Double Shot of Scotch

by Cleveland, Peter

  Excellent credentials.

  As Graves said, the company owned twenty plants around the world. St. James noted five in the United States, three in Canada, two in Great Britain, two in Spain, and one each in Portugal, Russia, Israel, Turkey, Japan, South Korea, Barbados, and Brazil. The worldwide market for seafood and related industry sectors approximated $300 billion US, fast approaching $400.

  Anderson appeared on the third website page, announcing a $30 million overhaul of the Brazilian plant and the construction of a third plant in Spain. An exaggerated smile showcased perfectly straight, white teeth. Jet black hair greying at the temples made him look the part of a distinguished CEO. St. James guessed him to be about six feet and forty-five years old.

  CISI employed approximately ten thousand people worldwide. Five hundred at head office, the balance spread among plant locations roughly in proportion to size and production volume.

  High-value shellfish products, mostly crab, shrimp, and lobster, accounted for sales of $2.2 billion; remaining revenues were spread almost evenly over twenty or so groundfish species such as haddock, halibut, cod, basa, tilapia, and perch. Fish guts and waste, called offal, was converted into fish meal, while products such as eels, sardines, and other delicacies found their own specialty markets.

  At $19 billion the company was tracking a little over 6% of the world market, which St. James thought amazing, huge by any standard.

  The United States accounted for 18% of sales, Canada 4%, the Far East 28%, the balance spread throughout Europe, South America, and the Middle East.

  Google searches revealed three major competitors: the German Grunn Rolf Fisheries, the Swedish Emano AB, and the South Korean Nao Tungsau. All public companies, which meant financial information was readily available on websites. St. James printed documents from each site and spent an hour or so calculating comparative performance statistics.

  CISI’s gross margin was higher than its competitors by three full percentage points.

  Impressive.

  Shareholder equity among all four was comparable, within 2% of one another. CISI inventory was slightly higher.

  Perhaps different species mix.

  Without realizing it St. James began to mumble. “Anderson won’t believe cost efficiency as the reason for hiring me, especially if he does the same analysis I just did. He’s not dumb! There’s no motivation to analyze cost efficiencies when you’re already number one in the industry.”

  More to this than meets the eye.

  12:15. Time to call Janice McPherson.

  Janice was St. James’s assistant at the university, the one proposed by the dean so St. James would accept a professorship. Pursuing a Harvard doctorate in business forced Janice to hold down three part-time jobs just to make ends meet. Being St. James’s assistant was one of them. Aside from marking student assignments, Janice presided over exams and handled classes whenever St. James was away working cases.

  “I’ll have the papers marked and on your desk within a couple of weeks,” she assured.

  “Great Janice. Would you mind emailing the class to say when they can expect them?”

  “Consider it done,” she replied warmly.

  As soon as he clicked off Janice, the phone rang, and Anna’s number popped up on call display.

  “Hi sweetheart,” he answered.

  She had found three Nelson Graveses. One was Nelson H., living in Toronto; the second, Nelson A. in London, England; and the third, Nelson G. in Los Angeles.

  “I immediately dropped the LA Nelson but kept the London one because you said he was British. Later I discovered Nelson H. was the one appointed chairman of CISI’s board, so I dropped Nelson A.”

  “Excellent,” St. James said, obviously quite pleased. “What did you find on Nelson H.?”

  “Born in Fowey, Cornwall, England sixty-eight years ago. Educated at Oxford. Five years in the military, rising quickly to colonel. He joined IBM in London right after military service. Thirty years with them; fifteen in England, five in New York, and the last ten in Toronto, managing Canadian operations. When he retired, CISI snapped him up. He sits on three other boards, Craven Chemicals Ltd., Dusten Pharmaceuticals, and Craig Automotive Inc.”

  “Is he chairman of those?”

  “No, just a director. Although he does chair the audit committee for Craven Chemicals. It doesn’t say here anywhere, Hamilton, but from all I’ve read the man seems like a real no-nonsense guy.”

