The Hand-over

by Elaine Dewar

  THE HANDOVER

  The Handover

  How Bigwigs and Bureaucrats Transferred Canada’s Best Publisher and the Best Part of Our Literary Heritage to a Foreign Multinational

  Elaine Dewar

  BIBLIOASIS

  WINDSOR, ONTARIO

  Copyright © Elaine Dewar, 2017

  All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher or a licence from The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright licence, visit www.accesscopyright.ca or call toll free to 1-800-893-5777.

  FIRST EDITION

  Library and Archives Canada Cataloguing in Publication

  Dewar, Elaine, author

  The handover : how bigwigs and bureaucrats transferred Canada’s best publisher and the best part of our literary heritage to a foreign multinational / Elaine Dewar.

  Issued in print and electronic formats.

  ISBN 978-1-77196-111-0 (hardcover).--ISBN 978-1-77196-112-7 (ebook)

  1. Publishers and publishing--Canada. 2. McClelland and Stewart

  Limited. 3. Consolidation and merger of corporations--Canada.

  4. Consolidation and merger of corporations--Law and legislation--Canada.

  5. Investments, Foreign--Law and legislation--Canada. 6. Canada. Canada

  Investment Act. 7. Book industries and trade--Canada. 8. Press law--

  Canada. I. Title.

  Z483.M33D48 2017 070.509713’541 C2016-907946-5

  C2016-907947-3

  Edited by Daniel Wells

  Copy-edited by Allana Amlin

  Typeset by Chris Andrechek

  Cover designed by Michel Vrana

  Published with the generous assistance of the Canada Council for the Arts and the Ontario Arts Council. Biblioasis also acknowledges the support of the Government of Canada through the Canada Book Fund and the Government of Ontario through the Ontario Book Publishing Tax Credit.

  “For my friends, anything, for my enemies, the law.”1

  In Memoriam

  For friends, colleagues, and ideas

  on the other side of the grass

  Beginnings and Endings

  This is a story about the slow, secret murder of Canada’s nationalist publishing policy.

  After telling you that in the first sentence, I should probably just say Kaddish for this book before I write another word. In fact, one famous former Canadian publisher, Avie Bennett, said as much.

  “It’s a book no one will read,” he said.

  “I’m not writing one, Avie,” I replied, which was true at the time.

  I only planned to publish a blog post about how he’d managed to hand over McClelland & Stewart Ltd., Canada’s longest-lived and best independent publisher, to a foreign entity, in spite of the Investment Canada Act which forbids same without government approval. It was a curious transaction that involved the sale of shares to Random House of Canada along with the apparent gift of control of the company to the University of Toronto. At the press conference Bennett gave at that time—late June, 2000—he’d said: “To achieve the survival of one great Canadian institution, I have given it into the care of another great Canadian institution.”2 The unwary believed he’d passed McClelland & Stewart (M&S) to U of T to have and to hold forever, that M&S would remain Canadian in perpetuity.

  Wrong.

  In fact, he’d created a brilliant method to free himself of the M&S albatross, to cash out while handing it off, piece by piece, to the largest foreign-owned publisher in the country. He’d found a way to get the federal government to declare this re-arranged M&S as “Canadian” in spite of the fact that its establishing agreements flew in the face of federal law and policy. That press conference actually signalled the slow-motion destruction of the nationalist publishing policy credited with making Canadian literature possible, a policy originated many years earlier just to keep M&S alive and Canadian, and the first step toward the submergence of M&S in the Bertelsmann media empire, headquartered in Gutersloh, Germany. By 2012, though the government kept saying the policy remained intact, foreign-owned companies dominated Canadian publishing and many independent Canadian publishers had bankrupted, were about to bankrupt,3 or had been shut down. All that remained of M&S was its colophon—stamped anew on the spines of a few fresh titles each year and displayed on the website of Bertelsmann-owned Penguin Random House Canada. M&S now has a virtual life. Its name lives on though its corporate body has been subsumed within a foreign entity. The nationalist publishing policy, on the other hand, is just plain dead.

