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2 EDITOR’S NOTE THE SHOW WILL GO ON When the world shut down, so did Cirque du Soleil. We followed it 4 SEVEN THINGS 16 through the logistical nightmare the followed, its filing for creditor Want to save the planet? protection, the dramatic battle for ownership and how it’s preparing Get a mascot. Plus, why to return to the stage. /By Jason Kirby banking jobs still rule and professional wrestling rocks STRIKE UP THE BRANDS Our first annual ranking of 25 companies that define what business- 7 NEED TO KNOW 30 Researchers are working on to-business excellence looks like right now. /By Aaliyah Dasoo how to encourage consumers to embrace public health measures. Corporate leaders “There’s just need to pay attention no way you’re going to make a 10 ASK AN EXPERT wildly successful Why managers can’t afford independent to slack off when it comes to company and not have Twitter new technology, and how to and Facebook entice your employees back trying to copy to the office post-pandemic Substack”

appy hour

12 THE EXCHANGE BlackRock Canada head

GLIA Marcia Moffat on why FO COVID-19 has been good

CAS for sustainability and why LU Canada makes a good testing ground for new

(RIGHT) investment products RNA;

WA 52 WEALTH

SK The road to investing in

NIEL emerging markets is littered

DA with potholes, but Matthew Strauss avoids the worst (LEFT) bumps. Plus, how suburban STACKED living is fuelling the real Canadian Chris Best is hoping to upend traditional media with his BEARD; estate boom

TT newsletter platform, Substack. He’s faced down Facebook before—

MA /By Joe Castaldo 56 TURNING POINT and lost. Will this time by any different?

APH Vito Paladino took over GR AGAINST THE ODDS

TO Audi Canada in the midst of the pandemic—and the When bond trader Paul Marcogliese’s two young sons were PHO 48 automaker’s push toward diagnosed with a fatal ultra-rare disease, he and his wife, Cheryl, VER electrification /By Tim Shufelt CO threw all their energy into finding a cure.

JUNE 2021 / REPORT ON BUSINESS 1 Editor’s Note

June 2021, Volume 37, No.6 Editorial Editor JAMES COWAN Assistant Editor DAWN CALLEJA Senior Editor JOHN DALY Copy Editors LISA FIELDING, SUSAN NERBERG Research CATHERINE DOWLING Art Art Director DOMENIC MACRI Associate Art Director BRENNAN HIGGINBOTHAM Director of Photography CLARE VANDER MEERSCH Contributors DEBORAH AARTS, LIZA AGRBA, JOE CASTALDO, TREVOR COLE, ROSEMARY COUNTER, TIM KILADZE, JASON KIRBY, ALEX MLYNEK, JOANNA PACHNER, JUDITH PEREIRA, KATIE UNDERWOOD Advertising Chief Revenue Officer ANDREW SAUNDERS Managing Director, Creative Studios and Ad Innovation TRACY DAY Senior Manager, Special Products ANDREA D’ANDRADE Brand on the run Product Manager RYAN HYSTEAD For most of its history, Shopify has made a virtue of anonymity. Production On most e-commerce platforms, individual retailers are less important than Vice President, Print Operations SALLY PIRRI their service provider. It’s painfully obvious at Amazon, where every mer- Production Co-ordinator chant competes for attention in a never-ending digital big-box store. Even on ISABELLE CABRAL an artisan-friendly site like Etsy, the branding of the tech giant is more promi- Publisher nent than the names of the individual sellers. PHILLIP CRAWLEY Editor-in-Chief, The Globe and Mail But ever since its founding, Shopify has positioned itself differently. It’s a DAVID WALMSLEY utility company, not a retailer. You aren’t aware of which electrician installed Managing Director, Business the cash register at a local boutique, so why care about which company facili- and Financial Products GARTH THOMAS tates its online transactions? The Ottawa-based tech firm exists to boost its cli- Editor, Report on Business ents’ profile, not the other way around. As president Harley Finkelstein once GARY SALEWICZ explained it: “Shopify is a brand to merchants—it’s not a brand to consumers.” Report on Business magazine is Through this quiet support of other brands, Shopify has built an over- published 7 times a year by The Globe whelmingly strong one of its own. Earlier this year, we partnered with the and Mail Inc., 351 King Street E., Toronto polling firm Ipsos to see which business-to-business brands Canadian execu- M5A 0N1. Telephone 416-585-5000. Letters to the Editor: tives hold in the highest regard. The goal was to understand which companies [email protected]. are seen as trustworthy, innovative and focused on their clients’ needs. Ipsos Copyright 2021, The Globe and Mail. surveyed more than 400 executives, asking—among other attributes—which Indexed in the Canadian Periodical Index. Advertising Offices companies are trailblazers, which are easy to work with and which best serve Head Office, The Globe and Mail, their communities. 351 King Street E., Toronto M5A 0N1 Shopify came out at No. 1 on our inaugural ranking. It frankly wasn’t even Telephone 416-585-5111 or toll-free 1-866-999-9237 close; the brand came first in 22 of 42 categories. For example, 81% of respon- Branch Offices dents agreed Shopify was ahead of others in leading the digital transforma- Montreal 514-982-3050 tion, a stunning 19 percentage points ahead of the second-place company, Vancouver 604-685-0308 Calgary 403-245-4987 Microsoft. On average, Shopify was eight percentage points ahead in all the Email: [email protected] areas where it took first place. United States and countries outside of These results suggest Shopify’s brand now rivals global leaders, such as North America: AJR Media Group, Google. The technology behemoth has come first on Ipsos’s ranking of the 212-426-5932, ajrmediagroup@ globeandmail.com most influential brands in Canada for the past nine years and landed in the top Publications mail registration No. 7418. spot this year in 13 out of 49 categories. Coincidentally, Google led second- The publisher accepts no responsibility place brands by an average of eight percentage points, just like Shopify. for unsolicited manuscripts, SHIRI KE

The difference, of course, is Google has been widely known for nearly two transparencies or other material. H Printed in Canada by Transcontinental OS

decades (it’s so established, its name isn’t just a brand but a verb). Shopify is Printing Inc. UR certainly better recognized by consumers than it once was—a year of pan- Report on Business magazine is electronically KO available through subscription to Factiva.com demic-driven growth in e-commerce helped, as did replacing RBC as Canada’s from Factiva, at factiva.com/factiva APH Send feedback to GR most valuable company. But it remains a resolutely business-to-business brand or 416-306-2003. robmagletters@ TO globeandmail.com that makes itself look good by keeping the spotlight on others. /James Cowan tgam.ca/r PHO

