in charge, every stenographer knew not to cross her legs in front of a man while taking dictation." Bob Chesshire, who worked for the Company at the time, remarked, "He was a peculiar sort of chap who suffered from a trop- ical liver and was quite likely to pick up a dictionary and heave it at someone he didn't like."

THESHARPE'ST BREAK INTHE coNrINUITY of the old executive system in the Company was caused by the war. The immense profits from the French engagement perpetuated the illusion of management by the London Governor and directorate while the end of the temporary profits eventually made all too plain the dilapidation of its Canadian affairs.*

Ignoring this underlying weakness, the Company chose this very moment to stage the most elaborate and most expensive pageant in its history. The Hudson's Bay Company celebrated its 250th birthday on May 2, 1920, and Sir Robert Kindersley decided to visit Canadaonly the third reigning Governor ever to do so.t Each Company unit, including every northern post, was given

*One business that briefly flourished aromi d that time was bootlegging, Canadian provinces had pa.s.sed laws prohibiting the sale though not the manufacture of alcoholic beverages, but since each province could enforce laws only within its own borders, booze could easily be transported for sale in other jurisdictions. The HBC immediately established a dozen mail-order houses from Kenora to Revelstoke and installed a Winnipeg bottling plant, capable of turning out four hundred cases daily, to supply its own brands to these outlets. Income peaked in 1917 at $2,260,627.

tThe others had been Sir Stafford Northcote, who had briefly visited Montreal and Ottawa in 1870, and Lord Strathcona, though that was a special case because he had been the only Governor in the Company's history to work his way up through the HBCs Canadian service.

THE LORDS AND THE GOOD OLD BOYS 371.

a grant to join in the festivities and every employee received a month's extra wages.* Philip G.o.dsell, an imaginative veteran who after joining the Company in 1906 had travelled more than 100,000 miles by dog team, snowshoe and canoe, was placed in charge of planning the celebration. It was to be the last great Company occasion, and G.o.dsell made the most of it.

On May 1, 1920, K-indersley addressed the Winnipeg staff at a gala dinner in the Hotel Fort Garry. He quickly got the guests on side by announcing a relatively generous non -contributory pension plan and pledged $1,225,000 to its trust fund. "I look to the future of the fur trade with a feeling of utmost confidence," he declared. -The last three years have shown the best results of any years in the history of the Company." The speech prompted loud cheers, several choruses of "For lie's a Jolly Good Fellow," and a new Company song to the tune of "There's a Long, Long Trail A-Winding." The fur traders, ships' captains, department store man- agers, clerks and servants formed a happy, chanting line, marching around the dining-roorri enmeshed in nets of paper streamers.t Climax of the Canadian celebrations was the great spectacle G.o.dsell staged at Lower Fort Garry, once the proud domicile of Sir George Simpson. Indian chiefs and

*The Company's a.s.sets at the time consisted of eleven major department stores, six wholesale houses, three hundred fur-trading posts, eighty-six steam and motor vessels, twelve hundred canoes, six hundred sledge dogs and 2.5 million acres of desirable prairie agricultural land.

t At a dinner for the London staff, Deputy Governor Sale gave a similar oration, handing out 134 long-service medals. One warehouse worker topped the list with sixty years of servitude. In Winnipeg, John George McTavish Christie was presented with a special medal; his family had served a combined 2 3 8 years with the Company.

372 MERCHANT PRINCES.

their retinues came from every corner of the HBCs former empire-Swampy Cree from Hudson and James bays, Saulteaux from Lake Winnipeg, Ojibwas from the Nipigon country, Sioux from the Portage Plains, and mighty warriors from the Peace and Athabasca valleys. "For a while," G.o.dsell noted, "the atmosphere of earlier and more picturesque days hovered about the Old Stone Fort. Silhouetted against the painted tepee covers at night the shadowy figures carried the mind back to days of long ago. ... Within the walls all was quiet and silent though the tent occupied by the two Mounted Policemen who kept watch was dimly lighted with a coal-oil lantern. An occasional light flickered from the Governor's residence and there was a peculiar tranquillity permeating the old fort and its surroundings, so different from the bustle of the city but a few short miles away." The following morning the Governor took the salute as birchbark canoes, York boats and dugouts sailed by the great stone fort, and cheering Winnipeggers; lined the riverbanks. Salute guns boomed, the Governor's flag snapped in the wind, and G.o.dsell introduced each tribal chief to the six-foot-six Governor, who looked exactly the way a benign despot should look. G.o.dsell had arranged for the Company interpreter to censor the Indians' comments, so that when the Chief of the York Factory Cree, for instance, complained because the Company was not feeding his dogs, the comment was translated into a flowery tribute to "the Great Master of the Company." Long into the night could be heard the screech of fiddles and the tattoo of moccasined feet stamping out the Red River Jig and Fightsome Reel. "As I gazed at the flickering lights of the tepees and watched the shadowy forms of the old Indians pa.s.sing the pipe once more from hand to hand," G.o.dsell lamented, "I realized with a keen pang that history had been made that day, and that, with its pa.s.sing, the old fort and the traditions which surrounded it had taken another long step towards antiquity."

