The Ethics of Self-Reliance for Canadian Tire and Canada

Head Table Guests

Ken Mann, Dealer, Canadian Tire, Yonge and Davenport; Reverend Prue Chambers, Rector, St. Nicholas Anglican Church, Birchcliffe; Chris Hirst, Grade 12 Student, Student Council President, North Toronto Collegiate Institute; Wayne Sales, President and CEO, Canadian Tire Corporation Limited; Gil Bennett, Chairman of the Board, Canadian Tire Corporation Limited; Anne Libby, Private Art Dealer and Director, The Empire Club of Canada; Janet McKelvey, Executive Director, Canadian Tire Foundation for Families; Peter Chant, Partner, Deloitte & Touche; Maureen Sabia, Director, Canadian Tire Corporation Limited; and Tony van Straubenzee, Managing Director, Russell Reynolds Associates and Past President, The Empire Club of Canada.

Martha Billies

To many people, Canadian Tire is a proxy for Canada. Indeed, a letter to the editor of the Cornwall Standard, written during the last federal election, brought that connection home to me in an amusing fashion: ""Wouldn't we be better off,"" the writer asked, ""if we just hired Canadian Tire to run the country? They're pretty well national, they know what they are doing, they don't believe in deficits, they are efficient, they are honest, they are innovators--everything that politicians are not.""

To that list of qualities, I would add, ""We also have our own currency.""

Now, don't worry. I'm not here today to discuss our policymakers or our politicians. But I think it is time to recall the values and principles that have made Canada a great nation and Canadian Tire a great company. Why? Well, I believe that the success of both depends on nurturing the kind of self-reliance that translates into greater productivity--in our boardrooms, and by extension, in our businesses and ultimately, in our nation.

I make this statement not as an economist or a CEO. I make it as a director and the largest common shareholder of a very large Canadian company. I also make it as a woman who was unable to join the board her brothers had been on forever until my father generously gave up his seat on the board in 1980 to allow me to sit at the table.

Many people who do not know me well wondered why, three years ago, I acquired control of the company my father and uncle created in 1922 in a garage on Gerrard Street east of Broadview with capital of $1,800-a company whose current 435 plus stores are within a 15-minute drive of 90 per cent of Canadians. A company that has diversified beyond those stores to include 260 gas bars and a financial services division that issues credit cards and manages over four million credit card accounts.

Those people who knew me understood why I took such a bold and yes, risky step. The answer is simple. I care deeply and passionately about the company that was such a vital part of our family life that some of its most revolutionary ideas--employees on roller skates to serve our customers better; Canadian Tire money to discount every purchase; profit sharing for all employees-were born at the family dinner table!

I also care passionately about the country that has enabled Canadian Tire's several hundred thousand employees over the years to find self-respect, security and financial independence.

I am concerned that the self-reliance we cherish at Canadian Tire, in our customers and in ourselves, is something that Canada, as a nation, needs to produce more of, if we are going to ensure a future worthy of our past. Maybe the term ""self-reliance"" does sound vaguely ""old-fashioned"" in a world of stunning new technologies and dot-com riches-sort of like Harry Potter meets Bill Gates.

My father was once asked the secret of his success, and he replied: ""Striving always to make things better."" To me, that is the essence of self-reliance-taking personal responsibility for personal, corporate and national success. That means winning, and winning is what it's all about.

Canadians can be winners.

But I sense that we are in danger of being sidelined in this increasingly competitive world that globalisation is creating. Our productivity as a nation may be improving, but compared to countries such as the United States we are still lagging far behind.

In this competitive world Canada is struggling-struggling to attract and retain our very best people and our very best businesses. Our productivity depends on winning the struggle.

There are many ways we Canadians can improve our productivity-and the productivity of our boardrooms. Simply put, I believe Canada's directors can do more for the companies on whose boards they serve. The unhappy fact is being a director of a large public company has, for many years and for many directors, been a relatively comfortable pew.

