Part 33 (1/2)
opportunity for expansion. The item came up again at a January 23 meeting, where the selling price was set at $8 million over book ' value, with an 80-percent cash advance. Approval to Jettison this most historic of the HBC's departments--the territory for which it had received its Charter 317 years eailier-was granted at the directors' meeting on January 2 8, 1987.
The official minute hardly does that momentous decision justice: ”The Board discussed the pros and cons of such a sale. On the one hand N.S.D.
is profitable and represents to Canadians the heritage and pioneering spirit of the company. On the other hand, it operates in a total welfare environment with considerable risks of government intervention, it requires capital for modernization and has little growth potential. On balance, given the overriding need to substantially reduce debt, the Board decided to approve the sale.”
Strangely, no outside directors attended that meeting, though they were polled by telephone. Only four executives, who also served on the board, were there to vote on the fateful motion to cut the ties with the I IBCs own history.* ”My recollection,” recalledj.W. ”Bud” Bird, one of the directors who was telephoned on the issue, ”was of feeling a sense of loss, that we were really changing the character of the Company, but that It was sort of a sidebattle in the mission to establish three main retailing giants and to concentrate where the volumes were and the super-store kinds of activity. The preservation of the origins of the Company was no longer commercially attractive to the main mission of the Company.”
That seemed more of a retroactive rationalization than a reason. Northern Stores had been a dependable money-maker, clearing$28 million in operating profit on
*They were: Don McGiverin, George Kosich, fain Ronald, and Gary Luka.s.sen. All the directors polled by telephone agreed to the sale.
DISASTER AND DELIVERANCE 545.
~1 $400-million sales volume the year the division was sold. Spinning the 178 stores off for $189 million reduced the parent company's debt by a net $150 million, about 6 percent of the totai it then owed, which didn't make any material difference. 'Filler was as puzzled by the decision as anyone.
”I couldn't fathoin how they could possibly come to that decision,” he said, ”particularly since we ha~ a five-year profit trend that was right on target and was marching on and on.The most difficult experience for me was having to face iny people, who all have an 11BC stamped on their backsides, and tell them about it.”
Rolph Huband, the U113CS vice-president and secretary, was the only Company executive who took note of the sale's historic dimensions. ”The heritage and adventuring spirit of the Company is gone,” he lamented.
d.i.c.k Murray, the former managing director, came out of retirement to thunder: ”Only unpardonable cowardice and incompetence could lead the Canadian owners of this great historic company to throw away these jewels in their crown. The Company now abandons the Canadian North; it severs generations of a trusting and respectful relations.h.i.+p between native peoples and traders--it deletes the words and discards the heart of its historic name: Coinpanv of Adventurers. One might Just as well take the RCMP and sell it to Pinkertons.” These sentiments were shared by former Deputy Governor Sir Eric Faulkner, who mourned: ”If the HBC is alive three hundred years froin now, it will be neither the fault of the Thonisons or of the Bay directors from 1970 on. If we had foreseen what would follow ... would we all have been persuaded to transfer to Canada?”
*The last of the great British directors, Sir Martin jacorub, expressed his vieiA s of the sale by quietly investing in the successoi company lo the Northern Stores Division, which at George Whitmans suggestion became known as the North West Company.
546 FAREWELL TO GLORY.
On May 2, 1987, precisely 31 7 years after the Company of Adventurers had taken up Charles 11's Charter to expiolt the upper half of the North American continent, Derek Riley, the Winnipeg businessman who had been elected chairman of the offshoot company, folded the Governor's flag that had flown over the posts of the HBC's northern division and banded it back to Don McGlverin. Suddenly it was over--3 17 years of history cut adrift as if they had never happened. Ken Thomsons main interest in the transfer was to claim for the HBC the art works collected by the northern division, taking three-quarters of the Inuit sculptures, prints and historical paintings.
