ca.s.sels & Graydon. And it was from '16ronto that the majority of the British directors wanted to recruit their first Canadian Governor. He was Allen Thomas Lambert, the high-school drop-out who had oined a Victoria branch of the Bank of Toronto at sixteen and was now chairman of the Toronto-Dominion Bank.

"Lord Amory approached me and it was not something vou would turn aside lightly," Lambert recalled. "I would have had to give the Company at least 40 percent of iny time and I wasn't able to resolve in my own mind how I could do that and still be fair to the bank." Other suggested candidates included Senator Hartland de Montarville Molson, the former chairman of his family's brewing company, and Major-General A. Bruce Matthews, chairman of Excelsior Life Insurance, but in the end the job went to yet another Winnipegger: George Taylor Richardson.

The sixth Richardson to head the family business, he was a tall, imperial man who exuded a kind of easy 460 MERCHANT PRINCES.

inst.i.tutional grace. Although he seemed on the surface to be the ultimate corporate bureaucrat, whose proudest boast was how many members of his companys twentyfive-year Club were third-generation Richardson employees, there was an adventurous side to him as well, known only to his closest a.s.sociates. An experienced helicopter pilot, Richardson would guide his Bell Jet Ranger across the Canadian landscape, swooping down on some lonely IIBC post, skimming over the nocturnal terrain of the endless prairie, following the moving lights on highways and train tracks, hopping across the Rockies, and finally, like some giant mechanical hummingbird, dip his skids in the Pacific. A Bay man even as a youngster, Richardson ran a trapline near his old family home on St Mary's Road at St Germain, near Winnipeg, catching and skinning ermine, mink and the odd coyote, which he sold to the I] BC. He lived there with his elegant wI fe, T is, hunting, riding his horses and puffing his arm] I Rea Belvedere cigars--guarded all the while by a rainbow of peac.o.c.ks, gugalating trumpeter swans and a domesticated flight of ptarmigan.

The governance issue having been settled (though Richardson was not sworn into office until November 26, 1970), the Canadianization of the Company moved into its final phase. The cabinet in Ottawa had stamped the terms of the transfer (including a five-year, 10-percent owners.h.i.+p clause) on February 26, 1970, and two months later Lord Amory had received notification from the U.K. Treasury approving the move. On May 28, the British proprietors convened at Beaver House for the last time. The I]Bc had been founded on May 2, 1670, in Whitehall Palace, when Charles 11 handed Prince Rupert the Charter, naming him and his fellow Adventurers "true lords and proprietors" of all the sea and lands of Hudson Bay and its drainage system-a grant that turned out to enclose a land empire of 1.5 million CANADIAN AT LAST 461.

square miles, 40 percent of modern Canada plus several states of the northern United States. Now, three centuries later, the Company still mattered (it ranked fiftysixth among U.K. firms in 1970) and, more than that, its uninterrupted existence was a reminder of the days when Britain had been great-just as its departure served notice that Britain was not quite so great any more.

"The die is cast, we're on our way to Canada!" exclaimed one of the elderly Adventurers after Amory proclaimed the transfer to Winnipeg; only four hands had been raised in proiest when the Governor called for a vote. That evening, the directors adjourned to Nelson's Tavern at Greenwich, where the supply s.h.i.+ps that ventured to York Factory had once been waved farewell. Joe Links had devised a menu replicating those early feasts, many toasts were proposed and many more were drunk, and while there may have been personal regrets, the mood was one of exhilaration.

They had kept the faith, these quirky Scotsmen and their English cousins who privately respected history while publicly appearing to exist only for profit, kept the faith and dispatched the Company to its modern domicile, intact, ready to benefit from the breath of fresh life in a new world.

THAT SAME DAY IN OTTAWA, Governor General Roland Michener had been host to a small ceremony at Government House at which the HBCs new Canadian Charter was signed into law. Because the move required simultaneous proclamation on both sides of the Atlantic, there was some concern about delays. Ron Basford (born in Winnipeg, of course), who was Registrar-General of Canada at the time, asked his executive a.s.sistant, Tex Enemark, to handle the details, including the business of affixing the Great Seal of Canada on the new Charter. Enemark telephoned Louis 462 MERCHANT PRINCES.

McCann, the Deputy Registrar-General, who explained that he could get the charter from Government House, once it had been signed by Michener, and bring it back to his office to imprint the Seal, then return it for Basford's signature. "I asked McCann how long it would take," Enemark recalled, "and he said perhaps forty-five minutes at the outside, but that would have meant that the Hudson's Bay Company would have been homeless for most of an hour, so I said, 'Well, why don't you take the Great Seal up to G overnment House and make the impression there?"'