THE LORDS AND THE GOOD OLD BOYS 373.

HBC celebrations at Lozver Fort Garry, May 1920

The most important legacy of the celebrations was Kindersley's decision to establish The Beaver, a magazine "Devoted to the Interests of Those Who Serve the Hudson's Bay Company." It eventually became a superb journal of record chronicling the history of the Northwest. But under its first editor, a Chicago advertising man named Clifton Moore Thomas, The Beaver limited itself mainly to a hodgepodge of curling scores from the Saskatoon store, news of an engagement in Kamloops, photos of an office picnic in Victoria, the results of a pie-eating compet.i.tion at Fort ii la Corne, word of new tennis and quoits courts for the Winnipeg staff-all interwoven with hair-raising fur-trade accounts and glued together with bad Irish jokes and harmless homilies on how to increase sales.*

The Beaz,ers scope and quality improved dramatically under its subsequent editors, Robert Watson, Douglas MacKay, Clifford Wilson, Malvina Bolus, Helen Burgess and Christopher Dafoe.

374 MERCHANT PRINCES.

Kindersley also signed a contract with Bruno Weyers, a New York business agent who'd had previous dealings with the Company, to produce films. The subsidiary eventually purchased two Hollywood studios and during the next decade produced thirty-seven two-reel films featuring such stars as Buster Keaton, Helen Morgan, James Melton, the Easy Aces and the Pickens Sisters. Some of the films premiered in Broadway's best first-run houses, but the advent of the big Hollywood productions killed the business, and the HBC wrote off its investment.*

THE PROFIT WINDFALL from its shipping operations had camouflaged its financial instability, but the Company could not compete in the volatile post-war market because its traditional methods emphasized conservative mark-up policies instead of customer-enticing price cuts and quality of service ahead of high volume. Charles Vincent Sale took over as Governor from Kindersley in 1925 and a year later the new Winnipeg super-store was opened. It covered an entire city block and had all the latest equipment.

Its two ma.s.sive banks of six elevators each faced one another on the street floor in a concave configuration. "The consequence of this layout,"

noted James Bryant, who worked there at the time, "was that

*The Company commissioned a forgettable eight-reeler about itself called The Romance of the Fur Country, and jealously guarded its reputation. When another film-maker produced a shoddy thriller ent.i.tled rhe Lure ofthe North, the HBCs lawyers got changes made in the print depicting a heroic-looking free trader being crushed by a brutal (unnamed, but British) fur monopoly whose agents burned his shack, stole his provisions, then dispatched him across something ominously called The Long Traverse.

THE LORDS AND THE GOOD OLD BOYS 375.

Elevator lobby at Winnipegs new super-s-tore

every customer wishing to visit any floor other than the main one, congregated in the elevator lobby. It was so restricted in size and shape that even small crowds caused utter confusion.... Customers ran back and forth to catch elevators, only to have doors close as they reached them.

Many became convinced that all the elevators on one side only went up and those on the other side only went down, an idea encouraged by some management trainees who, despite the scarcity of jobs, were not above having a little joke at the customers' expense."

Sale, who enjoyed risk and knew the Company desperately needed to diversify, had entertained an unusual visitor in his London offices before coming to Canada for his annual inspection tour in 1926. He was Ernest Whitworth Marland, born at Pittsburgh in 1874 when oil was $2.70 a barrel, who had struck his first gusher in West Virginia and soon founded his own Marland Oil company with headquarters in Ponca City, Oklahoma.