2 JUNE 2021 / REPORT ON BUSINESS Advisory Board

Who killed Encana? either worked there or did business In our last issue, Tim Kiladze and Jeffrey Jones investigated how with it in some capacity. The common Canada’s top oil and gas company lost its way and its name, and themes in these comments were ended up moving its head office to Denver. We heard from a number the company was brought down by of former employees with their own thoughts on the company’s fall. greed, incompetent leadership and the fateful decision to “drink the Kool-Aid” I was an employee at Encana and I found the [online] reader comments proffered by the investment bankers one of its predecessors from 1997 to about the piece particularly interesting. to spin off Cenovus and become a 2004. Yo u guys nailed the story. You Many were hopelessly naive or ill- pure-play natural gas producer. From didn’t miss anything—on the business informed, placing the blame on the my perch in the company, I tend to or its personalities. policies of the Harper or Trudeau agree—the downfall of Encana was I think the largest business-class governments. But a significant number entirely attributable to self-inflicted lesson is the true value of leadership. appeared to be written by people who wounds. —A former employee Murray Edwards is still a driving force at Canadian Natural Resources Ltd. and was from the beginning. We acknowledge the support of our acdemic advisory panel It’s surviving and thriving, all these years later. At Encana, leadership changes led to vast changes in focus and strategy, and gradual unravelling. I think you captured Yrjo Koskinen, Associate Dean, Research; Yolande Chan, Associate Dean, Haskayne School of Business Research at Smith School of Business that overarching lesson. I have to Stephane Massinon, Director, Public Nancy Evans, Executive Director, say it was a wistful read for me, Relations; Haskayne School of Business Marketing and Communications, though—it was a great place to work Smith School of Business. and learn one’s trade. —Dan Polley TL;DR RED MEAT 1 ISN’T FOR THE YOUNG Millennials and members of Generation Z are most likely to avoid eating steak, according to an Abacus Data survey. CANADIANS WHO DO NOT EAT STEAK 06/21 TOTAL 15% 7% 6% 8% 18–29 30–44 45–59 Banking is 3 Applying for still a pretty a job at most good gig Wrestling fans companies is LinkedIn weighed multiple 4. from the top rope factors—ability to advance, skills growth and company time-consuming The WWE had the most-watched stability—to determine YouTube channel, ahead2of The average job seeker spends nine hours the top companies that any “real” sport, in March. will “grow your career.” per month filling in forms, according to a survey from Ladders Inc., a career site. MINUTES WATCHED, TOP 10 COMPANIES TIME SPENT PER JOB APPLICATION BY CHANNEL 1 RBC 6 George 20 15 Weston Ltd. WWE 4.3 BILLION 2 TD MIN. MIN. 10 NBA 854 MILLION 7 BMO 3 Scotiabank MIN. 30 25 UFC 711 MILLION 8 SAP MIN. MIN. 4 Alphabet 5 OR 9 CIBC ESPN 503 MILLION 5 Bell LESS NFL 277 MILLION 10 Deloitte 26.4% 25.3% 17.6% 13.2% 12.1% 5.5%

5 Mascots are an effective way to promote environmentalism “Consider implementing anthropomorphism as a low-cost and useful means THERE’S to facilitate the pro-environmental appeals. ... For instance, hoteliers can add a happy facial expression of the earth to their green signs placed in occupants’ PLENTY bathrooms to encourage the reuse of towels, as well as discourage the excessive use of other bathroom resources like water and toilet paper.” OF CHURN 6—Khoa T. Do et al., Psychology & Marketing IN THE STREAMING BUSINESS Working from home has many meanings A survey conducted by YouGov found a slight divide between mothers Consumers who cancelled or added and fathers over whether full-time parenting counts as a full-time job. 7 and then cancelled a streaming service in February, according to DO YOU THINK “STAY-AT-HOME PARENT” SHOULD BE CONSIDERED A JOB?

Deloitte: AP

ADULTS FATHERS MOTHERS LEE/ S.

ONLY STAY-AT-HOME MOM 8% 15% 17% E JA ONLY STAY-AT-HOME DAD 5% 15% 7%

36% APH

BOTH 63% 48% 61% GR TO NEITHER 14% 14% 9% PHO

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himself as confrontation-averse, felt uncomfortable Don’t mask, don’t sell but didn’t make a scene; instead, he left and decided Companies don’t need to worry about driving away not to return. If people who oppose mask mandates tend to be customers with stringent health rules. New research more vocal (and thus more viral) than those who suggest consumers will pay extra to feel safe support them, he wondered, how might that affect a firm’s likelihood of enforcing strict safety rules? Viral videos depicting maskless customers in And on the consumer side, how does a business’s heated exchanges with store clerks have become handling of those rules affect people’s willingness commonplace during the pandemic. Oleg Urmin- to support the company? He co-authored a working sky—a professor at the University of Chicago’s paper with Abigail Bergman, a behavioural market- Booth School of Business—found himself in the ing researcher at the Booth School, running a series opposite scenario last year when he visited a gro- of experiments that tested how common backing for cery store where the manager bagging groceries strict safety policies is among customers and man- wasn’t wearing a mask. Urminsky, who describes agers. Across different types of businesses—big- VELLA ALEXEI ION AT TR US ILL

