Company Of Adventures - Merchant Prince Part 12

Revered as the Empire's pre-eminent visionary, Strathcona became Londons favourite colonial character. Ever courteous, more British than the British, painfully anxious to please, Strathcona as he grew older caused minor protocol problems for his London hostesses. He could never quite remember the proper precedence. One regal maven complained that "it was very difficult indeed to persuade him to 'stand in the order

During the 1980s, the regiment, now armoured and 500 strong, fielded Canada's last ceremonial cavalry troop consisting of a configuration of fourteen horses and eighteen men as riders and equipment personnel. It was saved from extinction by another Scottish-born philanthropist, Alan Graham, head of Calgary's Cascade Group, 200 LABRADOR SMITH.

of ]us going."' But the highly publicized generosity of his South African contribution had earned Strathcona wide repute and rescued the Hudson's Bay Company from social oblivion. "He is Canada in a swallow-tall coat,"

marvelled A.G. Gardiner, editor of the London Dally News. "You talk with him, and it is as if Canada stands before you, telling her astonishing story."

CHAPTER 8.

THE RECKONING.

Too weak to stand or even to read his own remarks, he sat before a representative gathering of the Company's shareholders like a stuffied effigy of himself- mute, barely emitting any vital signs, yet still there, the Governor and a Bay man to the end.

,rHE BOER WAR HND CRACKEDTHE MIRROR of imperial glamour. While the British could claim a military victory, it had been achieved in a sequence of senseless slaughters. The Empire finally had to ma.s.s 450,000 troops to crush 35,000 elusive Boer warriors. In the process, the invaders ravaged the countryside, burned the Boers' farms, and imprisoned their families in detention camps. There, 20,000 wornen and children died, son-ie of the youngest casualties being victims of ground gla.s.s mixed into their morning porridge. The conflict put an end to the na*fve Victorian notion of 61gentlemen's wars," and Britain's "splendid" isolation now became real.

At the same time, technological change was making the grip of Empire less tight. Electricity began to take over from steam, and Marconi's transatlantic wireless transmissions shattered dreams of cable and telegraph monopolies.

Few of these momentous changes disturbed Lord Strathcona's personal world. His already spectacular financial prospects changed only for the better. The CPR

203.

204 LABRADOR SMITH.

was finally realizing its traffic potential, the Bank of Montreal was setting new profit levels, and the soinnanibulant I ludson's Bay Company became one of the London Stock Exchano~e.s most fashionable investments.

Wbile trade in furs faced an uneven future, the Company's landholdings took on new significance. Since 1898, settlers had been funnelling into the Canadian West in ever-increasing numbers, and as they became successful farmers, even more were attracted. The influx triggered a land rush. Three million immigrants settled the barely inhabited Prairies before the outbreak of the Great War. Land values doubled, then doubled again. BN 1903, the 1111c was able to sell nearly 400,000 acres to willing homesteaders at five dollars an acre, though Strathcona A ould live to see the price quadruple to inore than twenty dollars.

As land values soared, stock quotations shot up. The Economist, which hadn't thought about the IJBC for thirty years, noted that the Company was showing "remarkable vitality in its old age." Share prices moved from ItM in December 1889 to YI 29.5 in November 1906, while dividends reached 24 percent and rocketed up to 50 percent-their highest level since 1688-though even at 50 percent this worked out to only 3.1 percent on the par value of the stock.*

Instead of sharing some of this new-won affluence with the field hands whose efforts had created and rnaintained the Hlic's land empire, at the Company's 1904

*A fringe benefit of the fortunes made from the rise in value of IJBC stock was the foanding of Dublin's renowned Abbey Theatre. Forerunner of the Little Theatre movement and the first state-subsidized stage in any English-speaking country, the Abbe ' V was able to open in its own building in 1904 thanks to .CI,3()O in 1113C stock profits donated by Annie Horniman, a London theatre manager.

THE RECKONING 205.

annual ineeting Strathcona delivered these worthy veterans the coup de grdce. He proposed that a pension plan be established (paying a top annual rate of $1,500 to Chief Factors witli thirty years' continuous service) but specifically excluded aiding those who were already retired. Not only were the former traders to be deprjve~ of any sustaining income but the Y~50,000 left in the Servants' Pension Fund after abrogation of the fur partnerships by surrender of the Deed Poll in 1893 was absorbed into general corporate revenues. When retired Chlef Factor Roderick MacFarlane complained, urging Strathcona "to aid ill doing the right thing by those ... [who] have suffered many hardships, and endured many privations in the performance oftheir onerous duties in the interior," his pathetic appeal was disinissed with a curt note pointinIg out that it was really quite useless to trouble the board with correspondence relating to a period with which the existing Hudson's Bay Company had only "an historical concern."