376 MERCHANT PRINCES.

Applying his practical grasp of petroleum geology and his natural instinct for the hunt, he hit it big in 1911 with the ninth well drilled on land owned by Willie Cries-forWar near the Osage Indian Reservation. He went on to develop Marland Oil into a major company but spent his money even faster than he made it.

Marland fenced in a tract of four hundred acres near Ponca and turned it into a pseudo-upper-cla.s.s British estate, complete with polo fields, peac.o.c.ks, ponies and hounds. Across the savage prairie of Oklahoma Marland and his pals would spend long afternoons, mounted on British hunters, following British hounds on the scent of British foxes. The son of a Scottish mother and an English father, Marland was so infatuated with Anglophile values that he went to grade school dressed in a kilt, and arrived in the wild Indian country during his oil-hunting days wearing a belted tweed jacket, knickerbockers and spats. He often visited London to recharge these pretensions and OD one such trip made a deal with the Hudson's Bay Company to exploit the mineral rights it had retained (from 1910 onwards) on 4.5 million acres of the Canadian West, checkerboarded across Manitoba, Saskatchewan and Alberta.

Sale and Marland worked out a simple arrangement: in return for providing the technical knowledge and paying all exploration expenses, Marland was granted a twerlty-five-year option to lease any parcel of land for drilling purposes, with the HBC receiving a royalty on any oil or gas produced.* Three years later, when

*Significantly, the partnership missed leasing the Athabasca tar sands, said to hold the world's largest oil reserves, because it viewed them only as a subst.i.tute for asphalt in road building. The two companies opened only one filling station, near the liBC's Winnipeg store, which sold Marland lubricating products but gasoline supplied by Imperial Oil.

THE LORDS AND THE GOOD OLD BOYS 377.

Marland's, personal spending habits caught up with him and he had to amalgamate his company with Continental Oil, the two concerns formed Hudson's Bay Oil & Gas (11130G), with the I IBC owning 2 5 percent (later reduced to 21.9 percent) of the stock.

By the mid-1920s, when the shift from Kindersley to Sale took place, chairmanship of the Canadian Committee pa.s.sed from Nanton to George Allan, who was soon joined by such Winnipeg worthies as James Armstrong Richardson, Robert Gourley, Conrad Riley and Hugh Lyall. They had all the required credentials: Richardson was president of his family's firm, head of the Winnipeg Grain Exchange, a director of the CPR and the Canadian Bank of Commerce, and in the decade that ended in 1929 acc.u.mulated one of Canada's great fortunes. Richardson's horizons, unlike those of most other HBC Committeemen, reached far beyond Winnipeg. The Richardsons have always had all of Canada for a playground.* Gourley was the animating force in Beaver Lumber and a director of such other Winnipeg touchstone companies as Monarch Life and Manitoba Bridge & Iron Works, and had been Canadian curling champion. Riley had worked for seven years on the Northern Pacific Railway before moving to Winnipeg to take a job in his father's Canadian Fire Insurance Company. He was, of course, also a director of Beaver Lumber and Great-West Life. Lyall had slightly different connections, being one of the rare HBC Committeemen who was not a director of either Monarch or Great-West, but he did establish Manitoba Bridge & Iron Works, was on the board of Northern Trusts, and president of Dominion Tanners, both

*When Richardson died of a heart attack at sixty-four in 1939, the Winnipeg Free Press lowered the flags on its building to half-inast.

378 MERCHANT PRINCES.

companies controlled by the Rileys. George Allan, who had been a Committce member since 1914, remained Chairman until 1940. True to form, lie was a director of Great-West Life and Northern Trusts, but unlike his predecessors and successors, he devoted most of his time to the Company's affairs. A graduate of Upper Canada College and Trinity University in Toronto, he had co-founded one of Winnipeg's largest law firms (Munson & Allan) and had been responsible for channelling millions of dollars' worth of British investment into the Canadian West. A Conservative MP from 1917 to 192 1, he was a political traditionalist, once complaining in a letter to London that "democracy has its valuable and strong features, but it certainly has its weak ones. I suppose it is natural that during a long drawn out period, activities of crooks, cranks, university professors, school masters and a clergyman with extreme socialistic views [J.S.