  “My take too. Any firings?”

  “No. Stellar career.”

  “Anything unusual?”

  “The only thing I found that seemed out of step with his career was he fell into financial difficulty in the late 1970s, forced to declare bankruptcy in England.”

  St. James perked up. “Interesting. Did it say who the trustee was?”

  “Yes, but I didn’t make a note of it. I should have. I’m sorry. You said to note everything, no matter how trivial.”

  “Don’t worry about it. It’s your first day. Find the name again, if you can. Google to see if the company still exists. If it does, call. Say you’re conducting a credit check on Graves and would like to know if he handled himself properly during the bankruptcy process.”

  “What do you mean?”

  “Was he honest with the trustee.”

  “On it.”

  Anna was about to hang up when St. James said, “Oh, Anna. You did such a great job on Graves, would you do the same for Cameron Anderson?”

  “He is …?”

  “The chief executive officer.”

  “Okay.”

  “And Anna, good work.”

  “Thanks.”

  St. James could hear the excitement in her voice.

  Could be a big asset; smart and anticipatory.

  St. James spent the next couple of hours researching more about the fishing industry.

  By early evening he had had enough and went into the kitchen, poured a glass of J. Lohr, and checked out three-day-old refrigerated Chinese food that he promptly deemed unfit for human consumption. Into the garbage it went. And into the living room he went. With the lights off he flipped on the radio and sat down on the love seat, content with just wine and the Eagles singing “Take It Easy.”

  He thought about CISI’s financial performance. He found nothing to be concerned about. Quite the contrary. Like Graves said, the company was growing faster than the industry average. If there were efficiency issues, they certainly weren’t significantly affecting financial results. Definitely the strongest company in the industry.

  So, why was the board so concerned? “Why am I here?” he said to an empty room. Was Anderson really keeping something from them, or was this board paranoia gone wild? By all rights they should be lauding Anderson for his success. Maybe Graves really was on a witch hunt.

  Chapter 17

  Mid-morning the following Tuesday the CISI Directors gathered in the head office boardroom where Graves’s superiority complex was out in full force.

  “Okay, let’s begin. Please take your seats,” he said authoritatively, sounding more like the colonel he once was than chairman of a large public company. Everyone finished their coffees and quickly found a place around the boardroom table.

  “As previously agreed we’re engaging an independent expert to review cost efficiencies, and, where appropriate, make recommendations to Cameron. You’re aware Al recommended a gentleman by the name of Hamilton St. James to be that independent expert. I interviewed him in Ottawa several days ago and am satisfied with his credentials. You’ll meet him at two this afternoon. Experienced in managerial reviews. Harvard graduate. CPA. I checked with a number of lawyers and bankers. All seemed to hold him in high regard.”

  St. James’s profile made its way around the table.

  Graves continued.

  “Cameron agreed to have operations reviewed and assess recommendations that may be forthcoming. Right, Cameron?”

  All eyes turned to Anderson.

  “Correct
,” Anderson said in a reluctant voice.

  The short, portly Cheryl Tomkins, wearing a conservative brown suit and no makeup, immediately picked up on Cameron’s lack of enthusiasm.

  “Cameron, the board needs to know you’re one hundred per cent behind this initiative,” she said in an uncompromising but respectful tone.

  “I assure you I’m fully behind it. If you sense reluctance it’s because our people are extremely busy, and this takes time away from demanding duties. Then there is the cost of this fellow. He isn’t cheap, and we have a budget to meet.”

  Blakie, a slight man with greying hair, dark complexion, and wire-thin lips was determined to challenge the need for all this. “I checked around; my sources say he’s quite arrogant. Do we want someone like that working directly with our people?”

  “David, half our people are arrogant,” Dunlop said sharply. “If we picked people based on personality rather than merit we wouldn’t be nearly as successful.”

  Coughlin nodded. “I agree.”