That brutally dismissive phrase relegating more than two centuries of steadfast dedication by generations of loyal employees to the oblivion of "historical concern" served as the corporate epitaph to the HBC's fur traders, if not the fur trade.

It seemeo an easy, if heartless, decision because the land boom kept accelerating. When Rudyard Mpling came back from a trip to Medicine Hat (where he had seen flares of natural gas blazing like torches) and reported the town had "all h.e.l.l for a bas.e.m.e.nt," Strathcona quickly realized the underground potential of mineral rights and ruled that the 11BC would henceforth retain them on all the lands it sold. The High Commissioner's interest in speeding up the already hectic pace of land sales was not limited to his mandate as Governor of the Hudson's Bay Company. He was also a controlling investor of the Canada North-West Land 206 LABRADOR SMITH.

Company, formed in 1882 to acquire five million acres of the original CPR land grant. In case emigrants to Canada failed to enrich his purse through purchase of a homestead, there was always the shipping line. During Strathcona's London tenure the CPR, in which he remained a dominant shareholder, established steamship connections between Liverpool and Montreal. The new fleet immediately became part of J.R Morgan's North Atlantic maritime cartel, which was estimated to have extracted frorn newcomers to North America a surcharge of $44 million until U.S. courts broke the back of the trust in 1911. Canadian Pacific vessels used in the service were already subsidized by the Canadian government. Yet both Sir Richard Cartwright, the Liberal Minister of Finance (and later ofTrade and Commerce), and his Tory successor, Sir George Foster, substantiallv increased these subventions, then enacted regulations that only goods travelling to Canada on steamships sailing directly to Canadian ports would be eligible for preferential British tariffs.

The rush to Canada was partl~ the result of the propaganda flooding Great Britain. The new Dominion was variously described as "the dutiful daughter of Empire," 16a hunter's paradise," "the wild and woolly west" and ,,the land of golden opportunity." "It little mattered ... if the Rocky Mountains sometimes penetrated into Saskatchewan or that no foothills ever dotted the fictional landscape," noted R.G. Moyles and Doug Owram, who have studied the promotional literature, "or whether the intrepid hero really could, simply by ,turning to the right-hand seek the rugged haunts 4thc grizzly bear ... or, by turning to the left, ride after the buffalo on his own undulating plain.' . . . It was best that nothing be too specific or accurate; that setting be an impre."ion only, an impression of a 'great wilderness' where . . . 'the red man and the buffalo roamed at will, THE RECKONING 207.

and the conventionalities of civillsed life troubled them not."' Settlers'

guides were distributed on British street corners; every railway station featured a poster glorifying some aspect of Canadian agriculture. Adventure novels of the period even hinted at erotic murmurs in the grain fields.

("Caleb would stand for long moments outside the fence beside the flax. Then he would turn quickly to see that no one was looking. He would creep between the wires and run his hand across the flowering, gentle tops of the growth.

A stealthy caress-more intimate than any he had ever given to woman.") The reality faced by immigrants was very different, of course: after the Atlantic crossing, cramped into steerage bunks, to be unloaded, cattle-like, in Halifax or Quebec; then the climb aboard wooden railway cars equipped with cookstoves but no mattresses for the long journey west.

There the newcomers were dumped onto the flat, sloughpitted prairie to scrub for a hidebound life. But at least their fate was their own, and within the cycle of the seasons they cultivated the virgin soil, bought an ox, then a horse, built a house, made a life. Out of their labours emerged not only a new land but a new nationality.

Much to the surprise of almost every official involved (except Strathcona, who had been on the grol-nd and appreciated the area's rich potential), the Prairies turned out to be almost as good as advertised. Even better, when Charles Saunders, an inspired cerealist working at a federal experimental farm, perfected a strain of wheat that required two weeks less to ripen than the standard Red Fife and produced top-quality flour. Even earlier, the prairie had been producing more than 100 million bushels of wheat, and as farmers consolidated their holdings, villages, towns and eventually cities simmered up. The local HBC trading posts were quickly overshadowed by general stores, train stations, grain elevators and bank branches-opened by young clerks sent west from head 208 LABRADOR SMITH.

offices in Montreal andToronto with a thousand-dollar bill pinned inside their coats to provide the initial capital. "There isn't a tmhorn gambler left in Nevada," exclaimed an American journalist after touring the West.

