COVER

Family Feud

A fight between the McCain brothers threatens their food empire

BRENDA DALGLISH September 6 1993
COVER

Family Feud

A fight between the McCain brothers threatens their food empire

BRENDA DALGLISH September 6 1993

Family Feud

A fight between the McCain brothers threatens their food empire

COVER

As boys during the Great Depression years and into their teens during the Second World War,

Harrison and Wallace McCain, brothers only 2½ years apart in age, went to school together and played games together in the village of Florenceville on the upper Saint John River, New Brunswick potato country. As young men out of university, in managerial jobs with K. C. Irving enterprises, they gained reputations for playing hard and working harder. In their late 20s, they and their two older brothers (since deceased) got into the business of turning raw potatoes into frozen french fries. Over the 36 years since their first plant opened in Florenceville in 1957, they widened their market as far afield as Australia and expanded their product line into frozen fruit juice, pizzas and other foods. Harrison, the older of the two, was the traveller; Wallace minded the business at home. They live next door to each other and work in offices linked by an unlocked door. Then, last year, differences arose between Harrison, now 65, and Wallace, 63, over the leadership of an enterprise with assets of $1.8 billion, 12,500 employees and worldwide sales worth $3 billion annually. Last week, the brothers’ fight became public in court, casting shadows of doubt over the future of the family firm.

Even now, the two sound like unlikely litigants. Wallace, the plaintiff in a lawsuit launched last week, said of Harrison, who he had just spent the day with: “Of course we’re still talking to each other. He’s my best friend. He’s my brother.” And Harrison, the defendant, told Maclean’s: “Oh, he’s a good fella, all right.”

Despite the brotherly sentiments, Wallace alleges in a case to be tried in September that Harrison is trying to push him out of their company, McCain Foods Ltd. At a meeting of the family holding company board on Aug. 17, a majority agreed with Harrison that Wallace should leave his job by Sept. 30. Harrison says that he favors recruiting younger executive leadership, whether that be from inside or outside the family. Wallace notes that two years ago they delegated decisions on their successors to a committee of four outside corporate executives, members of McCain’s operating board. Like so many family-business succession battles, several of which have left the company in the hands of outsiders (page 38), the rift at McCain’s seems headed for a nasty, protracted fight that will leave scars on both the business and the family. The battle also threatens one of Canada’s most successful multinationals. For New Brunswick in general and Florenceville in particular, the feud also raises questions about the fate of McCain’s 4,000 employees in the province and of thousands more jobs generated by the business.

The fray between the brothers already involves not only their children, nieces and nephews but, more surprisingly in a family that has guarded its privacy, public relations professionals. Three days after the Aug. 17 meeting of the family board, a Toronto public relations firm, representing Wallace, began making discreet calls to editors at a few news outlets. The gist of the information they conveyed was that a disagreement between members of a prominent Canadian family— no names were mentioned—was about to move into court. The PR firm offered to privately brief reporters about the issues behind the lawsuit as soon as the court documents were filed and the identities of the litigants became public.

For the McCains, those approaches to the media were unusual. Although in recent years, as the company flourished, Harrison began granting media interviews, Wallace remained in the background. It was mainly Harrison who received accolades for the company’s success, even though he always pointed out that his brother shared chief executive duties with him. In 1990, for instance, Maclean’s included Harrison in its annual Honor Roll of citizens who make exceptional contributions to Canada and The Financial Post selected Harrison as CEO of the year.

The brothers are different in appearance and manner, as well as in the public attention they receive. Harrison, who organized the company’s financing, built its European operations and is chairman of McCain Foods Ltd., is an outgoing salesman, shorter, rounder and balder than his brother. Last year, he had a brush with death when he suffered a heart attack during surgery, an event that Wallace’s court documents suggest may be having an impact on Harrison. People who have chatted with Harrison—and that seems to be almost everyone in New Brunswick—remark on his energetic and usually good-natured conversation.

