A FINAL TEST
We sometimes had those little rubs which Providence sends to enhance
the value of its favors.--_Vicar of Wakefield_.
While developing co-operative purchasing of farm supplies the pioneer
business organization of the farmers had continued its policy of
expansion in the grain business. The ideal of the farmers had been to
reduce to the lowest possible point the cost between the producer in
Western Canada and the Old Country consumer who bought most of the
Western grain. By engaging in the export business they hoped to become
an influence in keeping export values--the price at Port William, in
other words--at a truer level.
Prior to 1912 the export activities of the Grain Growers had been
restricted necessarily to an experimental basis; but on January 1st,
1912, the "Grain Growers' Export Company," as it was called, was
organized for business on a larger scale.
It now becomes necessary to record a final test of the Grain Growers'
Grain Company inasmuch as it demonstrated the mettle of the farmers in
a significant manner--the test of serious internal disagreement. Of
all the threatening situations through which this organization had
passed none was more critical than this later development.
The trouble was a brew which simmered for some time before the steam of
it permeated beyond directors' meetings. It began early in 1912 as an
aftermath of the unfortunate deal in oats, bubbled along to a boil with
the fat finally in the fire at the annual meeting of the shareholders.
The consequences were ladled out during 1913 and the bill was settled
in full at the annual meeting that year with a cheque for nearly a
quarter of a million dollars.
Like most internal troubles in business organizations the personal
equation entered into it. Certain of the directors were inclined to
criticise other directors and to be somewhat dictatory as to how the
farmers' business should be conducted. With the idea of improving the
system of management, the directors at this stage abolished the Board
of Control and the President was made Managing-Director with
supervisory and disciplinary powers.
Not long after this, at a special meeting of the directors to consider
future management, four of the nine directors introduced a resolution
to declare the position of Managing-Director vacant. They failed to
carry it--and promptly resigned.
This occurred in March. In the June columns of the _Guide_ these four
directors addressed an open letter to the shareholders, urging full
representation at the forthcoming annual meeting in order that their
criticisms might be threshed out. President Crerar joined in the
request for a full meeting of shareholders. If the loyalty or ability
of any director was to be questioned because he refused to surrender
his judgment to other directors who might disagree with him on certain
matters, it was time to have an understanding. So far as he was
concerned, he could not agree to become a mere speaking-tube for others
who might want their own way against his own convictions of what was in
the best interests of the farmers.
When the annual meeting opened, on July 16th, there was a record
attendance of shareholders and during the routine preliminaries it was
evident that expectancy was on tip-toe among the farmers. The split in
the directorate was a vital matter.
In delivering his annual address the President detailed the business of
the organization for the past year, referring but briefly to the facts
which had led up to the resignation of the four directors. The
Shareholders' Auditor followed with the balance sheet, giving detailed
accounts of receipts, expenditures, assets and liabilities; he answered
all questions asked. Then came a resolution, expressing the thanks of
the shareholders to the President--and this moment was chosen by the
leader of the revolt to spin his pin-wheels.
The debate began at three o'clock in the afternoon. It did not end
until ten at night. The President retired from the chair and the
Auditor was called on for detailed information, covering a period of
several years past. In the long speech which was then made by the
leader of the critics the President was declared responsible for all
the alleged mismanagement and his retention in office undesirable.
To the surprise of everyone a fifth director now took the floor and
joined the attack. Not having been one of the four directors who
resigned, this new criticism was unexpected and the tension of the
meeting grew. After amusing himself and the audience for awhile with a
humorous speech, No. 5 ended by suggesting that the President was not
sufficiently wicked to be driven from office.
Arose the remaining three members of the resigning quartette and, one
after another, had their say. Finally, when words failed them and they
rested their case, the President spoke briefly.
In the annual address, which he had delivered that morning, no attempt
had been made to deny the inadequacy of the Company's office
organization to cope with the exceptional crop conditions of 1911 and
1912. The latter season particularly had been very trying owing to the
lateness of the crop and the wet harvesting conditions. Twenty-five
per cent. of the grain, which started for market a month late, was
tough, damp or wet. The arrival of snow had prevented hundreds of
thousands of acres from being threshed and, on top of it all, railway
traffic had become congested so that cars of grain got lost for weeks
and even months and there were long delays in getting the outturns of
cars after they were unloaded. Money was scarce and farmers who were
being pressed for liabilities to merchants, banks and machinery
companies found it hard to get cars; naturally, once they had shipped,
they were in no mood for further delays.