"They're all selling town lots in Canada!"

Winnipeg came fully into its own. By 1911, it was Canada's third-largest city, and, at the height of the land boom, Winnipeg's hotel accommodations were so hard to come by that proprietors charged travellers willing to sleep on stairways a dollar a night. By 1904, Winnipeg's railway yards had grown into the world's largest-and busiest-with as man) as 1,800 cars shunted through per day'. While the city's North End became the centre of immigrant cultures, mansions of Winnipeg's rapidly expanding merchant cla.s.s were thrown up on the south bank of the a.s.siniboine, forming Wellington Crescent and its environs, where many of the leading figures in Winnipeg gathered. They included, over the years, the Aikins family, the Allans, Alloways, Ashdowns, Bawlfs, Drewrys, Flatons, Galts, Heimbeckers, Heubachs, McMillans, Nantons, Oslers, Pitblados, Richardsons, Rileys, Searles and Sellerses.

In the summer of 1909, when Lord Strathcona paid his first visit to Winnipeg in two decades, the local business establishment turned out in force. They organized a two-mile triumphal parade from the Canadian Pacific railway station to Government House, under arches and banners glorifying (and exaggerating) his connections with the city. Giggles of maidens dressed in white spread flowers before his carriage, and the crowds cheered at the verv mention of his name. It was a marked contrast to his firsi furtive visit forty years earlier, when as Donald Smith he had slipped into town and was promptly placed under house arrest by Louis Riel. Strathcona enjoyed the celebration but could not find it in himself to forgive Winnipeggers for having voted against him in the 1880 THE RECKONING 209.

Lord Stratbcona unveiling a plaque on the Fort Garry Gate during bis ~,isit to Winnipeg in August 1909

federal election. "hen a local deputation asked him for a million dollars to help establish the Selkirk Exhibition, he politely heard them out and said he would give his decision on his return through Winnipeg from ajourney to the Rockies. On his instructions, the CPR schedule~ that arrival to bring his private coach into the Winnipeg station at midnight. The organizers were on the platform, but no one was invited to enter his darkened and shuttered railway car.

Such incidents aside, Strathcona, a.s.sisted by W.T.R. Preston, who had been appointed Commissioner of Immigration for Europe by Laurier, threw himself into the recruitment drive for new Canadians with typical enthusiasiii-and,A as almost arrested for his trouble. Not satisfied with trying to boost emigration from Britain, he visited Hamburg to preach the gospel to German 210 LABRADOR SMITH.

booking agents. They seemed impressed that a British lord had taken the trouble to address them, but the German authorities, particularly anxious not to lose any farmers, had a different reaction. The Minister of the Interior, Count von Posadowsky-Wehner, officiallycomplained about the visit to the British government, threatening to arrest the High Commissioner if he ever returned. -rhe arrogance of the Canadian, Lord Strathcona, and the utter disrespect shown by him for the laws of the Empire in publicly conducting his emigration propaganda on German soil in the very teeth of the authorities, demand that vigorous representations should be made at once to the British Government. . . " editorially thundered the Hamburger Nachricbten. "Apart from the weakening of the Fatherland which the success of such propaganda entails, the attempt to lure our fellow countrymen to this desolate, sub-arctic region is, upon humane grounds alone, to be denounced as criminal."

SHORTLY AYFERTHE TURN OF'ri* CENTURY-only a few decades too late--the Hudson's Bay Company nervously began to develop retail stores. Although there had been a tiny tuck shop for local customers in a corner of the compound at Fort Garry since 1830, it was not until twenty-eight years later, during the Fraser Gold Rush, that the Company opened, in Victoria, its first real store.* In 1881, a modest drygoods, hardware and grocery

*Other small outlets, mostly glorified versions of the original trading posts, eventually appeared in Vancouver, Kamloops, Vernon and Nelson in British Columbia; at Pincher Creek, Edmonton, Calgary, Lethbridge and Fort Macleod in Alberta; at Prince Albert, Battleford, Yorkton, Fort Qu'Appelle and Whitewood in Saskatchewan; at Shoal Lake, Portage la Prairie, Deloraine and Lower Fort Garry in Manitoba; and at Kenora, Fort Frances, Fort Will iam and Mattawa in Ontario.

THE RECKONING 211.

