BUSINESS

Of mice and men

DEIRDRE McMURDY December 25 1995
BUSINESS

Of mice and men

DEIRDRE McMURDY December 25 1995

Of mice and men

BUSINESS

THE BOTTOM LINE

DEIRDRE McMURDY

In psychology it is known as "closure": an analysis of, and reconciliation with, past events that allows us to move forward and—with luck—avoid making the same mistakes. With 1996 at the door, it is time to contemplate some of the high and low points of the past year in business.

Rogers, Unplugged: Rogers Cablesystems Ltd. learned a hard lesson in customer service. The company sparked a consumer rebellion with its use of socalled “negative option marketing.” Canadian cable subscribers strongly— and successfully—objected to Rogers’ notion that they should automatically pay for a series of new specialty channels, unless they acted to cancel them. After a swift but savage public beating by customers, Rogers president Colin Watson held a press conference to admit: ‘We made a mistake and we apologize.”

Muchas Gracias, Amigos: In a smug editorial column about the economic crisis in Mexico, The Wall Street Journal described Canada as an “honorary Third World country” because of its high debt levels. “Mexico isn’t the only U.S. neighbor flirting with the financial abyss,” pronounced the Journal.

A Slash Diet Finance Minister Paul Martin introduced a federal budget aimed at reducing the federal deficit from its 1995 level of $37.9 billion. However, by cutting transfer payments to the provinces and trimming the size of the civil service by 45,000 jobs, Martin also took the first, crucial step towards reinventing Confederation.

And the Peace Tower Would Make a Great Condo: In the same budget, Martin pledged to raise money by privatizing several Crown corporations. Sure enough, by mid-November, Ottawa had raised $1.8 billion by selling off 50 per cent of its 70-per-cent stake in Petro-Canada, $2.2 billion from the sale of shares in Canadian National Railways, and another $1.5 billion from the sale of NavCanada, Canada’s national air traffic control system.

Barings’ Straits: From a desk in Singapore, Nick Leeson blew up Britain’s venerable Barings Bank with $1.9 billion in botched derivatives trades. Leeson is

now serving hard time for fraud in a Singapore jail. Second prize in this category goes to Toshihide Iguchi, a New York-based trader for Japan’s Daiwa Bank. He concealed losses of $1.5 billion on U.S. bond deals. Iguchi got tossed into prison for fraud and Daiwa got tossed out of the U.S. market.

In Canada, however, the pace of justice is infinitely more sedate. A full eight years after they were charged with fraud in the collapse of broker Osier Inc., Tony Chesnutt and Paul Cohen were respectively sentenced to seven years in prison. Their former boss, Len Gaudet, got eight years. All three are now free on bail pending an appeal.

The Mice That Roared: A frantic bout of merger mania saw billions of dollars in corporate assets change hands. Disney’s $25.8-billion purchase of Capital Cities/ ABC wasn’t exactly Mickey Mouse. But top dollar was the $46 billion that Mitsubishi Bank ponied up for the Bank of Tokyo.

In Canada, honorable mention goes to Onex Corp., which, with some prodding from impatient institutional shareholders, put brewer John Labatt Ltd.—and its stagnant shares—into play. Onex didn’t win the company with its $2.4-billion bid. But the action did flush out some Belgians who paid $2.7 billion for it.

Fly Me to the Moon: Technology stocks—especially anything with leverage to the Internet—drove the Dow Jones index to record levels. In Canada, an initial public offering of shares in a new company, iStar internet inc., was snapped up in seconds by greedy investors.

He Ain’t Heavy, He’s My Brother: The Blumes twins, Moe and Mark, became the latest corporate siblings to prove that water is thicker than blood. In 1991, Mark (of Mark’s Work Wearhouse, the Calgary clothing retailer) ousted Moe from the company. Last week, after the Wearhouse board ousted Mark, Moe decided to pounce. He hopes to make a bid to acquire the company. The Blumes brothers are just one notch ahead of Wallace and Harrison McCain, whose bitter feud over control of McCain Foods spilled over from 1994 into 1995. This year, Wallace moved to Toronto and bought control of Maple Leaf Foods.

The highs and lows of 1995, from the Disney deal to Calgary’s family feud