The Nation’s Business

From dynastic myth to mere mortals

Peter C. Newman March 10 1997
The Nation’s Business

From dynastic myth to mere mortals

Peter C. Newman March 10 1997

From dynastic myth to mere mortals

The Nation’s Business

Peter C. Newman

Until last week, Canadians felt a very special relationship with the Eaton family, the closest this country has ever come to having its own aristocracy. Only 25 years ago, the family’s department store chain still ruled Canadian retailing. Eaton’s set our national style; the family lived like kings, occupying private castles and even erecting its own church. Eaton’s was the country’s fourth-largest private employer, ranking right behind the two railways and Bell. The company’s 62 stores moved goods worth $25 million a week (half of all merchandise sales), while their catalogues enjoyed annual circulations of 18 million copies.

Four generations of Eatons have extended the company, founded by Timothy in 1869, across the country and through mail order offices into every hamlet.

They turned the stores’ sales pitch—“Goods satisfactory or money refunded”—into a phrase as familiar as the first line of the national anthem.

Although the family’s idea of staging elaborate Santa Claus parades in Canadian downtowns was copied by rival department stores, the kids knew which Father Christmas to trust. “Eaton’s Santa was the real one,” recalled Rick Rabin, of Gander, Nfld., who once lined the parade route. “You can’t fool kids about anything as important as that.”

Befitting their aristocratic behavior, the family had its share of eccentrics. Sir John Craig Eaton (son of the founder) and his wife lived like monarchs in a 70-room Norman castle they built just north of Toronto. They travelled the country in a private railway car, spending most summers abroad at a villa (originally built for Queen Elizabeth of Romania) in Florence. Lady Eaton made the headlines only once. In a 1927 interview with the Toronto Daily Star, she praised the Italian dictator Benito Mussolini because there were “fewer beggars hanging around the cathedrals.”

Her son, Timothy Craig Eaton, spent most of his life playing with model trains. His prize possession was a one-eighth-size model of the locomotive that had pulled Sir Winston Churchill’s funeral train. One of the family’s many legends is the tale of one famous Eaton mistress who, when asked what would make her happy, brazenly declared that she wanted “one of everything” in the family’s Montreal store. The merchandise kept pouring into her apartment (that featured a bedroom lined entirely in mink), until a load of bicycle tires was delivered and there was no place to stack them up. That was when she called a halt to the charade. In 1909, the family built its own United Church, Timothy Eaton Memorial, in midtown Toronto, which quickly became the Establishment place of worship.

Unlike most family dynasties, which fall apart as succession duties dilute their holdings, the Eatons discovered a way of passing on

their fortune virtually intact. Their secret was “estate freezing,” a process that allowed the hiving off of assets into a holding company (Eaton’s of Canada), which controlled all the common stock. It was placed under the control of succeeding generations after payment of a relatively modest gift tax.

John David Eaton, father of the four brothers whose flawed stewardship has reduced the once-proud firm to near-pauper status, headed the firm from 1942 to 1969, and like his predecessors prided himself in never going to the market for new investment capital. That maintained the family’s obsession with keeping balance sheets secret, but it also kept the stores from being modernized.

The current generation took over in the early 1970s and under Fred’s leadership, the company initially prospered with net profits totalling an impressive $60 million by 1979. It was only when the brothers grew bored with the business and hired a daisy chain of surrogate managers that things began to fall apart. Part of the trouble was that while Fred emerged as the natural leader, none of the brothers had clearly been designated to carry the family’s corporate torch.

Fred himself left to serve as Canada’s high commissioner in London from 1991 to 1994, and when he returned, his heart was no longer in retailing. He began, with brother George, to transfer the family fortune from yesterday’s business (department stores) to tomorrow’s technology—by acquiring control of the Baton Broadcasting System, and eventually the CTV network.

Of the brothers, only George has been spending his full time minding the store. John Craig devotes most of his energy to good works. Thor concentrates on his racing stables. Only two of the brothers’ children— John David and Fred Jr.—work in the stores.

I saw Fred Eaton in Toronto on Dec. 20, 1996. It was the Christmas rush and he was following family tradition by walking around the stores, wishing employees a happy holiday. When I asked about the retailing revolution that was devastating his industry, he shrugged: “Our company was accused of being the Wal-Mart of its age when Timothy was running it, because it was so different from anything that had come before. There is room for all kinds of operations, the more traditional, fashion-conscious retailers like us, and the big box discounters like Costco and Wal-Mart.”

As I was leaving, I mentioned the rumors swirling around the company for the past decade. Was Eaton’s in big trouble? “No, no,” he shot back. ‘Why would you think that? There are always stories about us, that we’re being sold or something. Nothing to it.” Two months later, Eaton’s was seeking court protection, the first step towards either bankruptcy or sale to an American mega-retailer.

Family dynasties that aren’t properly nurtured, perish. Even the Eatons.

‘There are always stories about us, that we’re being sold or something,’ said Fred Eaton. ‘Nothing to it.’