  “I say that as a publisher,” Bennett continued, as if I’d said nothing at all.

  I’m sure Bennett is right. He has been spectacularly right about many things in the course of his long life. After all, who, other than the few people in the tiny Canadian book trade, would want to fork over real money for an inside baseball book about publishing? There is nothing more inside baseball—yet baseball free—than the story of how leading Canadian publishers of books and newspapers turned a policy created to protect them into a pale ghost.

  And yet, though this tale is about a small industry that is shrinking like Alice4,5, it touches on much bigger issues, such as: the evolving idea of nationhood; how power really works in a country supposedly tamed by law; questions of identity we thought were put to rest but which have returned to bedevil us once more.

  Canada’s nationalist laws and publishing policies were born in the early 1970s, when this country was a rickety boat tossed on a sea of conflicts. Many in Quebec wanted a ship of their own. New rules and regulations were duly rolled out to counter what was happening on Quebec’s streets. The hope was that it if Canada could become a richer, better country—a post colonial state—then perhaps Quebecers would not want to leave. So: even as politicians and civil servants wrote laws that appeared to make Canadians the economic masters of our own house, they also negotiated free trade agreements to enrich that house through access to bigger markets, which made Canadians subservient to others peoples’ rules. The result was contradiction and dissonance. On the one hand, Canada’s national culture was protected by law and policy from foreign ownership, yet on the other, our borders were thrown open to investors from every corner of the planet. We touted cultural diversity as our strength even as we insisted that Canadian cultural products must be Made in Canada because our national sovereignty was at stake.

  In the end, while sleeping dogs snored in public, hypocrisy went to work behind closed doors.

  As I began work on this book, newly elected Prime Minister Justin Trudeau declared to the New York Times Magazine that Canada is a different sort of nation from all others. “‘There is no core identity, no mainstream in Canada,’ he claimed. ‘There are shared values—openness, respect, compassion, willingness to work hard, to be there for each other, to search for equality and justice. Those qualities are what make us the first post national state.’”6 He seemed to suggest that Canada is leading the way to a new political Jerusalem by becoming something never seen before—a state for which the usual norms of nationhood are irrelevant. I told my publishing friends to watch out, his statement signalled that change was on its way and they might not like its nature. But I also asked myself: was Trudeau right? Or was he dangerously wrong?

  Among other countries, important ones, no such post nationalism was apparent. Instead, an old and familiar form had begun to climb back up out of the political dungeons of the 20th Century. Rhetorical flouris
hes from the Nazi period, including wicked words like lugenpresse and volkisch,7 were being hollered at political rallies in Germany, Russia, Poland, Hungary, Greece, and would soon be heard even in the USA. Power was sliding from the grasp of a globalist old guard into the hands of those willing to say whatever it takes to win. China had set off on a course of old-fashioned nation building that included the creation of military islands in contested waters in the South China Sea. Russia had grabbed the Crimea and sent machines of war into Ukraine, allegedly to protect ethnic Russians, an argument all too reminiscent of Germany circa 1936. Waves of desperate refugees, fleeing from failed states in Africa and the Middle East to the borderless European Union, drowned by the thousands in the Mediterranean and the Bosporus. This made Europeans reconsider the virtues of fences. Britons voted for a bordered future. The Americans voted for America First.

  The return of this old kind of nationalism is why I hope you will read this book even if you don’t care about publishers, publishing, or those who make Canadian stories. The story I uncovered points to what can be expected elsewhere as legal walls go up and national borders are re-secured. I can say with assurance that these new rules will be turned inside out in short order, these new walls will soon be riddled with holes. The M&S handover makes that quite clear.