Ile felt very much more strongly about getting rid of the Company's fur business. ”I was just praying the Company would sell it,” he confided after the decision had been made. ”I think it's an anachronism. We don't need to kill animals to feed our vanity. They may not be a high order of life, but animals have the same right to live as we have. They can say what they like about anitrials being humanely trapped-its not true. You can't kill an animalwithout making it suffer. So why should we kill creatures who are out there trying to survive? That's all they're doing, trying to sumive. Over the coming years, people are just not going to be wearing fur coats. It's a dying business. I know that somebody else is still doing it, but it has nothing to do with my family.” That was a revealing statement, because it was the one aspect of current HBC operations that Thomson really felt pas- sionately about (except, of course, for losing all that money), yet he himself did nothing about it, allowing the Company's executives to work their way towards his conclusion on the issue--but only eight years after he became the Company's princ.i.p.al proprietor.
His son David confirms his fathers reluctance to applv the force of his authority, even in a cause he feels pa.s.sionately about. ”My father has never wished to DISASTER AND DELIVERANCE 547.
dictate his will to the business operators,” says he. ”Power is always perceived; when it is used, it ceases to be. He had believed that the people within HBC supported the business and that itwas beneficial to the Company.
Although he made his personal feelings very clear on numerous occasions, he would never unilaterally end the fur business within the IJBC.”
The Canadian fur-sale operations near the Toronto airport were sold for $45 million to Len Werner, the prevtous manager. Disposing of the British facilities at London's Beaver House was a much more complicated affair.
Hugh Dwan, the president of the HBC's British fur unit, received a phone call from lain Ronald ordering him to be at the London offices of Morgan Stanley a day or two later to hear the details pertaining to the sale of his company. Dwan, who had up to then received no notice of the move, was just as puzzled as Marvin Tiller had been about jettisoning the northern stores, particularly since the auction house had been turning good profits and he had just recently submitted (and had approved) his optiinistic budgets. The sale-to the Finnish Fur Sales Company, for $37.5 million-had been negotiated without his knowledge or consent. ”They told me that selling the auction house would enable the Company to concentrate on their core business,” he recalls. ”In f~ct, the fur business in England was no drain at all on Canadian management because we didn't need them. The debt reduction benefits were a drop in the bucket. To me, their decision seemed like chopping up the kitchen furniture to feed the fire, and then finding out you have no place to sit. . . They sold the company in the face of fastrising fur prices, so if they had waited one more year, they could have got several million dollars more. It was an undignified scramble to get out.”
Dwan had a devil of a time persuading London's ftir traders that the HBC move was serious. Three centuries 548 FAREWELL TO GLORY.
is a long time. ”They thought it was some kind of reverse takeover for tax reasons and that the HBC would end up owning the Finnish co-operative,” Dwan remembers. ”There was strong feeling that the Company had let them down. In furs, the HBC was a mark of confidence all over the world.” After his day at Morgan Stanley, going over the dreary details of the sale, Dwan walked to Earls Court, then took a taxi home. ”I turned on the TV news,” he recalls, ”and there was young David Thomson, who had just purchased a Constable for Y~2 million, saying that as its new owner he was anxious the United K-ingdom not lose its heritage, and that he therefore might not take it out of the country. I thought to myself, 'They've just sold out the best trading name in the world,' and I cried.”
On January 31, 1988, the fur men held a wake on the auction floor at Beaver House. It had been on January 24, 1672, that the first London HBC fur auction was held at Garrawav's coffee house, near the Royal Exchange, where tea frorn dried leaves imported by the East India Company had originally been brewed. That first sale was a very special event attended by the Company's founder, Prince Rupert, his cousin, the Lord High Admiral, the Duke of York (who would become the FIBCs second Governor and, as James 11, King of England) and the poet John Dryden. Now it was all over, and from seven in the evening to midnight, a lot of rum was tasted, songs were sung, and stories told. Special arrangements had been made to transmit the Company's farewell telegrams and telephone calls that day, presuming there would be some form of official farewell wishes sent to mark the end of the Company's founding department. Incredibly, no message ever came. ”They didn't even know we still existed,” said a bitter Arthur Frayling, Dwan's predecessor and a sixty-eight-~ ear veteran of the fur trade. ”The greetings from head office in Canada were as they had DISASTER AND DELIVERANCE 549.
been for some years previous-zero. They had actually established in their minds that the Company's great background and tradition was, in fact, a drawback. Now that I can't take. I'm sorry, I can't b.l.o.o.d.y well take it.”
