Titans: How the New Canadian Establishment Seized Power

Head Table Guests

Bart Mindszenthy, APR, Director, The Empire Club of Canada, Partner, Mindszenthy & Roberts and Communications Counsel; Rev. Phillip Bristow, St. Philips Anglican Church, Unionville; Grace Vela, Third Year Student, Oakwood Collegiate Institute; Kevin Hanson, Vice-President, Sales and Marketing, Penguin Canada; William D. Laidlaw, Second Vice-President, The Empire Club of Canada and a Director, Government Relations, Glaxo Wellcome Inc.; Julian Porter, Q.C., Special Partner, Gowling Strathy & Henderson; Michael Benedict, Editorial Director, New Ventures, Maclean's; and Ann Curran, Third Vice-President, The Empire Club of Canada and Partner, Lewis Companies Inc.

Introduction by George L. Cooke

It is my great pleasure today to introduce as our guest speaker, Peter Newman, author and one of Canada's most successful and honoured writers.

His writing has produced political profiles which include "Renegade in Power: The Diefenbaker Years" in 1963, and a study of Lester Pearson, "The Distemper of Our Times" in 1968. His focus later turned to members of the Canadian business establishment, profiling the first generation of Canada's business magnates, then to publishing popular studies of those in financial power; these include his two-volume "The Canadian Establishment" (1975 and 1981), which has made publishing history, "The Bronfman Dynasty" (1978) and "The Establishment Man: A Portrait of Power" (1982). His books have sold a perhaps unprecedented one million copies in Canada.

At the front of the first volume of "The Canadian Establishment" you find the following quote: "I thought that my invincible power would hold the world captive, leaving me in a freedom undisturbed. Thus night and day I worked at the chain with huge fires and cruel hard strokes. When at last the work was done, I found that it held me in its grip" which must offer some insight into the character and personality of our guest.

Peter Charles Newman was born in Vienna, Austria on May 10, 1929. He came to Canada as a refugee in 1940. Envisaging a business career for his son, Peter Newman's father enrolled him in 1944 at Upper Canada College where he met members of the Canadian establishment who would later become the subjects of much of his writing. He received his B.A. from University of Toronto in 1950; and his M.Com. in 1954.

Peter Newman became a very recognised and respected name for me personally while growing up in a home that chose The Toronto Star over the competing papers and Maclean's over American transplants. Of course, he was the editor of both.

In 1969 he became Editor-in-Chief at The Toronto Star. He was Editor of Maclean's where for a decade (1971-1982) he worked to transform the magazine from a monthly to a weekly with a Canadian slant on international and national events. In 1982 he resigned to work on a three-volume history of the Hudson's Bay Co.

Mr. Newman's new book, "Titans: How the New Canadian Establishment Seized Power," has been billed as "a daring look at the world of Canada's mega-wealthy, all-powerful financial gunslingers--those Titans with an attitude--who govern our lives." In its first week, it is now #1 on the best-seller list--outstanding by any standard, but not surprising given the track record of the author.

Mr. Newman, welcome to The Empire Club of Canada.

Peter Newman

Thank you George. Good afternoon.

I'm often asked about the relationship between me and the establishment. I have a wonderful quote: "Anyone who doesn't feel paranoid about power is not in full possession of the facts." I try to be fair and accurate but I don't feel at all part of the establishment. I feel a little bit like a jester. The jester, if you remember from the Shakespearean plays, is a character of some wisdom and some importance, not in a mainstream way but as carriers to the court of uncomfortable truths disguised as quips and fables and I feel that that's my role in the establishment.

I remember my favourite review of my book by Time magazine. It praised my information and the last paragraph said: "Newman's book reads as if he was invited to the establishment homes once." It's my perfect epitaph.

Now when I write about power (and I want to stress this book is not about money; it's about power) I try to find an accurate definition of what power is. Think about it. It is a hard concept to define because it can be many things. My favourite definition is by Lord Bertram Russell, the British mathematician and philosopher, who said that power is the production of intended effects. It is a good definition because it means that if you're powerful and you want something done or vetoed you can do it. This is different from the influence journalists have. We have no power. We can't make things happen. We can create the atmosphere in which things happen by somebody else.

The establishment is not some woolly writer's fantasy or invention. It does exist and it has run this country for the last 50 years. It started during the Second World War when the so-called dollar-a-year men, who were the heads of most of the then successful Canadian companies, went to Ottawa to serve during the War. They turned Canada into an industrial power and at the end of the War they fanned out to run their own companies again but they had spent those five years together in Ottawa and that's what formed the establishment. I have been following their successors ever since.