Well you and I know that it isn't anymore, nor should it be. Directors, after all, have ultimate oversight of a company's performance. It follows that the more productive Canada's corporate directors can be, the more they can contribute not only to their company's success, but to our country's growth.

I say this not only from my vantage point of 20 years as a member of the board of Canadian Tire, but from the relatively unique vantage point of being a majority common shareholder who is not the CEO.

So it may be instructive to articulate how I see my role as a shareholder and a director, as an example of how shareholders and directors can work to improve their own productivity and that of the companies whose interests they are pledged to serve.

When I bought my brothers' shares in 1997, I worked quickly to reassure the board that I wasn't going to fulfill the common fantasy that controlling shareholders of public companies try to run the company themselves and that they will at the very least try to interfere with management.

The essence of my message to the Canadian Tire board when I changed from being a board member to being a board member with 61 per cent of the company's common shares was this: I am a director and like all directors l intend to work through the board. Whatever responsibility I may feel I have beyond that is in my view subject to the best governance practices that all directors should respect.

The relationship between board and management is a highly delicate balancing act. It takes great independence, healthy confidence and more than a bit of courage both on the part of management and the board to successfully navigate through its intricacies and pitfalls. Having said this, I did feel that having discussions with the Chairman and the CEO in advance of formal board meetings could only facilitate our decision-making process as it would encourage our alignment.

I also told the board that my plan was to attend all board committee meetings and that is something I do today.

Beyond that, my role as a board member has been what it has always been-an active, curious, hard-working, independent-minded director with high standards and expectations of excellence and performance.

These qualities are what we look for in new board members, and because of this, I believe Canadian Tire has one of the finest boards in the country. Very few of our board members serve on a large number of other boards. That's because they won't have sufficient time to devote to us or their other boards, frankly. Trying to serve on too many boards stretches talent and commitment too thin. Directors who do simply won't have the time to know our company well, to come fully prepared for board meetings, to visit our stores, talk to our dealers, to be vigilant, independent and forthright.

On our Canadian Tire board, we don't take silence as an indication of either agreement or wisdom.

So when we go looking for a new board member, the first question asked by the governance committee, after reviewing our needs and the candidate's fit, is this: ""Do you have the time?""

I'm not embarrassed to stand before you and say I expect a lot from my fellow directors-as they do of me.

Their willingness to commit their time, attention and expertise breeds an independence of thought that I deem to be essential in all directors.

You can't be an independent thinker if you're too busy to know what the company is really all about. If you're not informed, you can't develop a worthwhile personal view, because you're always behind the information curve. I believe information is critical to being independent and if you can't exercise independence, one could rightly ask: ""What are you doing on the board in the first place?""

An independent board will be able to look beyond last quarter's results, be future-oriented and help management design the battle plan for winning. An independent board will have a greater respect for the natural and necessary boundaries between directors and management than a dependent or distracted one.

An independent board will enable a significant shareholder, or a majority one, to exercise her responsibility in the most appropriate manner possible, which is through the board.

Now some people will tell you that a board whose driving principle is independence will constantly be at odds with management. Not true. In fact, I believe that one of the primary responsibilities of a board is to encourage its own members to dare to be a minority of one. I encourage all our board members to pursue issues of individual interest at board meetings. True, it makes for some long meetings and occasional quizzical looks from management, but our directors should feel quite comfortable bringing up any matter of genuine corporate interest and at CTC they do. Directors are entitled to information about anything and open discussion as well!

I am often asked to speak about the role of women in Canadian business, and my view, ""that there should be more of us,"" is well known. I am keenly aware of the irony of being a woman who controls what is arguably Canadian men's favourite store. But let's took at the issue of women as board members from the perspective of time, or lack of it. The days when CEOs claimed there weren't any women qualified to serve, are now thankfully over.