  The M&S handover to a foreign owner was the direct result of laws and policies written to promote the opposite result. For a time, they worked as they were supposed to. For a time, they led to a flowering of literature about Canada by Canadians, some of it appreciated far beyond this nation’s borders, some of it universal in its reach. But legal walls are like real ones: they call up great ingenuity from those with an economic need to circumvent them. Our laws and policies were soon hollowed out by those determined to advance their private interests, and by civil servants happy to assist.

  In a way, then, the M&S story offers succor to those who argue that globalism is the future. Yet it also gives support to those who think a national culture is essential to sovereignty and security, and must be protected by law and practice. In other words, this M&S narrative has general application though, above all, it’s a Canadian story, a story that could only have happened here. It demonstrates how Canadians wield power, how well-placed Canadians band together to do things forbidden to those who have none. It’s about a smart, beloved/feared man who, seeking long-term redemption, teamed up with Canada’s most able lawyers to get it; how a leading nationalist got around the rules shielding the sovereignty of the national mind.

  It turns out that nothing could be more Canadian than that.

  People who publish and distribute books in Canada have mythologized their business as a Social Virtue for close to 70 years. (In New York, they don’t distinguish the book business from any other because in New York all business is Virtuous.) Books made in Canada, so long as they are not self-help tracts or cookbooks, are widely considered to be Good Things that any Right Thinking Person should purchase during the Holiday Season, the more the better. Civil servants who have doled out hundreds of millions of dollars over four decades to Canadian-owned publishing companies, in the form of grants and tax credits, take this one step further by adding the phrase “vital to national sovereignty.”

  On the Canada Council website, you can find (if you search hard) lists of Canadian-owned publishing companies that have been awarded many different kinds of grants to defend Canada’s mental borders. The Canada Council’s website has changed recently to reflect a new vision of who and what it wants to fund, but since the early 1970s, it has supported with public money things like author tours, the publication of literary fiction and non-fiction and its marketing and promotion. The Department of Canadian Heritage offers publishers support by various means, but especially from its Canada Book Fund—the Fund distributes about $39.5 million a year. Ontario, where two thirds of English Canadian publishing companies dwell, offers publishers grants from its own Arts Council. In addition, the Ontario Media Development Corporation administers another Book Fund and tax credits.

  Yet Canadian-owned and controlled publishing companies are the endangered coral reefs in what federal civil servants call the publishing ecosystem. Reports on the publishing industry demonstrate that almost no Canadian-controlled publishing companies could survive without government aid.8 In some circles, this tenuous existence is regarded as an inverse measure of social value which may be why owning the means to publish stories by Canadians has been treated as a cleanse by some who got rich through less laudatory means (such as manufacturing components for military vehicles or land development). Those in charge of handing out civic prizes, such as honorary degrees, Orders of Canada and of Ontario, have rewarded owners of Canadian publishing companies for their sheer endurance as they struggle to: meet payroll; assure whining authors that everyone interested did get a copy of their latest tome; explain why a third of the books they printed the previous year were returned unsold by the one dominant Canadian bookseller in the country (who gets a significant proportion of revenues from household goods and toys).9

  I can’t think of an industry with so little economic clout that is nevertheless so well-connected to the powerful. This connection could be described as transactional. On the one hand, Canadian publishers have a desperate need for government money which requires at least defensive familiarity with those who decide how much will be on offer. On the other hand, politicians need public platforms unsullied by voices other than their own. This perhaps explains the abundance of political memoirs written by people running for, leaving, or considering, public office.

  Perhaps because funding is available, the number of Canadian publishing companies has been growing even as demand for their product has been shrinking: in 2013, there were three times as many Canadian publishing companies as there were 25 years before. (That number is expected to fall over the next five years.10) The number of Ontarians with full-time jobs in book publishing was about 1600 in 2012, but those jobs are precarious and the well-paid ones are the hardest to hang on to. Salaries are low according to an industry survey conducted by the trade publication Quill & Quire in 2013. That year, entry-level editorial staff earned between $25,000 and $35,000 a year while a person working as the president/publisher of a Canadian-owned company (half of which earn revenues of less than $1 million a year) was paid about $57,000. Their counterparts working for foreign multinationals earned about $138,000.

