At age 92, Stephen Jarislowsky is finally planning his retirement. Sort of.
After completing the sale of his investment-management company to Bank of Nova Scotia on May 1, Mr. Jarislowsky is winding down his active work with the company and is handing over his last 200 accounts to others this summer.
He will move out of the company’s offices in downtown Montreal when his new office is ready, just a couple of floors above in the same building. Then the billionaire money manager will focus to the next chapter of his life, which will be devoted to giving away most of his share of the $950-million he and the firm’s partners received from the sale Jarislowsky Fraser Ltd. to Scotiabank.
His private foundation has been making donations for many years, but Mr. Jarislowsky said the task will become an even bigger focus for him now that he has sold his company.
“You cannot just throw money into a foundation,” he said in a recent interview. “You have to manage it. It’s probably more difficult to give money away intelligently than it is to build money.”
And build money he did. Mr. Jarislowsky founded his firm in 1955 with then-partner Scott Fraser, initially as a boutique research firm, and later as a leading money manager for institutions such as pension funds. It grew into one of Canada’s largest independent investment managers with more than $40-billion in assets under management, making Mr. Jarislowsky one of Canada’s richest people in the process.
His charitable foundation will be the work of his “dying years,” he says, guided by his focus on developing targeted areas of excellence – a lifelong motto for Mr. Jarislowsky in his personal and professional dealings.
Governments, he says, should fund basic services, while wealthy individuals have a responsibility to nurture extraordinary advancements.
“Any human being who rises in fortune and anybody who is able to have a foundation should aim for excellence, and not pay for the norm – that’s the government’s function,” he says. “The excellence in society can come, and should come, from people who have more money than they need.
“That’s why I back first-class art, first-class music, why I’m interested in the environment to the extent that I can set up chairs in water management, for instance.”
The Jarislowsky Foundation has already provided endowment funds to create 36 university chairs across Canada, typically research positions for senior academics focused on areas such as corporate governance, the protection of democracy and improved environmental standards.
The foundation has also funded medical causes – helping develop the Navigator Project, for example, which steers patients more quickly through cancer treatments – and has donated to numerous arts, music and cultural organizations.
Reflecting on a 63-year career in the investment business, Mr. Jarislowsky says he is most proud that he “aimed for excellence to the extent I was capable of doing it.”
His passionate work promoting better corporate governance in Canada was part of that effort.
Mr. Jarislowsky helped co-found the Canadian Coalition for Good Governance in 2002 – a powerful group of institutional investors that advocates for better board oversights of companies. He has also helped provide endowment funds to FAIR Canada, a Toronto-based organization that advocates for regulatory reforms to benefit small shareholders. In Montreal, he helped create the Institute for Governance of Private and Public Organizations in 2005, which does research and makes recommendations on governance improvements.
What kind of progress has actually been made? Mr. Jarislowsky says governance has improved dramatically in Canada – including in the investment fund sector – over the past 15 years. But executive compensation remains a disappointment, with pay levels rising too high. The best people, he says, do not demand tens of millions to do a job.
He says he strongly believes people chosen for top management make the greatest difference in a company’s fate, yet says he is still not willing as a shareholder to approve such enormous compensation levels.
“If you hire really grown-up, mature people, they don’t only work for money. If they only work for money, I don’t want them,” he says.
“That was never necessary, and the quality of management doesn’t go up by raising the pay. I’ve seen extremely successful companies where the president got half of what his main competitor got. I’ve never worked for money alone. I work because I feel there is great satisfaction in being productive and doing something good.”
The ideal CEO compensation model would provide a good base salary and an annual bonus for extraordinary performance.
Mr. Jarislowsky would grant no stock options, and would expect a CEO to either buy shares with part of his bonus or take share units as a portion of his bonus – but not receive equity as additional compensation heaped on top.
He also supports initiatives that have given shareholders more input on compensation and the election of directors, including the introduction of say-on-pay votes and majority voting. The next step, Mr. Jarislowsky says, is for Canadian companies to allow “proxy access,” adopting guidelines that allow large shareholders to propose director nominees whose names would be included on the main voting ballot.
If shareholders own 3 per cent of a large company, they may not have control, but they should still have the right to suggest directors, he says. “I think it’s a legitimate demand.”
He is not a fan, however, of one current governance trend. He disagrees with calls for boards to set targets to add more female directors, saying women should join boards because of their skills and not because they are filling a quota.
“I think there are more and more women going on boards that are of excellent quality, but I don’t think there should be a political thrust in this,” he says. “It should be based on ability and the individual situations.”
The decision to retire came down to timing – and family. Mr. Jarislowsky says he decided to sell his firm this year in part because he didn’t want the company to stumble if he were to die while still involved in its operation.
His only child working at the company – daughter Alexandra, who is director of research – is based in New York, he says, which he felt is too far from Canada to oversee the company.
(Mr. Jarislowsky had four children, but son Stephen died in 2014 at the age of 64 after a long illness. His other son and daughter do not work in the business. He also has five grandchildren.)
“I didn’t want my widow, who doesn’t have any interest in business or this type of stuff, nor my daughter, to be at the mercy of 32 other partners,” he says.
“Knowing human nature, I felt that was a recipe for nothing but strife. I could hold it in check myself, but I couldn’t be sure that would be the continuation. I didn’t want my heirs to say the guy left a mess.”
The decision to sell to Scotiabank made sense, he says, because it isn’t easy for an independent money-management firm – even one with $40-billion in assets under management – to compete with the size and global scope of the major banks.
Jarislowsky Fraser manages money for pension plans and other institutions, but asset management is increasingly divided into smaller niche areas of expertise, which requires specialized staff with research clout in each area, Mr. Jarislowsky says. The company also manages money for wealthy individuals and families, but he says it is getting harder to compete for new business with banks that have thousands of employees to act as their sales force.
Scotiabank will bring clout and support, he says, while allowing Jarislowsky Fraser to continue operating independently. The firm will keep its name, its office in Montreal, the same management team and investment autonomy.
“A firm like mine will get all the benefits that a bank can bring your way because the bank is the full owner of the company.”
Mr. Jarislowsky says he will continue to live a simple life in Montreal in the same house he bought in 1972 with his wife, Gail.
He has no yacht, no private plane and didn’t even fly business class until he reached “a certain age.” He says part of living an ethical life is to live “like a normal person.”
Mr. Jarislowsky calls ethics his religion. Although born to Jewish parents in Germany in 1925, he says he is not a traditionally religious person and doesn’t “believe in all the hocus pocus.”
“I think it’s all fairy tales,” he says of traditional doctrines. “I think it’s basically a country club where you feel superior to some other country club.”
Applying his ethical beliefs in his business career meant more than acting honestly, he said. It meant considering himself a “fiduciary” who was legally responsible for putting his clients’ interests first – a level of professional obligation he believes politicians and other public servants should also adopt.
“Ethical behaviour is something an intelligent, grown-up person will decide is the way to live,” he says. “It’s the easiest way to live, and the best way to get respect and recognition from people.”