Owing to the condition of the grain, too, the grading was so uncertain
that exceptional care had been necessary in accepting bank drafts on
carloads of grain for amounts nearly double their possible value under
the unusual current crop conditions. Even with the greatest care the
Company found that in many instances they had given greater advances
than were realized when the cars were sold. The refusal of drafts,
passed by some local banks for amounts the managers should have known
could not be met, led to many hard things being said against the
farmers' agency.
Under these conditions it was only to be expected that the work in the
office would become congested badly for weeks at a stretch. Double the
amount of work was entailed in handling a given quantity of grain,
compared to the season before. The Company was handicapped for office
space also and errors were bound to occur in a business involving so
much detail that a simple mistake might lead to infinite trouble.
Correspondence had not been answered as promptly as it should have
been, the necessary information regarding shipments being unavailable.
All of these things had been met frankly in the President's annual
address and now when he brought the day's animated debate to a close he
added merely a word or two regarding the strong financial position to
which the farmers' pioneer trading organization had won its way in the
commercial world. He pointed out the future that lay before it. Upon
personal attacks he did not comment at all.
Immediately a unanimous vote of thanks for his untiring work and
loyalty was tendered Mr. Crerar. The debate was over. The following
morning the officers for the ensuing year were chosen and only one of
the four directors who had resigned from the old Board was re-elected.
He withdrew and the whole incident was closed.
But the real test was yet to come. The withdrawal of the four
directors had left but five to cope with the difficult situation of the
Export Company. It had found itself with a large amount of ocean
freight on its hands--freight which had been secured on favorable terms
from shipping agents for use later in transporting grain which the
farmers' agency expected to sell in the Old Country. It was decided to
cut off the export business entirely for the time being and to re-let
the ocean shipping space to other exporters. The price of ocean
freight fluctuated to such an extent, however, that rather than accept
an immediate loss it was thought better to use the freight, after all,
making shipment to fill.
At the time of the sixth annual meeting the Export Company had stood
about level on the books; but during the two succeeding months the
grain shipped from Fort William went out of condition while crossing
the ocean and when it arrived in port the Old Country buyers refused to
look at it. Heavy charges had to be met in treating to bring it to
sale condition and very heavy losses were incurred. Before the matter
was cleaned up finally these losses totalled more than $230,000.
When a quarter of a million dollars has been expended in a direction
where tangible results have not been in evidence--when it has been
sacrificed apparently for the sake of a principle--then does the manner
in which such a loss is accepted become significant. The exporting of
grain had begun to receive particular attention from the shareholders
of the Grain Growers' Grain Company following the season of 1907-8 when
they discovered the apparent margin of profit in the export business
during much of the season to be from eight to twelve cents per bushel.
This had been due, no doubt, to the fact that it was a time of
financial stringency and only a few exporting firms could get the money
necessary to carry on the business. The export value of grain, the
farmers had figured, should be its value in the world's markets, less
the cost of delivering it. By engaging in the export business,
obtaining their cable offers regularly from the Old Country, they felt
that their competition would be a factor in governing the prices paid
the farmer, thereby benefiting every farmer in the West.
That this had been accomplished the shareholders of the trading company
were convinced. Therefore, instead of losing their heads as well as
this large sum of money, they examined the situation coolly and sanely,
making up their minds that the loss was due to the grain going out of
condition because of the unusual weather which had characterized the
season. No doubt the executive and directors had been handicapped by
their lack of knowledge as to the methods and manner in which the
export business was done; but that was to be expected and only by
experience could they learn.
"Can the export part of our business be developed successfully with a
little more time?" asked the farmers.
"Yes, we believe so," replied their officers.
"That's all we want to know. Write a cheque to cover this loss,
reorganize the Export Company and stick to it."
This faith in their officers, in themselves and in the cause they had
at heart was justified within the next two seasons when success was
achieved with the subsidiary concern and the farmers were able to
congratulate themselves that they had been sufficiently level-headed
not to allow themselves to be stampeded from the exporting field
altogether to the great weakening of their influence.
The accomplishments of the Grain Growers in marketing their own grain
cannot be dismissed with careless gesture. Their severest critic must
admit that the manner in which the farmers conducted themselves in the
face of the situation that threatened entitles them to respect.