COVER

ON THE ROAD WITH BANKERS

‘Don and Derral’ peddle the mergers to townsfolk

JOHN NICOL December 7 1998
COVER

ON THE ROAD WITH BANKERS

‘Don and Derral’ peddle the mergers to townsfolk

JOHN NICOL December 7 1998

ON THE ROAD WITH BANKERS

‘Don and Derral’ peddle the mergers to townsfolk

JOHN NICOL

The local cable television studio in Grande Prairie, Alta., can best be described as “down-home”— egg cartons on the concrete-block interior to baffle the sound and a poster of Grande Prairie’s modest skyline as a backdrop for the nightly news. It is in places like this, far from the concrete-and-glass canyons of Toronto and Montreal and the committee rooms of Parliament Hill, that the skirmishes in the bank merger debate are taking place. On a chilly autumn day, the Bank of Montreal has sent two vice-presidents, Don Marr and Derral Moriyama, to convert the country’s “key influencers”—civic leaders and the bank’s better clients—in this hinterland of farmers, foresters and gas drillers. Their appearance on the cable TV talk show quickly becomes the “Don and Derral Show.”

The hosts explain the anti-bank resentment in Alberta, where the perception is that eastern banks repossess farms and abandon the province during every recession. But Marr and Moriyama, who pop vitamin C pills to ward off colds during the 16-hour days they set for themselves, won’t entertain any negative talk. The duo declare their western roots up front—Marr, originally from Saskatchewan, now works out of Hamilton, while Moriyama is an Albertan currently working in Edmonton. And they recite, as they have in legion halls and hotels from Oak Island, N.S., to Vernon, B.C., well-honed lines—crafted for them by head-office spin doctors who have analyzed the results of opinion polls and focus groups. Banks in Canada, says Moriyama, “are just like a small retailer with Wal-Mart coming to town.” When cornered by people upset with banks, Marr deflects the criticism with a hockey analogy: “Give us a two-minute penalty and let us back on the ice. The clock is ticking.” The Don and Derral Show is only part of a massive campaign by the banks—costing an estimated $25 million—to convince Canadians to accept the Bank of Montreal merger with the Royal Bank of Canada, and the CIBC alliance with Toronto Dominion. Orchestrated by some of the country’s highest profile media massagers, the first stage of the campaign through to Labour Day was low-key: a mixture of polling, lobbying MPs, encouraging clients to appear before the various parliamentary committees crisscrossing the country, and responding to negative newspaper articles with letters to editors. Stage 2, triggered by the public’s coolness to the mergers, was launched with the slogan, “The status quo is not an option.” It is a concerted effort to meet Canadians face-toface. The Bank of Montreal has mostly used the Don and Derral Show, while the other merging banks have used senior executives to meet business and community leaders. The banks’ chairmen have also been active, writing

guest columns for newspapers, meeting with editorial boards, even going to small towns like Listowel, Ont., and Knowlton, Que., in search of grassroots support.

Stage 3 is an all-out, high-profile propaganda assault. With privately commissioned polls saying they are losing the public relations war, the Bank of Montreal and the Royal began a ‘Two banks, one pledge” campaign on Nov. 18, listing what they promise to do, if they can merge, in full-page newspaper ads and a 25-page pamphlet. Also under consideration is a series of television ads for January, on the basis of the ‘Two banks, one pledge” pitch.

Bank of Montreal chairman Matthew Barrett, meanwhile, by far the most aggressive of the four bank chairmen, has sent a video to employees exhorting them to spread the word that the merger’s success has everything to do with their future and the future of their families.

Despite claims by economists that up to 40,000 out of 160,000 current jobs may be lost after the two mergers, socalled grassroots groups of workers have rallied to express support for the mergers. That may in part be due to the scorched earth message emanating from the top echelons: what the banks will do, including more layoffs, shorter branch hours and intensified branch closings, if Finance Minister Paul Martin does not approve the merger plans—all of which will come with a “Blame Martin” refrain.

To be fair, the task facing the spin doctors is daunting. The banks have no natural constituency—there are no community groups or business power

brokers publicly demanding that Martin approve the mergers. Instead, they face citizens with long memories of unhappy dealings with financial institutions, while top executives of the principal non-merging banks, Bank of Nova Scotia and the National Bank of Canada, are debunking pro-merger arguments. Seven out of 10 Canadian Federation of Independent Business members are against the mergers, and more than 100 organizations representing farmers, students, women and labor have coalesced under the banner of the Canadian Community Reinvestment Coalition. The cry from their leader, Duff Conacher of the citizen-advocacy group Democracy Watch, is: “What we don’t need are bigger banks. We need better banks.”

The response from Marr and Moriyama is equally passionate. Part fearmongering, part flag-waving, it oper-

ates on an if-it’s-Tuesday-this-must-be-Lethbridge pace. The merger, says Marr, is not about competing internationally, but an attempt to become large enough to protect market share in Canada from foreign “category killers” who are “trying to get a beachhead” or are “sneaking in through the Internet.” But the banks won’t wave the white flag, they say. They won’t become another “Avro Arrow, and let good jobs move out of Canada.” They won’t let people in New York City control Canada’s financial sector. Their bank, Marr and Moriyama tell audiences, has already lost the business of issuing affinity

credit cards for the University of Manitoba’s alumni association to a Delaware-based credit-card operator, MBNA. Marr says you won’t find these MBNA types “flipping pancakes at the Calgary Stampede. They can come in and cherrypick the cream of our business and take it back to the United States, wherever they’re from. They won’t be cooking hamburgers at charity events here.” On the Don and Derral Show’s Alberta swing, which included stops in Medicine Hat, Camrose and Red Deer, well-heeled citizens arrived with enough merger skepticism to fill a fleet of half-ton trucks. But Marr and Moriyama won many of them over with slide shows and pat catchphrase responses to every question. Soaring bank profits? “The banks aren’t looking for a tag day.” The banks are already too big and powerful? “We want competition.” Job losses? “The big prize we’re after is the opportunity to spend more on technology.” Campaign insiders say the phrases developed from information gleaned from bank focus groups.