  “I called my old firm to see if the partners had ever worked with him,” offered Andre Fox, a man of average build. “I found two who had. They said he accomplished wonders with firm clients about to blow up over ethics.”

  “What was their experience with the man?” asked Harold Tewkesbury in a low, almost inaudible voice.

  “In one case a chief technology officer for Zanics Technologies didn’t test software to the extent advertised. After several hundred products had been sold, design flaws began to bring down customer systems, every company’s nightmare.

  “When complaints poured in, Zanics engaged St. James to manage the crisis. In two days he uncovered how reliability had been misrepresented and immediately advised Zanics to blow the whistle on itself. Go public before the media gets a hold of it, he said. But management thought the advice tantamount to brand suicide and vigorously argued against it. They insisted on dealing with the problem quietly, behind the scenes, away from the public eye.

  “There was a huge debate between St. James, management and the board, at times quite heated, I’m told. St. James argued the issue was public confidence, not faulty software. Employees didn’t do their job. Why should customers ever trust Zanics again, was his point. The company had to show public trust was far more important than the cost of fixing software. In the end, Zanics reluctantly agreed.

  “Publicly, Zanics apologized for the software disaster. Testing employees were immediately terminated for cause on the grounds of misleading customers and senior management.

  “Zanics replaced all the defective software with the next generation, at no cost. And customers were assigned free onsite technical support until all problems were identified and resolved. Zanics was determined no customers were to lose business because of the software failure. That was the promise it made to the public.”

  “Cost must’ve been shockingly out of sight,” Blakie concluded, shaking his head.

  Harold chimed in, “It would break the company.”

  Fox’s grin broadened. “On the contrary, gentlemen. Zanics was voted company of the year for honesty. Didn’t lose more than five customers, and apparently those were chronic complainers, even in good times. Sales rose 13% the following year. Publicity from the honesty award generated more than enough new business to cover the cost of the software fiasco.

  “Zanics publicly held itself accountable when St. James forced the issue. Refusing to hide behind lawyers, it admitted the wrong and made it right, at no cost to the customer. Trust in Zanics actually rose. Customers felt safer with Zanics than any of its competitors.”

  Al nodded agreement. “Natural tendency is to fix things quietly. Avoid negative press. Try to sneak solutions by before the public finds out. But, if the press catches wind before the problem is announced, allegations of cover-up explode in every form of media — journalism, radio, and television. Social media now the deadliest of all.

  “Media thrive on cover-ups. They stop at nothing until every morsel of the story is ripped from the soul of an organization. Like piranhas, feeding on corporate flesh. Whipping the problem into multiple stories, each one more damning than the last. All to convince the world that if the company covers up one thing, what else might it be hiding? That, my friends, is brand suicide.

  “It takes years and thousands of dollars, maybe millions, to crawl back from a publicity disaster like that.”

  Graves’s meaty hand adjusted his horn-rimmed glasses as he interrupted. “Okay, let’s get back to St. James. John, what do you think?”

  “I’d like to know the effectiveness of marketing expenses. How much revenue is created by every marketing dollar spent? Which initiatives work, and which do not?” said Coughlin.

  Anderson bristled. “You know, John, we analyze marketing expenses in detail twice a year. We’re constantly weeding out programs that don’t generate sufficient revenue to pay for themselves.”

  “Yes, I know, Cameron,” John replied sympathetically, “but it would be comforting to have an independent view to show shareholders we’re cautious with their money.”

  “That’s a two-edged sword, John,” Blakie said curtly. “We’ll be lucky if St. James doesn’t cost more than $250,000. If no value is added, we have wasted money.”

  Graves’s wider eyebrow twitched as he held up a hand to re-establish order.

  “Ladies and gentlemen, may I remind you we’ve made the decision to hire someone, presumably St. James unless you have some violent objection this afternoon. That’s final. This argument is pointless.”

  The room went quiet.

  Cheryl Tomkins was first to speak.