  Multinational-owned publishing houses utterly dominate the Canadian publishing marketplace in spite of decades of support for Canadian-owned entities, and laws and policies aimed at changing that balance.11 One foreign-owned entity—Penguin Random House Canada (PRHC)—has cornered 32% of the Canadian trade book market. (A trade book is one aimed at the general book buyer. Educational publishing is aimed at schools, universities, or specialists in their fields of knowledge.) This level of market concentration has drawn little attention from the Competition Bureau. Why? The Competition Bureau is mainly concerned about an abuse of market power that leads to rising prices for consumers. It doesn’t appear to have investigated why retail prices for paper books have remained about the same over the last decade in spite of book unit sales declining12 and in spite of the advance of smart and just-in-time technologies that should have made production, distribution, and marketing more efficient, and lowered costs. Yet such concentrated ownership does have a big impact on the diversity of ideas: two people13 mainly dominate decision-making on what will be offered to the public by Penguin Random House Canada even as the rest of its staff play musical chairs for their jobs.

  It should not be a surprise that just about everybody in the Canadian book business has met, worked with, or heard about everybody else. I can’t think of a group whose members are more intimately entangled. Canadian publishers used to buy and sell pieces of each others’ companies as they staggered to the edge of bankruptcy and back again. One market research firm believes that this consolidation phase is over and that any advantages
from mergers have been squeezed from Canadian publishing.14 Many employees who once had full-time jobs with some benefits must make do now with whatever freelance gigs they can patch together. They bounce from one bit of piecework to another, into the agency business and out again, carrying fresh gossip as they go. The result is that most people who work in Canadian publishing “know” far too much about their colleagues.

  I put the word know inside quotation marks so you will understand that this is not nearly so reliable a form of knowledge as that required by the courts. To “know” in Canadian publishing circles means to gather tidbits about everyone else, the kind that make good stories. This should have made unearthing the facts concerning the central event in this book—the handover of McClelland & Stewart Ltd. to what is now Penguin Random House Canada—dead easy. Yet these facts remained extremely well hidden for fifteen years. When I asked officials at the University of Toronto (which owned the majority of the M&S shares for more than a decade), for information about this transaction, they behaved like witnesses to a gangland slaying. They knew nothing. No one still working at U of T who had anything to do with the initial gift, the management of the gift, or the subsequent sale of the University’s shares to Random House of Canada, would submit to an interview or even answer questions by email. Others who signed the contracts involved and who did speak to me were unable to recall the most basic details, the kind that usually remain forever on top of business minds, such as how much money changed hands.

  Yet publishing people can tell you what one famous M&S executive was paid—a remarkable $250,000 a year—because his former wife spilled the beans at a party. They will also tell you that a famous publisher threatened to withhold all future charitable gifts from a certain institution if that institution refused to do his bidding. (While he may have threatened, that famous publisher continued to make major gifts to that institution well after it failed to do his bidding.) They “know” these things because most of them (but not all, which is why this book is in your hands) live and work in Toronto, go to the same parties, restaurants, bars, coffee shops. They fall in love with each other, marry, fall out of love, whisper about who is sleeping with, or has slept with, whom. They fight, schmooze, hire, fire, and point fingers at this one’s failure or that one’s surely undeserved success. They can be kind, yet prone to snobbery which is usually defined as taste. They can be vain, yet appear as humble as an old shoe, especially when accepting an award on behalf of an author unable to attend a ceremony. They can be helpful and cooperative and considerate of each others’ feelings, yet wily and competitive. Some are Canadian-born persons who have spent their professional lives producing the best Canadian books possible though they work for foreign-owned entities. Some are foreign-­born persons who have spent their professional lives producing the best Canadian books possible for Canadian-owned companies. In other words, there are no villains here.