It was ironic that on March 2—just two days after Eaton’s filed for bankruptcy protection—a soiree was staged at the Eaton Centre in Toronto to celebrate the mail’s 20th anniversary. Calling it a “Salute to the city,” organizers threw the bash for 250 of us dubbed "Toronto’s most outstanding people.” For two hours or so, we munched on canapés and mingled around a stage in front of Eaton’s flagship store. Fred Eaton was among the honorées and in a quiet moment, he wryly commented to me: ‘Timing is everything, isn’t it?”
The observation was appropriate. He was being honored just as the family business tottered on the brink, thrusting the Eaton family into a harsh public spotlight. Of course, the timing of the event had been determined months before. And the sudden decision to seek protection was not a case of guile but a case of reality finally triumphing over hope. Sustained losses continued to mount and the bankers’ patience had worn thin. The retailing empire founded by Timothy Eaton more than a century and a quarter ago had been in trouble for a few years, along with many other retail empires. And as other businesses before had discovered,
Eaton’s problems eventually became unwieldy—the result of strategic mistakes amid changing times.
As with any such outcome, the fallout will be far-reaching. Suppliers and creditors will be out of pocket, stores will close and people will lose jobs. It is tragic when a business begins to fail and doubly tragic when it is a household word. But I believe Eaton’s will survive as a scaled-down store chain.
The blow to the Eaton families’ retail empire also has another significance. It marks the diminution of another of the 32 Canadian families I identified in a 1986 book, Controlling Interest: Who Owns Canada?
That book estimated those 32 families controlled a staggering one-third of the country’s corporate assets. I warned about the dangers of such familial economic concentration of power and called for proper competition laws and free trade to open up Canada’s marketplaces. Since then, 13 of the 32 families have fallen on hard or, at the very least, more difficult times. And while tag days for the remaining family members are hardly necessary, the facts are that the Scottish expression “shirtsleeves to shirtsleeves in three generations” has been borne out. Concentration of economic power in a dynamic, competitive marketplace rarely remains in the same hands forever.
That is because no proprietor is perfect and able to outdistance all competitors. No owner can always forge the correct strategies. In Canada, too many successful families had made their fortunes simply because they were already wealthier than most rivals. They also were protected from foreign rivals thanks to tariff barriers.
And they were allowed to knock around smaller competitors as a result of Canada’s thoroughly inadequate competition and stock market securities regulations. But since the mid-1980s, that has no longer been the case.
Once new competition laws kicked in, they contributed towards busting up the unhealthy marketplace concentrations, giving consumers a break and other entrepreneurs new opportunities. Equally helpful in terms of providing consumer choice and busting up Canada’s family trusts was the North American Free Trade Agreement plus the 1994 ratification of the Uruguay Round of the General Agreement on Tariffs and Trade.
Among the 13 family casualties were the Reichmanns, Steinbergs, Belzbergs, Poslunses, Romans, Manns, Ghermezians, Loves, and now the Eatons. Most remain in business but are mere shadows of their former selves, worth considerably less now than in 1986, just 11 years ago.
The other four families whose empires are not gone, but have been diminished, divided, or altered measurably are the McCains, the Ivaniers, the Molsons, and the vast HeesEdper holdings of the late Peter Bronfman (older brother Edward was bought out before trouble struck). All have suffered huge financial setbacks.
The reasons for their demise or shrinkage vary. Retail woes plagued the Eatons, Steinbergs, Robert Campeau, the Poslunses and Ghermezians. The Reichmanns, Manns, Loves and Hees-Edper group suffered from too much debt and the collapse of overvalued real estate assets. The Romans lost vast sums on a misguided coal mining scheme and soaring debts. The Ivaniers, owners of steel giant Ivaco, suffered the double whammy of market downturns and heavy borrowings. The Molsons have been selling off non-brewery assets and facing more competition than ever before in their beer business. As for the McCains, the family business still thrives, but the family has been splintered as a result of a fraternal feud.
Concentration of economic power still exists in Canada but its size, relative to the economy as a whole, has been greatly diminished. New players have filled the vacuum left by these families, the assets have been sold or seized or mortgaged, and vast new fortunes have been made by immigrants and other new entrants in the high-tech, resource and retailing sectors.
The unfortunate demise of the Eaton retail chain underscores the fact that free enterprise is about failures as well as successes. The Eatons made mistakes in running their stores. But they should not be pilloried or pitied. They rolled the dice, as any entrepreneurs must do, and lost. They have paid an enormous price. But the Canadian economy will continue to roll on. Only the names change. And the names are not important.
Concentration of economic power still exists in Canada, but a new breed is rising to make their own vast fortunes
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