Wallace, the company president, on the other hand, is tall, lanky and more low-key. While Harrison jetted around the world selling french fries, Wallace tended to admistrative duties and the company’s North American operations. He also spent more time in Florenceville, a picturesque village where the McCain plant dwarfs the rest of the town and the cemetery has its own fenced-off section for McCain plots (page 36). The two brothers even list different religions in their Who’s Who biographies. Harrison says that he is Presbyterian, while Wallace is Anglican. That difference may not mean much, however. As one friend observed, roaring with laughter: “Hah, they’re businessmen. They worship one god, the god of the spud.”

Wallace only began to emerge from his brother’s shadow this year. In April, two months after Wallace now alleges that Harrison made his second of several attempts to remove him as co-CEO, they were jointly inducted into Canada’s Business Hall of Fame. At a black-tie dinner in Toronto, where Bank of Nova Scotia chairman Cedric Ritchie presented the honor, the brothers dropped no hint of their rift in brief acceptance speeches. In early August, just days before his lawsuit was filed, Wallace talked to The Financial Post in what his son Michael says was his first such interview in 25 years.

Despite their differences, people who have worked with the brothers say that they appeared to have enjoyed a true partnership. “I’ve only seen them working as a team,” said one senior Ottawa official. “They are very different kinds of people, but they were complementary.” Added another longtime business acquaintance: ‘When I read about their difficulties in the newspaper I was shocked, because from everything I’d seen of them they were a tightly knit family that got along together exceedingly well. They seemed to have a tremendous amount of respect for each other.” He said that when he discussed various business issues with Harrison, “He’d say ‘I better check this out with Wally.’ Sometimes I’d think it wasn’t the most vital thing in the world, but, hell, he’d think it was important enough to run it by Wally.”

Despite the McCain brothers’ down-home, just-folks image in New Brunswick, most of the people interviewed by Maclean’s last week adamantly refused to talk on the record about the brothers’ disagreement. From Ontario business acquaintances to potato farmers in the Florenceville region, few people were willing to risk raising the ire of a McCain. ‘They might not like it if they knew I was talking about them,” said one potato farmer. The farmer, who sells half of his crop to the McCains, said that the dispute touched a nerve even closer to home for him. He shares a farm with his brother. “I realize that we’re not 20 any more and it makes me start to wonder.”

Indeed, says James McNiven, dean of the faculty of management at Dalhousie University in Halifax, for family businesses, regardless of size, the question of what happens when the founders leave is the single most difficult issue to resolve. “It’s the old shirtsleeves-to-shirtsleeves in three generations,” said McNiven. “The patriarchs build the company, the sons sort of run it and the grandsons lose it. It’s not a new problem. That three-generation thing was recognized way back in the 1700s in England.”

The succession question is a central factor in the McCain dispute. In a statement that Wallace

filed in court and made public only after several newspapers challenged an earlier no-disclosure order by the judge, he alleges that Harrison wants him to leave the company because Harrison wants to control the succession process. “The concern of Harrison McCain was that, of all the sons, Michael McCain was the most capable and might be identified as the person who, in the future, should succeed,” said the statement. “Harrison McCain did not wish Michael McCain to be that person.” Michael, one of Wallace’s four children, oversees McCain’s U.S. market operations from a base in Chicago. Although he has been regarded by some as the likeliest succession candidate, he told Maclean 's that he is not pushing for the job. “Listen, I’m 34, I’ve got five kids, I’ve just built a new house,” he said. “I don’t want the job right now.”

Wallace’s court statement details several proposals the brothers made to each other to settle their disagreement, none of them acceptable to both. Now, Wallace is asking the court to allow him to keep his present job at McCains or, failing that, to divide the company in half, giving both brothers an equal share.

Harrison, for his part, issued a brief press release noting that “the fact remains that Wallace and I are two businessmen in our 60s sitting atop a $3-billion enterprise that is in great shape. To make sure that it stays that way in the future, we need to find a new CEO to take over. It’s time for transition. There are lots of reasons. Three families that include most of the shareholders think so. Wallace’s family has a different opinion. I have reconciled myself to changing my role in the company. I think it’s time Wallace did, too. The issues will get settled through negotiation or a legal process or both, and we will start looking for a new CEO. We want the best person for the job from inside or outside the company, it doesn’t matter. We just want the best.”