I One argument by Marr and Moriyama S that resonated—in late 1997 American giant I Citibank outbid the Bank of Montreal and other relatively small Canadian banks to get the Canadian government’s credit-card business—is not faithful to the facts. Senator Serge Joyal, a member of the Liberal caucus committee that, under chairman Tony Ianno, looked at the mergers, researched the confusing array of government credit cards. American Express won the government travel card business, taking over from Citibank. For MasterCard, which is used for 92 per cent of everyday government purchases, the Bank of Montreal was beaten out—not by Citibank, but by Canada’s own little National Bank. For Visa, used for the remaining eight per cent of purchases, Citibank

had indeed won out over the Royal Bank, Toronto Dominion and CIBC. But according to government documents obtained by Maclean’s, that was only because the Canadian banks did not meet some of the requirements of the bidding process, such as a promise to provide detailed billing summaries. “When their argument was put to us, I saw heads and knees shaking, ‘Oh, my God, the Canadian banking system is going to be eaten up by the Americans,’ ” says Joyal. “When I started digging into arguments, I find out it was not exactly the story we were told.”

Meanwhile, the pitch has intensified. On Nov. 18, the Bank of Montreal and the Royal launched their ad campaign and pamphlet. They vowed to reduce service charges by at least 10 per cent, continue to serve rural Canada with branches, start a special bank for small business, and double—to $40 billion—the loans available to smalland medium-sized businesses within five years of the merger. But critics such as Conacher quickly point out that such promises have not stopped the banks from cutting back in small towns like Spryfield, N.S., and Keene,

Ont. “What is stunning,” he said, “is that amidst a campaign where they’re asking the public to grant them an enormous favor, they’re withdrawing service and reducing hours.”

Catherine Swift, Canadian Federation of Independent Business president, is just as skeptical of the promise to help small business. “Over the years, we’ve heard they’re going to put a billion into this, and when we look back later and check, it never happens,” she notes. But Swift and her organization have paid a price for such criticism. Only a few years ago, the Bank of Montreal praised the federation's research when it put the bank in a favorable light. Now, the banks are questioning the methodology of federation surveys showing wide spread antipathy towards the mergers. Suddenly, says Swift, “we’re the lunatic fringe. Shoot the messenger if you don’t like the message.” John Crispo, the outspoken economist noted for his stances in favor of free trade and against government intervention, has also felt the heat. In October, he contended in an opinion piece for The Globe and Mail that the mergers were “executive-driven by a small group of men who stood to gain immensely in money and power.” A Bank of Montreal vice-president and graduate of the University of Toronto’s Rotman School of Management, where Crispo is based, subsequently sent him a letter saying he would withdraw his support from the Rotman School. “I will certainly convey this position,” the vicepresident wrote, “to all those who are looking for a broad education exposure—obviously they won’t be getting one in your class.” Similarly, the Bank of Montreal cancelled $1,500 worth of tickets to a fund-raiser for MP Sarmite Bulte, who was one of 54 Liberals on the Ianno committee, the day after the committee’s report condemning the mergers appeared in November.

HALF OF CANADIANS HAVE A NEGATIVE IMPRESSION OF THE BANK MERGERS

What is your general impression of these proposed mergers?

NORTHSTAR RESEARCH PARTNERS

While discouraging people from speaking against the mergers, the banks are seeking others to spread a more favorable message. The Royal Bank’s David Moorcroft, vice-president of public affairs, acknowledged that during the Ianno committee hearings, branches were instructed to tell clients who expressed support for the mergers where and when they could be heard. But in courting voices for their side, the banks first had to win over their

Marr says banks need to join to fend off foreign ‘category killers’

own employees, who have been regularly updated with internal memos and repeatedly told, contrary to what critics assert, that the mergers would protect their jobs.

Once again, the Bank of Montreal has been at the forefront. Barrett made a call to arms in a video that is part fatherly chat, part doomsday message. “I need your help,” he intones. “We only have a few weeks left. Crucial weeks are coming.” He says he doesn’t want to tell employees what to do, but adds, “it would be a damn shame if the people most affected, those who have the most to gain—or the flip side, to lose—if their views were not heard by the policy-makers. I’m taking the muzzle off. Talk to your customers, speak to your family.” The employees' futures are at stake, he says, if the banks do not reap the “efficiencies” of the merger. On the surface, Barrett’s appeal has enjoyed some success. So-called grassroots employee groups have shown up at town-hall meetings organized by MPs. Two hundred people turned out for one such meeting, with Toronto Liberal MP Carolyn Bennett; Bennett said 150 of them were Bank of Montreal employees, leading her to wonder if the event had been orchestrated.

According to executives at the Royal and the Bank of Montreal, in-house surveys show that up to 90 per cent of employees are in favor of the mergers. But stories continue to leak out about middle managers—especially in Toronto’s towers—who are worried that hundreds of their jobs will be lost. There is similar unease about the mergers among Canadians. A national survey by Maclean ’s, and a poll released last week by the Canadian Federation of Independent Business, continue to show that the banks, despite all the efforts of their chairmen and the likes of the Don and Derral Show, must still contend with skepticism, from Grande Prairie to the Grand Banks.

KIMBERLEY NOBLE

CELIA MILNE