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Published online by Cambridge University Press: 11 June 2012
Genstar Ltd. of Canada provides a superb case study of the relationship between the strategy a corporation chooses to pursue and the organizational form which it adopts. Genstar had originally operated as a holding company. But its managers came to understand that the advantages that form provided were outweighed by the problems it posed given both the general goals of Genstar's parent, the Société Générale de Belgique, and the particular opportunities and obstacles presented by the Canadian business environment since World War II. The result was the adoption of the multidivisional form.
1 See a Special Report by Ekblom, H.E., “European direct investments in the United States,” Harvard Business Review. (July-August 1973).Google Scholar
2 Dyas, G.P. and Thanheiser, H.T., The Emerging European Enterprise: Strategy and Structure in French and German Industry (Boulder, Col., 1976), passim.CrossRefGoogle Scholar
3 These include the particular impact of the law of foreign investment regulations or the role of Genstar in the real estate boom in Canada. See for the latter aspect: Lorimer, J.The Developers (Toronto, 1978)Google Scholar and Aubin, H., City For Sale (Montreal, 1977).Google Scholar
4 Greening, W.E., “The Belgian Role in Canadian Economic Development,” The Canadian Banker, 66 no. 2 (Summer, 1959), 122–123.Google Scholar
5 R.D. Radford, “Canada's Capital Inflow, 1946–1953,” I.M.F. Staff Papers, IV, 217–257.
6 W.E. Greening, “Belgian Role,” 125.
7 SGB, Annual Report, 1951.
8 For example, Edgar Van Der Straeten, director of Sogémines Ltd., was Vice-Governor of SGB and also Vice-Chairman of “Union Minière,” Henri Blaise, President of Sogémines Ltd. was chairman of SGM and son of Gaston Blaise, Governor of the SGB. The prominence of the representation of top management in the non-ferrous mining industry reflects, of course, the importance of this industry for the group at this time.
9 Felix Notebaert, long time representative for the Solvay group and Belgian metallurgie interests in North America, acted as an agent for the group. He was well acquainted with James Muir, of the Royal Bank, which explains, according to a company executive of SGM, the choice of this financial institution. He also knew Jules Timmins of Hollinger Mines. They all joined the first Board of Sogémines Ltd.
10 Sogémines Ltd., Prospectus, 1956.
11 SGB, Annual Report, 1954.
12 See W.L. Forster, “Investing in Canada: The Sogémines Story.” Address to the Chemical Institute of Canada Convention of August 3, 1961, 18.
13 Sogémines Ltd., Annual Report, 1955; SGB, Annual Report, 1955.
14 Sogémines Ltd., SGB, Annual Reports, for the years concerned.
15 W. L. Forster, “Investing,” describes the different stages of development of a project, which clearly demonstrates the SGB group's extensive involvement.
16 A major supply contract resulted from Sogémines' participation in the Brunswick Mining and Smelting Corporation Ltd. Sogémines Ltd., Annual Report, 1959.
17 SGB, Annual Report, 1960.
18 For tests of diverse causes of foreign investment see: Caves, R., “Causes of Direct Investment: Foreign Firms' Shares in Canadian and U.K. Manufacturing Industries,” Review of Economics and Statistics, no. 56, (1974), 279–293CrossRefGoogle Scholar and Gorecki, P.K., “The Determinants of Entry by Domestic and Foreign Enterprises in Canadian Manufacturing Industries: Some Comments and Empirical Results, Review of Economics and Statistics no. 58, (1976), 485–488.CrossRefGoogle Scholar
19 See Laureyssens, J., “Le crédit industriel et la Société Générale des Pays-Bas pendant le régime hollandais (1822–1830),” Revue belge d' Histoire contemporaine, III, nos. 1–2, (1972), 121–140Google Scholar and “The Société Générale and the origin of industrial investment banking, ” Revue Belge d' Histoire contemporaine, VI, nos. 1–2, (1975), 93–115.
20 The continuing presence of executive directors of the Royal Bank on the Board of Sogemines and later Genstar is however not an expression of ownership. The relationship, because of its constancy and duration, appears to be closer than is the case in other Canadian corporations and banks. The bank's representative however seems to fulfill only the role of facilitator of communication and expert source of knowledge.
21 See Sogémines Ltd., Brochure on the Amalgamation, 1965.
22 Sogémines held 60.9% of the voting shares of Brockville Ltd., 44.2% of Inland Cement Ltd. (CBR, the S GB cement company, held another major interest), 58.1%of Iroquois Ltd., and 93% of Eastern Electro Casting Company Ltd. It shared “managerial responsibility” in Rothesay Paper Company and McAllister Towing Company, of which Sogémines and other SGB companies owned 50%.
23 See organizational chart in Appendices 1–3.
24 W. L. Forster, “Investing,” mentioned that it was rumored during the early years that Sogémines had been formed to harbor refugee capital from Africa. He emphatically disclaimed this allegation. “Group investments in Belgium for new industries, and the expansion of existing industries, far exceed the money they have put into Canada. Nor were the companies formed to provide an escape hatch for money which had become frightened by the trend of affairs in the Congo. Neither Sogémines nor its subsidiaries have increased their capital since trouble commenced to develop in the Congo and, in fact, the Group has also invested far more money in the Congo in recent years than in Sogémines and its affiliates.” See Park, F.&L., Anatomy of Big Business (Toronto, 1973, 155–9)Google Scholar for an example of proponents of these allegations.
