Company Of Adventures - Merchant Prince Part 31

"Disliking Ken Thomson, let alone detesting him, is wholly impossible,"

confessed Richard Gwyn, a leading Canadian commentator who once worked for him. "He radiates niceness from every pore, down to the holes in the soles of his shoes. He's self-effacing, shy, unpretentious, soft-spoken. He peppers his conversations with engaging archaisms, like 'golly' and 'gee whiz.' But then you stop feeling sympathetic, because you realize that his innocence is just a synonym for timidity. And you realize at the same instant that the YOUNG KEN 5 13.

reason Thomson newspapers are bland is that they are led by the bland."

The Thomson operational code had been set down bV Roy but it didn't initially change much under Ken. B oth Thomsons regarded editors as expendable eccentrics, and Clifford Pilkey, then president of the Ontario Federation of Labour, once called their company "a vicious organization, certainly not compatible with what I describe as decent, honourable labour relations."

Reporters did not receive free copies of their own newspapers, and earnest bargaining went on to deprive delivery kids of half a cent in their meagre take-home pay. Most positions had fixed salary limits, so that anyone performing really well would inevitably work himself or herself out of a job. In pre-computer days, Thomson papers sold their used page mats to farmers as chicken-coop insulation and Canadian Press printers were adjusted from triple to double s.p.a.cing to save paper. Each newsroom telephone had a pencil tied to it, so there would be no wasteful stubs floating around. "G.o.d help us if they ever realize there are two sides to a piece of toilet paper," one publisher was heard to whisper at a management cost-cutting meeting. In a thesis he wrote for the Carleton School of Journalism, Klaus Pohle, the former managing editor of the Lethbridge Herald, doc.u.mented the Thomsonization of his former paper and coined the name for a sadly relevant and increasingly frequent process.

In January 1980, Thomson had used some of his North Sea oil proceeds to purchase, for $130 million, a major Canadian newspaper chain, FP Publications Limited, but that projected him into new and unfamiliar ter- ritory. FP had fielded an impressive Ottawa news bureau under the inspired direction of Kevin Doyle (later the editor of Maclean'V) that included such stars of Canadian 514 FAREWELL TO GLORY.

journalism as Allan Fotheringham, Walter Stewart and Doug Small. The bureau regularly beat the Parliamentary Press Gallery to the news, but it didn't fit in with Thomson's usual barebones operation. When FPs Edmonton bureau chief, Keith Woolhouse, who was working out of his one-bedroom apartment, asked for a wastebasket, that was enough to trigger the costefficiency instincts of Thomson's executive vice-president, Brian Slaight. Doyle tried to defuse the situation by offering to send out an extra wastebasket from the Ottawa office.

"Is it excess to the Ottawa bureau?" Slaight, ever the champion of independent editorial control, sternly demanded.

Doyle, about to break the news of Prime Minister Pierre Trudeau's resignation, calmly replied, "Well, if you mean, do we need it, no, we don't."

At last, a triumph for head office. Slaight could barely contain himself "We have a truck that goes from Ottawa to Toronto to Winnipeg, then on to Edmonton. If we put the wastebasket on the truck, it will hardly take up any room, and won't cost us a cent!"

So the wastebasket journeyed jauntily across the country, and it took only a week and a half to reach its destination. But the Edmonton Bureau's troubles were far from over. Woolhouse wanted to rent an office and needed furniture. Slaight vetoed the initial $1,600 estimate but later approved a bid of $1,100 from a local repossession centre. That didn't save Woolhouse.

He permanently blotted his copy book by purchasing his pens and paper clips on the open market instead of from the repossession house. The Edmonton bureau was soon closed, as was the entire FP news operation.

The FP purchase had also thrown the Thomson organization into the unusual position of having to operate newspapers against local compet.i.tion, especially in YOUNG KEN 515.

Ottawa, where its Journal was up against the Southamowned Citizen; in Winnipeg, where its Free Press was head to head with Southams Tribune; and in Vancouver, where its Sun had to compete with Southam's Province. That ran strictly against Thomson's publishing philosophy, which perpetuated his father's dictum that what's important "isn't the circulation of one's own newspaper, it's the circulation of the opposition's. Even second-largest is no good. Only the largest is worth buying." The dilemma was neatlv resolved on August 2 7, 1980, when Southam's closed tl~e Winnipeg Tribune while Thomson shut the Ottawa Yournal-th rowing eight hundred employees on the street-and Southam's bought out Thomson's inter- est in the Hancouver Sun. The Ottawa move was particularly puzzling because the journal's circulation had climbed 25 percent in the previous six months and its advertising linage was the highest in eight years. But looking back on that Black Wednesday, Thomson wouldn't change a thing.

