Archive for January, 2010

Look at those two men, Jim Balsillie and Mike Lazaridis, co-CEOs of Research In Motion, on the back cover of my new book. Don’t they look ready for takeoff? Well, so’s BlackBerry: The Inside Story of Research In Motion.

Regular readers of this blog will see a visual change. With BlackBerry due to be published on March 2, it was time to move on from Manulife, which was published last May. In the days ahead, I’ll be talking more about BlackBerry and RIM. Meanwhile, I can tell you I’ve enjoyed working on this book during the last three years. Much of what I’ve written has never before been told at all, let alone in such compelling detail. I had excellent access to the co-CEOs as well as other members of the executive team and RIM employees.

RIM is an innovative company that has grown from 100 employees in 1997 to more than 12,000 today. If only Canada had more such entrepreneurial global players.

I love a conspiracy theory as much as the next guy, but the one propounded over the weekend by the Canadian Association of Income Trust Investors (CAITI) is a bridge too far. I look at the group’s website from time to time and am amazed how long they’ve managed to maintain their fervor against the federal government for ending income trusts in 2006.
Among the group’s dark contentions is that Ottawa killed income trusts so that the life insurance industry, including Manulife, would have a clear field to sell retirement plans.
That’s quite stretch but nothing like CAITI’s recent claim that NDP finance critic Thomas Mulcair “is completely unaware of that event that almost saw Manulife go ‘too big to fail’ on Canadian taxpayers.”
That statement is a bit awkwardly put, but I assume CAITI means that Manulife almost neeed a bailout by Ottawa. As someone who closely studied Manulife during the period in question, let me say that nothing could be further from the truth.
When the stock market crashed in 2008, Manulife lobbied for help from the regulators and the minister of finance. If Ottawa had been favoring the firm as CAITI claims, you’d think the powers-that-be might have acquiesced. Instead, Ottawa made matters worse for Manulife by demanding that the firm add $11 billion to capital when others in similarly besieged circumstances needed to find only $600 million.
That’s why Manulife took out a bank loan, issued equity, cut the dividend and saw the share price collapse from $39 to $9.
Other than that, it’s a heck of a theory.

Standard & Poor’s yesterday dropped its credit rating on Manulife Financial to A+ from AA-. Normally, a one notch fall like that wouldn’t matter much, but in this case, the agency had warned management in advance. S&P didn’t like a plan by Manulife CEO Donald Guloien to reorganize U.S. operations claiming that what he had in mind would reduce the company’s cash flow.

Guloien went ahead anyway, thereby proving that as a leader, he’d rather be a loner than someone who just plays along. You can see that personality trait in his music. Guloien’s father and his many aunts and uncles are all musical. A cousin, who took the stage name P.J. Perry, plays bebop saxophone and has won two Juno awards. Guloien also plays the sax, but admits he has no sense of rhythm or timing, so he can’t perform in a band. Twenty years ago, when he was taking lessons, his teacher told him to leave his sax at home. In an attempt to improve his errant timing, Guloien spent the next few lessons clapping his hands to a machine with flashing strobe lights. “You’re hopeless. I’ve got a three-year-old who could do better,” said the instructor. “Are you really trying?”

Guloien told me that his self-confidence was eroded and he stopped playing the sax for a while. “Then I thought, ‘I never intended to play in a band anyway. I don’t have the time. The hell with him.’” Guloien bought a sopranino, a small sax with a high, shrill sound that doesn’t carry very far. In those days, he’d take the instrument when he traveled on business. In the evening, he’d relax by playing in his hotel room, all by himself, confident that he was not disturbing the other guests.

The man has not changed in the years since. No ratings agency is going to call the tune for him.