*A prominent member of a well-established Winnipeg grain family, Searle stayed on the Committee for fifteen years, but when he developed the habit of spending every winter in Florida, and thus missing an increasing number of meetings, he was not invited to stand for re-election.

t Chester was so relaxed that he even took on an outside directorship (his only one), naturally choosing the Great-West Life a.s.surance Company.

416 MERCHANT PRINCES.

as every other Winnipeg Committeeman (he was president of Monarch Life and a director of Beaver Lumber), Woods was an original. He was the ultimate insider, so trusted by Manitoba's political and economic 61ite that for a brief time he was chief bagman for both the provincial Liberal and Conservative parties at one and the same time. He took on the HBC Chairmanship determined to move the Company's head office to its proper address, on Winnipeg's Main Street, and though he didn't succeed, he put in place most of the necessary groundwork. Prompted by Chester, he also reactivated the Hudson's Bay Oil & Gas operation. By the spring of 1943, the firm owned a dozen wells in Turner Valley, representing 10 percent of the field's production. Within the decade, the HBC had invested $8 million in exploration and HBOG had become the second-largest holder of known gas reserves (4.3 million acres) in Alberta, with eighty producing wells. A major exploration agreement was signed with Continental Oil, to expire June 30, 1951. That proved to be a bonanza because Continental at about this time named as its president L.E McCollum, one of the great Texas oil- men, who invested $300 million in land acquisition and oil exploration in the next two decades.

A continuing controversy of the 1950s concerned the desirability of moving retail operations into Ontario and Quebec and whether or not the HBC should join other department stores in establishing satellite branches in suburban shopping centres. Chester's position, strongly supported by Elmer Woods, was nothing if not clear: he would never "go whoring in the East," and there was no point going into shopping centres because sales in such urban fringes would only reduce the core business of the Bay's magnificent downtown department stores. "If there were fuddy-duddies in the TRANS-ATLANTIC BLOOD FEUD 417.

Company, they were to be found in Canada rather than London," claimed Joe Links. "Chester was instinctively opposed to buying other companies, believing the HBC could perfectly well build up any business it wanted and 'crucify' its compet.i.tors. Above all, Chester wanted the HBC to stay in the West-certainly to make itself compet.i.tive, to enlarge its big downtown stores, to build parkades, and open up new stores in unexploited areas, but not to challenge 'those wh.o.r.es in the East,' where an honest trader with Western Canadian principles would only get his fingers burnt. We in London felt the shopping centre movement gave HBC opportunities with its expertise in operating retail stores of widely differing sizes. Chester's argument that anything that might weaken our downtown stores must weaken the Company was an interesting reversal of a situation that arose in the HBCs pioneering (lays. When the French took to opening trading posts upriver in order to catch the Indians before they reached the HBC posts with their furs, the Bay men on the spot sought authority from London to go still farther upriver.

But London foresaw a limitless leap-frogging and decided instead that better prices for furs and better trade goods would do more for the Company's reputation. I once reminded Chester of this story and saw him momentarily waver. If what he was saying had been said by those London b.a.s.t.a.r.ds of the eighteenth century, then perhaps he might be wrong after all. But he was comforted by the thought that twentieth-century London didn't agree with him: this confirmed that fie must be right." Peter Wood, the HBC's Treasurer, verified this: "If the London people had been overtly against the suburban stores, Chester would have been vehemently for them."

It was a costly dispute. Sears in the United States had opened its first suburban store at Aurora, a Chicago 418 MERCHANT PRINCES.

suburb, in 1928, and by the early 1950s shopping centres with department stores at each end were sprouting up all over America. Woodward's opened Canada's first shopping-centre store at West Vancouver's Park Royal in 1950 after the HBC had turned down an offer from the Guinness family, the centre's developers, to be the anchor store. Four years later Canada's initial double department store plaza was launched in a suburb of Hamilton, with Morgan's and Simpsons-Sears as anchor tenants. Eaton's put its first branch into Oshawa in 1956. George Weightnian, a thirty-year Bay man who eventually became manager of market research, still laments the lost opportunities. "I wrote a long pr6cis summing up the prospects for the Company and made a convincing argument, but when I finished my presentation, Chester just said, 'Young man, you can't see the woods for the trees,' and I thought to myself, 'Well, there you are."' Part of the problem was that Chester was an atrocious driver, seldom drove his car and was not aware of the effect of people's new mobility on North American cities.