  “I would like to know about inventory. I’ve never clearly understood how it’s calculated. The adjustment after last year’s physical count was huge. Too large. As directors we must have a better understanding of this. Next to plant and equipment, inventory is our largest asset.”

  Nancy Slitter chimed in. “I agree with Cheryl. I have the same issue.”

  “Yes, it would be good to have a greater understanding,” Al said, nodding.

  Graves looked pained, obviously unhappy Cheryl had raised the question. “What specifically would you want to know?”

  Anderson looked to be about to speak, then changed his mind.

  “I’d like to know about counts and pricing. And what percentage of inventory goes bad? What percentage of inventory’s sold on the verge of going bad?” said Cheryl.

  “Auditors check all that,” Blakie argued with a look of irritation.

  A frustrated Cheryl snapped, “I know that, David. I’m concerned with product liability. Auditors make sure inventory is fairly stated on financial statements. They insist on allowances for aged products or freezer burn. But they don’t know if fish is about to become bad before it actually is bad. I worry about people becoming sick. I don’t need to remind everyone of the Maple Leaf Foods story. Tainted food costs a lot in public trust. Not to mention liability claims.”

  Nancy, John, and Harold all nodded agreement at the same time.

  Graves drummed the table. “Very well. So we have marketing efficiency and inventory as agenda items this afternoon. Anything else?”

  “When I was in banking,” said the crusty Tewkesbury in a monotone voice, “I pushed clients to justify overhead expenses on an annual basis. It would be good if this St. James fellow would have a look at those for us.”

  Graves eyed faces around the table. “Good. Anything else?” he said again, anxious for closure.

  The room went quiet once again.

  “Okay, let’s break for lunch. Please be back by 1:45,” Graves commanded.

  Everyone stood and placed documents in file folders, away from wandering eyes, then went their separate ways to lunch.

  It was 1:50 when St. James entered CISI headquarters on Front Street and announced himself to the receptionist. She noted his name, directed him to a chair in the waiting area, then announced his arrival to Graves’s executive assistant.

&
nbsp; St. James watched a number of people he knew to be directors from website pictures parade into the boardroom. Then Graves came out, shook St. James’s hand, and asked if he would mind waiting just five more minutes until they had dealt with a small recurring agenda item. St. James had no objection.

  Chapter 18

  Graves was true to his word. Exactly five minutes later he reappeared to escort St. James into the boardroom where he made his way around the table shaking hands.

  When he got to Al, they hugged.

  “Great to see you, Hamilton.”

  St. James smiled broadly. “You too, let’s grab lunch or a drink soon.”

  “Why not both,” said Al, smiling in return.

  Handshakes complete, everyone sat.

  It was a traditionally styled boardroom: solid mahogany walls, richly painted oils, and a long dark oak table elaborately trimmed, hand-carved in exquisite detail. An oversized nineteenth-century chandelier centred the room; its light too dim, an array of pot lights was necessary to compensate.

  Graves sat at the head of the table, as St. James expected. Looking somewhat puffier, he wore the same suit and tie he had in Ottawa just days before. St. James wondered if he and Jensen had the same image consultant.

  Graves called the meeting to order.

  “Hamilton, this morning the board discussed what it would like you to investigate. There are three distinct themes. First, the effectiveness of marketing expenses. Second, inventory compilation and quality. And finally, the level of overhead expenses. Do I have the themes correct?” Graves eyed each director around the table one by one.

  Everyone nodded in sequence, like children agreeing with a teacher, whether they did or not.

  St. James made notes while Graves continued.

  “Hamilton, what I have called the three themes is certainly not enough detail for you to fulfill the mandate. Cameron will provide you with specifics later.”

  St. James nodded as he scribbled.

  “You’ll report directly to Cameron. Of course you’ll require more to conduct the assignment. I suspect interviews will have to be arranged, documents and correspondence made available and the like. My assistant, Juanita Mendoza, will see to your needs. I leave that to the two of you to organize.