Yet even today, less than 8 per cent of the members of boards of major Canadian companies are women. Monday I read in the paper that it's 7 per cent. The most recent survey of 560 public Canadian companies tells us that women hold 372 out of 4,950 board seats. Even more bothersome, fewer than half of the surveyed companies have any women at all on their boards. Contrast this with the U.S. where 11 per cent of Fortune 500 directors are women, and 86 per cent of Fortune 500 companies have one woman, at least, on their boards.

I can assure you there are all kinds of highly qualified women who would contribute greatly to Canada's companies and their productivity.

Yes, slowly, the number of women on Canadian boards is increasing; there are more women with senior business experience than ever. However, this morning, we all read in the newspaper that women's enrollment in MBA programmes is stalled. At the U of T, the numbers have actually dropped. But I am not deterred. I agree with Roger Martin, things are getting better for women and we, as business people, just have to be more proactive.

Why are there not more women directors? That can be answered simply. Men aren't comfortable with the thought of women on their boards. We look different. We sound different. I happen to think we view the world differently and I know we are more independent. It's not a coincidence that independence is the quality I value uppermost in directors.

I want to send a message to all the men out there, and in here, that women are good for business for all kinds of reasons-not the least of which is productivity.

No company and no country can compete, let alone win, in the global arena by engaging only half its brainpower, especially in this age. And no big company, in particular, can do without women at the top.

Much has been said about how women are so much better at starting and running small businesses than men. Great! I'm all for Canadians of every sex, stripe and persuasion starting their own business. It's what my father and uncle did 78 years ago, when each of them took turns throughout the cold winter nights tending a coal fire in order to keep their customers' early model cars warm enough to start.

But don't you think it's time we stood up for women playing a greater role in big business in Canada. I do. I am amazed by the hype around women in small business. I sometimes suspect this is generated by men in big business. Is it misplaced praise? Or, is it systemic condescension? All I know is I look forward to the day when women directors, including myself, will no longer feel obliged to devote one word of our speech to the Empire Club to this topic!

I said earlier that the principle of self-reliance that has driven Canadian Tire for 78 successful years can translate into greater productivity for Canadian companies and our nation. I want to spend a moment with two examples of self-reliance at Canadian Tire that I believe have teachings for all of Canada's companies, large and small.

The first has to do with how employees share the wealth generated by our productivity, and the second, with fostering the spirit of independent thinking--there's that word again--that is so necessary for success in any business.

One of my father's most passionate convictions, and one he shared with his brother, was that profits should be shared with those who helped create them. Indeed, he often stated that the company had a moral responsibility to reward each person who contributes to the company's profits over and above his or her salary or wage. For A.J. Billes, respect and reward were sacred tenets. And so he pioneered a profit-sharing plan for employees that remains one of the best in Canada.

It's easy to forget just what a revolutionary idea profit sharing was when it was first introduced at Canadian Tire. The Canadian Tire profit-sharing plan has added significantly to every corporate employee's salary since 1956, and later to most dealers' employees as well.

Behind profit sharing lies the principle that I believe Canada needs to re-embrace if it is to restore the sense of individual responsibility and national productivity that was once one of the hallmarks of our standard of living. Profit sharing rewards individual effort. It encourages people to take risks, to be independent, and to earn future security through the robust health of a profitable company--Respect and reward. Principles that were the driving force behind another initiative that was thought to be, in the 1930s, somewhere between radical and lunatic. That initiative is now viewed as conventional wisdom in the world of retailing-whether it's cars being sold, or coffee. The idea was my father's and uncle's belief that our customers and employees would benefit much more from our stores if they were operated by independent business people who had a vested interest in the success of an individual store.

Thus was born the concept of associate dealer stores. The best advisers in the business argued that manager-operated branch stores was the way to go. There is ""more control that way.""

But my Dad and uncle did not see it that way. They saw dealers as men, very like themselves, whose independence of thinking was itself a ""competitive advantage,"" although I'm not sure that phrase ever entered their minds. To everyone's surprise, except my father's and uncle's, the associate dealer system worked. The favourite word for this kind of structure today is partnership and, I am often told, we live in an age of them. I smile when I hear that, because Canadian Tire has been in a successful partnership for nearly three-quarters of a century now.