BY THE EARLY 1950s, Sir Patrick Ashley Cooper, now nearing his sixty-fifth birthday, began to send out feelers about having his term as Governor extended beyond normal retirement. He had a good case and made certain that it was promulgated in the Company's 1951 report. Share values, he reminded the proprietors, had fallen from 131s 3d in 1928 to 22s 6d in 1930, but since 1932 the Company had distributed Y,3 million in dividends and ploughed 98.5 million back into its treasury, raising a.s.sets from Y,10.7 million to Y,66.8 million. Cooper had introduced many enlightened policies, such as stressing promotion from within. He established the TRANS-ATLANTIC BLOOD FEUD 419.

Hudson's Bay Record Society to take over publication of the Company's historic doc.u.ments. He was the first Governor to hold summer picnics for the London staff at his home, and even demonstrated a sense of humour when he read out to an annual Court a letter he had received. "I got your letter about what I owe," wrote the troubled UIBC customer. "Now be pachant. I ain't forgot vou. Please wait. When I have the money I will pay you. if this was the Judgement Day and you was no more prepared to meet your maker than I am to meet your account you sure would go to h.e.l.l.

Trusting you will do this."

I kind of liked Sir Patrick," remarked Scotty Gall, the old Arctic hand, who met the Governor several times. 'T le loved the feudal system, behaved like a baron coming around to inspect his serfs. But he was a keen businessman, too. He knew the right side of the dollar and gave nothing away." That was true enough, and there was no doubt that Cooper had rescued the Company from the Depression. But the post-war era demanded other qualities, and even if it was mostly Chester's fault, relations between Winnipeg and London had deteriorated beyond repair, so that no concerted expansion plan could be put into effect. Cooper's exag- gerated sense of personal vanity had become even less endearing to Canadians than it was to the Londoners, and his Churchillian refrain, that he had not become Governor of the HBC in order to preside over its dissolution, was a brave stance but hardly a policy.

During his tenure at Beaver House, Cooper had acquired a collection of silver pieces made in 1670, the year of the Company's founding, and had special carpets woven in Kidderminster by four artisans especially chosen for the job. He also had his portrait painted, and as was then the custom, an extra copy was done for a 420 MERCHANT PRINCES.

record of the original. Cooper borrowed the copy to hang in his country house and one summer weekend in 1952 told R.A. Reynolds, the Company secretary, he was taking the original home to compare the two canvases.

Reynolds had placed a secret mark on the primary painting and was not too surprised when Cooper returned on Monday morning, pa.s.sing off the copy as the real thing.

It was a tiny incident, but it raised questions about Cooper's approach.

There had been rumours that he was charging his London flat to the Company and that he accepted generous expense-account advances but seldom reported on them. Whether or not this amounted to any serious abuse of his fiscal responsibilities, it certainly was true that after more than two decades in the Governor's chair Cooper had lost the ability to differentiate between his personal considerations and those of the Company. There were, in those days, very tight foreign exchange controls in Britain, to the extent that executives travelling abroad were allocated ridiculously small spending allowances. The Bank of England agreed to grant Cooper, as HBC Governor, a special exemption to finance his journeys and required entertainments, yet Company auditors discovered that he was withdrawing a similar amount from the Winnipeg office but sending his bills through to be paid in London. Cooper made his own rules and at one time even imported a tractor for his farm with the allowance granted him by the British central bank. The London board members deputized Lord Waverley to persuade Cooper that he should resign. The final confrontation, attended by Tony Keswick (by then promoted to Deputy Governor) and Waverley, left Cooper no escape.

Keswick recalled later, "We just said: 'The staff have lost confidence; it's no use trying to build it up. It must come to an end. There must be a change."'

TRANS-ATLANTIC BLOOD FEUD 421.

"Do I understand what that means?" asked a distraught Cooper.

"You understand what it means."

"Yes, I understand what it means. We won't discuss it any more."

And so, on November 19, 1952, Sir Patrick Ashley Cooper resigned as thirtieth Governor of the Hudson's Bay Company.

Chester had won.

CHAPTER15.

CANADIAN AT LAST.

