BUSINESS

A troubled truce

A secret ruling involving the McCains is revealed

BRENDA DALGLISH May 23 1994
BUSINESS

A troubled truce

A secret ruling involving the McCains is revealed

BRENDA DALGLISH May 23 1994

A troubled truce

A secret ruling involving the McCains is revealed

There was serious drinking and lots of noise. Wallace McCain, attended by a coterie of lawyers and other advisers as well as his wife and adult children, threw a champagne party in a Fredericton hotel room that was widely reported as a celebration of his legal victory over older brother Harrison. The apparent cause for that April 20 gathering was an arbitrator’s decision that allowed Wallace to keep his job as president and co-chief executive officer of the family frozen food giant, McCain Foods Ltd. There was only one problem. Despite the boisterous show of high spirits, Maclean’s has learned that Wallace in fact had little to celebrate. According to sources familiar with the 110-page judgment, Mr. Justice Ronald Stevenson, the New Brunswick Court of Queen’s Bench judge hired by the brothers to settle the dispute, ruled largely in Harrison’s favor. The brothers confirmed independently last week that although Wallace is allowed to keep his job for the mo-

ment, he could be ousted at the drop of a hat. Contacted in his office last week, Wallace agreed that his position is precarious. “I’m here today,” said Wallace. ‘That’s about all I can say.” As to whether he and Harrison have agreed that he will have a job tomorrow, he replied simply: “No.”

Although McCain Foods is a private company, its fate is no small potatoes to New Brunswick. About 3,000 of the company’s 12,500 employees are based in the province, most in the village of Florenceville, the McCain brothers’ lifelong home and the multinational firm’s corporate headquarters. Stevenson’s decision leaves open the possibility that the company—which the brothers started in 1956— might be split up and sold if they cannot patch up their disagreements. However, Harrison, contacted at home last week, said his goal is to keep the company together. “Absolutely,” he said. “That’s what 65 per cent of the shareholders [the extended McCain family] want. And that’s what the judge wants.”

In an attempt to end their fight over succession, Wallace last year proposed that he and Harrison divide the company in two. But Harrison, McCain’s 66-year-old chairman and cochief executive officer, and Wallace, 64, could not agree on that, either. Next, Harrison tried to remove Wallace from his job. That forced Wallace to resort to the courts for help. The brothers eventually hired Stevenson as a private arbitrator in an effort to keep the details of their family feud confidential.

The issue is complicated by the fact that in 1991 the two brothers set up a board to run the family holding company that controls aspects of McCain Foods. The board is composed of six of their sons and nephews (sons of their two deceased brothers who also had a stake in the company) as well as a longtime employee, George McClure, vice-president of corporate development. Harrison said that the board has the power to remove Wallace if it chooses. Said Wallace: “It’s fair to say that the scenario is not settled.”

However, David MacNaughton, president of the Toronto-based public relations firm Hill and Knowlton Canada Inc., who was hired by Wallace as an adviser, maintains that the judge’s decision is a win for Wallace because he kept his job. “So far, the dispute hasn’t affected the operations of the business,” added MacNaughton. “I don’t know what employees, customers and others would think of yet another attempt by Harrison to get rid of his brother.” Last year, the company, which has assets of $1.8 billion, reported sales of $3 billion.

In personal terms, the last year has been anything but happy. In addition

to the brothers’ disagreements, Harrison’s wife, Marion, died on March 30 after a long battle with cancer. Despite their disagreements, Wallace attended the funeral and wept during the service.

The strange dispute between the brothers has most of New Brunswick speculating about what went wrong. Even Wallace sounds puzzled. “If someone had told me five years ago that this was going to happen, I’d have said they were smoking pot,” he said. “It’s a very complex story and it hasn’t been told yet. There is a mystery. Someday I’ll talk about it.” And Harrison concedes that the disagreement could stem from more than just succession. “It’s difficult to know,” he said. “I’d have to be able to read someone else’s mind.”

One observer familiar with the case said there is no single event that triggered the rift between the brothers. “It was kind of like a marriage breakdown,” he said. “You live together for years, and then all of a sudden one day you put your razor blade in the wrong place and it all falls apart.” For now, the McCain brothers are in no mood to kiss and make up.

BRENDA DALGLISH