"Because it's bolted down," McCann replied, never having been confronted with such an order before.

"Why not unbolt it?"

"It weighs 350 pounds!"

"So, get a truck."

Although McCann firmly believed that the security of Canada depended squarely on the Great Seal's remaining bolted in place on the twelfth floor of the Canadian Building in downtown Ottawa, he did recognize that this was a special occasion and agreed-though he insisted the entire operation be cla.s.sified as top secret and an armoured vehicle be rented from Brink's for the transfer. The HBC was represented at the brief ceremony by Graham Towers, the former Bank of Canada Governor who had served on the board; David Guest, the lawyer who had thought up the patriation formula, was also present. There, too, was the Great Seal of Canada, resting on top of the Governor General's writing desk, which was almost collapsing under its weight. "At this point, a noticeable change overtook McCann," Enemark remembered. "Here was a middle-level civil servant who had spent his whole life immersed in the monotony of the shuffling of the paperwork of officialdom.... Now, suddenly, there was this great national event wherein the oldest incorporated company in the world was going CANADIAN AT LAST 463.

through the metamorphosis from being British to being Canadian, and there was Karsh's brother, Malak, taking pictures, while Louis was telling the Governor General, the Registrar-General and the former Bank of Canada Governor about where to sign. McCann became quite animated, showing His Excellency how to turn the screw on the Great Seal with such zest that I thought the desk would collapse for sure. After several attempts, the impression of the Seal was placed on the doc.u.ment, and the job was done."

And that was how the Hudson's Bay Company came to Canada at last.

*At the (late of its Canadian incorporation, the HBCs a.s.sets consisted of nine s.h.i.+ps, three airplanes, 585 trucks, 33 large and medium-sized department stores, 218 northern stores, three of the world's largest fur-auction houses, merchandise worth $65 million, a payroll of 15,000, plus a 21.9-percent interest in 41 million acres of oil and gas rights across the Prairies. That was a considerable increase from its original stake in the country, three hundred years earlier, when the Company's total a.s.sets consisted of a leaky ketch, one abandoned canoe, three pairs of used snowshoes and fourteen employees. But then it also owned 38.8 percent of Canada--compared with only .0017 percent by 1970. It took a further four years for the Hudson's Bav Company NrchiNes to be transferred from London. s.h.i.+rlee Smith, the Keep(.-r of the Archives, was posted to London in October 1973 and supervised the transfer of 4,200 linear feet of records, which were s.h.i.+pped in six twentv-ton containers, divided among different s.h.i.+ps for safety across the Atlantic. In the fall of 1974 the doc.u.ments were deposited in the Provincial Archives of Manitoba, where thev are housed in an environmemallv controlled vault on the s econd floor of the Manitoba Archives Building. This significant archive is consulted by national and international scholars and the odd journalist.

CHAPTER 16.

McGIVERIN'S RUN

He a1h,red the IIRC's corporate cultureforever.

ONE OF THE UNIA RITFEN CONDITIONS set by London before agreeing to the IIBC's transfer was that a top retailer be hired to run what had become the Company's core business. No one was more anxious to recruit the right person than d.i.c.k Murray. 'rhe managing director was a great Bay man but a lousy merchandiser. Murray's restless energy and infectious enthusiasm had guided the smooth Canadianization of the Company, but it had also burned him out. (Suffering from nervous exhaustion, he signed himself into the Mayo Clinic but soon recovered.) More dedicated to the glorious idea of the Company than its often grubby daily realities, he began to have trouble making decisions. He would get his staff to work up proposals for construction of a shopping centre branch, approve their submission, then take it to the board and vote against the project. At the same time, he was facing an internal dilemma about the leveraging staff accountants were injecting into the Company's balance sheets. (Borrowing charges, instead of being shown under inerchandising costs, were attributed to the overall operation, which made the retailing results look far better than they actually were.) Murray's choice to head the department storesthough he must have known he was also picking his own successor-was Donald Scott McGiverin, then a

4o5 466 MERCHANT PRINCES.

