The Last Canadian Knight

by Gordon Pitts

  Day watched the train wreck that ensued at Hydro One. When Clitheroe was axed, the Ontario government promoted Tom Parkinson, an experienced Australian power executive, to run the company. Parkinson resigned in an expenses scandal of his own, and walked away with a $3 million severance. When the dust settled, Hydro One was running out of CEO options. Laura Formusa was still in the company as general counsel, and she was appointed acting CEO. She liked the job, and was good at it. Graham Day had taught her well. She showed the board that she should stay on as the permanent CEO. She was steadfast, guiding the utility through difficult times, but the uncertainty eventually got to her. She did not know the path forward for the utility, and she too left at the end of 2012.

  Hydro One remained a political hot potato, accosted for its rates and billing systems. The public had become cynical about any chance of improving Ontario’s power system. The gas plant fiasco of the McGuinty era—cancelling two suburban Toronto natural gas plants for political reasons at a cost of over $1 billion—was just another example of the broken system, where politics had become the major driver. That system sat in limbo for fourteen years, divided into generation and transmission/distribution arms. There were none of the efficiencies of a single company, but, privatization advocates argue, none of the potential benefits of competition or a private sector mindset. (One nod to privatization has been private ownership of the Bruce nuclear plant.) Ontarians are said to have paid many millions in higher power bills for this half-assed state of play. It seems such a waste.

  The Liberals escaped severe electoral punishment for their gas plant sins. A new premier, Kathleen Wynne, came to power facing a fiscal challenge in an uncertain economy. Despite being painted by critics as a left-winger, she was pragmatic on power, and became convinced of the need for a significant selloff of Hydro One. The company would remain intact, as Day and Clitheroe had designed it, and the province would retain a 40 percent stake. The rest would be sold over time in a series of public share offerings. Day was sceptical. He didn’t believe in partial privatization: the company should be moved entirely to the private sector. He also wondered about the aim to spend the proceeds on infrastructure outside the power system. There was just too much cluttering the agenda, he felt, while the goals should be to invest in the system and constrain rates.

  Throughout his career, in Britain and Canada, Day’s goal had been to take politics out of the business of the companies he privatized. But in Ontario, successive governments had failed to depoliticize electricity. By 2016, little had changed, and public anger over exploding power rates was rising to a crescendo.

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  It is summer 2016 at Canadian Forces Base Borden, north of Toronto. The Tim Hortons has a busy lunchtime crowd, a sea of olive green fatigues. It would be easy to miss the small figure striding through the door if not for Eleanor Clitheroe’s confident gait and welcoming smile. She, too, is wearing fatigues—standard fare for a reserve chaplain doing duty at a military base while ministering as an Anglican priest to her church in the Niagara Peninsula.

  After the Hydro debacle, Clitheroe, a person of faith, made a career change, went to divinity school, and kept in touch with Graham Day—there are Christmas cards—but from afar. The bond is still there, she says. “He was gender neutral, if you want to say that. He took talent as opposed to preferences. And so I loved working for him. I’d work for him again if he ever needed someone.” Would she have done anything differently at Hydro One? “I might have left a little earlier, but that might be the only thing.” What about her compensation? “It was what I was told to do, so I did it.” In 2016, it is a different world. The new CEO of a partially privatized Hydro One is paid up to $4 million a year; at the time of this writing, there had been very little comment. He should thank Eleanor Clitheroe, who took the heat and paid for it with a career.

  There remains bitter opposition to privatization. But Clitheroe believes that, as the power debacle has unfolded since she left Hydro One, consumers’ attitudes have been shifting. “In the fourteen intervening years, they’ve seen rates go up significantly. And so they’re saying to themselves, ‘Well, I thought retaining government control of a monopoly was going to protect me, and it hasn’t.’” She and Day had worked towards an integrated strategy that, in their view, ultimately would have upgraded the system, delivered more competition, and kept a lid on rates. That didn’t happen, Clitheroe observes. But she feels that, as people become more and more frustrated, they will look back and say that maybe she and Graham Day had a better plan.

