The Last Canadian Knight

by Gordon Pitts

  At the same time, “He is very supportive of management,” says John Bragg, who recruited Day to the advisory board of his family company based in Oxford, Nova Scotia. Bragg has amassed a billion-dollar company based on frozen foods and communications—including the large Eastlink cable TV and communications business in Atlantic Canada. He is a firm believer that management needs directors who give them 100 percent support—that is, until the time comes that management clearly can’t do the job.

  Bragg adds that Day will take this support beyond mere words. At one point, the Bragg companies needed to raise money and were struggling a bit in the effort. Bragg had been thinking about a government program that would provide tax credits on funds invested. He thought about tapping investors through a bond issue.

  Later, Bragg received a call from Day saying he and Ann had talked it over and were willing to put up some funds to buy bonds. Based on what they could borrow, their commitment would be about $250,000. An investment in a growing private company is not the most secure undertaking for a retirement-age couple, but they were sending the message: we are here for you. The money was not needed in the end—Bragg got his financing anyway—but he treasures the loyalty. “There was no fuss about it, just a private call and we never talked about it again.”

  It speaks volumes that, for a number of Canadian family companies, Day was either the first outsider, or among the first, on what had been a family-only board. He has played this role with companies as diverse as Acadian Seaplants, the Halifax-based pioneer in processing seaweed for human and animal use, and the Martin family’s shipping firm, CSL. That requires a special tact and insight, but also the courage to tell it like it is. It is too easy for a director to take a laissez-faire stance and a passive advisory role in many private companies. Day, however, given an opening, can deliver a stream of questions and observations, drawing widely from his own rich experience. A CEO has to learn to sift through these comments and choose what works best for him or her and the company, but it is well worth the effort, say the CEOs who have worked with him.

  Timid or tentative CEOs cannot thrive in the face of the Day bulldozer. They roll over too quickly. It is easy to assume that “Sir Graham knows best” because of his rich experience, but even Day concedes he is sometimes wrong, and faces up to it. It is better to express his opinion firmly than to let an issue die with no debate. For managers, the best approach, as with any strong director, is to challenge his thinking and adapt it—and come prepared to be interrogated.

  Allan Shaw learned this lesson at Shaw Group, the private building materials and real estate development company whose board Day joined soon after returning from Britain. Like Sobeys Inc., but on a smaller scale, the company was contemplating a move beyond its familiar base. Shaw Group is a legendary Nova Scotia company with origins in the mid-nineteenth century. It was run for years by Lloyd Shaw, a lifelong social democrat and a major figure in the Co-operative Commonwealth Federation, the forerunner of the New Democratic Party. His daughter, Alexa McDonough, became national NDP leader in the 1990s.

  By the late twentieth century, the company was owned by its management group, having made the transition from family control. The chairman was Lloyd’s nephew Allan, the last family member with a stake in the company. Day joined what would become a powerhouse board, with towering personalities such as fish and telecom magnate John Risley and aerospace tycoon Ken Rowe.

  For the company to grow, Allan Shaw was convinced it had to look outside the region, possibly beyond the continent, but it was a case of finding a comfort level. That set off a long journey into the global economy. Allan had good guides. Day and the board encouraged him to look around the world, including at the high-growth markets of China and Thailand. Allan did his Asian tour, came back, and told them what he had seen, and how Shaw Group could participate with local partners. Then the board asked: Are you prepared to fly over there every two weeks to manage that relationship? What if you are being exploited by offshore partners? What would you do? Shaw was unsure he could make those commitments, although he would try. The board suggested he look a little closer to home.

  So he pulled his focus back to Central and South America, and went through the same process of visits and discussion. Again the board suggested he shift the focus even closer to home. By that time, Allan had reined in his global aspirations, but the company still had to grow. The board suggested looking at other sectors; indeed, Shaw’s team had been thinking about the wood industry. It turned out that the big Swedish furniture retailer IKEA needed to buy pine furniture to supply North America. Shaw Group started negotiating with the company, and they put together a deal: IKEA would buy wood products from Shaw Group over seven years at ever-decreasing costs, as its business model dictated.

  As that negotiation was going forward, Shaw Group was also investigating opportunities to get into the pipe coating business in Nova Scotia, feeding off offshore gas discoveries. Day helped open some doors, and Shaw Group made a connection with ShawCor (no family relation), a Toronto-based company involved in energy piping. The two contracts were signed the same week. It was a heady time for the old brick company.

  The IKEA contract was a great relationship, but it could not survive IKEA’s unrelenting imperative to drive down costs. After about five years, it was hard to make money, and by that time, IKEA was looking farther afield for partners. As the Nova Scotia plant became uncompetitive, the Shaw Group shut it down, having learned a lot. It didn’t lose any money, and it helped many people who never before had permanent jobs learn skills to take out in the world.

  It is a sad day when a plant closes. Allan was walking around the dark factory with a woman who was one of the lead workers. There were just the two of them, and she said she felt so bad for his having to do this. Shaw said he felt bad for her: she was losing her job. Then “we both cried.”