The release, however, is not clear about Harrison’s plans. Wallace’s statement says that Harrison intends to remain chairman. And despite the tone of his press release, Harrison, while declining to discuss details, said that he is not planning to retire. “That isn’t what I have in mind,” he told Maclean’s. “But I’ve got to find time to write a book, I want to write a book about business.” He said that he has reconciled himself to the idea of “getting a guy or two to run this company, who are 45 or 50 years old, rather than 60 or 65. It would just be the right thing to do.”

Before 1991, solving the succession issue, as for any other company problem, was a matter for the two brothers who were equal partners in the business they founded. But in that year, according to Wallace’s statement of claim, he and Harrison agreed to appoint six of their sons and nephews, plus a longtime employee, to the board of the family holding company. At the same time, they assigned sole responsibility for selecting successors to the four-member board committee of the operating company, McCain Foods Ltd. But at the family holding company’s board meeting on Aug. 17, five of the seven board members supported the resolution to remove Wallace. His two sons, Michael and Scott, opposed the move. Support came from Harrison’s two sons, Mark and Peter, and from Andrew and Allison McCain, sons of the two deceased brothers. George McClure, the longtime employee who worked with Harrison on European operations, also voted with the majority. Wallace alleges in his statement of claim that the majority voted against him because of “intimidation” from Harrison.

In an interview with Maclean’s last week, Allison McCain, who runs the company’s operations in Great Britain, offered this explanation for wanting Wallace’s removal: “We have to make an orderly transition to the future. We just feel that it’s timely.” He acknowledged that the business is thriving. Despite the recession and the brothers’ feud, McCain Foods turned in record-breaking revenues and profits for the year ended June 30. Allison, 44, said that he is interested in taking over the top job eventually. “Quite honestly, I don’t have the experience to do that job today,” he said. “I may well have, at some point in time. But I don’t today.”

However the succession is finally resolved, the battle between the brothers injects a bitter closing note to a lifetime partnership and

THE MCCAIN FAMILY TREE

ANDREWAND LAURA (1879-1953) (1891-1982)

HARRISON (b. 1927)

WALLACE (b. 1930)

ANDREW (1921-1984)

ROBERT (1922-1977)

MARK

BUSINESS ANALYST, CORPORATE DEVELOPMENT DEPT., MCCAIN FOODS LTD.

SCOTT

V-P, PRODUCTION MCCAIN FOODS LTD.

ALLISON

MANAGING DIRECTOR, MCCAIN FOODS (GREAT BRITAIN) LTD.

BETH

I

ANDREW

~r~

PETER

V-P, EXPORT SALES, MCCAIN FOODS LTD.

MICHAEL

PRESIDENT AND CEO, MCCAIN USA INC.

STEPHEN

V-P, OPERATIONS, MCCAIN PRODUCE INC.

KIRK

(DECEASED)

MARY

ANN

ENVIRONMENTAL CO-ORDINATOR, MCCAIN FOODS LTD.

GILLIAN

MARGARET

[

NANCY

many good times together. As one early co-worker recently recalled from the days when the McCain brothers were employed by K. C. Irving, they didn’t act like typical Irving men. “Jesus, they were wild,” recalls one early co-worker. “They swore like troopers, and loved hard work, long parties and fast cars. They thought nothing of staying up all night and then putting in a 16-hour day the following day.” In a 1990 interview with The Financial Post,

Harrison described how they got started: “Both of us are salesmen. Wallace is good at administration and purchasing; I did the basic financing. Both us did the selling. You can always hire a guy to run the factory, but you’ve got to move it—flog it, as the Brits say.” For two brothers who proved that they could flog it, who built a multinational company in a town so small that ^ the McCain bonspiel is a major event, solving a problem 2 like succession should be easy. But it is not. And, unhap§ pily for the partnership, all the lawyers and public rela| tions experts in the country may not be able to put the I McCains back together again, o

BRENDA DALGLISH

Michael McCain: raising a family of five children in Chicago, T don’t want the job right now’

8 with JOHN DeMONT in Halifax and S MERLE MacISAAC in Florenceville