  Chapter 20

  Knee-Deep in the Rubicon

  Anyone who wants to discover the picture-perfect Maritimes could do worse than head to Hantsport, a tidy mill town with white churches, frame houses, a Tim Hortons outlet and hardware store, and the peaceful feel of a place that has scarcely changed in a hundred years. It’s not where you might expect to find a man who has walked the corridors of power, turned around global companies, and was knighted for services to a British prime minister.

  Yet this is where Graham and Ann Day ended up after their British adventures, in the pewter-coloured Cape Cod they had built in the 1970s and to which they kept putting on additions. (Whenever a child left, Day likes to quip, they would add a room.) Looking downriver, they could see the ruddy banks of the Avon River as it flows softly out to the Bay of Fundy’s Minas Basin. Upriver lay the Jodrey mill, the Jodrey factory, and a cluster of Jodrey company houses and family homes, a reminder of the clan that has dominated Hantsport since the 1920s.

  These are the Days’ roots, and with roots come responsibilities—and a sense of duty to the family of Roy Adelbert Jodrey, the tough old plutocrat who gave a young lawyer a chance. This became the scene of one of Graham Day’s most daunting challenges, rivalling anything he tackled in Britain, and perhaps his most successful outcome. The Jodrey story is a case study in navigating a tortuous, emotional family-enterprise breakup while avoiding litigation and deep hostility.

  Roy Jodrey was one of the most resilient entrepreneurs Canada has produced, a man who battled to the top of the pile, almost lost it all, and scrambled back up again. He was the descendant of French-Swiss immigrants to the South Shore, Nova Scotia. In the 1870s, an ambitious young man named Joseph Jodrey moved to the Gaspereau River, a beautiful arm of the broader Annapolis Valley. There he joined the established settlers, many descended from planter families from New England who were offered land in the fertile valley by the British after the shameful expulsion of the Acadians in the eighteenth century. Joseph owned a sawmill, but his son Roy was destined for bigger things. At the dawn of the twentieth century, Roy left school in the sixth grade and, as a born trader, was drawn to the Annapolis Valley’s luxurious apple production. By age sixteen, he was transporting barrels of apples to the docks in Wolfville for shipping around the world. As his ambition swelled, he invested in power dams on the Avon River and a pulp mill in the river town of Hantsport, which became the base of the Jodrey empire. In 1927, Minas Basin Pulp and Power Company was born and became Roy Jodrey’s core business.

  Then, in 1933, Jodrey founded a company called Canadian Keyes Fibre, using a Maine company’s process to turn pulp into moulded paper trays and plates. Canadian Keyes Fibre was also one of the first Canadian companies to seek shelter under the Companies’ Creditors Arrangement Act, a now popular means of protecting an insolvent company against creditors, allowing time to reorganize. This was the Great Depression, and Jodrey was up to his neck in debt. His businesses were bankrupt, but he held on with the support of the Bank of Nova Scotia. The businesses recovered—including Canadian Keyes Fibre, later known as CKF, which prospered under vertical integration, using materials and power flowing from other Jodrey enterprises. Roy Jodrey went on to triumph after triumph, dying in 1973 at age eighty-four.

  But by the time the twenty-first century dawned, inside the frame houses and mills of Hantsport a storm was gathering. It was part of the natural life of famil
ies. The Jodreys were in the third generation of the family enterprise, and they had evolved into three branches: the family of Roy’s son John, still active in his nineties, and John’s son Bruce, a top manager in the business; the family of Roy’s daughter Jean Hennigar, now led by her investment banker son David; and the family of another daughter, Florence Bishop, led by her son George. The apple businesses had grown into a sprawling entanglement of assets worth more than half a billion dollars and controlled by a family holding company called Scotia Investments. The Jodrey name did not appear on supermarkets, gas stations, or frozen food packages. The companies were not household names. This was old, quiet money.