"The British have the rigidity of red hot pokers without their warmth. "

-Lord Amory

TONY KESWICK, WHO HAD BEEN BROUGHT on the board by Cooper in the mid-1940s, now took over as Governor, and his presence introduced a whiff of China Seas buccanecring to the HBCs deliberations. "He was a big man in every sense, a sharp trader, and I thoroughly enjoyed working with him," reminisced Eric Faulkner, who was for a time his Deputy, "although there were moments when one had to slightly pull on the reins and say, 'Tony, you're going a bit too far. There's too much bulls.h.i.t in that, you must be more careful."'

To such admonitions, mild as they were, Keswick preferred to reply with a parable and a fact. The fact was that during his stewardship, HBC profits climbed 320 percent; the parable had something to do with a myth- ical creature known as the Arctic Robin. "It had been snowing for a long, long time," went his oft-told tale, "and the poor bird, having had nothing to eat, said to himself, 'I think I'll turn up my toes and pack it in.'Just then, a farmer let his bull out of its pen near where the Arctic Robin was sitting. The bull had been overfed and after a while deposited an enormous pile, which allowed

423.

424 MERCHANT PRINCES.

the Robin to have a delicious hot breakfast. The bird, feeling perky again, flew up a tree and started singing so loudly that it attracted the attention of the farmer's son, who fetched a catapult, took aim, and killed the Arctic Robin stone dead." The point of the story, as Keswick loved to explain through snorts of belly-pumping laughter, was that "if you get to the top with the aid of bulls.h.i.t, you shouldn't sing about it."

Keswick came by his merchant adventurer's calling honestly, having been a.s.sociated for most of his business life with Jardine, Matheson, the Hong Kong trading house. "Both companies, at different times and different places, lived dangerously and had to struggle against larger forces," he pointed out. "Whatever else, the life of a merchant adventurer is full of incidents." One such incident that ill.u.s.trated Keswick's approach to life and adventure made good his claim that he may have been the only politician ever shot for making a budget speech. In the winter of 1940-41, when he was working forjardine's along the South China coast, the invading j.a.panese had hived most of the surviving foreign community into the International Settlement, the European quarter of Shanghai.

Elected head of the munic.i.p.al council, Keswick was presenting his annual budget at an outdoor arena in Shanghai filled with five thousand ratepayers when Yukichi Hayashi, a j.a.panese radical opposed to the foreign presence, rushed on stage, took out a revolver and began firing at him. The first bullet went through his rib cage, causing Keswick to feel genu1nely annoyed. "I told the j.a.panese fellow, 'For G.o.d's sake, stop that.' Then I fell on top of the little chap. Nearly killed him. He tried to send another bullet up my nose and took three fingers off the interpreter's left hand with his last shot. Seemed very upset."

His would-be a.s.sa.s.sin was hailed as a hero in 'Ibkyo while Keswick escaped with only superficial wounds and CANADIAN AT LAST 425.

Sir William.7. "Ton-Y "Keswick

eventually boarded the last plane to leave Singapore before the j.a.panese invasion. He had a good war, and later spent most of two decades as a director of the Bank of England. His many honours; included membership in the Royal Company of Archers. "We're the Queen's bodyguard whenever she's in Scotland," he explained. "We have bows, arrows and little swords and stomp about protecting her." Scotland was also the site of his grouse moor, on a 6,000-acre estate in Dumfriesshire, sixty miles south of Glasgow. It was stocked not only 426 MERCHANT PRINCES.

with game birds, sheep and cattle but also with statues. Haunted by memories of Buddhas spotted in the Far Eastern landscape, Keswick planted, at strategic viewpoints throughout his estate, works of some of the twen- tieth century's most famous sculptors: two Rodins, Epstein's famous Madonna and half a dozen Henry Moores, including his resplendent King and Queen. "I have all the big boys," he allowed, "and they look very well in their natural surroundings against the skybetter than seeing them in some d.a.m.n museum."

Perhaps because Keswick had such a powerful sense of self-worth and came to the HBC without having to prove anything, his thirteen years as Governor were very different from the stewardships of his predecessors.

Unlike Cooper, Keswick placed the greatest emphasis on cultivating the staff, trying to raise morale by reigniting their pride in the Company.