  Global business stories do not all have a happy ending. Graham Day was part of that project and it was the right thing to do, just as it was right to diversify into modular housing, which has worked well for Shaw Group. “[Day] helped us figure out what we shouldn’t be doing, and concentrate on what we were good at,” Allan says. “We were always good at doing our homework, but he probably helped us narrow it down. And when we went after those things, we were convincing.”

  But Allan Shaw warns about the importance of being stalwart in the face of formidable directors. The directors once shot down a business proposal with one of them saying, in effect, “that’s the stupidest thing I have ever heard, and we don’t ever want to hear about it again.” In retrospect, Allan wishes the company had looked at the idea more carefully first, but the board’s pre-emptive rejection discouraged management from bringing new thoughts to the table. Nobody wanted to be part of the stupidest idea ever.

  It gave him insight into the dynamics of a strong board, where one director, or several, can swing the debate. Then there is the danger of piling on. “I saw that the odd time with Graham. I don’t think he ever meant to do it, but he had the stature to be able to end a debate by saying something very definitive.” But that is also what you gain with a powerhouse director, “this kind of power and magnetic personality, charismatic, that other people want to follow.” For Shaw and his team, it was part of their education in working with a strong board. Day, he says, was “absolutely a positive force.”

  Shaw also pays tribute to the board’s tough-minded thinking in appointing a new CEO as his successor. Allan had backed the appointment of a long-time manager, but some board members, led by Day, thought the man lacked sufficient commitment. Still, the directors agreed to back his choice. Then, just days before he was due to take over, the CEO-in-waiting got sick and took leave. The board pondered the choice again and this time concluded the appointee was not the right person. When the man returned, Allan Shaw had to tell him the company had changed its mind. Day became part of the committee to pick another CEO, a methodical three-year process. T
hanks to strong direction from the board, the company, albeit painfully, made the right choice.

  It is another example of what one friend says is the essential attribute of Graham Day: “When Graham is in, he is all in.” He will give it his all with unflinching loyalty and commitment, but he will also be unsparing in his opinions.

  Derek Oland came to understand that. His family brewery, Moosehead, based in Saint John, New Brunswick, was unhappy with the American importer of its beer into the United States, the US branch of Guinness, but it could not decide how best to extricate itself from the relationship: negotiate an exit or just cut the cord.

  The Olands did their legal work through Stewart McKelvey, where Day was now counsel. Oland had met Day on the Nova Scotia Power board and found him very impressive, a straight shooter who was good with numbers. Oland asked Day to help solve the US problem. It became evident that Moosehead should negotiate its departure. It was an expensive divorce, but it worked well for Moosehead. Oland was able to move its US business over to San Antonio–based beer distribution company Gambrinus Co. It was a great relationship for ten years, until Moosehead took control of its own channels in the United States.

  Day’s role with the Olands would widen beyond legal advice. Derek’s father Philip Oland had died in 1996, and Derek, after being president for seventeen and a half years, was preparing to move into the chair’s role. His father had resisted having a board of independent directors, but Derek knew he needed the support of knowledgeable outside people. Graham Day would be the first to join from the outside, followed by Courtney Pratt, an experienced executive from Toronto.

  The decision was made that Derek should not stay on as president, but no one in the family or the company was ready to succeed him. Who should be the first non-Oland to run the Moosehead business, with its roots stretching back more than 150 years in the Maritimes? Oland and Day were working with a headhunter and saw a number of candidates, but were not happy with the choices. One day, they arranged to meet an experienced consumer goods executive named Bruce McCubbin, who had been working for the Montreal conglomerate Imasco. Oland knew that, when Day is bored, you need only look below the table and see his foot moving like mad. About ten minutes into the interview with McCubbin, “I looked down, and the leg had stopped. I knew Graham was interested, and I was, too.”

  McCubbin became an outstanding CEO who garnered the respect of Derek Oland’s sons in the company and helped guide their development. One son, Andrew, would succeed McCubbin as president in 2008. Meanwhile, Moosehead further expanded the board, adding people such as John Bragg and Aldéa Landry. “Graham was a strong part of it,” Derek says. “His motivation was he liked to see family companies do well in the Maritimes, and anything he could do as a director, he was prepared to do.”

  But there is a sad sidebar. Through much of his tenure on the board, Day watched the tension between Derek and the other holding company shareholders: his siblings Richard and Jane. Philip Oland had chosen Derek over Richard to run the company, and the residue of resentment remained. It was an example of the toxicity that can surround a difficult succession in even the best family companies—and the best families. Day served on the board for nine years, until 2006, and he saw the business turn around and a development plan put in place for the Oland sons in Moosehead. Arrangements were made to buy out Jane and Richard.

  But the story does not end there. On the night of July 7, 2011, Richard Oland was murdered in his downtown Saint John office, setting off a wave of gossip and speculation around the Oland family. More than two years later, Richard’s son Dennis was charged with second degree murder, setting the stage for a closely watched and widely reported trial. On September 16, 2015, a jury found Dennis guilty, and he was sentenced to life imprisonment. In late October 2016, however, the New Brunswick Court of Appeal ordered a new trial, citing flaws in the trial judge’s instructions to the jury.