JUNE 2021 / REPORT ON BUSINESS 7 Need to know

RESPONDENTS’ AVERAGE box stores, hospitals and airlines—they PREDICTED LEVEL OF Even as vaccination numbers rise and PREFERENCE FOR AIRLINES found that a strong majority of people sup- THAT REQUIRED MASKS mask mandates are loosened, companies port stricter policies. But individuals also will need to make decisions about which underestimate the percentage of other safety rules to keep. Some are already people who agree with the stronger rules. having to decide whether to make vac- That’s a problem, the researchers argue, cines mandatory for their employees. And in the work to establish social norms that if the norm skews toward anti-mask (or encourage companies to protect public anti-vaccine) perception despite popular health. The results are informative as we approval, there may be hidden costs for look toward a future when vaccination 60%businesses whose policies are lax because requirements for public spaces become a they fear a backlash. “Going forward, signs hot-button issue. of active cleanliness are probably going to In one study, participants made a series ACTUAL LEVEL OF SUPPORT be seen as more positive than before the of choices between an airline that required pandemic,” added Bergman. Furthermore, mask wearing and one that only recom- the study respondents in most cases rated mended it. Prices varied between the stricter stores as warmer and more com- choices, and respondents were also asked petent—the former rating was particu- to predict other consumers’ preferences larly surprising for the researchers. between two equally priced tickets. In 69% The paper’s final study asked partici- of cases, people selected the stricter air- pants to choose between a hospital that line—and were willing to pay a premium 70%requires employees to be vaccinated and of about $27 for it. And people significantly one that doesn’t. They found the same pat- underestimated how many others preferred the stricter airline. “The public sees tern of widespread support for a stricter the mask requirement as more controversial than it is,” the working paper reads. policy alongside underestimation of that In another study, participants watched two real-life videos recorded in dif- opinion in others. ferent Walmart outlets. In one video, a maskless customer was confronted by They also found that the more an indi- a manager and removed from the store; in the other, customers complained vidual underestimates wider support for a about a mask-free patron, but no action was taken by management. They were vaccine-enforcing hospital, the less likely then asked to choose which store they would rather visit. About 70% of people they are to warn a friend away from visit- chose the stricter Walmart. The store staff was also rated significantly higher ing the less strict facility. That result again on showing traits like warmth, care and competence. But yet again, participants points to the difficulty of establishing underestimated the percentage of others who would choose the first option. social norms that help businesses weigh To sustain a norm like mask wearing, the researchers argue, people must not the costs and benefits of their policies. only support the idea but believe others support it as well. The theory relates to “We don’t have well-established norms a social science concept known as pluralistic ignorance: when those in a major- that there’s consensus about, so people ity group privately disagree with something but go along with it because they are kind of guessing. If we know what the incorrectly assume most others accept it. This widely studied phenomenon norm is, we know when to complain and has been implicated in issues from college alcohol consumption to discourag- not to complain, when to give advice and ing female participation in the labour force. In the context of mask wearing, if not to. Our evidence suggests that people’s you support strict enforcement rules but don’t know you’re in the majority, you inaccurate beliefs about these norms get in might be less likely to speak up about it. And if you’re a manager, you may not the way of building social consensus about align your firm’s policies with your beliefs. In the current study, 88% of manag- what firms should do,” says Urminsky. ers thought everyone should wear a mask indoors, but just like consumers, they But the researchers warn business strongly underestimated support for those requirements among customers. owners not to interpret their findings as unconditional—especially in a hotbed of anti-mask or anti-vaccine sentiment. “A n overinterpretation of our results would IS NOTHING SACRED? be, for example, making a big show of throwing a maskless customer out of a store and posting it online,” says Urmin- Want to diminish consumers’ concern for the environment, gender sky. “There may be backlash against strict equity or social justice? Use a cause to promote your company. A new enforcement that we didn’t measure.” study from the Rotman School of Management found that when a brand Still, as public health mandates evolve aligns itself with a “sacred value” in a bid to boost profits, it can also and firms balance safety rules against reduce people’s commitment to the issue. In one case, consumers who the risk of alienating their customers, it saw a “Happy Earth Day” message from NASCAR, the stock car com- seems that enforcing strict safety policies pany, had diminished respect for the annual environmental event. To will only serve to bolster support among succeed, brands must show a real commitment—like Patagonia encour- most customers—no matter how vocal aging customers to repair their coats, rather than replacing them. the dissenting minority. /Liza Agrba

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office likely won’t be the default anymore, companies need to make the commute worthwhile by highlighting what your home office lacks: “social interaction, collaboration, participatory activities,” says Mayhew. The best new spaces will lean into the office as social destination— think self-serve coffee stations, kitchenettes, cozy couches, games rooms. All are creature comforts we’ve grown accustomed to. “You want all the comforts from home but also with that human connection.” ASK AN EXPERT Our company is facing new government regulations. Pick up the Slack How do I find a good lobbyist to plead our case? All of my employees have adopted new Maddy Stieva, government collaboration tools, but I’m having trouble relations consultant at Capital adjusting. Is it okay if I just stick to email? Hill Group, knows the word “lobbyist” is potentially loaded. “The term tends to remind Nope—and not because it into your schedule to bring in a people of House of Cards,” she is embarrassingly akin to specialist or sit down with your jokes, “mostly because people sticking with your beeper or assistant for a few hours a week,” don’t always know what we fax machine. It’s the equivalent suggests Wright. Do it for the do.” Here is what they do. “For of being a quarterback who team—but know it’s really for anyone who offers a service or refuses to touch the ball. “If you. “Collaborative tools are product that solves a problem the whole team is engaged in the future of work, and they’re the government faces, we work live, interactive, collaborative here to stay. If you don’t adapt, for you to connect with them, technology and you choose not sooner or later, you’ll fall short.” establish relationships and to, that’s not okay,” says Darryl deliver solutions,” she explains. Wright, associate partner with Since our office is empty, Hire a lobbyist like you would People Advisory Services at EY we’re using the opportunity anyone else: “Start with Google, Canada. Wright has seen bosses to remodel our out-of-fashion if you want, but a better plan is refuse to use Slack or Zoom or common spaces. What are word-of-mouth referrals,” says other company-wide tech. That some cool touches employees Stieva, who suggests touching would be a fireable offence for will appreciate? base with comparable companies every other employee on the Rumours about the death of the with similar goals. Look for the team, so imagine the resentment open office have been greatly person who can achieve your if their leader gets a free pass. exaggerated. It’s unlikely we’re goals with their connections This is not only poisonous to going to see the return of high- and personality. These work culture but also just a drag. walled cubicles or even taller characteristics matter more than “It’s not cool to have a boss in panels between desks, according a fancy title on a CV, as does the Dark Ages,” says Wright. to Marcia Mayhew of Mayhew experience. “A sk about their past “You need to learn like we’ve all Inc., interior office designers. successes, how they did it and if Y had to.” Think first about what Not that post-pandemic offices that’s the kind of success you’re

exactly is holding you back: Is will be exactly as we left them. looking for too,” she says. Then, KENDR it a lack of competency? Your “Business owners are rethinking like every other hire you’ll ever M C attitude? Tackle this thought. who needs to be in the office make, it’s all about fit: Choose JOE Remember change is hard— and when, and creating unique someone you’re excited to work ION AT

but you’re luckily in a great dedicated workspaces for with and who’s excited to work TR position to learn. “Carve time sharing.” Since a daily trip to the with you. /Rosemary Counter US ILL

