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The Globe and Mail

Michael McCain's got a stomach for change

Illustration of Michael McCain, chief executive officer, Maple Leaf Foods Inc.

Anthony Jenkins/The Globe and Mail/Anthony Jenkins/The Globe and Mail

For Michael McCain, it has been the summer of change.

Start with the biggest change of all: He is without his best friend and confidant – his father, Wallace, who died in May. At the funeral service, held in Toronto and simultaneously broadcast in two churches in New Brunswick, Mr. McCain told the assembled mourners that he called his dad nearly every day at 7:30 a.m., "just to hear his voice, just to ask him how he was doing." So there is a void now in his life and in his morning routine, and also one in the boardroom at Maple Leaf Foods Inc., where the father, as chairman, served as adviser and boss to the son.

His financial circumstances are changing, too. After Wallace's death, family assets are being shuffled. When that's done, Michael McCain will have a much-reduced stake in McCain Foods, the private family business out of Florenceville, N.B., that sells frozen pizzas and French fries. Instead, he will have most of his personal wealth tied up in Maple Leaf, a public company where mistakes – including his own – are exposed to broad scrutiny.

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All of which is to say there's probably more pressure on him now than ever. At 52, Mr. McCain has many things: a personal fortune worth hundreds of millions of dollars, a permanent spot in the Canadian establishment and a big job as the head of one of country's largest food companies. What he doesn't have is time to waste. There's something to prove here.

The shareholders are banging at the gates and they want to see a return on their investment – something Maple Leaf hasn't been able to provide in quite a long time. The company's stock price is lower than it was a decade ago (when dividends are included, it has produced the tiniest of returns). Last year, the Ontario Teachers' Pension Plan grew tired of waiting and divested its entire 35-per-cent stake, bringing a somewhat bitter end to its long partnership with the McCains. Nearly one-third of those shares wound up in the hands of West Face Capital, an aggressive Toronto hedge fund known to be big on results and short on excuses. A brief skirmish ensued, resulting in Greg Boland, West Face's founder and chief executive officer, joining Maple Leaf as a director to change the climate in the boardroom.

What hasn't changed for Mr. McCain lately is his unwavering belief in his blueprint – a massive overhaul of the business that involves spending more than $1-billion to replace some of Maple Leaf's medieval factories – and his confidence that by following it, he can make the next 10 years more rewarding the past 10 were.

"Our choice, really, is to fix the business or get out of it. Because you're not going to run a broken business." Realizing his choice of words, he tries to correct: "Or a broken supply chain, I should say. Not a broken business."

Inside a Maple Leaf boardroom, we sit down to a sampling of the company's products: chicken breast on salad with raspberry vinaigrette; a turkey sandwich with vegetables on Dempster's rye; Olivieri-brand cannelloni; garlic bread; Schneider's bacon and wieners. (All of it is prepared by John Placko, a chef who bears the title "director of culinary excellence.") Mr. McCain, who is probably the only multimillionaire in Canada who would describe a hot dog as "absolutely spectacular," then begins an examination of the less-than-spectacular shape of Maple Leaf itself.

For instance: There's a bakery close to downtown Toronto. "That plant was built in 1903. The oven was commissioned four years before I was born, in 1954. The floors are wood, okay? They've got wooden floors. I mean, this is an asset that has seen its day." He has plenty more like that. After taking control of Maple Leaf with the financial backing of Teachers in the mid-1990s, he and his father made 30 acquisitions. Then they used the favourite crutch of Canadian manufacturers – a weak dollar – to compete with U.S. rivals, papering over the inefficiencies on the factory floor.

When the loonie rose from 62 cents (U.S.) to parity, that game was up. It is the story of Canadian manufacturing, writ small: Too many plants, with too many workers, using technology that is too old, and producing too little, at a cost that is too high. (The proof is in the profit margins, which are thinner than shaved meat. On nearly $5-billion(Canadian) in sales, Maple Leaf earned a grand total of $26-million last year.) Most executives don't talk down their own companies in this way. But Mr. McCain has something to sell here (his plan), and he isn't shy about his considerable talent as a communicator to sell it.

