The scene at dinner the evening before the June 20 annual meeting of Union Gas was convivial. Chairman Malim Harding, President and Chief Executive Officer William Stewart, two other members of the board of directors and some of the invited investment-community guests dined at one table amidst laughter at what has become a highlight in Chatham, Ontario’s social season. The glow from that night in the southern Ontario city where Union’s head office is located did not, however, last. Less than three weeks later, the 68-year-old Harding had demanded and received Stewart’s resignation. It was accepted at a July 16 board meeting, which Stewart wasn’t allowed to attend to defend himself or discuss his views. The 24-year veteran of Union Gas gave up the office, the company’s six-seat King Air Turboprop aircraft, expense account dinners and shows at Toronto’s Royal York Hotel Imperial Room, removed the six-footlong sailfish caught off the Virgin Islands from the wall of his third-floor Chatham office and departed. “It was,” says Stewart, “a shock to me.”
A three-sentence press release pointing to “differences of view and approach between Mr. Stewart and the company’s board of directors” was painstakingly drafted and released the next day. Says Director John Cronyn, of London, Ont.: “We spent a lot of time on those words.” The sudden departure of Stewart, 50, leaves the position vacant in a company with 2,250 employees, about 440,000 customers and 9,608 miles of natural gas transmission and distribution lines in a triangular area from Windsor to Owen Sound to Toronto carrying about one-third of the gas used by Ontario industry and households. It was a decision arrived at by Harding, son of the founder of Harding Carpets and its current chairman, and some members of the board. Union director Joseph Land, also chairman of the Continental Bank of Canada, says the cause was “a great number of things. I don’t know that you could pick one.” Analysts, however, blame the board as much as management for the company’s lacklustre performance during the past four or five years. “I wouldn’t take that job unless there were five new directors,” says one investment analyst.
Losing presidents is not new to Union
Gas. In 1974, then-president Bruce Willson resigned over policy disputes with both the company and the industry. But Willson gave the board sixmonths’ notice and Stewart was named the week Willson resigned. Last month’s leave-taking, while less stormy, was certainly more precipitous. However, while some of the board members were pushing for a reversal of the downtrend in profits, others only learned of Stewart’s ouster when they were notified of the July 16 meeting. “It was,” says Land, “a surprise to some people on the board.” Harding had requested Stewart’s resignation the week before. “Would there be opportunity for discussion?” Stewart asked. “No,” replied Harding.
Stewart did not attend the meeting held at the Harding Carpets offices on Toronto’s Yonge Street, rather than the more usual Chatham head office or the boardroom on the 41st floor of Commerce Court where Union has its Toronto offices. The afternoon meeting was short and quiet; a recorded vote accepted the resignation. Another absent director was former Ontario energy minister and treasurer Darcy McKeough who had been named to the board at the annual meeting. Though he was on holiday in Western Canada from the family plumbing firm in Chatham, his name has emerged as possible president as quickly as a mushroom in a rain-soaked lawn. It will likely be on the list the board search committee brings to the next board meeting Aug. 14. Harding, whose carpet company has lost money for the past two years, left later that July week for a holiday, offering no further explanation.
But for Stewart, there is only one word: Petrosar. In 1974, when future natural gas supplies looked scarce and Trans-Canada PipeLines—suppliers to eastern utilities like Union—warned of shortages within two years, Union studied a dozen alternative sources to Western Canadian natural gas, including liquefied natural gas from Algeria. Union settled on an expensive synthetic natural gas contract with Petrosar of Corunna, Ont. But by 1978, Union’s 100 billion cubic feet of storage was filled, the scarcity scare had been wrong, skyrocketing prices and conservation had chopped consumption, government oil pricing policy meant residual oil was stealing industrial markets—and the expensive Petrosar gas was costing Union more than its selling price. AÍthough the Petrosar decision was taken before Stewart became president, he had been part of the management group which recommended it. A solution last year, selling the gas to Northern of Omaha, fell through when the U.S. Energy Regulatory Agency refused to permit the export. Also aggravating the board was the $86 million—with no immediate profit return—pledged in 1977 for joint ventures investment over three years with Canadian Reserve Oil & Gas and Hudson’s Bay Oil and Gas, both of Calgary.
The crunch came as Union Gas’s submission was being prepared for Ontario Energy Board hearings later this month. The Union Gas board wanted the Petrosar losses included in the presentation in order to argue for offsetting rate increases. Stewart feared a furore from industrial and municipal customers who wouldn’t want to pay for management’s mistakes. Hoping a profitable export deal was still possible, he wanted current Petrosar losses omitted.
It was then that Harding asked for his resignation, leaving Stewart to look for a new career within the industry, likely in Toronto or Western Canada. He is planning to move from his frame ranch-style house on the south edge of Chatham. For Union Gas, the search for solutions and people to find them continues. As former Interprovincial Pipe chairman and Union Gas Director David Waldon says, “In any company, no one person is indispensible. The company is bigger than any one individual.”^
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