  Some Jodrey companies were old-economy survivors in processing and manufacturing, now challenged in their markets and needing new investment. But change was hard. Various members of the family handled different assets: John and Bruce paid attention to the core businesses, Minas Basin Pulp and Power, and CKF; George Bishop oversaw the holding company and served in some of the core companies; the Hennigars tended to real estate, retirement homes (Extendicare in Canada, Assisted Living Concepts in the United States), waste management, and the family’s controlling interest in High Liner, a fish-processing company based in Lunenburg. Roy Jodrey, like his friend Frank Sobey, had been an enthusiastic investor in Canadian public companies. George Bishop and Scotia Investments chief financial officer Archie MacPherson were stewards of a large portfolio of stocks, estimated by outsiders at $200–300 million, including Roy Jodrey’s old position in Scotiabank. One of the prize assets was Algoma Central, a century-old rail company that had evolved into a Great Lakes shipper. It had even named a tanker after its illustrious shareholder. Alas, the Roy A. Jodrey sank in the St. Lawrence River shortly after the death of its namesake; fortunately, all hands were saved.

  The Scotia Investments operating model—certain cousins in charge of certain assets—worked for a while. A constructive relationship existed among the four main personalities—George Bishop, David Hennigar, and the father-son tandem of John and Bruce Jodrey. But it was getting tense. As one group brought forward proposals about its business, it had to face the judgment of the entire family. It would walk away with the sense it could never get what it wanted. There was frustration all around.

  Complicating this picture was a generational reality: the family was branching out, encompassing some cousins who worked in the company and some who did not, some well informed but others unknowledgeable. There were three children and twelve grandchildren and they were having children in turn. The shareholder group had widened to about fifty members in the second, third, and fourth generations. The consortium of cousins had no reason to be together except for an increasingly thin blood relationship. The board, consisting entirely of family members, was increasingly dysfunctional. It was a recipe for conflict—and it eventually pulled Graham Day into its stew.

  George Bishop was concerned about what would happen in the next generation, if they did not get the companies on a stronger governance base. He proposed bringing in three independent directors. His uncle and cousins agreed. George suggested Moncton trucking magnate Wes Armour; David supported Toronto businessman Ken Cork. And Bruce Jodrey championed Graham Day. Over the next seven years, Day’s mission would be to prepare the Jodrey family for the future while preserving asset values and avoiding lasting rancour. The man who had privatized great swaths of the British economy would later say, “The resolution of the differences, and the differing aspirations, of all the shareholders from the three branches of the Jodrey family was the most time-consuming, complicated, and demanding group of transactions in which I have ever been involved.”

  Ann Day says he did it for the right reasons. “This is our town, and we have some friends in the family. He said if he could help, he should.” Help, he did. The role of director on the board of a private family company can be pretty simple. It often means rubber-stamping decisions and offering a bit of advice, with no real expectation it will be followed. But Day was taking on something much bigger: the role of mediator and problem-solver for a very diverse set of individuals.

  George Bishop was a courteous man who loved operations and felt a deep responsibility to the Annapolis Valley and its people. His uncle John was widely respected for his business acumen. As he advanced into his nineties, he was still very smart, but feeble and losing his hearing. Bruce had been pulled along in the business by his father, but was increasingly distracted by health and philanthropic issues. David Hennigar was a chip off Roy Jodrey’s block, an outsized character with a colourful turn of phrase and a stockbroker’s love of the deal. Now the board had to make room for new personalities, and none was bigger than Graham Day’s. David Hennigar knew Day as “a kind of a shoot-from-the-hip guy.” Hennigar’s wry appraisal was that “sometimes I think he thought about things and sometimes I’m not so sure.” According to Hennigar, “He was never short of opinions, usually bolstered by stories about something that had happened in his career.”