"He used to come around and sit in my office," recalled Arthur Frayling, who was in charge of London fur sales, "and say, 'Arthur, we're having a bad year, can you do anything for us?' I'd tell him that we would make a decent kick, and he'd put his hand on my shoulder and reply, 'We're counting on you.' That pompous old b.u.g.g.e.r Cooper would never have done that. He would have sent out four memorandums on how to reorganize the fur division." After his annual trips to Canada, Keswick would write a hundred or more personal letters to the Bay employees he'd met, and eventually knew nearly all of them by their first names.

Keswick's most serious a.s.signment was to protect the Company against an attempted takeover by Max Bell of Calgary and H.R. Milner of Edmonton.

The episode was referred to in the H13Cs secret internal files as "The Bullfight" because the tactics employed by the Alberta investors were similar to those used in the takeover of the Matador Land & Cattle Company, a venerable Texas CANADIAN AT LAST 427.

land outfit that had struck oil. The idea, novel at the time, was to seek representation on the board of the desired company and, with the information obtained, promote an offer to shareholders for control. Once their goal was achieved, the new owners would then sell off parts of the company to pay for their acquisition expenses. Had Bell succeeded, he would have spun off the HBCs retail stores to Simpsons or Eaton's and, in effect, obtained the HBCs petroleum reserves for nothing. An athletic-1c.o.king gent with a sporty brushcut, Bell had made an early fortune in the Alberta Oil Patch, purchased half a dozen daily newspapers, and become a well-known horse breeder and racer. A fitness devotee, he would disconcert employees who had come to see him for a pay increase by walking across the office floor on his hands, urging them to state their case as money poured out of his upside-down trouser pockets. He owned the luxury yacht Campana, a pair of islands up the B.C. coast and several vacation palaces but had Spartan eating habits.

"Max's idea of real debauchery," claimed his friend the sportswriter Jim Coleman, "is to have three flavours of ice-cream in the same dish."

There had been heavy buying of HBC stock on American stock exchanges in early 1952 and rumours began to grow that a New York syndicate, organized and headed by S.G. Warburg & Company, the British merchant bankers, would attend that year's annual Court to grab control of the Company. Because both the Canadian and the U.S. groups were attracted by the FIBC's oil leases, Company management immediately began to negotiate a new long-term agreement with its exploration partner, Continental Oil, locking the two companies into joint ventures until 1999. Within a year of its original push, the Warburg group decided to unite with Max Bell. That gave the combined group sway over more than 200,000 shares (out of 2.5 million shares 428 MERCHANT PRINCES.

outstanding), nowhere near a control position but enough to worry management. Keswick decided to deal first with Siegmund Warburg. "I put on a clean white shirt and went to have tea with Mr. Warburg in the interest of 'shareholder relations,'" he wrote to Canadian Committee Chairman Elmer Woods. "After a sip of very indifferently made tea I took the opportunity of expressing my own views on the breaking up of the companies or selling off limbs, especially those with long histories and established success. I left him with no doubt that in principle I would find it very difficult to agree to any such policy and that I personally believed ardently in maintaining the united strength of our grand old Company."

After prolonged discussion and some bickering, Warburg agreed to vote his proxies with the board, but Bell held out. He had drawn up a forty-four-page report suggesting how the H13C could improve its profit potential, particularly in oil operations, and on March 17, 1953, Bell and Keswick met face to face. "At times he shouted like an undisciplined or spoilt boy unable to get his way too easily," Keswick recalled.

"Curiously enough, the question of taxation never arose as a major criticism, nor did transfer, other than his recommendation that I should transfer myself over and settle down like a broody hen on top of the Canadian Committee. ... It could all be summed up in one generalization: that Mr. Bell feels that we lack drive and progressive management; we do not make the most of our a.s.sets-, and that if we did we could treble and quadruple our profits. ... It is good that we have shareholders as keen as this but I am glad there are not too many of them." Bell quite rightly concluded he was not being taken seriously and soon afterwards sold his 11BC stock-at a $500,000 profit. The main impact of his raid was to bring a substantial block of stock across the Atlantic.

CANADIAN AT LAST 429.