The establishment used to be like the Olympic symbol. I don't know if you remember the Olympic symbol which is a bunch of circles that overlap. In the establishment, circles are formed around a particularly strong personality like Paul Demerais or Peter Munk or around a strong capital pool--and the circles overlap. That's what makes an establishment. There was never a conspiracy. Leftwing people always say the establishment was a conspiracy. It didn't need to be a conspiracy because the people in the establishment all thought alike or thought alike when they formed a psychological entity. A change has happened between the old establishment and the new one. Let me go into that a bit.

The old establishment which I described in my first volume had common sets of values, beliefs and enemies. The members touched and greeted each other across a wide spectrum of commonalty. They accepted, understood and protected each other as their contrails kept crossing in a long lifetime of command positions. They spent their whole lives in one big conference call. They all knew each other. They really had almost an ethereal kind of communication. They didn't even need to talk to one another to have the same attitudes. That has been shattered and this book is about the new establishment which has taken the place of the old one.

The leader of the old establishment was a very interesting character called Bud McDougald. I remember visiting his house for the first time and he showed me around his 35-car garage. He even had a car made entirely of tulip wood. A lot of people think that I get interviews with these people very easily but I don't and I want to just give you one example of how I got to Bud McDougald. McDougald was then in his sixties and he had never talked to a journalist in his life. Incidentally, he was the head of Argus Corporation which was the predecessor company to Conrad Black's Hollinger. I phoned him and I wrote to him and asked him for an interview and he said he didn't speak to journalists. And that was that. It was true. There were no clippings of him ever having talked to a journalist even though he was a very important industrialist at the time. He controlled companies worth about $1 billion. So I had lunch with his friends. I found out whom his friends were and I told them I was writing a book on the establishment. I wanted an interview with Bud McDougald but he wouldn't talk to me. I said I was going to write the book anyway and I was going to describe his ten-billion-dollar empire. Or sometimes I said a hundred-billion-dollar empire and they got very nervous of course. I knew that as soon as the lunch was over they'd be on the phone to McDougald saying that there was this crazy out there saying he was worth $100 billion and he had better do something about it.

It worked. Eventually he saw me and we had a real interview--quite a few of them actually. He had never talked to a journalist so when I asked him a question he answered it rather than acting like a politician who can talk all day about nothing. A favourite quote from McDougald, when I asked him about his education, was: "Well I left school at 14. I have regretted it all my life." I had an image of all the great facts that he had missed, great books that he had missed and he continued: "Yes, I have regretted it all my life. I should have left at 12." Of course McDougald was the guardian spirit and the animator of the Toronto Club. He really made it into a great club and incidentally it is the only club that still means anything. He explained to me once that he believed in committees but only committees of one and that he was running the Toronto Club, as indeed he was. He controlled who got in and who didn't.

There are a lot of wonderful club stories. The York Club used to be the private residence of Sir Albert Gooderham and Lady Gooderham. Lady Gooderham was a finicky lady who didn't like walking across the cold bare floor to the bathroom in the morning so he had two rails built so that she could push a button and a servant would come and fill her tub with hot water. The servant would then push a button on the tub and it would come up beside her bed. She would climb into the tub and push another button and it would go into the bathroom so she could have her bath. Well this was fine except that one day Sir Albert was showing some guests his house. They said they wanted to see the shortest railway in the world so he pushed a button and out came the hot bathtub with a screaming Lady Gooderham in it.

I realised how clubs had changed when I visited the Rideau Club recently in Ottawa. Now the maitre d' of the Rideau Club was always a retired colonel in the army with a bristling British moustache. The maitre d' in the Rideau Club today is (a) a woman, (b) black, and (c) a Grace Jones look-alike. I think you can see what has happened to clubs. Belonging to clubs is not at all important and of course I exempt the Empire Club but the dining clubs that were once so exclusive are meaningless.

I have a wonderful anecdote about Red Wilson, the Chairman of BCE who was President of the Mount Royal Club in Montreal. He loved to smoke cigars so he invited the editor of Cigar Magazine from Brooklyn to give a speech to about 50 people who were all cigar smokers including the Governor General who had come there for the occasion. This speaker got it into his head somewhere that you addressed the Canadian Governor General not as Your Excellency but as Your Admirable and kept addressing him all night as Your Admirable. At the end of the dinner he gave a little speech with questions and the Governor General asked him a question. He said: "A lot of cigar smokers think that you should start the day with a small cigar and then work your way up and in the evening have a large cigar. What do you think?" And he said: "Well Your Admirable I will tell you I just light up one big mother fucker in the morning and it keeps me going all day." That's a true story.

