Buddies Who Can Spare a Dime
King and Bay Streets in Toronto. They call it MINT corner. A coin’s throw away rise the office towers that are the latter-day obelisks of obvious wealth, home to Canada’s Big Five, hoarders of 90 per cent of the assets held by Canada’s 11 chartered banks. There, the Bank of Montreal, Canadian Tmperial Bank of Commerce, the Bank of Nova Scotia, the Toronto-Dominion Bank (thus MINT); two blocks away, the reflecting shimmers of golden-walled No. 1, the Royal Bank of Canada. No matter that the official headquarters for three are elsewhere— above this asphalt patch the power presides. The Bank of Montreal’s Chief Executive Officer (CEO) William Mulholland spends every Thursday in Toronto away from Montreal’s storied St. James Street; the Royal’s money market operations, corporate marketing and investments have come to Toronto, too. But while the power is there, the presence is also elsewhere with 7,407 branches
stretching from frame structures in Newfoundland, past Ontario brick and neoclassic Prairie columns to the redwood and fern plazas of British Colum-
bia. In some 50 countries around the world, Canada’s Big Five are in the top 65 by size, setting standards for stability. They are the keepers of the keys, the bastions of trust, your next-best friend.
Stirring within these multinational money machines, amidst the 150,000 employees and $189 billion in assets multiplying at an annual rate of 25.7 per cent, with 1978 after-tax profits of $1 billion (an excess profit tax rumor shook the stock marketon Friday)is the noise of percolating change as pressure builds without and purpose awakens within. Plach of the five men whose life at the top is watching a bank’s bottom line has taken over in this decade. They are: Royal’s President and CEO Rowland Frazee; Montreal’s President and CEO Bill Mulholland; Russ Harrison, chairman and CEO at the Commerce; Ced Ritchie, chairman, president and CEO at Scotiabank; and Richard Thomson, T-D chairman and CEO. These five will make banking in their own image in the 1980s, not only selecting successors to their kingdoms but also choosing the means by which Canadians will communicate using plastic money, magnetic computer tapes, 32 million bank accounts and almost two billion cheques annually. They, along with the six other chartered banks, Bank Canadian National and Provincial Bank of Canada (see box, page 37), Mercantile Bank of Canada, Bank of British Columbia, Canadian Commercial and Industrial Bank and Northland Bank, will make the next change themselves because decennial revision of the Bank Act, the governing federal legislation already twice delayed since 1977, will not likely squeeze through Parliament before a federal election call within the month. As written, it would have changed banking little, although it would have at least slapped control on the runaway commercial leasing and loan business of 180 foreign bank affiliates and representative offices doing an estimated $5 billion in business in Canada under no agency’s watchful eye. Additional recommended change, expected from a Commons committee this week, will wait for a new bill in a new Parliament.
Ïhe five men each see it as a calling to keep his own bank safe, sound and profitable while beating off competition from trust companies getting into credit cards, acceptance corporations like IAC Ltd. champing for bankhood, and the burgeoning growth of credit unions across Canada and caisses populaires in Quebec. They are the kings and kingmakers of the financial palaces who will change the face of Canadian banking and how Canadians deal with that face, these men whose work world is an all-pervading quiet that mutes the tones of speech hovering above the thick, muffling carpets. Behind the symbol is the substance; obscured by the very trappings of their power are the trials of their position. The mystic moments of risk appear to be too few amidst the ceremonial and cerebral chores, but there are enough such choices that, if right, would make a lesser man, if wrong, could break a lesser bank.
There hasn’t been a bank failure in Canada since 1923. Unity’s 1977 demise was but a silent meal for Provincial, only an excused burp on the balance sheet. But failure is not the problem, response and responsibility are, as what has been called the exquisite neutrality of bankers comes to an end. The oneman rule of previous administrations is gone, replaced by a flurry of management systems, computer networks, government regulations, market share,
promotional positioning and all the harum-scarum of corporate slick. Banking is about to change again, as irrevocably and as far as it has already come from the quill pen and the grilled cage. Old feudalism has given way to new freedoms. Jealously wielded routines have been jarred into wider roles. Here, then, a look at the five who can pass a mantle, pivot a career, back some corporate jockey riding a risky idea and control money levers more powerful than most legislatures:
Richard Murray Thomson. Bespectacled Dick Thomson’s style, usually urbane, sometimes uptight, buttressed by a Harvard business degree, tipped him toward the top before he was 35. Like an overgrown boy to whom exertion and excitement are the same, at 45 he looks as if he could both crush the enemy and comfort a friend. In his llth-floor Toronto office that’s as big and almost as well-lit as a nighttime tennis court, he is surrounded by Canadian paintings and a sprinkling of Inuit carvings. He speaks softly of his job, placing the phrases on a reverent string. “I love it. We feel on the inside. It’s a sociably exciting thing to be involved in.” His self-described team-leader role is to balance market growth with profits and social justice. “We’re not a bunch of high-wire artists working on an independent act.”