PERHAPS IT HAD SOMETHING TO DO with celebrating his victory over Bell, the first colonial to challenge London's vested authority, but more likely it was Keswick's intuition that his beloved Company could not much longer resist the pull westward and would soon be domiciled in Canada, that prompted him to stage one final, glorious pageant. Who better as the centrepiece of such a grand occasion than the most eminent Englishman of the century, Sir Winston Churchill? The wartime Prime Minister's ancestorJohn Churchill (later first Duke of Marlborough) had during his seven-year reign as the HBC's third Governor restored the Company to glor~,. Nine generations later, the eightyone-year-old Sir Winston had reluctantly retired from active politics in 1955, and allowed Anthony Eden to succeed him with the immortal comment: "I must retire soon. Anthony won't live forever." He was working on his masterpiece 7he Second World War, and while his intellect seemed undiminished his health was poor and he was feeling left out of things. Word had come from Chartwell, his country house, that he might be open to an invitation to join the HBC in some manner because he felt there was no other commercial enterprise with which he could align himself without drawing criticism for favouritism. Lord Waverley had suggested the entirely honorific but appropriately historic t.i.tle "Grand Seigiieur of the Company of Adventurers of England Trading into Hudson's Bay," which had the advantage of playing up to Churchill's approach to the British Empire: its details had always bored him, but he was much attached to its ideal-"the spectacle of that immense estate enhancing the grandeur of England," as Jan Morris described it.

Churchill accepted Keswick's invitation but Winnipeg did not. When the Governor mentioned the idea to the Canadian Committee, Elmer Woods replied 430 MERCHANT PRINCES.

that he thought "any such position would be incompatible with the stature of Sir Winston. By the unthinking public it would be construed as a form of publicity, with unfavourable reactions. . . ." Keswick forwarded copies of the Woods letter to his fellow British directors with the notation: "I have received the attached somewhat typical and ungracious unanimous disapproval," and paid scant attention to the Canadians. He decided the t.i.tle would be conferred at a ceremony in Beaver Hall, followed by luncheon at Skinners' Hall on April 27, 1956, with the top layer of Britain's social, economic and political establishments invited to attend.*

"We had a h.e.l.l of a job getting him up the Skinners' Hall steps,"

Faulkner recalled. "He appeared deathly pale and we had seats with little tables every fifty yards or so, equipped with helpings of f fudson's Bay fiftyyear-old cognac. He would take a little slug of it and go on, so that bv the time he got into the hall there was colour in his cheeks and he was happily coherent." Another HBC director, Lord Alanbrooke, who had been Churchill's senior military commander, was astonished at the transformation. "He is a marvel," the former Chief of the Imperial General Staff told Lord Moran, Churchill ',s physician, who was at the luncheon. "Before the Election in 1945 1 said to myself: He is finished.

I could not get him to decide anything.... He was burnt out.... That was eleven years ago, and look at him now."

*The banquet was catered by Ring& Brymer at forty-two shillings a head, with the menu consisting of Scotch salmon with hollandaise sauce; long fillet of beef with new potatoes and French beans; lemon posset and Savoy fingers-and two wine varieties to wash it down: Forster Fleck-inger Riesling Auslese, 1953, and Chiteau Uoville Poyferr6, 1934. Warre's Port, 1927, accompanied dessert, and Fine Old Cognac was served with the coffee.

CANADIAN AT LAST 431.

Sir Winston Churchill at Beaver Hall, April 2 7, 1956

Keswick and Sir Edward Peac.o.c.k proposed glowing toasts to the old man, praising his magnificent accomplishments, pretending the office of Grand Seigneur was more than just a grandiose t.i.tle. The former Prime Minister went along with the game. He rose to his feet, looking a trifle strange in what he must have imagined was a Grand Seigneur's uniforni-a smoking jacket over a dress shirt decorated by a bright green bow-tie with 432 MERCHANT PRINCES.

large white polka dots-and mischievously told his delighted audience: "I must be very careful how I use the great power that has been placed at my disposal at this very agreeable and memorable function. If I were perhaps to interpret it too literally, it might need a leng-thy explanation and I might not receive the full accord which it is in all cases desirable should be given to it and also given to the Grand Seigneur. I will not, therefore, attempt any strong action as a result of the post to which you have called me until and unless I have had further experience. . . ."

