by Clifton Bertram
An object lesson in the root causes of the Occupy Wall Street movement came this week when Maple Leaf Foods, Canada’s leading consumer packaged food company, announced plans to shutter the Schneider plant in Kitchener after a presence in the community since 1886.
Over a period of more than 100 years, J.M. Schneider’s was based in Kitchener, and in that time became synonymous with quality meats. But the Courtland Avenue plant, which was built in the 1920s, was rapidly becoming outmoded and inefficient, according to Maple Leaf executives. Still the closing came as a big shock to the community, including Verne McPeake, who retired from the plant on September 1 after 43 years of service.
“I am in shock. There has been talk and rumours…it’s an old building and blah blah. But I never thought it would come to this because we have a good product.”
The loss is a bitter blow to a region still reeling from the downturn in the economy, and made worse by the current struggles being experienced by another pillar of the community’s business sector, Blackberry manufacturer Research in Motion.
Still, Maple Leaf says the historic Schneider’s brand will live on, and many of the employees will be given the opportunity to transfer to a new and modern Hamilton plant the company is constructing.
The new plant, as well as the closure of aging facilities like the historic Schneider’s operation, is all part of a Maple Leaf strategy to beef up efficiency. Despite eight consecutive quarters of increases in profitability, the meat packer has struggled to reward shareholders, who have become increasingly restless with the company’s lack of dividends. But the company’s billion dollar modernization plan has critics far beyond the Kitchener workers most affected, and provides a window into the kind of boardroom manipulations that have fuelled the Occupy Wall Street movement’s anti-corporatist agenda.
Until its takeover by Maple Leaf in 2003, J.M. Schneider’s was Canada’s second-largest packaged meat producer, and throughout that time it had been privately held, family operated in accordance with a community focused ethos. Regardless of the economic climate, Schneider’s did whatever was necessary to protect the jobs of its workers, and the well-being of the community. Layoffs were never considered an option. But the company’s attitude toward community responsibility declined sharply after the purchase, says Verne McPeake.
“It lost the family orientation. It was big business, we’re here to make money. It was all impersonal. It was a job, you came in and they paid you for it.”
The new owners, Maple Leaf Foods, were big business indeed. As part of the McCain Foods empire, the company had been operated for many years as a virtual private fiefdom by its majority shareholders, New Brunswick’s fabulously wealthy McCain family – one of Canada’s richest clans.
The McCain family has not had everything its own way in recent years, though, and it’s not only plant floor workers who are unimpressed with the company makeover and its impact on both workers and investors. Last year, the Ontario Teacher’s Pension, owner of 36% of the company’s shares, divested itself of one-third of its holdings to investment company West Face Capital, Inc., triggering a proxy battle over the wisdom of COO Michael McCain’s billion-dollar restructuring.
Michael McCain has been leading an investment program to try to plough money into that to make more money. Other shareholders look at this, and I think West Face may as well, and say there is no money to be made here, its a commodity business. You should probably just stop ploughing all this money into it and do something else with the cash.
The Toronto Globe and Mail reported last December that “Tom Dea, a partner at West Face, said in a statement that after having been “rebuffed on several occasions when we have raised these concerns with management and the board of directors, we have concluded that the board needs to hear a strong message from shareholders that the independence and governance practices of Maple Leaf do not satisfy their expectations or today’s standards of good corporate governance.”
Still, after West Face was granted two seats on Maple Leaf’s Board of Directors, its principals quietly dropped their objections to McCain’s plans – a move which ultimately left the Schneider’s Kitchener employees the losers in a game of Bay Street musical chairs where all the other participants are high-stakes Canadian establishment players: the McCain family and West Face investors like veteran Bay Street lawyer Purdy Crawford, Woodbridge Co. Ltd. chief executive officer Geoff Beattie and former Ontario Power Corp. CEO James Hankinson.
The damage that is in the process of being done to Kitchener and region by this move is just one symptom of what happens when corporations act like corporations, and not like individuals, capable of caring – and care-taking.
Author's Note: The first job I ever had was in the grocery business in a small prairie town, and the first and most important lesson I learned there was that if you look out for your customers and your employees, they will look after you. This was something that J.M. Schneider knew, but something that billionaire Michael McCain seems to have forgotten, as have many of today's balance sheet cowboy CEOs. If that weren't so true, there'd be a lot less need for anyone to Occupy Wall Street.