In my book I detail the demise of 31 family dynasties and that is really the biggest shift in the establishment. Not just the Eatons, the Sutherlands, the Creeds, the Burtons, the Steinbergs, the Hermants, the Bassetts and so on. Of course there are still people with those names but they don't form any power matrix. They are just people who happen to have the same surname. With the demise of these family dynasties the establishment has changed forever. In a way it's too bad because I admired the old establishment for one point which was that the members really cared about the communities where they lived and worked. There was a kind of social conscience there that you don't get anymore. But it's gone. The old establishment is suffering a crisis of nerve and faith, a loss of the easy confidence that once marked its passage. The two main rules of maintaining power are forgotten. One is that power must be harvested as carefully as it is seeded and that any lead that fails to renew itself is bound for extinction.

The way I define the new establishment in "The Titans" is that the old establishment was a club and the new establishment is a network and that is the key--a network. Everybody now networks all the time, all day, and a network is very different from a club. A network is like a telephone exchange. Anybody can join. Anybody can hook into it and that's what happens. There's a big deal coming down and the companies involved, the titans involved, form an alliance. Very temporary, very strong for that deal and then they go on to something else. That's one of the characteristics of the new operators. They operate strictly on mutual self-interest. Long-term planning is next Wednesday's power breakfast. Their motto is simplicity itself, whatever works. They believe implicitly that it's never too late to have a happy childhood and that you should die young as late as possible.

They live for fun as much as for money and pursue both to the end of the universe. You are not judged by whom you are but by what you've done and that's very important because all that matters is what you've done. It doesn't matter whom your father was, what school you went to, what clubs you belong to or don't belong to. It's what you have done and what you've done yesterday or today or tomorrow. Instead of a pseudo-aristocracy we now have a genuine meritocracy. I think that's great news because it means that anybody can be a member of the establishment as long as you have chutzpah and talent and a record of having done something.

These are the kinds of guys who answer telephones while making love and actually one admitted to me that he had placed a call during that time but that's another story. One of my favourite characters in this book is a Calgary entrepreneur. I asked him for the definition of the establishment and he said if you have paid your debts in this town you're establishment. Another favourite character, Seymour Schulich, who gave $50 million to York University, said that reputation is character minus what you have been caught doing. Schulich is a wonderful guy. He is a Canadian from Montreal, from Mordecai Richler country, and he made a huge fortune in Nevada gold. He came back to Canada and decided to give away $50 million to start a business school and he had gone to McGill originally. He wanted to donate it to McGill to name a mining building after him, the Seymour Schulich mining faculty, but the university turned it down. Instead it got the money from a Chinese millionaire in Hong Kong. He then went to London, Ontario and wanted to donate the $50 million to a business school there. That university immediately panicked and persuaded the Iveys to donate the money for the Ivey Business School. He then went to the University of Toronto and offered the money. Finally York University accepted his $50 million.

In the book I trace the origins of the money culture. We live in a money culture now. It was 1996 or 1997 when for the first time Canadians earned more money from dividends, commissions, capital gains, rents and interest than from salaries or wages. We really have genuinely joined a money culture. I quote some of the far-out examples of how people in this book spend their money. I think my favourite example is Peter Nygard who is a Winnipeg clothing entrepreneur. He has built a house in the Bahamas that covers four acres, has a habitable area of 100,000 square feet and you have to drive a car from the living room to your bedroom. I have an image of somebody sleeping there at night, responding to a call of nature and having to say: "Damn it I've got to get into my car and go to the bathroom." He's got a sauna that holds 25 of his best naked friends and a miniature Matterhorn. He has got a rock factory. There are not too many rocks so he invented these plastic rocks that look very real and he has built a Matterhorn from which you dive into a pool and stuff like that. It's interesting because these people spend money the same way they live. It's on impulse; it's big. Everything is big; everything is bigger than everybody else's. They are in competition with each other, they have a very limited view of the world, a kind of a blinkered view of their own enterprise. They have very little loyalty to their country, even to their city. But they are extremely good at what they do. They are world players and they have taken this country into the global economy and they will take it into the 21st century.

It is interesting when you compare how the old money was spent and how the new money is spent. Old money drinks Glenfiddich scotch, vacations in Palm Beach, wears three-piece suits and believes in Tom D'Aquino. New money wears fancy belt buckles and iguana sandals, drinks Perrier and believes in Charles Darwin. Old money has hairy ears, wants to do its duty and plays polo. New money has pierced ears, is waiting for its cell phone implant, snowboards, bungy jumps and plays poker. New money tips lavishly and regards waiters as buddies. Old money tips with a dismissive wave and treats waiters as self-rappelled furniture. Both new money and old money prefer Cohiba cigars which were Castro's favourite until he gave up smoking in 1985. New money believes that the Cohiba cigars are actually rolled by dusty young Cuban maidens whereas old money just wants a great smoke. New money buys art. Old money buys artists.