"n.o.body likes to see people lose their jobs," he says. "We didn't take any satisfaction in that. But the situation at the journal was hopeless and it was never going to get any better. We couldn't give the paper away for a dollar. We tried nine different buyers. n.o.body else wanted it. Somebody had to draw the curtain. So when Gordon Fisher of Southam's told us he was going to close his paper in Winnipeg, he suggested we close thein both on the same day. I thought it was a good idea because I knew if he closed his paper first, people would come to me and ask, are you going to close yours, and I didn't want to lie to them. So when he said, 'Why don't we do it the same day?' I said, 'Oh boy, we'll be in real trouble-but let's do it."'

Trouble came in the form of a Royal Commission, headed by Tom Kent, a former Economist and Winnipeg Free Press editor, who labelled the'rhomson publications as "small-town monopoly papers [that] are almost 5 16 FAREWELL TO GLORY.

without exception, a lackl.u.s.tre aggregation of cashboxes" and suggested the organization be forced to sell its flagship publication in Toronto, the Globe and Mail, purchased in 1980. The recommendation was not followed up, but the hearings brought into the public consciousness Thomson's utilitarian code of editorial independence. "We run our newspapers in a highly decentralized manner, delegating operating authority to publishers," Ken Thomson told the Commission's opening session. "We have vested in our publishers the responsibility and the autonomy to decide what news, information and comment should be published daily in their newspapers." That was true enough, and there was no more eloquent witness to that philosophy than Harold Evans, the former editor of both The Times and The Sunday Times, who wrote in his memoirs that the difference in ownership between the Thomsons and Rupert Murdoch was "a transition from light to dark." Neither of the Thomsons have, in fact, cast much of an editorial shadow over their publications. The problem is that editorial budgets ultimately decide any publication's content, and that was-and is-how the Thomsons exercise control. Since the Kent hearings, John Tory has impressively improved both the quality of Thomson papers and the working conditions under which they're produced.

The severest test of Thomson's hands-off att.i.tude was the Globe story about the newspaper closings written by Arthur Johnson, quoting the press lord's heartless comment on the plight of those who had lost their jobs: "Each one has to find his own way in this world. "Johnson firmly stuck to his version, but Thomson categorically denies having made the comment.

"I explained for twenty minutes how we had gone way beyond our statutory obligations in severance arrangements, but that we were not prepared to see the company's a.s.sets dissipated because YOUNG KEN 517.

Southams Gordon Fisher consoles Ken Thomson during the 1981 Royal Commission on Neuspapers.

we didn't have the guts to face up to the flak. I never said anything about everyone having to make his own way in the world, even though that quote will go down in history with me. I would never say that. I know I'm not brilliant, but even I can figure that one out," He didn't phone the Globe to complain, but six weeks later he met publisher Roy Megarry at a Royal York Hotel reception and let him have it. "Jesus, Roy, the Globe misquoted me terribly," he complained. "They put the worst words in my mouth. I never phoned you about it, but I wish I had."

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"Geez, Ken," Megarry replied, "I wondered at the time why you'd make such a statement and I talked it over with the editor involved, but he insisted that you had said it."

"You'll have to take my word for it. I didn't. I'm not that stupid."

Megarry, who persuaded Thomson to invest $65 million in turning the Globe into a national newspaper, insists there has been no editorial interference from the Thomson head office, a few blocks away. "It's one thing to own the Barrie Examiner and not interfere editorially," he says. "It's another to own the Globe in the city where you reside and resist the temptation to put on pressure. But they haven't." On Thomson's sixtieth birthday, Megarry edited a special one-copy issue of the Globe, subst.i.tuted on his doorstep for the real thing, that had a front page with Ken's picture on it and several feature stories about Gonzo. "That morning, Ken did phone me,"

Megarry recalls, and said, "'What are you doing, you rascal?'-he frequently refers to me as a rascal-and admitted he had been stunned, because for a split second he thought it really was that day's Globe. 'It was a cute thing to do,' he told me, 'but I hope it didn't cost the company too much money."'

DURING THE LATE 1970s, Ken Thomson enjoyed a unique problem. With oil prices up to as much as $34 a barrel, his share in the North Sea fields purchased by his father was throwing off annual revenues of $200 million. That's not the kind of sum you keep in a savings account. Tax reasons plus the wish to get into hard a.s.sets dictated new acquisitions, but the chain had run out of cities, towns and even villages where they could maintain monopolies.

Thomson went shopping for a safe, timeless investment for his family.