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That skill was put to the test in a big way three years ago, when deadly bacteria found its way into Maple Leaf meat, killing more than 20 people. Had the crisis been handled badly, it might well have killed the company itself. Instead, Mr. McCain was lauded for his response to it: Almost immediately, he went on television, looked straight into the camera, and apologized. For PR professionals, the episode has become a case study in crisis management. It has even been the subject of an academic paper by two professors, who called it an example of "how communication can generate widespread support even after an error with tragic consequences has occurred."

Watching his TV apology, though, one can detect a hint of fear in his facial expression. Was he worried that the scandal would sink Maple Leaf? "Of course. The day it happened," he says. He was in his office when he found out about that the first death. "The realization was, you're looking over the precipice."

In the end, Mr. McCain and Maple Leaf suffered financial damage but escaped with consumers' trust intact. Still, he has regrets. He wishes he had known more about food safety before the crisis hit. "You show me a leader that can't look and say, 'Boy, I made mistakes and wish I would have done that differently.' If you can't [admit that] you're a very dubious leader of anything, at any time, in any circumstance."

And, he hastens to add, the tainted-meat scandal set him back in his efforts to restructure Maple Leaf. He figures he probably lost at least two years of progress. Even now, faith in that plan is far from universal, not even inside the company. On a recent tour of Maple Leaf plants and offices, Mr. McCain says, he spoke to 4,500 employees, then polled them using electronic voting technology. They were asked, "How confident are you we can get this done?" About 10 per cent answered in the negative; another 20 per cent worry that he is moving too fast. "We viewed it as very strong support," he says.

Even so, some wonder why he wants to take the long, hard way when there are big multinational food companies that would be eager to pay a premium to buy the company.

Mr. McCain professes to be open to the idea. But he is far from convinced that selling out is the right thing to do. The legacy of his father is never far from his mind.

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"He and I both shared a conviction and a commitment to building things. It's much better to commit to build than it is to commit to tear down," Mr. McCain says. "That conviction doesn't change today. That's what he would have wanted. That's what he loved. That's what I love doing."

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CURRICULUM VITAE

FAMILY

Born Nov. 13, 1958 in Florenceville, N.B., to Wallace and Margaret McCain. His father and three uncles founded McCain Foods, the French fry giant, in 1957.

Married to Chris McCain. They have five children: Jonathan, Lauren, Hilary, Scott and Hannah.

BEGINNINGS

Educated at Mount Allison University in Sackville, N.B., and the University of Western Ontario, where he received his business degree.

According to the book Family Ties: The Real Story of McCain Feud, on his graduation day from UWO he told his uncle: "Oh, by the way, just so there's no misunderstanding, my ambition is, some day, to have your job."

CAREER

Joined McCain Foods right out of university, in 1979. By 1990, still in his early thirties, he was running the company's U.S. division.

Left McCain Foods in 1995 amid a widely publicized dispute between his father and his uncle about which of the McCain offspring would lead the company.

He and his father joined forces with Ontario Teachers' Pension Plan to take a controlling interest in Maple Leaf Foods in 1995. Michael McCain became chief operating officer, and was promoted to CEO in 1999.

Sits on a diverse range of boards, including Royal Bank of Canada, the American Meat Institute, and the Centre for Addiction and Mental Health Foundation.

MANAGEMENT STYLE

Believes in constant communication and is known to go on cross-country tours of Maple Leaf plants, talking to employees. A BlackBerry is always nearby.

A fan of: The "Six Sigma" management strategy employed by companies such as General Electric.

Not a fan of: People who claim they're too busy to take a vacation. "That's in my view a sign of a weak manager, that they're not on top of their game [if]they say they can't afford the time."

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IN HIS OWN WORDS

On the death of Wallace McCain:

"They say that there's nothing more intense for a man to go through than the passing of his father. It's certainly true for me."

On his decision to take a larger financial position in Maple Leaf and sell down his stake in McCain Foods:

"There are many entrepreneurs in life that have all of their eggs in one basket. Does that sometimes lean into risk? Of course it does. But that's life."

On the most frustrating thing about his summer vacation in Greece:

"I was dying to find some place where I could throw some plates against the wall so [I could say]that I did that. Jesus, I thought that was the ceremonial thing you're supposed to do in the Greek Islands. Couldn't find a place to do that."

On criticism from shareholders:

"You know, there's always critics. There always has been, always will be."

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