There has been one interesting change I am happy to say in the wives of old money and new money. Old money tended to treat wives as sort of decorative partners. New money wants spirited women and has them and most of these women either work or do volunteer work and they are very impressive. I am sorry to say though that when I look at the power wielders in this country there are still;' very very few women. General Motors in Canada is headed by a woman as well as Ford and Xerox but when you look at those companies they're Canadian subsidiaries of giant American parents. These people don't really have ultimate power. Or they are companies like Heather Riesman's where the company is their own company. I am sad to say it is still true that most of the titans are men. I think the best definition of when equality will arrive is: "We will have true equality when we have as many incompetent women in positions of power as we have incompetent men." That may take some time.

Incidentally we are always worried about the economy and I think the government has got it all wrong. Everything is based on unemployment statistics and unemployment is going to rise. It is going to keep rising for the simple reason that statistics don't include people who don't have jobs. And that's the future. There will be fewer and fewer jobs but there will be lots of work. We have to differentiate between jobs and work. You have to go all the way back in history to the builders of the original cathedrals. There was no such person as a cathedral builder. There were carpenters who built the pews and glaziers who put in the glass and stonemasons who built the walls and the ring people who made the bells. And then they would move on. That's the future. We have to start thinking in terms of work and our people who are at university now are going to be trained and they are going to be trained to work. The idea of getting out of university and 20 years later getting a gold watch from your company is dead.

I have already mentioned philanthropy and philanthropy is a way that the titans, the new establishment, gets legitimacy because yes, they have money, yes, they have power, but they still want that legitimacy in their communities. And they do it by giving money away as long as it is tax deductible. And I don't put that down. I'm glad that they are there and they are putting up buildings with their names on them.

I was once for some reason assigned by Time magazine to report on Billy Graham's first Toronto crusade, the first time that he was in Canada. Since I was working for Time I was allowed back stage after the first evening. They had had a wonderfully successful evening. More people came up and declared for Christ than ever before at any first night. But there was no money. The collection plates were passed and they got a bit of change. So Graham called me over as the only Canadian behind the scenes and he said: "What's happened here?" And I said: "Well Billy, you are in Canada now. And even when people are saving their souls they want to be sure it's tax deductible. And you didn't announce that it was going to be tax deductible." So he said: "Bless you brother." And the next night the money rolled in when it was announced that donations were tax deductible.

Another motivation of course is that these people who donate their money want some immortality and the only way they can get it is to have buildings with their names on them. Again I see nothing wrong with that although I much prefer Woody Allen's definition of immortality. He was once asked by a very eager young interviewer whether he hoped to achieve immortality through his films and Woody Allen said: "Hell no, I want to achieve immortality by never dying."

The real mark of the titan is global outlook. Peter Munk has gone to London permanently. He is expanding his empire from there. Izzy Sharpe has 60 of the world's best luxury hotels but only two in Canada. Gerry Schwartz has only one major asset here. Jimmy Pattison is expanding almost entirely in the United States. Frank Stronach is a tax exile in Switzerland. Paul Demerais now has assets of $100 billion in Europe and so on.

The new establishment is going to create a big problem for Canada. I am talking here about tax havens and tax bases because a lot of these people manufacture their goods in one country, distribute or sell their goods in another country, invest their profits in a third country and live in a fourth country or have a domicile in a fourth country. So where is the tax base? How is the Canadian government going to be able to tax those enterprises as governments do have to have a tax base. They have got to have enough money to build hospitals and schools and some kind of defence force etc. This is going to be a great problem because money that goes into tax havens is going to be just about impossible to tax. And the tax havens are getting much more sophisticated. There's one tax haven called the Seychelles. They are islands off Madagascar in the Indian Ocean and not only do they attract tax avoiders but they encourage people to come who want to launder money. The most interesting tax haven is the Cayman Islands. It has a population of only 25,000 but is the world's fourth-largest financial centre. There are 550 banks on this little island 32 kilometres long because of course there are no taxes. The only daily paper in the Caymans incidentally is the Cayman Compass which has a regular column on teaching your parrot to talk and guess who owns it? Conrad Black.