Woodsworth], miracle workers and pedlars of paradise, should have their innings and their place under the sun, and that the product of their combined efforts should be a Social Credit Party, a CCF Party, a Communist Party and a Labour Party~"

London, too, had been undergoing important physical and personnel changes. Governor Sale was coming under increasingly virulent attack for the Company's inability to turn adequate earnings on its huge department stores. Despite these uncertainties, the Company invested the bulk of its wartime profits in a new head office building on Great Trinity Lane, opposite the famed Church of' St Ethelburga the Virgin in Bishopsgate.*

Designed by Oscar Faber, Hudson's Bay

*It was at this stone sanctuary, dating back at least to 1430, that Henry Hudson received communion on April 19, 1607, before setting off on the voyage of exploration that would eventually provide the Company with its initial base of operations.

THE LORDS AND THE GOOD OLD BOYS 379.

House was a curious, turreted edifice that needed a large formal garden around it to bring out its lines. The Company also built Beaver House on Garlick Hill in the 1920s, and for the first time in two centuries, the HBCs fur auction could once again be held at its own premises. Inside, there was refrigerated storage s.p.a.ce for two million pelts and large fur-grading rooms under double windows with a northern exposure.* The halls and boardroom were decorated with paintings of former governors, narwhal tusks and ship models in cases. After the Hudson's Bay House building was sold, this structure also accommodated the Company offices.

In Canada, the Company's stores were being transformed. Through the direct intervention of Deputy Governor Sir Frederick Henry Richmond, managing director of Debenhams, a large London department store, the 1113Cs retailing outlets were placed in the charge of P.J. Parker, a fornier Boston merchandiser who had set up his own store across the road from the HBCs Calgary outlet and had been bought out to obtain his services. A tiny creature who appeared to have walked straight out of the pages of Pickwick Papers, he had rosy cheeks and always wore gloves and matching spats. But Parker was a misanthropic presence who angered his fellow employees with his fusty ways, and he lasted for less than a year.

In his place was appointed an obscure British accountant named Philip Chester, who would exercise almost as significant an impact on the Hudson's Bay Company as had Sir George Simpson a century earlier.

*To prevent any variation in light quality, the walls and floors of these grading chambers were glazed with sand-blasted nonreflecting battleship-grey tiles.

CHAPTER14.

TRANS-ATLANTIC.

BLOOD FEUD.

The Governor and the HBcs Canadian General Manager understood that, like two scorpions in a bottle, only one would emerge, the victor

"TIILE PHILIP CHESTER WOULD TURN OUT to be the dominant force in creating the modern Hudson's Bay Company, neither his tenure nor its success would have been possible without the operational matrix set down by Charles Vincent Sale. Eventually deposed as the HBCs Governor in a shareholder revolt triggered by charges of self-dealing, during his sixteen years in the Company's two top jobs Sale turned its operations upside down. Not only was he largely responsible for generating the wartime profit that financed its growth through the uncertain 1920s but he also transformed the HBC from mainly a fur-trading house and general-store business into a ma.s.s retailer. Unlike most of his predecessors, he took more than a pa.s.sing interest in Canada, spending three months of every year touring the Company's stores, and, as a parting gesture, granted the Canadian Committee most of the authority it had always wanted. At the same time, he widened the Company's horizons by throwing its archives open to historians and hiring a young Oxford zoologist (Charles Elton) as a consultant to study fluctuations in Arctic animal populations.

What really brought Sale down was the Depression. The great department stores he had built across the West

381.

382 MERCHANT PRINCES.

were transformed almost overnight from luxurious merchandising palaces into drafty nightmares with huge overheads.'rhe new Winnipeg store alone had an annual carrying charge of $3.3 million, while Vancouver, at $2.6 million, was nearly as expensive. Gross margins had to be increased to 38.5 percent of selling price just to meet overhead costs, making it difficult to turn any profit. Between 1929 and 1931, operating losses in the retail division jumped from $182,000 to more than $2 million. Sale's plight was aggravated by shareholder expectations. "Many of them had acquired their shares in the same confidence of steady returns with which they would have opened a savings account," wrote I IBC archivist Anne Morton, and, "bitterly disappointed, were now out for blood. Sale was the obvious scapegoat."

London's initial response to the Depression's onset was to dispatch Lord Ebury, one of its senior directors, to Canada for a first-hand report.* He was appalled at the laxness of some of the staff, condemning P.J. Parker, then in charge of stores, as being unfit for the job. "Amongst his chief weaknesses-apart from Drink-are a tendency to jump into action without proper forethought," Ebury reported. "He fails to appreciate the supreme importance of ... living up to agreements and promises, and he is inclined to be a bit of a 'slick."'