Winnipeg-based group vice-president with Eaton's, who joined the Bay as Managing Director, Retail Stores, in September 1969. Born in Calgary (where his father spent the best part of his fifty-three years with Dominion Rubber, which later became Uniroyal) and educated in Winnipeg, McGlverin began working at Eaton's (selling men's shoes at $1.85 a day) on weekends and holidays, leaving only to earn an MBA at Ohio State. He was never good at sports. Referring to his lack of co-ordination, his father once remarked that his son "ran like a crowd." In Toronto, Donald quickly worked his way up the Eaton's corporate ladder, becoming a prot6g6 of Chairmanjohn David Eaton, and in 1961, at only thirty-seven, was appointed to the company's board, the youngest non-Eaton ever to be so favoured. Five years later he was transferred to Winnipeg and placed in charge of western operations.

One reason McGiverin worked so hard was his tragic home life. He married Margaret Ann Weld in 1950, and they had a son (Richard) and a daughter (Mary). In 1957, they were living just north of Toronto in Thornhill, which at that time had run-off ditches paralleling the streets. Richard, who was then four, had dressed up to celebrate his grandfather's birthday and went out to watch the water flow by. He lost his footing and drowned while his mother watched helplessly from a kitchen window. She never got over it and died eleven years later. Mary suffered from a rare disease of the spine called scoliosis that required special care including years in a body cast.

Though she later fully recovered, her condition took its toll on McGiverin's spirit.

In Winnipeg, McGiverin at first had little intention of taking the Bay offer because he a.s.sumed he would have a shot at the top slot in Eaton's.

But in the spring of 1969, when John David Eaton retired, his sons instead picked R.J. Butler, who was far less experienced.

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McG iverin took his daughter on a long European cruise aboard the Michelangelo, and somewhere under the Mediterranean moon decided that the Hudson's Bay Company was his destiny. That option was made considerably easier by an offer from Eaton's to work for Butler in a newly created but ill-defined post as vicepresident, corporate development. "These guys were sending me east to do something I wasn't interested in," lie told a friend.

"I'm a sock salesman, after all. Corporate development, whats that? It probably meant dealing in property, but I did only two real-estate deals in my life-when I sold my houses in Thornhill andVVinnipeg, and lost money on both-so I didn't feel qualified."

McGiverin and Murray worked well together, each glad he wasn't doing the other's job. During the next three years the Company purchased the AJ.

Freiman department-store operation in Ottawa as well as 49.9 percent of the GAV. Robinson firm in Hamilton, and eight suburban stores were opened.

In the fall of 1972, after an Edmonton board meeting of Hudson's Bay Oil & Gas, Murray was called into the hotel suite offIBC Governor G eorge Richardson and his Deputy, Alex MacIntosh, a tough'Foronto lawyer named to the board in 1969.* They unceremoniously presented Murray with a memorandum that not only listed in precise, almost hourly detail the newly outlined duties of the job he had held for thirteen years but also spelled out in humiliating terms that he was henceforth not allowed to discuss any aspect of retailing with anyone except McGiverin, and that, effective immediately, he couldn't even enter an 1113C department store without McGiverin's permission. On a recent visit to Montreal, Murray had entertained at lunch a French-Canadian

*Maclniosh's fainily mottois "Touch not the cat without a glove."

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executive who had just been hired by the Morgan's subsidiary. It had been a friendly, welcoming gesture, especially so since Murray was the only HBC executive who could speak French, and he wanted the newcomer to feel at home. But Richardson and MacIntosh used that incident as proof of his interference in the retail department. "It was grubby, grubby," Murray recalled. "So I just said, 'Oh, for G.o.d's sake, I quit.'"

On November 17, 1972, McGiverin was appointed president of the Hudson's Bay Company. He hit the ground running. "At our first management meeting," he recalled, "we committed ourselves to becoming the preeminent department store in Canada." The Company had a long way to go. The year McGiverin took over, retail sales generated per square foot of store s.p.a.ce were a dismal $57, compared with $88 for Woodward's and $100 for Simpsons. The stores were run according to a pathetically outmoded decentralized buying and distribution system, with each major unit having its own warehouse and purchasing agents. The HBC was very much the weak sister of Canadian retailing.

A born-again pragniatist with little concern for the Company's traditional survival syndrome, McGiverin set out on a ma.s.sive acquisition spree to establish The Bay as the leading national retailer. Trying to catch up on two decades of hesitation, he projected the HBCs presence into suburban malls by accepting nearly every developer's proposal that came along. At the same time, he

*Murray later became head of the government's Foreign Investment Review Agency and, later still, president of the Federal Business Development Bank. He then retired as a gentleman adventurer, dividing his year between seaside dwellings in Maine and British Columbia. But the Company is not forgotten; above the bathtub in each of his houses hangs a full-colour painting of the Nonsuch, the s.h.i.+p that started it all.