  Graham Day could only watch from the sidelines as this sad saga played out. His affection for the families he served continued long after he had left their boardrooms.

  Chapter 19

  Power Play

  On an early June day in 2002, the directors of Hydro One were holding a meeting with a single agenda item: their own mass resignation. Chairman Graham Day was in on the conference call, knowing the board’s relationship with the owner of the power utility—the province of Ontario—had reached the breaking point.

  Day was the central figure in a potential $5.5 billion privatization IPO that had gone badly off the rails. Up to now, in privatizations where he had played a role, he had known only triumphs: British Shipbuilders, Rover, PowerGen, Nova Scotia Power. He had built an international reputation as a privatizer-at-large who could drive these projects like no one else. This one would be different.

  The conference call ended quickly, because the board knew it was in an untenable position, having lost the support of the single shareholder. A dispute over executive pay had escalated to the point that the province was publicly slamming the board and overriding its authority. It was clearly a prelude to aborting the IPO and, as the plans became known, replacing the current board. In the view of some directors, they were victims of a public flogging by a government acting in bad faith. “We can’t work in this kind of a situation,” director Bernard Syron, chairman of the food services giant Cara Operations Ltd., later told the Globe and Mail. “It’s a catastrophe. It’s a tragic situation.”

  Day was frustrated, but he was also experiencing a familiar feeling. If he felt something wasn’t fair, to him or the people he worked with, “I’d push back. I don’t get pushed easily, and I won’t roll over, and I’ve never rolled over. At Hydro One, I said ‘I’m out of here’ and all the board walked out with me.”

  How did it happen? This should have been the crowning cap to his impressive career. But here he was in a political firestorm, accused of, at worst, a serious governance lapse in enriching members of his team; at best, being tone deaf to the political and economic forces roiling Canada’s largest province. That was not how he saw it. At sixty-nine, after four decades in the privatization wars, he was learning another lesson: never trust a government to keep its backbone in the midst of a contentious privatization.

  He had signed on to the Ontario Progressive Conservative government’s plan to privatize Hydro One, and he had worked with a highly capable CEO to make it happen. The initial public offering had been days away. There had been a court challenge, and the judge’s decision had gone the other way, but that was fixable. Then the executive compensation scandal dragged in Day—although his own integrity was never seriously questioned, except as a politically motivated diversion. Now it was over, ending four of the most tumultuous years in Graham Day’s life—and yet it had all started with such promise.

  When the saga began in 1998, Day was sixty-five and had nothing more to prove in life. He had a knighthood, the gratitude of the UK government (particularly Conservatives), and was an inspiration not only to free market advocates everywhere, but also to anyone who respected integrity in business. He still was a very busy corporate director and a mentor to an impressive group of acolytes. The Thatcher privatization thrust had been influential around the world, and he basked in the reflection of its success. It was a heady time.

  Privatization in Canada had not been as ambitious, but there had been progress: the federal Progressive Conservative government under Brian Mulroney had released Air Canada and Canadian National Railway from the government clutches. Day had admired the CN process and the work of two former public servants, Paul Tellier and Michael Sabia, in making it happen. He believed any privatization had to be a clean break, with no lingering government role. Then, on June 8, 1995, Ontario voted in a majority Progressive Conservative government and a new premier. Mike Harris, a former golf pro, was no Thatcher. He was not particularly impressive as an opposition leader, but he had seized on free market principles in his election pitch, and
he rode them to victory. Harris and his followers promised a Common Sense Revolution. A group of conservative-minded party members had been meeting to develop principles to change Ontario utterly. Among the ringleaders was Bill Farlinger, the boss of the Canadian branch of the accounting firm Ernst & Young. Farlinger was a golfing buddy of Mike Harris, and became the prime mover behind the privatization push.

  Once again, Day got one of those fateful phone calls, this time from Farlinger, now chairman of Ontario Hydro, asking him to join the board. Farlinger told him the Ontario PCs had plans to privatize the massive power utility. “Because of PowerGen, I thought I knew a little bit about electricity,” Day says. “I thought I knew more about the generation side than the transmission. And I assumed that Farlinger wanted that knowledge and, quite frankly, that credibility.” He also thought he understood how governments work. He dealt easily with public servants, and had flourished under the Thatcher approach: As the chief of a privatizing company, he valued that the government let him run the business while the politicians looked after the politics. Ministers never faltered in their support, and he never embarrassed them. “I was dealing with people who did what they said they would do, when they said they would do it. I had no experience at all from either [major British party] of bad faith.” That would not be the case in Ontario.

  Day was already familiar with Ontario Hydro because he had done consulting work for the utility. “I thought it would be fun.” It would be another form of service, and the opportunity to work with such a country-building or, at least, province-building entity. As he told journalist Rod McQueen for Financial Post Magazine in March 2001, “Canada has always been very slow on privatization. As a nation with a lot of state involvement, Canada has always been well behind the curve.” He blamed foot-dragging in the Canadian public service: “Do turkeys vote for an early Christmas?”