I want to say a few words about Conrad because he's such a character. He is probably the only royalty we have left in the Canadian establishment. When he travels, a cook and butler proceed him to show that he and Barbara have every comfort. He has become a metaphor. Being Conrad Black is no longer a name but an occupation. He has more power than most heads of state. Since 1985 he has bought 300 newspapers and now has the third-largest media chain in the world with revenues of $3 billion. I don't know if you remember in 1997 in the fall issue of the "Moderator" the United Church cast some doubt on whether Jesus Christ was really divine. It was a theological argument of some subtlety and some complexity but it prompted Double Exposure, the comedy team, to pick up the cue and they said: "Great news. Conrad is back in the running." Conrad is such an intimidating presence that even his absence intimidates. There was a meeting of the CIBC Board of Directors once when he was applying for a loan and when a director of a bank wants to borrow money from his own bank the director always leaves the room. And somebody who was in the room told me that the room reverberated with Conrad's absence. He has the body language of a puma in heat. I interviewed his spiritual advisor Cardinal Carter who suggested to me in the book that Conrad should really have been Jewish. He is very articulate, very interesting, very intelligent and while there is potential for abuse in his owning so many papers I don't at the moment perceive what that abuse should be except for him to express his opinion which is why people own newspapers anyway.

A lot of other interesting people are in my book--Pete Munk for example who is a great actor. You could auction his smile at Sotheby's. I remember he is always mad at the press. I remember him phoning me once. This was a couple of years ago when he topped the Canadian salary total for CEOs and he was head of Barrick then. It was published that he had made $32 million and this was the biggest payoff in Canada. He phoned me and said: "Did you see that goddam story in the Globe and Mail where I Blade $32 million? They always get everything wrong. I made $54 million."

To be more serious about the titans, they are really setting the agenda for this country--the economic and social agenda. I have a chapter on the BCNI (Business Counsel on National Issues) which comprises 150 of Canada's largest companies and they have sales of $1.7 trillion. Through Tom D'Aquino, their CEO, (this is all documented in the book including D'Aquino's words) they have set the agenda for the government during the Mulroney years and during the Chretien years. And that includes free trade, the anti-deficit fight, the Calgary declaration and most seriously the Competition Bill. This is the anti-monopoly bill which should be what holds business back and D'Aquino actually persuaded the Minister of Consumer Affairs to let him write the bill. So we are now the only country in the world where the anti-monopoly legislation has been written by the very people it was meant to police. It's scary.

Let me end with a look at Bay Street where we are now. In my book I called Bay Street Canada's "eleventh province" and it is more powerful than all the others put together. If you include derivatives and bonds, $100 billion changes hands every 24 hours in these 20 blocks where we now are. The markets turn according to the dictates of the chief traders of the big brokerages called the "big swinging dicks." They all wear red suspenders which is why I have these on and why the red suspenders are on the jacket of the book. Half the Canadian financial institutions are in these 20 blocks. The stock market used to be thought of as a casino but that's no longer true because casinos have rules and the stock market doesn't. It's a crapshoot. But it is also a true meritocracy. The race is to the swift; not the well born, properly schooled, or decently acquainted. The role model of many of these traders is Mike Millikan; not the Mike Millikan who went to jail but the Mike Millikan who invented junk bonds and several instruments of finance. Mike Millikan is the ultimate workaholic. He used to live in New Jersey taking the bus to New York every day so he could spend his time in the dark morning hours reading. He had a coal miner's lamp mounted on his head and he could read documents on his way to work. He was bald and had 30 toupees with different lengths of hair so it looked as if his hair was growing for a month. He then started all over again. I don't see anything wrong with that myself. A Wall Street novelist once said that to succeed you need the chutzpah of a used car salesman, the moral sensitivity of a stone crab and a line of credit. I'm not sure that that's true but that's Wall Street.

I want to finish talking not about my book but about my country. You know we are 13 months from the millennium now and the new century will energise us. It will give us a new start. There is nothing as hopeful as having a new start. Everything will be dated from that night. It will be a great time to be alive. And I believe that it is time to sing some songs in praise of this country and in praise of ourselves. A lot of people think that in another Quebec election maybe Quebeckers will leave. They won't leave. There's a quiver of common intent in this country to stay together. To be Canadian is better than to be anything else. To be a Canadian is an act of faith and we will fulfil that faith.

Let me finish with a story. I was in New Brunswick once covering a by-election. When a reporter goes into a place he has never been he tries to find someone who looks as though he has been around for a while. I saw a fisherman puffing his pipe at a wharf and I went up to him to start a conversation. I said: "Have you lived here all your life?"

And his answer reflected the quiet optimism I feel about Canada. He said: "No, not yet."

Thank you very much.

The appreciation of the meeting was expressed by William D. Laidlaw, Second Vice-President, The Empire Club of Canada and a Director, Government Relations, Glaxo Wellcome Inc.