The British fur trade ended with Frayling, well over six feet tqll and with the hearing of the infantry colonel lie once was, standing on the bidding stage at Beaver House and leading the mourners in song:
Dear old pals, jolly old pals all in together in all sorts of weather. Dear old pals, jolly old pals, Give me the solace of dear old pals ...
T[ IE RULF OF THI 'roRY-KOSICI I-RONALD triumvirate ended on July 1, 1987, with the appointment of George Kosich as the HBCs president and chief operating officer. A University of British Columbia Commerce grad, he had spent twenty-seven years with The Bay, and even though his cutbacks had earned him the nicknaine George Carnage, he was a capable retailer with
Having divested itself of its northern stores and fur trade, the Company went on a kind of scorched-earth rampage, getting rid of the very last historic symbol it possessed. This was the collection ofsilver objects minted in t670, the year of its incor poration, that had been gathered b ' v various Governors and kept at Beaver House. 'rhe thirty hallmarked pieces were s.h.i.+pped without notice to New York for sale bv Christie's, so that some of the foi met British I IBC directors ~ad less chance to buy them, or, as one former Governor intended, to donate them to the city of London.
550 FAREWELL TO GLORY.
energy to burn, and brought to his position an optimistic outlook and determination to dismantle the deadening sanctions of head office.*
Kosich's-and the HBC's-good fortune was to have at his side Gary Luka.s.sen, the Company's chief financial officer, who became a key man in its resurrection.
Kosich was tough and as single-minded as a mountain inule, which didn't enhance his popularity. On October 24, 1988, anationymous pet.i.tion was circulated at the fIB(”,s head office, asking executives whether they respected Kosich's style of management. ”Do you believe that the removal of George Kosich [as chief operating officer and president] would return the Company to a more stable and productive environrnent?” the questionnaire demanded. At the first rnanagettient committee meeting after its distribution, John Tory began the proceedings by turning to Kosich and, with inock seriousness, explaining, ”Before we start the business of the meeting, there is an announcement I have to make. ft concerns the questionnaire that was circulated to the executive staff. We've tabulated the results. There were 17 5 replies that came in. Six percent voted for Ed Broadbent [then NDP leader], about 15 percent were undecided, and the others said they didn't know who George Kosich was.” One of Kosich's prob- lems in dealing with staff morale was his vocabulary. He was always talking about ALB.W.A. (which meant Management By Walking About-a reference
*lain Ronald resigned the same day Kosich was appointed, later becoming president of administration for the Canadian Imperial Bank of Commerce. ”I just couldn't stay at The Bay a moment longer, because I have to took at myself in the mirror every day, and can't shaN e with mN eyes shut,” lie told a friend just after he quit. Doug Ntahaffy, t~e I IBCs senior N ice-president, finance, also resigned within a few weeks of the Kosich appointment.
DISASTER AND DELIVERANCE 551.
George Kosich, President, 11BC
to mingling with customers), eliminating T.N.M.J. (the That's Not My Job syndrome, when it came to helping close sales by using a little extra effort) and in a gush of participles, defined his formula for success as ”downsizing, rationalizing, fine-tuning and refocusing.”
With Ken Thomson's and John Tory's active backing, Kosich turricd the Company inside out, closing unprofitable units but supporting success with ambitious retailing plans. The deliverance of the HBC was not nearly as dramatic as its near disintegration. It was largely a matter of rationalization and reorganization- 552 FAREWELL TO GLORY.
the gradual reintroduction of the Company to its natural retailing audience.