*Francis Egerton Grosvenor, 4th Lord Ebury, was one of the most-decorated officers of the Canadian Expeditionary Force in the First World War. I le came out from England and spent the early years of the century in the Kootenays as an a.s.sayer for smelters at Trail and Nelson, and after 1910 worked on the Duke of Sutherland's land-settlement plan in Alberta. He joined the 29th Battalion CEF (16bin's Tigers) in Vancouver in 1914, and won the DSO and bar, the MC and bar, and the Croix de Guerre with palm. fie was mentioned in dispatches five times, was wounded, and ended the war staff officer with the 4th Canadian Division. He served on the board of the HBC and another City inst.i.tution, the Royal Exchange a.s.surance.

TRANS-ATLANTIC BLOOD FEUD 383.

In contrast, Ebury had nothing but praise for Philip Alfred Chester, who had been a.s.signed to Canada by Sale as Chief Accountant in 1925 after having joined the London staff as a junior two years previously. "Mr.

Chester," wrote Ebury, "is, in my opinion, brilliantlv clever and certainly one of the quickest thinking men I have come across in a long time." The visiting peer added a prophetic footnote: "Ile suffers from high blood pressure and needs careful nursing; one of the drawbacks of Winnipeg is thai this man is never free of his work, or thinking or talking shop." Ebury strongly recommended that the Canadian Committee, then headed by George Allan, be given power to deal with the Company's staff appointments and daily operations. His suggestion was confirmed at the Court of proprietors on June 2 7, 193 0, and put into effect by Sale himself during a Winnipeg visit shortly afterwards.

The essential element in the reorganization that followed was the appointment of Chester as General Manager for Canada, at an annual salary of $20,000. Although the London board's resolution had conferred on the Canadian Committee "full powers of attorney" and all necessary arrangements "for the due exercise thereof," the true meaning of these phrases would be argued over for the next forty years. "There seemed afterwards to be some misconception of what was really arranged with the then Governor on this side of the water and what apparently was the conception at head office," admitted Allan in a speech to his Calgary staff, "but that was very soon washed away. . . . As I put it, if they desired us to relieve them and take over the management, administration and control, that it might as well be one hundred percent, and that the horns had better go with the hide."

The HBCs affairs were clearly in crisis, and its proprietors began demanding a drastic shakeup. In London, 384 MERCHANT PRINCES.

the fight to unseat Sale and his board was led by a solicitor named Charles Louis Nordon. A highly effective campaigner on behalf of minority shareholders' rights and dividend incomes, he was incensed with the Hudson's Bay Company's dismal earnings record and eventually fought the Company of Adventurers to a standstill. "My father considered it to be one of his greatest legal triumphs," recalled Keith Nordon of his father's clash with the HBC, "in that he was well and truly up against not only an enormous Company but also against almost the whole of the City of London in that, in the big dispute, the City naturally sided with the powerful Hudson's Bay." At one point, things got so nasty that Nordon (who held 740 shares in 1927 and whose family had been investing in JIBC stock since 1873) was physically barred from one of the HBCs annual Courts and had to sneak in through a fire escape.

Nordon had first challenged Sale on the fact that between 1920 and 1925, the Company had sold land worth P,1,987,738 while paying outY,1,750,922 in taxesa levy which, when added to administrative expenses, meant the land sales had been a futile waste of potential future a.s.sets. It was a perfectly reasonable criticism, but Sale chose to ignore it because Nordon was too insignificant a shareholder. Nordon continued to bombard the directors with meticulously researched queries in the later 1920s so that even proprietors who had at first considered him a noisy nuisance began to pay attention. He was particularly incensed by the revelation that in 1927, which was not an especially bad year, the Company had been able to earn only Y,151,909 on its E6,779,656 investment in the fur trade and sales shops.

Having been barred from corresponding with the Company, Nordon began issuing a series of circulars condemning Its fiscal performance and the integrity of its directors. He organized a shareholders' vigilante TRANS-ATLANTIC BLOOD FEUD 385.

group that included several major investors including Captain Victor Alexander Cazalet (the HBCs largest stockholder with 40,5 00 shares), who demanded action.* The shareholders were particularly frustrated by the Company's practice of diverting profits to something called a "dividend equalization fund," which was really a reserve account, preventing more generous dividend distribution.