Churchill concluded his remarks with a touching benediction. "This honour will be appreciated all my-," there was a long pause and his voice tightened, "-all my remaining life." Sensing they might not see him again, members of the audience grew still. The Grand Seigneur turned to leave. He stepped gingerly frorn'the speaker's dais and, when he reached the bottom stair, faced the hall and gave everyone present a long, searching look; then his features broke into a cherubic smile. The ovation was deafening, lasting the long moments it took for the head table party to escort Sir Winston down to his car.*

*After the ceremony, Churchill wanted to know if he could do anything for the Company. Asked whether he might donate one of his paintings, the former Prime Minister replied that this would be difficult since he'd given them all to his wife. When Joe Links went to see Lady Churchill, she explained that while Sir Winston had painted about six hundred canvases, only twenty-five of them were any good, and she didn't want to give the Company either one of his bad ones or a very good one. They finally settled on "the twenty-sixth or twenty-seventh," a Marrakesh street scene that still hangs in the FIBC Governor's office, now in the Simpson Tower at the corner of Bay and Queen streets in downtown Toronto.

CANADIAN AT LAST 433.

HAVING VNNQUISHED BELL and toasted Churchill, Keswick's main preoccupation became getting along with Chester. His style was certainly more accommo- dating than Cooper's. After visiting London late in 1952, the kVinnipeg-based executive sent the Governor a comforting note. "I cannot attempt to describe the wonderful contrast of my first visit under your reign," lie wrote; "it was so happy and enjoyable that I'll hop over any time, even for forty-eight hours." But Chester had by then been battling London for nearly a quartercentury, and his suspicion of British motives had inarinated his brain, so that despite his early good intentions he could not stop fighting. "It was easy to follow Cooper," Keswick recalled, "because he was a puffed-up hot-air merchant. But my main task was handling Chester, who was very able, a piledriver intolerant of people not willing to work twenty-four hours a day, but he had a great capacity for sulking. At some ofour board meetings, I could see him starting to lose his temper, and I'd say, 'Phil, you're turning black.' It was enormous fun." On one occasion while en route from Toronto to Vancouver, the plane in which the Governor was travelling experienced extreme turbulence in an air pocket over Winnipeg. "We all had to fasten our lap straps," Keswick recalled, "and the pa.s.senger next to me, who must have known who I was but hadn't uttered a word during the flight, said out of the side of his mouth: 'Phil Chester must be down below."'

Even the London board members who admired Chester found him difficult.

Deputy Governor Faulkner complained that "on his black-face-days, he was almost impossible to deal with." Yet Faulkner also believed that "Chester had saved the Company. He was a difficult man to like but easy to respect." That was a generous verdict because Faulkner's introduction to Chester had not been promising. "When I first went on the board, I 434 MERCHANT PRINCES.

arrived in Montreal and had breakfast with Chester at the Ritz-Carlton,"

he remembered-only too well. "I needed to blow my nose, so I drew a handkerchief from my left sleeve, where I always carried it. Chester saw me and said: 'It may offend you deeply, but for Christ's sake, don't wear those suede shoes in Canada, because the only people who wear suede shoes here are not the sort of people we would have as directors of the Hudson's Bay Company. Secondly, last week four Royal Canadian Navy captains returned from a course in the United Kingdom. They went on television, and when one of them blew his nose into a handkerchief he'd taken out of his sleeve, Canada went up in smoke, thinking this man's been corrupted. So, don't keep your handkerchief there and take off those shoes.' I remember thinking to myself, 'My G.o.d, what have I walked into?"'

Still, the Compariv under Chester's regime prospered. On August 29, 1946, he had been promoted to Managing Director and granted a $15,000 bonus, but not even that show of confidence satisfied him. "He would chip away at London's authority, chip away at it the whole time," HBC financial officer Peter Wood remembered. "They always said, 'We'll give in on the little things, but we're not going to give in on the main points.' By the time Chester had chipped away a hundred times, he had grabbed a fair amount of authority."

Records of the time reveal that despite Chester's constant complaining, lie made not a single policy proposal that wasn't eventually approved by London, while the British directors seldom pressed him to do anything against his will. Yet the feud continued unabated. The enlarged Canadian membership on the London boardin 1957 and 1960-required new appointments that dramatically improved the calibre of the Canadian Committee. C.