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THE EXCHANGE Rock solid As head of BlackRock’s Canadian outpost, Marcia Moffat is helping push investors toward a more sustainable future—a shift that’s been sped up considerably by the pandemic

BY TREVOR COLE

With office towers largely emptied direction. There’s a fundamental thanks to pandemic protocols, the shift in the market. We had a brain trusts of many large corpora- session with clients featuring Bill tions are spread hither and yon. It Gates and Larry Fink (1) talking hasn’t hurt the global investment about sustainability, and then behemoth BlackRock, which attracted Mary Barra, the CEO of GM, and a record inflow of US$172 billion in the CEO of Rivian, R.J. Scaringe. the first quarter of this year. These (2) And it was our most well- days, Marcia Moffat, head of BlackRock’s Canadian attended event ever. division, conducts her business far from Toronto’s Interesting. We’ll get into the financial hub, connecting with clients (and the sustainability stuff in more detail a roughly 100 employees responsible for the divi- little later. sion’s US$217 billion in assets under management) The other thing on investing I between hikes with her two teenage children and would say is the whole notion young black Lab along the woody trails surround- around construction of the ing Collingwood, Ont. Could that be one reason portfolio, as opposed to stock Moffat is keen to talk about the investment world’s picking—you know, asset growing shift to climate-driven initiatives? No—it’s allocations. What are the macro probably the money. trends and so on. That’s a big theme, and that’s where our Have you sensed a change in how 1. Fink is sophisticated clients really lean. Canadians are investing because BlackRock’s When you say “sophisticated CEO and chair, of the pandemic? clients,” you mean… and co-founded You’d heard for a lot of years the firm back in Think of us as a B2B type of about the death of active 1988. He now has model. We have an institutional management. If anything, this a personal net client business. Our clients worth of more pandemic environment has than US$1 billion. for that business are pension proven the importance of active funds, insurance companies, management, because the 2. Rivian family offices, foundations, markets have swung in different makes electric endowments, some of the other luxury vehicles directions, and there have been (starting at about asset managers on a sub-advised some tectonic shifts, some US$70,000) and basis, and so on. And then our acceleration of technological and is now valued other big pillar in Canada is our other structural trends. And then around US$27 exchange-traded fund business billion. Scaringe there have been some shifts in has been called through the iShares franchise.

RNA terms of different sectors being Elon Musk’s The clients for that tend to be

WA under further pressure and other nemesis. those institutional clients I SK ones popping up. We had been mentioned, as well as financial NIEL

TK having a lot of conversations advisers, and then individual DA TK with clients around investors buy them, too.

APHS sustainability heading into this. BlackRock is in at least 30 APHS GR

GR You think the foot will come off countries. That should give TO TO the pedal because of the crisis. you perspective. How would PHO PHO Actually, we went in the other you characterize Canadian

JUNE 2021 / REPORT ON BUSINESS 13 Need to know

(CANADIAN SHARE OF ASSETS UNDER MANAGEMENT: $217 BILLION) investor behaviour in a way that differentiates it from others? BLACKROCK $8.7 I speak more from an U.S. $21.4 institutional lens than from an JAPAN $5.8 individual investor lens, and I would say there’s commonalities CHINA $4.3 GERMANY $3.9 in terms of how sophisticated BLACKROCK’S TOTAL ASSETS institutions approach investing U.K. $2.8 UNDER MANAGEMENT around the world. This move to FRANCE $2.7 VS. ANNUAL GDP OF SELECT COUNTRIES asset allocation is a global trend. ITALY $2 (TRILLIONS US$) And the move, from a financial BRAZIL $1.8 adviser perspective, to more of CANADA $1.7 a model portfolio, where you RUSSIA $1.7 might make some adjustments, as opposed to stock picking, is a trend we see in different regions. One reason is a broader-based 3. The Taskforce think specifically around oil, In most countries, you do see a agreement that climate risk is on Climate- driving cars, planes and so on. Related Financial home-country bias, and Canada investment risk, that we are Disclosures was But it’s much broader than that. is no different. The pensions in a transition, and that those established by Our clients are saying they’re have gotten away from that to a companies that are not preparing the Financial going to double their assets in large degree. From an individual adequately for the transition Stability Board, sustainable strategies to 2025. a G20 financial perspective, you still see there’s will be left behind and will be oversight body, to So, these are your big clients. Are comfort with what we know. And riskier investments. There’s the steer companies they thinking about these things I would say Canadians would be other side of that coin, where toward more because they’re having to plan out transparency well-served to look outside our there are real opportunities, about their 20, 40 years from now? borders to where the growth is not just within venture carbon-related That would be part of it, but happening. The U.S. is a natural. capital–type investments in assets and not all of it. I think we’re seeing Certainly some emerging emerging companies, but with climate-related the risks as being much more risks. markets. China’s a powerhouse. well-established companies near-term now and manifesting The very first ETF was launched in that are preparing for the 4. The themselves in valuations, as well. Canada in 1990. The TSX recently transition better than their Sustainability Is it a problem that there are listed the first bitcoin ETF. Now peers. Sustainability is a broad Accounting no regulations around what Standards Board we’re listing the world’s first Ether topic. There’s also ESG— is an independent constitutes sustainable investing? ETF. environmental, social and non-profit, Additional rigour is being And you’re missing one, governance. I would say that founded in 2011 pushed for, and it is happening. to establish Trevor—the first bond ETF historically, there’s been a lot of specific Because you’re right, it can be globally was launched in Canada focus on governance, and rightly accounting difficult to know: Is what I’m by BlackRock. so, because a well-governed standards and investing in having the impact Okay, why do these things happen company does tend to have its language for I’m looking to have? And the ESG-related in Canada first? arms more around the strategy, disclosures people are drawn to sustainable Canada’s got a couple of great is more thoughtful, is more in each of 77 investing for different reasons. attributes. It’s a sophisticated prepared, is getting asked the industries. A portion is that climate risk market. It is small enough to try tough questions by its board of is investment risk, and there’s 5. BlackRock some of these things and see directors. That piece has been calls Aladdin opportunity. Some is that people if they take off. That’s a lot of part of the investor engagement a “centralized want to have an impact. But all what I do, in terms of running for a long time. The social and processing of that comes without wanting the business in Canada: Try the environmental, less so. It system for to give up returns. And that’s investment something out here, and then it hasn’t manifested itself in an management.” what we have focused on—the can be used as a model for other investable way, if you will. It started data and analytics to really regions around the world. Now, sadly, we’re seeing the selling its use understand what the risk is, to institutional Let’s talk about sustainable repercussions of climate change clients in 1999 how to quantify it, how to make investing. Is this a game-changing more readily, in terms of the but does not offer investment decisions on it. trend, in your view? physical risks it presents. The it to individual There is a push afoot for more It is. It is here to stay. The insurance industry, property investors. standardized disclosures. I conversations on sustainability and casualty, would see that would say that’s moving quite have been picking up over early. But then you start seeing it quickly. And this would be the last few years, and then trickling through the investment around TCFD (3) and SASB (4), through the pandemic, they have portfolios. And then there’s and then investors meeting with accelerated significantly. the opportunity. When most companies and indicating what Why? people think about climate, they kind of metrics they’re looking