  Archie MacPherson watched as the new director settled in. There was never a sense of doubt in Day’s words. “He wasn’t there to sugar-coat but to say exactly what he thought, and that is what you need, especially in a family company. It’s the idea that you don’t pay me to agree with you, you pay me to say what I think. You can still do what you want.”

  Senior family members knew they needed someone of Day’s authority. They had seen other families ripped apart by governance and succession disputes; the businesses suffered, and family relations were irreparable. In New Brunswick, there was the McCain story, and the memory of brothers Wallace and Harrison locked in bitter confrontation about who would succeed them, and the public spectacle of a legal battle. And New Brunswick also had the Irvings. K. C. Irving had built a sprawling family empire based on forestry, energy, real estate, shipbuilding, media, and retail assets, and as K. C.’s three sons moved into their eighties the family was splintering. One branch, the forestry side, didn’t get along with the energy side. The Irvings managed to achieve a sweeping reorganization, but the family split was never repaired. Inside one branch, , there had been a very public falling out between Arthur, one of K. C.’s three sons, and his own son Kenneth, who had fallen from chosen one to outcast. There was, however, one model of success: the Sobey supermarket empire founded by Roy Jodrey’s investing pal Frank Sobey and built by Frank’s sons. There was the inevitable friction among cousins, but the Sobeys were developing strong governance practices. They also had publicly traded companies that allowed disaffected or uninterested family members to cash out their holdings.

  The Jodreys could see the seeds of disaster. It was like a marriage on the rocks. They loved each other in many ways, but they couldn’t really live together. So they had to consider divorce. George Bishop remembers his cousin David Hennigar coming to him and saying that his branch had an attachment to to some things, and Bruce and George’s branch to others. The thinking was: why not go their own way? Roy Jodrey must have been rolling over in his grave, but the family agreed to give it a try. They were baffled, however, about how to start the process. By this time, John Jodrey had stepped down as chairman in favour of Graham Day, who was coming to the same conclusion as the family. He was the right man at the right time. George Bishop was impressed by how quickly Day sized up the situation and put together a team to carry out what would be an almost two-year process of reorganization.

  As for Day, he loved the sheer challenge: “In a sense, it’s not doing anything materially different than I did with Shipbuilders or cars or whatever. The pieces are different, but you’ve got this puzzle and the puzzle’s not going to go away, and somehow you’ve got to make the pieces fit as best you can.” Day knew he could call on people savvy in the world of business. First, he would put Jim Dickson, a Stewart McKelvey partner, at the centre of the negotiations among the family members. Dickson knew operational issues and he knew families, having worked with the Sobeys as both an outside counsel and a seni
or manager. On tax and valuation issues, Day would work with John Roy, a partner with the accounting firm Grant Thornton in Halifax—and another veteran of the Sobey file. Lydia Bugden, the bright young commercial lawyer with Stewart McKelvey, would work with Scotia Investments, and other lawyers would help on key pieces of the file.

  John Roy felt from the beginning that there had to be a way to hold the family conglomerate together. That was before he and Jim Dickson embarked on in-depth interviews in search of what the family wanted. After as many as twenty conversations, they were surprised. Some members didn’t know what they wanted, and it took time to clarify their feelings. Others had a fierce attachment to certain assets, but were diffident about others. Some just wanted to escape. John Roy changed his view, coming to understand that, if the businesses stayed together, it could be destructive for the assets and the relationships.

  The two men delivered their findings: some people wanted to own operating assets, others wanted cash and securities. The next challenge was getting it done. It came down to a long and complicated negotiation. Says John Roy, “It meant breaking up a family business of several generations, and it was and still is emotional.” The Bishop and Hennigar branches clearly wanted to take assets, but one of the most surprising responses came from Bruce Jodrey. Coming out of university, he had worked side by side with his father John and his cousins, rising to vice-chair of the holding company and chair of CKF. But his life had taken a different turn. He and his wife Martha, a renowned educator with her own successful career, were passionate about improving the conditions in Nova Scotia for children with learning disabilities, a commitment that arose from family experiences.