With joyful solo involvement in multimillion-dollar commercial loans given over to others, he dips pleasurably into the four or five deals cooking at any time within the creative kitchen he con-
ducts. While many of the fortnightly board meetings he chairs are mere routine (“it isn’t a matter of getting up”), substantive discussion on capital formation, attitude toward government regulation or organizational change occurs often enough that “it’s a great discipline. You don’t want to go to them with a recommendation that hasn’t been well thought out.” Self-serve automated banking is one area of future heated board debate as the best way to extend hours, save customer time and free personnel to offer more products. “We’re not going to dehumanize the banking function.” Nor will it match the overnight success of service stations where nearly one-third of gas now pumped in Canada is self-serve. What the board may also expect from him, however, is something he’s not yet prepared to give: a higher public profile. His pleasures are private; he seeks no stage, satisfied to submerge his ego in the organization, seeing his time as part of a continuum. The youthful hand has not yielded to the yearning head. Yet.
William David Mulholland. Here it is, Bill Mulholland’s crowning glory in a bejewelled life, and he winces at the word: turnaround. Breathing life into a moribund Bank of Montreal when he joined in 1974, he dismisses success as only realized targets scribbled on an envelope. Cherubic-faced, U.S.-born (now a Canadian citizen) and looking like a Notre Dame back gone a bit bulbous, he
has picked up the pieces before. In 1969, when six Brinco executives died in a corporate jet crash, it was financier Mulholland who was called in from Morgan Stanley & Co. to avert disaster on the $1 -billion Churchill Falls hydroelectric project. Success then and now springs from his management view: “Taking what you have that is very perishable, translating it and enabling it to carry on in a multiplied way after you’ve passed the scene.” Not a bad familial philosophy, either, for the 52-year-old father of nine.
His bank spent its first 150 years building assets to $6 billion in 1967; in 1978 alone, another $7 billion was added. “When you get to be a certain size, you just grow in great gobs, you almost can’t stop it.” He claims he could easily add $2 billion in assets within 30 days, another $4 billion in six months. “Anytime you want to, you can get the freebies on the balance sheet if there’s some reason to do it. Being bigger is not a good enough reason.”
While preparing his staff through hothouse programs of forced responsibility for the expected doubling of assets within five years, he worries about his potential for paranoia, the corneroffice mystique that isolated past bankers. “This is an organization dedicated to cutting you off, protecting you from bad news. Like baby food, it tends to get chewed up for you.” The full meals come from the required signal to him after first discussion by anyone of any loan over $25 million. Antennae extended, he prowls the country, listening
to anyone who is audible, lunging audaciously to buy 89 Bankers Trust Co. offices in New York City for $1 billion. Half-glasses at the ready, a head of steam a-building, the boy born in Albany, New York, has become the man advancing on Manhattan.
Russell Edward Harrison. As a little old lady comes click-clicking across the marble banking floor, the Commerce’s Russ Harrison knows what’s right and wrong with banking. By the time the lady gets to the counter, she’s so flustered she’s forgotten her name. “We’re a long way from making customers as comfortable as they are going into Eaton’s.” But in that strain is the strength, too. “Banks have an aura about them,” he says, “like a church.” Harrison, a svelte 57, borrows more cigarettes than he buys these days; as a pipe user he smokes a lot of matches. A relaxed and open individual, the frankness does not extend into his business. To bolster his case, he cites the ravaging Depression, when Canadian banks were near bankruptcy, busily bailing each other out. “Would it have served the Canadian people to know there were no reserves? Disclosure, as an issue, is the same. The government’s going to push and push and push. The industry is going to resist, resist, resist.”
His bank today is an open, sunshine place compared to 1973 when Neil McKinnon was hounded from office after months of brooding insularity. Then, sentences weren’t interrupted; speech only followed fourfold thought. Symbolized by songstress Anne Murray and her reputed six-figure advertising contract, the Commerce has clambered back. It has not been without the plodding pain of long hours. “In my office,” Harrison once told a colleague, “weQQQ
have no concept of time. We go until it’s done and then we go back and do it again. Our wives and families pay the sacrifice.”