14 JUNE 2021 / REPORT ON BUSINESS for. As to whether it can be You mentioned your banking immediately regulated, we’re experience, so let’s focus on you. still feeling our way through. You came to lead BlackRock in You are seeing a push for these Canada six years ago. How has that changes, and you are seeing worked out for BlackRock? companies responding, both I would say it’s worked out with net-zero commitments and extremely well, Trevor! First of with sustainability reporting. all, we struck an alliance with And it’ll get better and better. RBC on the iShare side of the On net zero, BlackRock has business, which brings together launched products with explicit our global capabilities and their temperature-alignment goals. capabilities. Your chair, Larry Fink, has called Was that a Marcia Moffat on companies to show their decision? plans for being compatible with Nothing is solely one person, a net-zero economy. With US$8.7 6. The BlackRock adding in more and more but yes, I was instrumental in trillion in assets under control, U.S. Carbon external sustainability data. that. Because as an independent Transition BlackRock has a lot of power. Can You’ve heard of providers like asset manager, the structure of Readiness ETF. you effectively force companies to MSCI, Sustainalytics, Refinitiv, the Canadian market is such that become net-zero compliant? 7. Moffat—who Rhodium Group, Clarity AI— you’ve got 80% of distribution There are client needs that must has a law degree they all provide sustainability through the banks. To be and an MBA from be met around sustainability. Rotman—spent metrics. We have loaded those successful as an independent, it And we’re looking at how we 12 years at RBC, into Aladdin. We’re talking, like, makes sense to have an alliance. can best serve our clients. including three 1,200 metrics. At one time, BlackRock controlled Specifically on your point, overseeing its So it’s a massive processing brain more than 80% of the ETF market $210-billion we do have an investment residential around investment risk. in Canada. By the end of 2018, that stewardship team that engages mortgage There’s a real thirst for being was down to 36%. Were you trying with companies, with a view portfolio. able to understand portfolio risk to fix that by partnering with RBC? toward long-term value creation from a climate perspective. And When we first entered Canada, 8. The Canadian for shareholders, around their ETF market share opportunity—last month we we were the only player. So at governance, their strategies of BlackRock and launched two carbon-transition- one point we had virtually 100% and their transition readiness. RBC iShares is readiness funds. And just to give of the market. As any asset class now reportedly And asking for good disclosure below 31%. you an idea of the appetite, it was matures, inevitably there’s more so investors can make proper our biggest ETF launch ever. It competition. There’s now dozens decisions on those companies. was $1.2 billion. And it continued of providers of ETFs. So yes, we We should talk a little bit to grow. Across those two, it’s were losing market share. And around the data and analytics, US$1.8 billion. And the U.S. given what our strengths are, and and also some of the products equities version (6) is the largest what RBC’s strengths are, the or capabilities we’re offering, single launch in history: US$1.25 alliance made a lot of sense. (8) because there’s quite a lot billion. That ETF produces about What is the chief skill you’ve happening in those two areas. 50% less annual greenhouse gas needed as head of BlackRock Let’s touch on it briefly. What emissions per dollar of revenue Canada? analytics are you talking about? than the Russell 1000, which is It’s collaborating across the We have an investment its benchmark. organization, to be able to management platform called Is there any risk in having one connect the dots. When you’re Aladdin. (5) It’s end-to-end, system coming up with solutions trying to get something done software as a service. We have for everyone? in the regional arm of a large proprietary risk analytics Everyone uses it differently. The multinational, you need to within the enterprise system. users are in control. I spent many develop those skills around It goes across asset classes, and years in banking (7), and you collaboration, influence, sharing it goes front-to-back within would see organizations build a vision for what can be and an organization. For example, these systems, and very quickly, having others feel they’re part portfolio management tools, they become legacy systems. of that vision. trading, operations compliance The world keeps changing, and it This interview has been edited accounting—all of that in a single becomes extremely expensive to and condensed. platform. From a portfolio view, keep a system current. So that’s what’s the value? It’s around the way I think about Aladdin. Trevor Cole is the award-winning author users being able to see the The industry has moved away of five books, including The Whisky whole portfolio and understand from proprietary systems. It just King, a non-fiction account of Canada’s the risks in its totality. We’re doesn’t make sense. most infamous mobster bootlegger.