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While on a flight to London, John Tory pa.s.sed over to Ken an annual report of the Hudson's Bay Company, with the comment, "This is one you should think about." That struck Thomson as a weird coincidence because he had been thinking about The Bay, ever since Fred Eaton at a party had mentioned that the HBC was lucky because so much of its profit flowed from non-merchandising sources. "It was like mental telepathy," Thomson recalled of the airplane conversation.* At first glance, the Hudson's Bay Company seemed a perfect takeover target. It certainly carried the kind of historic pedigree that would please a British-Canadian lord, it was widely held with no control blocks that would have demanded premium prices, and it was a well and conservatively managed enterprise, ideal for the Thomson habit of acquiring companies that turned decent profits without requiring day-to-day involvement. "It looked to me like a business that in the inflationary environment of that time would do quite well, because the top line was pushed up by price increases while many of the costs, including store leases, were fixed," John Tory recalled. "Also I knew that Simpsons, which they had just taken over, was not well managed, so that a turnaround would have impressive bottom-line results."

On March 1, 1979, Ken Thomson and John Tory called on Don McGiverin to announce they were bidding $31 a share--36 percent over market value-for 51 percent of the Hudson's Bay Company. At The Bay's board meeting two weeks later, Governor George Richardson reported that in a meeting with Thomson

*There is another theory why Thomson settled on The Bay. He walked Gonzo most often through Craigleigh Gardens, near his Rosedale home, and at night the most visible object from the shrubbery is the ochre neon sign at Bloor and Yonge, announcing-rhe Bay! The Bay!"

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the previous Sunday evening he had failed to persuade him to buy less than 51 percent. The board decided that the premium offered for control was not high enough and that $37 to $40 would have been a more appropriate amount.

That consideration was aborted by the sudden entry into the bidding of grocery magnate Galen Weston, offering $40 for the same percentage, though part of it would ha-,e been payable in stock. Unlike Thomson, Weston hinted that he intended to fire most of the FIBC executives, replacing them with his own.

In typical Establishment fashion, the first telephone call Thomson received after word of his intended takeover leaked out was from Fred Eaton. "I wish you luck. Welcome to the world of merchandising." The second was from Galen Weston, advising him of the competing bid.* By April 2, Thomson and Tory had raised their bid to $35 for 60 percent of the HBC stock. Weston countered with an improved offer ($40 for 60 percent), but once Thomson came in with an unconditional cash offer of $3 7, for 75 percent of the shares$276 million more than he had originally been willing to pay (although for 75 percent of the shares rather than the original 51 percent)-the bidding was over. The Bay board met on April 4 to approve the takeover formally. The Thomson group made only three demands: a pledge that its equity position wouldn't be diluted by the issue of extra treasury shares; two seats on The Bay board for Thomson and Tory; and alteration of the

*It was a project the fathers of both men had desired. Galen's father, Garfield, had purchased 200,000 f IBC shares in preparation for making his own bid, just before he died; Rov Thomson had told his sidekick Sid Chapman and his granddaughter Sherry that he someday wanted to own the Hudson's Bay Company.

YOUNG KEN 521.

Company's banking arrangements so that the two banks on which they sat as directors-the Toronto-Dominion and the Royal, which had financed the deal-could get some of the business. There was so little board discussion on these issues that when Richardson pointed out it was Don McGiverin's fifty-fifth, the directors burst into "Happy Birthday."

Ironically, this all happened just five weeks short of the ten-year limit that Canadian Committee Chairman David Kilgour had wanted to include in the Company's patriation arrangements. "I don't like all this b.l.o.o.d.y publicity," was Ken Thomson's only public comment.*

KEN THOMSON DID LITTLE TO EMOY his position as the FIBC's proprietor, neither becoming its Governor nor taking part in any of its rituals. One exception was a summer journey he took to Baffin Island and Hudson Bay with his wife, Marilyn, two of their children, Lynne and Peter, and George Whitman, the Company's VicePresident of Public Affairs, a Second World War pilot who had fought in the Battle of Britain and had since earned a cross-Canada reputation as a social animator. They had just finished lunch at Ross Peyton's tiny hotel

*There was one strange incident in the takeover. George Richardson made a personal profit of more than $15 million by buying-through his own firm, Richardson Securities1,059,800 shares of HBC stock in twenty-one separate deals between February 6 and 2 3, 1979, at an average price of $2 2.5 0, nearly $15 below the amount for which he traded them in six weeks later to Thomson. "Lucky George," as he quickly became known, defended his amazing good fortune and the Ontario Securities Commission cleared him of any wrongdoing. But he was worried enough about accusations of insider trading that he devoted half his speech as Governor before the 1979 annual meeting to defending his actions.

