BUSINESS

A family food fight

BRENDA DALGLISH September 19 1994
BUSINESS

A family food fight

BRENDA DALGLISH September 19 1994

A family food fight

Almost a year to the day after the private fight between brothers Wallace and Harrison McCain exploded into public view with a lawsuit launched by Wallace, he headed back to court. Last Thursday, Wallace asked the New Brunswick Court of Queen’s Bench to resolve the wrangling over the future of McCain Foods Ltd., the $3-billion international frozen-food company he and Harrison founded 38 years ago in Florenceville, N.B.

He apparently made that move anticipating that 30 family members, gathered at a company shareholders meeting this week, would vote to oust him from his job as co-chief executive officer of McCain. And while the brothers battled back and forth, other family memg bers—as well as the 700 resi§ dents of Florenceville— watched with growing dismay.

“It’s just pitiful that they’ve let it come to this,” said Fred McCain, a cousin of Wallace, 64, and Harrison, 66, who lives in Florenceville and has no financial interest in the company. “I don’t think they even know what it’s all about any more.”

In a letter from Wallace to Harrison last week—which Wallace also released to the media—he complained that Harrison was being unreasonable about the proposals he has put forward to settle their dispute. “It seems the more flexible I become,” wrote Wallace, “the more rigid the approach you take.” In turn, Harrison, who has tried to keep the family feud private, was clearly unhappy with Wallace’s latest contact with the media. To a Canadian Press reporter seeking his response, he snapped:

“The press has the God damn letter in an hour and a half, and I’m still writing my notes to reply.”

Meanwhile, Andrew McCain, the

nephew of Harrison and Wallace and -

the chairman of the family holding company, McCain Foods Group Inc., says that Wallace’s latest lawsuit is similar to the one he launched a year ago when the brothers first clashed, over the issue of Wallace’s removal. That action, which was to head off the holding company board’s attempt to remove Wallace from his job, was eventually turned over to a private arbitrator, Judge Ronald Stevenson. At that time Stevenson ruled that because of a legal loophole that the holding company board had failed to close, Wallace could keep his job for the moment but could be removed in the future if the board followed

proper procedures. The judge also offered, in an informal letter to the brothers, his own solution to their dispute.

Wallace’s latest legal action requests that the court impose Stevenson’s recommendations that both he and Harrison step down as chief executive officers, that an outsider be hired to run the company and that a portion of the company’s shares be sold to the public.

The feuding McCain brothers take their private fight into the public courts But Andrew McCain insists that the majority of the family opposes this because they believe that taking the company public would harm their interests. “We intend to defend ourselves vigorously,” he said. “We don’t think the case has merit.” (Although only 30 family members were to vote at the meeting on Sept. 13, there are as many as 50 beneficiaries, including children and trusts, who have a financial interest in the company.)

Wallace and Harrison are co-chief executive officers and have jointly managed the company for years. However, they each control only 34 per cent of the company’s shares

and the remaining 32 per cent are owned by the families of their older, deceased brothers, Robert and Andrew, who were early and active investors in McCain Foods. “Wallace would like the world to believe that it’s a partnership [between him and Harrison],” said Andrew. “But it’s a corporation. It was incorporated in 1956 by four brothers.” For his part, David MacNaughton, a spokesman for Wallace, notes that until 1990, McCain Foods did not even hold board meetings. ‘Wallace and Harrison just ran the business,” MacNaughton says. “When they had something to settle they talked to each other.”

Still, Andrew McCain says that most family members object to a stipulation that shares in the familycontrolled company be sold to the public. Said Andrew: “Why should I, or any other shareholder, be forced to transform my holding in a private company—which has no need for the financing, incidentally— into a smaller holding of a public company to alleviate the concerns of one shareholder.” But according to Wallace’s spokesman, he wants the company to go public for two reasons. Public investors “would impose a proper corporate governance on the company,” says MacNaughton. Furthermore, the move would provide an orderly way for the company’s many family shareholders to liquidate some of their holdings in the future.

About one month ago, it appeared that Wallace and Harrison were coming close to reaching an agreement on the future of the company. Harrison sent Wallace a letter saying that he would consider Wallace’s proís posai that Judge Stevenson’s I recommendations be followed. But other family shareholders z objected to the share-sale proI posai and, on Aug. 23, Andrew 1 McCain tabled a motion to the “family holding company’s board that Wallace be removed from his job. The seven-member board accepted that motion and then called this week’s meeting of the family shareholders for a final vote. On Sept. 1, Wallace’s sons, Michael and Scott, also filed a lawsuit against the company, alleging that they are not receiving sufficient information to participate on McCain’s board of directors.

If this week sees Wallace McCain removed from his job, his last recourse will be to the courts. It would then be for the legal system to try to succeed where family has failed—in finding a formula for peace.

BRENDA DALGLISH