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PHOTOGRAPH SCOTT BARTON, KURIOS – CABINET OF CURIOSITIES/COURTESY CIRQUE DU SOLEIL wearing his trademark tinted glasses. “Look, this is not good, obviously. But it’s not the end of the world.” Within days, however, Cirque’s world would completely collapse. Over the past year, Cirque du Soleil granted Report on Business maga- zine access to its top leaders as they fought to keep the company alive. Along with interviews with Cirque’s former owners, performers, lawyers, past executives and others, they pro- vide a front-row seat to not only the crushing decision to cancel the com- pany’s shows worldwide and lay off 95% of its staff, including acrobats, clowns, musicians and other creative types, but also the complex logisti- cal scramble to unwind Cirque’s vast international operations. And they reveal the financial con- tortions Cirque had to perform to survive. It’s a company with no real assets beyond its brand and its exper- tise at creating live extravaganzas. But carrying a staggering amount of debt, Cirque was arguably more exposed to a once-in-a-century pan- demic than any other major company in the world. The crisis triggered a desperate scramble for emergency financing that saw Cirque plunged into one of the most complex bank- an ode to the seven-layer multiplane camera system ruptcy filings in Canadian corporate history. And it set off Disney perfected to make animated scenery in movies a high-stakes, hard-knuckled battle between the powerful like Snow White and Bambi more realistic. No wonder private equity firms that controlled the company and its CEO and 20-year Cirque veteran Daniel Lamarre was creditors—a clash that ultimately left Cirque in the hands so eager to talk up the company’s long game when he of Toronto-based Catalyst Capital, whose business model stepped on stage, onto a literal blank canvas on the includes targeting and seizing control of distressed assets. floor. “We are preparing an amazing show that I hope Now, with the pandemic’s end in sight, Cirque is opening will stay here forever,” he beamed. the door on its plan to revive itself and bring back at least Later, after the acrobats and anthropomorphic fur- some of its performers, beginning with two of its oldest and niture had wandered into the wings, Lamarre joined most popular shows in Las Vegas this summer. The chal- me in the front row, where he reflected on everything lenges will be many—from the unpredictability of COVID- Cirque was up against. Yes, R.U.N. was a costly flop, he 19 variants and lingering border restrictions to more funda- admitted. The financial hit to Cirque was around $20 mental questions about how Cirque will repair its famously million and even more to its partner, MGM Resorts close-knit workplace culture and preserve the risk-taking International. And yes, the virus was deeply worrying. ethos on which it was built. A crisis unit had been formed just the day before at What Cirque is attempting is the corporate equivalent of the Cirque’s Montreal headquarters to monitor the risks seemingly impossible acrobatics its performers are known to its employees and operations. for—only it’s doing so after suffering a near-fatal injury. Vast Yet, Lamarre remained true to his reputation for fortunes, personal reputations and the livelihoods of thou- unshakable optimism, a quality he attributed to having sands of former employees, not to mention Quebec provin- “a very selective memory” that stops him from dwell- cial pride, now ride on Cirque sticking the landing. ing on those instances when Cirque’s big creative bets don’t pay off. This moment in the company’s nearly 40-year history is no different, he insisted. “A s a robust T entertainment organization, we mitigate our risk with a portfolio that is broad enough that if you have bad To understand Cirque’s terrible, horrible, no good, very bad luck or a bad situation somewhere, you can absorb that year, it helps to know where the company stood going into without getting the company into trouble,” he said, the crisis and the circumstances that made it so vulnerable

JUNE 2021 / REPORT ON BUSINESS 19 when the pandemic hit. In mid-February 2020, around the time the World Health Organization assigned COVID-19 its official name, but before Quebec had confirmed a single case, Cirque’s headquarters buzzed with activity. Located in the Montreal borough of Saint-Michel, on the site of a former limestone quarry that later served as the prov- ince’s largest landfill, the steel and glass structure could be home to just about any multinational corporation, 0, an e y 202 mplo save for the gigantic bronze sculpture uar yee br tronic polar e ima bea of an old leather clown shoe near the F an r in n Q a entrance. Inside, it’s the kind of place H e l id a s where turning a corner puts you face e n r i t n to face with a life-size animatronic n a o f a polar bear. Young men and women in M x s ’ f fantastical costumes dart in and out of e u o

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20 JUNE 2021 / REPORT ON BUSINESS our business people, we’re always spending too much.” He knew all too well what could happen when both balls were dropped. In the wake of the 2008 financial crisis, Cirque suf- fered a string of disappointments as the recession sapped demand for its pricey tickets and the company turned out several creative duds that left it exposed. With profits falling, Cirque laid off hundreds of execu- tives and performers, and embarked on a plan to diversify its business, with bold talk of theme parks, caba- ret shows, movies and expansion into Asia. By 2015, however, Laliberté, then 55, put Cirque up for sale, saying he wanted to spend more time with his five children but also to explore ventures in real estate, multimedia and technology. (Lalib- erté declined to be interviewed for this story.) Despite inter- est from 52 suitors, the winning bid was a consortium led ician works on chn sa te that was fet by U.S. private equity firm TPG Capital, which bought a 55% A how sup y h s po a s rn stake. Shanghai-based Fosun Capital acquired 25%, and pro- ed e s to s vincial pension fund manager Caisse de dépôt et placement o e p s e a du Québec bought 10%. The group reportedly paid US$1.5 n n d i n billion for the company, with Laliberté holding on to 10%. a 2 n

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e grow further over the next four years. By the end of 2019, Cirque owed US$970 million in long-term debt, and Moody’s, the credit-rating agency, had warned the company’s “largely harder to navigate. Tightening border restrictions debt-funded expansion strategy could be unsustainable.” under the Trump administration made processing as If trouble ever arose, Moody’s added prophetically, Cirque many as 7,000 visas and other permits a year more would have little room to maneuver. complicated. Rising diplomatic tensions with China Cirque’s debt load didn’t appear to concern its owners. hurt too: In December 2018, Cirque pulled out of talks As an LBO giant, TPG had already deployed US$50 billion to feature its performers in China’s highly watched in nearly 200 transactions over the previous two decades, Spring Festival Gala on the same day that country including many media and entertainment investments. Right seized Canadians Michael Spavor and Michael Kovrig till the end, Cirque was generating nearly US$100 million a in retaliation for Canada’s arrest of a Chinese telecom month in revenue and meeting its interest payments. Even executive on a U.S. warrant (though the company said today, those with knowledge of TPG’s Cirque strategy call the two weren’t related). the focus on its debt a red herring. “Our debt was basically But if the rise of nationalist populism and identity trading at par in advance of COVID, so the markets were politics were making it more difficult to find a shared saying Cirque was appropriately capitalized,” says a source language that would transcend borders, those same familiar with TPG’s thinking. borders would prove dangerously vulnerable to the The initial focus for the new owners was on improving invisible enemy of COVID-19. efficiency. “Cirque had an abundance of culture and cult- like commitment to the brand, and at the same time it had an abundant lack of controls, accountability and responsibil- C ity for [profits and losses],” says Mitch Garber, the Montreal businessman who joined the TPG-led purchase of Cirque as Cirque’s pre-pandemic success was grounded in its its chair (he was replaced last September). “It’s hard to be ability to juggle the competing demands of creativ- critical, because it worked for Guy. He’s not an org chart guy. ity and commerce. As Lamarre put it that February He’s not a quarter-over-quarter growth guy, and he doesn’t in Montreal, “If I were to listen to our creators, they necessarily hold people accountable for missing their num- never have enough money, and if I were to listen to bers, which is something that’s necessary when running a