An early HBC retail store, at Peace River, Alberta

emporium was built at the intersection of Winnipeg's Main and York streets, and there the Company stubbornly remained for forty-five years while most of the city's commercial development took place several crucial blocks away at Portage and Main, later Canada's bestknown intersection.

Sensing that the HBC was not intending to capitalize on Winnipeg's remarkable growth, in 1905 the Toronto-based T. Eaton Company opened a magnificent five-storey department store at Portage Avenue and Donald Street-the latter, ironically, named after Smith. Spread over 6.5 acres and using all the latest merchandising techniques, it employed beautifully groomed high-stepping delivery horses that were soon the talk of the town.

Eaton's had revolutionized the Canadian retail trade by selling merchandise strictly for cash with a satisfaction-or-money-back guarantee. A militantly Methodist abstainer who drank b.u.t.termilk instead of water because he didn't believe merchants should patronize anything that was free, the chain's founder, Timothy Eaton, had 212 LABRADOR SMITH.

established a reputation for scrupulously honest dealings. Among other things, he had eliminated the socalled wet sales. This was a shabby trick used by merchants of the day to market fabrics by pretending they had been slightly water-damaged on their way across the Atlantic and could therefore be purchased at unbelievable savings. The merchandise was actually old stock n.o.body wanted to buy that had been carefully sprinkled with salt water from barrels kept specifically for that purpose in the storekeepers' bas.e.m.e.nts.

In contrast to Eaton's innovations, the HBC persisted in its parsimonious and conservative ways, losing trade to rambunctious new compet.i.tors throughout the West. That la.s.situde was best expressed by Strathcona at the Company's 1908 annual meeting. When shareholders objected that little effort was being expended to turn existing trading posts into attractive sales centres, the Governor haughtily replied that this was unnecessary because "the Hudson's Bay Company, by their dealings, then- administration, and their management in the past : * * acquired a prestige, which is not possessed by others in the West.... The name of the Hudson's Bay Company is an advertis.e.m.e.nt of itself, and our stores do not require so many embellishments." If this had ever been a fact, it certainly wasn't true now. New iminigrants, who const.i.tuted the overwhelming majority of prairie customers, had never heard of the HBC; many of the oldtimers, who knew it only too well, had unsettled scores with the Company and would gladly have walked or ridden miles to shop elsewhere.

THE FIRST SIGN OF CHANGE, though it seemed a natural and not particularly important appointment at the time, was the election in 1907 to the HBC board of Leonard Cunliffe to replace the retiring Sir Sandford Fleming.

An THE RECKONING 213.

important City animator involved with the financing of Harrods department store, Cunliffe did what few other British I I BC directors of the day had ever done: he went on a Canadian inspection tour, accompanied by Harrods'

resident impresario and managing director, Richard Burbidge. It was Burbidge who had converted a modest groceteria into the world's largest department store, with, eventually, 220 departments and 20 acres of selling s.p.a.ce. Under his influence, Harrods became recognized as a social rendezvous, with bevies of elegant dogs chained outside its entrances, waiting for their owners who were shopping or relaxing at one of three watering holes: a Georgian- style Gentlemen's Club done up in rich mahogany, a Ladles' Club in the Adam style, with figured satinwood and windows of stained gla.s.s, or the palm court tearoom, which featured its own orchestra. Burbidge was also known for engaging daughters of the n.o.bility to model fancy underclothes. Paid C20 a week, debutantes considered the a.s.signment quite a thrill.*

Cunliffe and Burbidge returned from Canada shocked by the inadequacy not only of the 11BCs pitiful retail outlets but also by the absence of any administrative structure capable of capitalizing on the prairie boom.

There was nothing particularly outrageous in their carefully worded report except its unmistakable

*Among other innovations, Harrods pioneered the use of department-store escalators, with attendants stationed at the top of the first flight to serve jiggers of cognac to anyone fl.u.s.tered by the ride. flarrods' cable address was, and remains, EVERYTHING-LONDON. The store much later became part of the business empire of the mysterious Egyptian billionaire Mohamed al-Fayed, who grew so enraptured with his possession that he vowed it would remain in his family for a thousand years. Ile announced th,it when he died he would be mummified and laid to rest in a tomb atop Harrods.

214 LABRADOR SMITH.

subliminal message that Lord Strathcona was running the Hudson's Bay Company into the ground. The few stores that had been opened were so badly stocked and so poorly operated that they were turning over their merchandise only once every twelve to forty-eight months, and their accounting techniques were a century out of date. Strathcona's determination to govern the firm through a centralized London bureaucracy only vaguely in touch with Canada's startling new realities and, above all, his unwillingness to mobilize the 11BCs financial resources to modernize its operations made it crystal clear that only the Governor's removal from effective authority could revitalize the Company.