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at Pangnirtung, on Baffin Island, and Whitman was relaxing on a small rise overlooking the town when up puffed Marilyn and said, "George, I want to do some shopping at that co-op you told me about. You got any money? Here I am, married to the richest man in the country, and he won't allow me to have any credit cards or anything like that. Can I borrow a hundred dollars, But don't tell Ken about it."

Whitman peeled off the bills and she skipped off down to the co-op. Just as she disappeared from view, as if on cue, the world's eighth-richest man came up the hill with the same request. "George, I want to go up to the Bay store and buy some fishing tackle. Can you lend me a hundred dollars?"

Later that day, as they were fishing, Ken began to eye Whitman's down-filled vest so wistfully that the Bay man finally told him to take off his Eddie Bauer finery and slip it on. "If you like it, it's yours,"

Whitman offered, happily expecting to agree with Thomsons refusal. Instead, tfie press lord held out his hand and said: "Let's shake on it." And that was the last Whitman ever saw of the vest that had been his Linus blanket on many a northern expedition.

Later that day something significant happened, best recorded in Whitman's diary: "We were fishing on the Kulik River and I had gone back to the boat with a double handful of char, when I heard Paul McIlwain, one of our pilots, shouting: 'George! George! Marilyn's hurt bad!' She was down between two river rocks and had a deep cut between her eyes and down her nose. I pulled my shirt and T-shirt off and bound up her head in them. I carried her to the boat where we met Ken and our Inuit guide. We started across the mile and three-quarters of iceberg-studded water to the first-aid station at Pang, Marilyn in the bow, weeping and still in a state of shock. Me on the motor, Ken amidships and the old Inuk, in front with Marilyn, telling her a story.

YOUNG KEN 523.

"'In the Kulik River, there's a big mother fish,' he was saying, 'but this year the fish was going to die and there would be no more char in the Kulik. But today you put some of your blood in that river and the mother fish is going to live and we'll always have char.' Having used a little applied psychology, the Inuk moved back and stood between Ken and me. He gave me a nudge with his elbow and, pointing at Ken, asked: 'He good man,'

"I didn't reply for about fifteen seconds because to have given a token response to a deeply personal question like that would have been perceived as flippant. So I waited, and then said, 'Yes, he's a very good man.'

"The Inuk, who was one of Pang's elders, turned to Ken, and carefully crafting his thoughts, said: 'You don't go home. You stay. We take boat, we go down Kingnait Fiord. You come. You catch big char, see polar bear, cari- bou. We live on the land. You stay with us, my wife, my family, George too.'

"Ken was absolutely mesmerized. He tried to mumble something, but nothing came out. He leaned over and whispered to me, 'Does he really mean it?'

"'Of course he means it.'

"'Well, I can go anywhere. I can go anywhere in the world for a holiday.'

"'Yes, but Ken, there are things that money can't buy. You've just been paid the most tremendous compliment that one man can give another. He's offering to share his life with you.'

"Poor Ken," Whitman noted in his journal, "that kind of generous gesture was completely outside his conceptual frame of reference-that some person from another culture would comfort his wife with a beautiful little made-up fairy tale and pay him the highest tribute that a person in a tribal society can extend to someone who comes from away...."

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IF THERE IS ONE SANCTUARY where Ken Thomson can find peace it's in the private world of his art objects. Within these hushed precincts he can build his own aesthetic universe, indulging his whims without the budgetary problems that inhibit most collectors. He richly deserves his reputation as the premier collector of habitant scenes by Krieghoff (some selling for as high as $275,000), all of them magically revivified by one of England's best restorers. "He knows every picture the artist painted or attempted to paint and is constantly improving his collection," according to the Earl of West- morland, a director of Sotheby's in London. "He's got a great eye and a pa.s.sionate love of art," echoes Christina Orobetz, the president of Sothebv's C anadian company.

The best of his Canadiana coflection (conservatively estimated as worth $20 million) is now displayed in a 5,000-square-foot gallery on the top floor of Toronto's main Bay store. "I've reached a plateau," he says. "I've got my collection basically together and have reached the point where I can be very selective with gathering my objets d'art." They include the only wood carving Michelangelo ever did, stunning boxwood and ivory carvings and some incredible miniatures by Octavio Jenilla. Death is a recurring theme of his collection, which includes any number of realistically rendered skulls-the carving of a sleeping child using a skull as a pillow, the tableau of a starving wolf being strangled by a skeleton, and a pearwood skull hinged to reveal a miniature Adam and Eve on one side and the Crucifixion on the other. The most unusual-and most treasuredobjects in his collection are the ship models carved by French prisoners in British jails during the Napoleonic era. Thev carved to keep from going insane in their dungeons but had few tools or materials, so most of the hulls are fashioned out of the bones of the] r dead, the rigging braided out of their hair.