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PHOTOGRAPH COURTESY CIRQUE DU SOLEIL On Feb. 21, Duncan Fisher, who’d joined Cirque two up.” After she’s flung through the air repeatedly, McCarthy’s years earlier as vice-president of touring operations, act culminates with her heart-stopping plunge, headfirst, got a message from a tour director with Blue Man toward the ice from about 20 feet in the air, where she is Group, which was scheduled to travel to South Korea, caught at the last moment by another performer. “I wanted it where an outbreak had just occurred. Fisher spent to be perfect and to take in every moment,” she says. “Once the last week of February in Munich with the tour- that final trick ended and I got in the finale position at the ing show Totem, which was set to visit Italy, Europe’s end of my act, I just started crying.” hardest-hit country, the next month. There, too, ques- tions were being asked about how to proceed. Fisher rushed back to Montreal, where he was C charged with setting up Cirque’s crisis task force, which began meeting daily. Their discussions still Cirque du Soleil is the United Nations of live entertainment. largely focused on how Cirque could keep shows run- At its height, the company’s 4,900 employees hailed from ning in the face of widening government restrictions almost 90 different countries, and it maintained a small army and what types of safety protocols were needed for of translators so they could all talk to one another. On its employees and audiences. “There wasn’t any talk of us touring shows alone, there were 1,500 performers, artists and shutting down,” says Fisher. “It was, ‘How do we oper- technicians from 50 nations. Nearly all of them would soon ate in this new reality we’re seeing?’” be out of a job. And with borders rapidly closing, they all had As the situation worsened, the daily meetings to get home. grew to include more than 70 people. Despite their While many employees had heard from their local manag- size, the gatherings were kept to around 45 minutes, ers that shows were being put on hold indefinitely, official with a strict time limit imposed on questions. “If we word came from Lamarre via a short video posted on the couldn’t solve your problem in 60 seconds, we’d take company’s internal communications hub at noon on March it to a sidebar meeting,” Fisher says. “Everybody in the 19. Cirque would be laying off 4,679 employees, he said, company then knew exactly what was happening with retaining a bare-bones staff of 259 in Montreal. “This is a tem- every tour around the world.” porary situation,” he tried to assure them. That was the first week of March. By the second, Behind the scenes, the massive logistical dance of repatri- “everybody knew what was coming our way,” says ating everyone was already underway. “A ll the barriers at the Jean-François Girard-Berberi, then Cirque’s head of company dropped, and everybody wanted to work together talent operations. “Everything was moving so fast, to help employees and save the company,” says Girard-Ber- you had very little time to react.” (He left the company beri. Members of the tour services team in Montreal, along this past April.) One by one, its touring shows were with local tour managers, began frantically booking flights shut down, and by Friday, March 13, all 13 of them— through Expedia for all 1,500 touring employees. With accounting for an estimated 65% of Cirque’s rev- employees hailing from countries as diverse as Kazakhstan, enue—had closed, save for Crystal in the U.K., where Switzerland, Belarus, Moldova, Denmark, Taiwan, Australia, the government was slower to implement lockdowns. Russia, Colombia, Japan, Finland, Italy and Brazil, the flights For Lamarre, the halt was crushing. The only con- crisscrossed the globe. All told, the bill for airfare was close solation, if it could be called that, was that the six to $1 million. Yet within a matter of days, the mass mobiliza- remaining Cirque shows in Las Vegas were still oper- tion was complete. “From when we started shutting down, it ating, though he knew the clock was ticking. On March took us 10 days to get everybody home,” says Fisher. 14, the day after the Trump administration declared a Well, almost everybody. Eight Mongolians who’d worked national emergency, Lamarre sat in a chair at his hair- on various Cirque shows found themselves trapped when stylist’s as his phone pinged every few minutes with their country closed its borders, even to its own citizens. updates on the spreading crisis. Then came the call Ninjin Altankhuyag, a 25-year-old contortionist with the from MGM Resorts: All the Vegas hotels were clos- show Kooza, was one of them. From the age of seven, when ing, and with them the Cirque shows—O at the Bel- Cirque came to Mongolia for a casting call, she’d wanted to lagio, Love at the Mirage, Kà at MGM Grand, Mystère join the company, and she got her chance in 2014. Kooza was at Treasure Island, Michael Jackson One at Mandalay in Lyons, France, when it was shut down. “Cirque found us an Bay and Zumanity at New York-New York. Lamarre apartment to stay in until we could get back home,” she says, excused himself and walked to his car in a daze. “I just “We really appreciated it.” As the weeks turned to months, collapsed in my car as I came to the understanding that she mostly watched TV and cooked. “I learned a lot of new Vegas was shutting down,” he says. “It meant we had recipes,” she says. Finally, in August, they were able to snag a no more shows. It meant we had no more revenue.” spot on a special charter flight to Ulaanbaatar. As it turned out, the 1 p.m. performance of Crystal Before employees left their tour sites that March, they’d in Glasgow that Sunday would be Cirque’s last show helped tear down most of the tents and pack up the arena before locking down, making McCarthy’s act one of shows. Tents at three tour sites, in Melbourne, Houston and the final performances before the company’s collapse. Montreal, were left up in the hope that shows might resume Crystal follows the subconscious journey of a in the coming months, but eventually those too were disman- young woman after she falls through a frozen pond, tled. That left Fisher with the question of where to put them and as McCarthy stepped onto the ice, a narrator’s all, along with costumes, booths, sound and lighting equip- voice echoed out: “It’s easy to fall, harder to get back ment. Gear from Europe went to the warehouses of a truck-