25 A feature article in Fortune, (February, 1969) entitled “Belgium's Muscle-Bound Giant” describes the troubles of SGB since 1960.
26 Franck was a professional manager who had served the SGB group in several overseas companies.
27 Sogémines Ltd., Brochure on the Amalgamation, 1965.
28 See Canada, Statutes of Canada, (Ottawa, Queen's printer, 1964–1965)Google Scholar, Ch, 13. The other piece of legislation was the Corporations and Labour Unions Returns Act (CALURA), 1963. This act stipulated, among other things, extensive reporting requirements on foreign participation in corporations operating in Canada.
29 SGB, Annual Report, 1963.
30 The Financial Post, (August 1, 1964).
31 Sogémines Ltd., Brochure on the Amalgamation, 1965.
32 The Financial Post, (August 1, 1964).
33 Sogémines Ltd., Brochure on the Amalgamation, 1965.
34 Genstar Limited, Submission to the Royal Commission on Corporate Concentration (Montreal, November 1975), 16.Google Scholar
35 See especially Chandler, A., Strategy and Structure. Chapters in the History of Industrial Enterprise. (Cambridge, 1962).Google Scholar
36 The term is used by Williamson and cited in the conclusion of Chandler, A. and Daems, H., “The Rise of Managerial Capitalism and its Impact on Investment Strategy in the Western World and Japan,” The Rise of Managerial Capitalism, ed. Daems, H. and Vander Wee, H.. (Louvain/The Hague, 1974).Google Scholar “Managerial capitalism” is the editors' descriptive term for an economic system dominated by multi-divisional and conglomerate firms acting in the described manner.
37 Williamson, O., Corporate Control and Business Behavior: An Inquiry into the Effects of Organization Form on Enterprise Behavior. (Englewood Cliffs, 1970).Google Scholar
38 W.L. Forster, “Investing,” 22.
39 Sogémines Ltd., Brochure on the Amalgamation, 1965.
40 Sogémines Ltd., Annual Report, 1967.
41 The company was renamed because the old name, which referred closely to the connection with the Société Générale des Minerais, was no longer reflecting the nature of the enterprise. Of the composite name GEN-STAR the “GEN” (for “Générale”) referred to the parent group and the “STAR” was added asa symbol for the widely diversified activities of the corporation. Genstar Ltd., Annual Report, 1968.
42 BACM, Annual Report, 1968.
43 Sutter Hill Ventures buys small enterprises in high growth, mostly new markets, particularly in the area of sophisticated electronics. After the establishment of a company is assured, it is sold.
44 Genstar Ltd., Genstar Ltd., 1967–1971, (June 1, 1972). Unpublished brochure.
45 ibid.
46 Sofina stands for: Société financière de transports et d'entreprises industrielles.
47 “L'Affaire Sofina,” Courrier Hebdomadaire (-C.R.I.S.F, Brussels), nos. 269 and 270, 1964, 20–23.
48 Fortune, “Giant.”
49 Genstar Ltd., Annual Report, 1969.
50 Genstar Ltd., Annual Report, 1969–1973.
51 Genstar Ltd., A Submission to the Royal Commission on Corporate Concentration, (Montreal, November 1975), 5.Google Scholar
52 The Financiar Post, Summer 1975 Supplement. The top 300 Corporations.
53 Fortune, “The Fortune Directory of the 300 largest industrial corporations outside the U.S.,” (August, 1974).
54 The Financial Post, Summer 1978 Supplement. The 300 top corporations.
55 Abbey Glen was a large diversified real estate company that owned large tracts of land for development (18,000 acres) and income producing property. The income properties represented slightly more than half of the company's assets and were appraised (in 1976) at a value of $202 million. The land holdings had a book value of $145 million and were located for 53 per cent of the acreage in Alberta, for 19 per cent in Ontario and a third and fourth largest block in New Jersey and in Miani. In July 1976 Genstar purchased 55.9 per cent of the company from Capital and Countries Property Corp. of London, England, for $49.5 million. The rest was acquired later.
See Von Ond, P.F., Genstar Limited. January 1977, A Research Report, (Montreal, 1977).Google Scholar
56 Genstar Ltd., Annual Report, 1970–1977. Headquarters were transferred from Montreal to Vancouver and San Francisco in early 80s.
57 Quebec based Miron Company Ltd., was formed in 1961 by the amalgamation of Miron et frères limitée and seven other companies in the construction industry. At that time the SGB cement subsidiary C.B.R. Cimenteries-Cementbedrijven bought a majority interest. In 1972 they owned 72.2 per cent of the total number of voting shares outstanding. Miron built some of the major landmarks in Montreal. The Right Honorable Louis St. Laurent, ex-prime minister of Canada, was longtime chairman of the Board in the sixties.
58 I.e. Global Transport Organization, in which Genstar was a one third partner had contracts to supply port lighterage and heavy lift services for oil projects in Saudi Arabia. GTO with Agence Maritime S.A., a SGB subsidiary, formed EAST (Euro-Arab Sea Trailer Line S.A.) between Marseilles and Red Sea Port of Yanbu. Its speciality was tri-level roll-on roll-off barges. Complementarity is found here too; GTO specialized in transport of heavy construction materials.
59 In 1978.
60 Net assets = total interest bearing debt, deferred income taxes and shareholders equity.
61 Genstar Ltd., Annual Report, 1977–1979.
62 Genstar Ltd., A Submission to the Royal Commission on Corporate Concentration, (Montreal, November 1975), 55–61.Google Scholar
63 See Appendix 4, for a typology of the corporate investment strategies.