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As with most enterprises, Ken Thomson's art collection is not exactly what it seems. It's controlled by Thomson Works of Art Limited, a company owned by his three children so the increase in value of the collection will be exempted from taxes on his death. The Krieghoff paintings offer their owner an extra incentive: every Christmas, Ken lends one or two canvases to Hallmark, which sends him free Christmas cards bearing the imprint of his painting in return. "They give me a thousand cards free and another four hundred wholesale," he admits.*

IN RUNNING HIS COMPLEX OPERATION, Thomson of course enjoys the advantages of proprietorship, so that he can be wrong without triggering any adverse consequences. He also has the supreme luxury of belonging to a dynasty, so that financial results-good and bad-can be spread over generations instead of having to meet quarterly projections. The HBCs stock values didn't climb back to their original purchase price for more than a decade, but there was never a thought of liquidating or seeking other drastic remedies. "We never have to keep looking over our shoulders at people taking over any of our companies," John Tory points out. "Even when we make major acquisitions that have an initially negative impact on our profitability, in the longer term we'll have a broader base on which we're able to grow. It's really that simple."

Not quite. Tory's real function in the Thomson hierarchy is a source of constant conjecture within and without the organization. "I'm a professional and I never worry about my image," Tory says. "As a business person

*The Thomson Christmas card list has carefully noted beside each name the year when it will be removed from his mailings.

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Von can have too high a profile and there's no upside to that whatsoever.

When we bought the Hudson's Bay Company there was a big fuss, but we didn't say much; when it was down for the count we said even less; and when it recovered we said nothing."Ibry refuses to play the Bay Street game. "I don't need the kind of glory others seek," he says.

It's too easy to speculate that John Tory is the brains behind Ken Thomson, because that wouldn't be fair to either of them. Thomson is smarter than that and Tory is not that self-effacing. As president of most of the family holding companies, Tory exercises enormous influence. He acts as a kind of secretary-general of the $11 -billion corporate confederacy, prodding, solving, appointing, acquiring, divesting, trouble-shooting-running the d.a.m.n thing-but nevej quite making the ultimate decision by himself. He is not exactly a surrogate because when he speaks no one knows whether it's really with his voice or Ken's. Veterans of the Thomson organization know that it's usually both, and leave it at that.

Tory reads at least two books a year that have nothing to do with business, loves to pa.r.s.e balance sheets, is happy to work sixteen-hour days, plays some golf and tennis, and skis, but when a friend asked him to go sailing discovered he didn't own a suitable short-sleeved shirt. The centre of his life is his family-four super-bright children (John, Jennifer, Jeffrey, Michael) and ten grandchildren. He plays a mean "After You've Gone" on a barrel-house piano and dabbles in bridge, but his most serious hobby is keeping up with his wife, Liz, Toronto's shrewdest and busiest social animator. As well as his Thomson responsibilities he is a director of Sun Life, Rogers Communications, Abitibi-Price and, for the past twenty years, the Royal Bank of Canada. "If you asked almost anyone on the Royal board who was the most brilliant guy there," says former deputy chairman John Coleman, "they'd say YOUNG KEN 527.

John Tory. He asks the most pertinent questions and can see through a deal most quickly."

Thomson himself doesn't just admire Torv; he worships the man. "If you take the best qualities of the best people in all the different fields of business and roll them into one-that's John Tory," he says. "It's the same pleasure for hi in to work, the way I collect paintings and walk my dog.

Above all, hes got a great wife, family and good friends. They have fun together."

That emphasis on family governs Thomson's own life. "He has so much love and affection with the family and Gonzo," says his son David, "we get so much pleasure just seeing him and trying to make him happier." David likes to quote the maxim of Meyer Guggenheim, the Swiss-born American industrialist who maintained a family dynasty by handing each of his sons a stick and asking him to break it. Each did. He then gave each a bundle of sticks, which none of them could break. "Stand alone, and you will be broken," he told them. "Stand together and no one will break you." The Thomson family very much sticks together; they are proud and protective of one another, especially ]i n tragic circ.u.mstances.

just two weeks before Christmas 1990, Gonzo died.

"I've had the loss of dear ones, human beings," Ken lamented, "but I've never experienced anything that shook me more than his death. Gonzo slept with me the last night. I held the little guy in my arms and I thought, I can't really stand this. I left the room and then I thought, no, he really needs me. I've got to be there. I felt him expire. I don't want ever, ever to go through such a thing again . . ."