Our sense of family at Canadian Tire is genuine and long-standing. It is bred in the bone. The partnership created by my father and uncle embraces the corporation, its employees, the dealers and our thousands of suppliers, who partner with us in ways that encourage their own spirit of entrepreneurship and boost their own levels of productivity. Everyone at Canadian Tire-and I mean everyone-is focused on serving our customers. And all our training, education and motivation programmes work to serve that single goal.

During the mid 1990s Canadian media predicted that the American ""big box"" stores were going to wipe Canadian Tire off the map. Guess what, we're still here. Looking back, it's very clear to me that what enabled us to take on these very tough challengers was the unity created by our partnerships and the loyalty, vision, hard work and dedication of our employees.

But what about the battles ahead?

Well, they're not just coming from the U.S.A.; they're coming from everywhere-including cyberspace. The globalisation of retailing means much more than being able to buy things on the Internet. It means more than being able to buy a high-quality toaster or drill at a very low price because it was made by highly skilled people at a much lower cost than it could ever be made for in Canada.

Globalisation means creating not only critical mass, but gigantic mass so that the economies of that mass and scale are immediately enjoyed by the customer. By Canadian standards Canadian Tire is not a small company; we do $5 billion a year in sales. But compared to Walmart, which does $166 billion in sales worldwide, we are a small company, certainly in global terms. Our David has done pretty well against their Goliath. But the challenge is never-ending.

Now a lot of companies have made huge investments in on-line shopping, and haven't seen their first dime of profit.

Our view of the Internet is as a natural extension of our philosophy that we are here to serve the customer. Having stores that are 15 minutes away from 90 per cent of our customers is one way of serving. Having an on-line presence that's immediately available to them 24 hours a day is another. This is not a separate and new business after all; the Internet gives us the opportunity to leverage the best-known brand in Canada.

Our red triangle is recognised by nearly 100 per cent of Canadians. Our printed catalogue is delivered to over nine million homes all across Canada. Just imagine it actively integrating on-line.

Yes, the Internet will be a challenge for us, but more than any Canadian retailer, I believe it will provide a major opportunity in the years ahead.

Canada is a nation of perpetual opportunity. It was in 1922 and it should be in 2022. There has been something in the Canadian character that has sparked our rise to the somewhat embarrassing heights as the best place in the world to work and live. I call that quality ""self-reliance,"" and the company I am privileged to have been born into has thrived nurturing it.

But, while opportunities continue to arise for Canada, they are neither automatic or eternal. They have to be earned. Ask our leaders--in business and politics both--how they are going to create more opportunities for the next generation of Canadians.

My call to action today is focused solely on those areas of Canadian business where my experience and my situation give me an expertise that I have been honoured to share with you today.

I believe Canada's public companies should look hard at how they choose their directors in order to ensure that those directors-and the companies they direct-are as productive as possible.

Productivity improvement, like any major change a corporation undertakes, should be championed from the top. Seeking out the best candidates for the board, regardless of their sex or any other consideration except expertise, enthusiasm and time, must be the order of the day.

Canadian companies and Canada itself must return to the ethic of self-reliance that has fostered the creation and growth of many Canadian household names like Canadian Tire.

When my father and uncle moved from their original garage to the corner of Yonge and Gould Streets, they would change their company's name to ""Canadian Tire"" because such a grand name would suggest to the world that their tiny enterprise was much grander than it actually was. Now I have no illusions that we will be changing our company name to ""Global Tire,"" but I do know that my father and uncle's small company grew into its name.

Today I am the standard-bearer for their heritage and their values. The principles of self-reliance that will always continue to serve Canadian Tire well and spur our growth are the very principles that Canada should embrace to ensure its future.

Thank you.

The appreciation of the meeting was expressed by Tony van Straubenzee, Managing Director, Russell Reynolds Associates and Past President, The Empire Club of Canada.