Strathcona was yet again trapped in his own myth. He genuinely believed-as he always had-that what was beneficial for him personally would naturally benefit the Company. That may briefly have been true when both the man and the HBC were on their earlier growth curves, but the ever-increasing land-sale revenues and his own fattening purse had lulled the Governor into a false sense of corporate security. From his own narrow vision, it may have made sense to minimize expenditures on stores and to concentrate on marketing land. But such a shortsighted approach also meant that the Company was forfeiting its future. If current trends and management continued, the Hudson's Bay Company would have been virtually out of business the day it sold its last acre.

The most devastating condemnation of Strathcona and his methods was contained in an unpublished history of the HBC, written by Philip Chester, who was named the HBCs first General Manager for Canada in 1930 and had access to all the records. "Company policies were not changed by [Strathcona]," Chester alleged; "in fact he accentuated that [policy] of taking every possible dollar out of Canada, as he apparently believed the Deed of Surrender committed the Company to a slow, lingering death, which would come about when the acreage it had THE RECKONING 215.

received as part of' the purchase price of its monopoly had been sold. He established for himself a network of spies among employees in Canada, which contributed to denuding the organization ... of good administrators and managers. The vital qualities of restless energy and expansion of the Simpson era were crushed by apathetic policies, and as civilization gradually pushed the Fur Trade into the North, the Company left the rich opportunities of a growing Canada to its young and aggressive compet.i.tors.

In those years Canada became a nation and enjoyed great economic and social expansion, but the Company failed to meet these favourable circ.u.mstances, and the natural opportunity to become a great mercantile Company in Canada was lost."

While Strathcona was ensconced in the Governor's chair and still the Company's largest single shareholder, not much could be done to dislodge him. But in 1910 a powerful stockholders' alliance was formed to combat his regressive policies by challenging his sway over the HBCs board of directors. After a London court of appeal had ruled that receipts from the sale OfHBC land were a return on capital and therefore not liable to income tax, a group of City financiers a.s.sociated with the American interests of J.P. Morgan started to put pressure on Strathcona to increase the number of outstanding HBC shares so that they could partic.i.p.ate in the potential growth of the company. At the 1910 annual meeting the Morgan interests won four out of the nine directors' seats, gaining significant influence.

Thomas Skinner, a financial adviser to the Canadian government, a director of the CPR and the Bank of Montreal, and chairman of the Canada North-West Land Company, was promoted to Deputy Governor, along with the four Morgan representatives:

Robert Molesworth Kindersley, chairman of the mer- chant bankers Lazard Brothers & Company and Whitehall Trust; he was also a director of the Bank of England, and 216 LABRADOR SMITH.

managed large private shipping interests. Within five years he would be clevated to Governor of the Hudson's Bay Company.

Vivian Hugh Smith, a partner of Morgan, Grenfell & Company, later Lord Bicester, who served as Governor of the Royal Fxchange a.s.surance for forty-two years and was one of the City's most distinguished financiers.

Richard Burbidge, the managing director of Harrods, who immediately obtained the FIBC's British goods purchasing account (at 2.5 percent commission) and had his second son, Herbert, appointed Commissioner of the Company's stores. Harrods was also granted exclusive rights to merchandise HBC furs, the first time the pelts had been offered publicly in London since the Company's founding in 1670. The only other display of the Company's products had been at the Colonial Exhibition of 1886.

William Macken ,ie, the Ontario-born teacher-turnedentrepreDeur who was founding chairman of Brazilian Traction and president of the Canadian Northern Railway, complete(] from Halifax to Victoria in 1915. He was the first Caradian-born director and revelled in the honour.

This powerful quartet's first decision was to divide the JIBCs operations into three separate departments, each with a new commissioner, in charge of the fur trade, land sales and retailing. The Company's stock was split on a ten-for-one basis and its capitalization doubled through issuance of 200,000 c.u.mulative Y,5 preferred shares, which raised YI million for store expansion. To advise on overseas growth, a fledgling Canadian Committee was appointed consisting of three eminent Winnipeg businessmen, Sir Augustus Nanton, George Galt and Sir William Whyte, a retired CPR vicepresident. Almost at once they got down to the business of transforming the Hudson's Bay Company into a modern corporation.

Construction of a major chain of THE RECKONING 217.