Passionately a nationalist, he looks ahead to specialty branches offering fewer products, to fierce commercial loan competition from foreign banks (“They’re going to cream us in the big cities”) and to less pressure from unionism within 10 years: “I honestly think we’ll be rid of it.” Sitting, as he does, in a 62-per-cent tax bracket, he does not expect to grow wealthy. “I don’t know any rich bankers,” he laughs. “Most of my customers, the people I see, could buy me out 20 times over. Most of them? All of them!”
Rowland Cardwell Frazee. After working in the shadow of the inimitable W. Earle McLaughlin, Rowlie Frazee has become the light. McLaughlin, with 18 years as the Royal’s chief executive officer, director on 17 other boards, critic of central bank policy and much else that moved, has finally ceded control, retaining the chairman’s title until 1980. The first thing Frazee made clear to his colleagues was that he will not be staying 18 years. At 57, that should be an unnecessary reminder, but it was noted carefully by the 47 other directors who met in the panelled 41st-floor Montreal boardroom under the watchful gaze of previous presidents’ portraits. Speaking to a private dinner for key personnel and directors at the time of the bank’s annual meeting in January, Frazee, with tongue planted firmly in cheek, told the group he planned to emulate McLaughlin. He left them waiting for a breathless moment, then said: “I’m going to take up pipe smoking.”
Of those at the top of the Big Five,
Frazee is perhaps the most at ease, the most comfortable within his own skin as he moves with the residual grace of the former hockey player he is. It is a manner that suggests he has been running the Royal for some time longer than official announcements would indicate. That time has given him the perspective to see his life and the bank’s as part of an evolving whole. The era when loans were favors bestowed became the years when customers were frantically besought. That move to consumer banking “made us all a little more human, opened us up, created an atmosphere, a realization that we are a service industry.” The “blue-skying” he indulges in these days will lead to specific moves such as expansion into the U.S., but it will also lead beyond “just being a banker,” he says. “You have to accept your responsibilities in the community.” When he says that, it sounds honest, not onerous, as the former infantry major marshalls himself for the changing battlegrounds ahead.
Cedric Elmer Ritchie. The last six years have been a severe test of Ced Ritchie’s strategy and stamina. Picked as Scotiabank president and CEO in 1972, named chairman in 1974, he retains all three titles still. As a result, he’s a man on the dead run even when he’s sitting down with his constant cigarettes and bottomless cups of black coffee. Like any other banker who has scrambled his way to the top, he still has friends in the field and cronies in the vault, but behind the creased face that comes from 12-hour days there is a
basic shyness covered by the veneer of bravado. At 51, he jokes that Bath, New Brunswick, where he joined in 1945, is “main branch” but it helps him keep one foot planted in offices of small Canadian businesses while stepping out to Asia. Lamenting the younger and less experienced branch managers that rapid expansion has brought to all banks, he looks back 30 years: “We’re unable, at this point in time, to deliver that same type of advice and counsel” to small business. It’s a fault he hopes to correct with a live-in learning centre in
London, Ontario, that stuffs staff with management information and will eventually accept small businessmen looking to expand markets. It’s a fit, too, with his interest in international trade, particularly the Pacific rim. After four visits to China, he sees the potential and the problem. “A tremendous amount of business is done on mutual trust. We have to develop a whole generation who knows how to work in Asia.”
His style is to plunge himself in, leading a board contingent to Manila or flying to Calgary on a Sunday with $90 million for Robert Blair’s run at Husky Oil last July. “Any one of us around this building will get on an airplane and go and try to do a deal,” he says. “I don’t think you can legislate entirely. I think you also have to demonstrate that it’s possible for everyone to get in and mix it up.” As the last of the loners, his direction now is to share power out and shore people up within the framework it has taken six years to call his own.
* T his, then, is the much feared Central Canada Bank Conspiracy: two guys from Manitoba, two from New Brunswick, one from Albany. Out of the five, one will rise to be seen as dean, primum inter partes, first among equals, though each says it’s a role he will not seek. Fiercely competitive, none would want another to speak for him. Nor do they have much need for the ego massage parlors that politicians frequent; they dislike pomp and distrust pretence; they cringe from public criticism, seeing it as personal attack. However, as Canada heads toward some future cashless society, these unseen managers of many lives will need to shed the luxury of their anonymity—not for anointed leadership, but to show banking has a heart, not just a head.