JUNE 2021 / REPORT ON BUSINESS 23 ing company in Amsterdam, while the rest was loaded into including the Cirque du Soleil trademark, to a separate trucks and stored in Las Vegas or Montreal. In all, nearly 700 holding company they controlled. If Cirque filed for tractor-trailers were packed away. bankruptcy protection, lenders might no longer have a Many of them still sit in the parking lot beside Cirque’s claim on the Cirque brand—arguably its most valuable headquarters. “When I see them, truck after truck after truck, asset—in many parts of the world. And bankruptcy was it just hits me in the gut,” says Leroux, the professor at Con- looking increasingly likely. Moody’s slashed Cirque’s cordia, who also teaches at the National Circus School across credit rating deep into junk territory and warned the from Cirque’s offices. “The first time I saw them, I thought, pandemic shutdown had “significantly heighten[ed] Oh my God, so this is what a multinational touring force looks the company’s risk of default.” like at a standstill. It’s heartbreaking to see so much creativ- When the asset shuffle eventually came to light, it ity, so much potential, so much investment and so many put Cirque and its existing ownership group on a col- dreams just sitting there in a parking lot.” lision course with debtholders. “To the extent they In the world of theatre, it’s tradition to leave a single lit were taking security away from the lending group and lamp, known as a ghost light, onstage after everyone has left the lending group doesn’t have the ability to call on for the day. In Melbourne, after packing away the equipment that security anymore, that reduces your pool of col- for Kurios, that’s what employees did, where Cirque’s big top lateral, whether or not the company is insolvent,” says once stood at the Flemington Racecourse. The light stayed lit Joe Pasquariello, a partner and head of the corporate until this past April, when Cirque had to clear out for good. restructuring group at Goodmans, which represented a committee of secured creditors. Enter Catalyst Capital. Controlled by secretive T Toronto financier Newton Glassman, the private equity firm specializes in acquiring distressed assets, The crisis facing Cirque wasn’t entirely unprecedented. The like the secured debt of struggling companies, on the 1918 Spanish flu triggered government lockdowns that forced cheap. It then restructures the businesses with the circuses across America to end their touring seasons early. goal of spinning them off at a profit. Through March In October of that year, Charles Ringling notified the 1,200 and April 2020, Catalyst, led by managing director employees of the Ringling Bros. World’s Greatest Shows the Gabriel de Alba, began quietly buying up Cirque’s circus was shutting down. The next day, it staged its final first-lien debt (the first in line to be paid when a bor- standalone performance. By the next spring, it had merged rower defaults) at around 50 cents on the dollar. with Barnum & Bailey, and the combined company was back With US$4.3 billion in capital commitments, Cata- on the road at full force. lyst’s strategy has put it at the centre of some of Can- At Cirque, as with the rest of the world, no one knew how ada’s largest restructurings, including those of broad- long COVID-19 would keep its grip on the global economy, caster Canwest Global, steelmaker Stelco and theatre but early on there was hope the crisis wouldn’t last. “We went giant Imax. But it has also been stuck with holdings it from almost US$100 million a month to zero in a week, and I failed to unload profitably, such as Advantage Rent A think we all naively thought we’d be able to recapitalize the Car, which filed for bankruptcy protection for the third business and by the end of the summer or beginning of fall time in May 2020, and Gateway Casinos, which saw a this thing would be over,” says then chief financial officer Sté- US$1.1-billion sale collapse last year. The firm has also phane Lefebvre, who joined Cirque in 2016 and was recently pushed limits in its battles with adversaries. A recent named chief operating officer. Ontario court ruling revealed Catalyst had indirectly The financial nightmare would last much longer than that. paid up to US$11 million to Black Cube, an Israeli pri- In theory, Cirque had three options. It could tap the govern- vate investigation outfit, which carried out a sting on a ment for a bailout. It could get its existing investors, TPG, former Ontario Superior Court judge who had previ- Fosun and Caisse, to inject more cash to keep the company ously ruled against Catalyst, in an attempt to discredit afloat. Or it could file for protection from its creditors. him. Catalyst has said it was unaware of Black Cube’s Lamarre preferred the first two options, and he turned to the actions. (De Alba declined requests for an interview.) Caisse for support. The pension fund had extra motivation to In the wake of the transfer of Cirque’s trademark, see Cirque survive intact. Less than two months earlier, in Feb- Catalyst assembled an ad hoc group of other lenders ruary 2020, in what might go down as the most perfectly timed and negotiated with Cirque to replace the $50-million asset sale ever, Laliberté unloaded his remaining 10% stake on loan from its owners with one from the creditors. the Caisse for US$75 million, thereby doubling the pension By then, though, the struggle for Cirque du Soleil’s fund’s exposure to the company. By early May, Cirque had soul had become an all-out brawl. Pierre Karl Péladeau, secured a loan of US$50 million in “emergency funds” from its CEO of media giant Québecor, vowed to “rescue” ownership group, and the Quebec government pledged up to Cirque with a vague pledge of “several hundred mil- $200 million to help Cirque get back on its feet, providing con- lions of dollars.” Péladeau also took a shot at Lamarre trol was anchored in Quebec and the existing owners main- and Garber, then Cirque’s chair, on social media: “The tained control. Cirque’s immediate future seemed safe. accounting truth demonstrates beyond any doubt that But there was a problem. Cirque had already failed to make the management of [Lamarre and Garber] has been roughly US$20 million in interest and principal payments to more than deficient…Cirque and its talents must be its creditors in March 2020. And just before doing so, Cirque’s saved.” (Garber fired back on Twitter: “My life would ownership group had transferred intellectual property assets, have been so much easier with much less risk if my

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PHOTOGRAPH COURTESY CIRQUE DU SOLEIL examined Cirque’s books, including Quebecor, Rogers The fund got bogged down last fall in a dispute between Can- Communications, Goldman Sachs and Feld Entertain- ada Revenue Agency and Cirque’s new owners over the tax ment (which once owned Ringling Bros. and Barnum treatment of the payments, which would amount to US$3,000 & Bailey Circus and now operates Disney on Ice), no per employee. At one point, an exasperated Quebec Supe- bid could top that of the creditors. As lenders, only rior Court judge, Louis Gouin, who oversaw the bankruptcy they could include the face value of the company’s filing, urged the two sides to work out their differences on US$1 billion in debt as part of their bid, an insurmount- compassionate grounds. “This is my human side talking,” he able hurdle for other contenders. told the lawyers. “These are really exceptional times. Those With that, Cirque became a holding of its lenders, acrobats can’t find a job tomorrow. I very much, very much led by Catalyst and including Sound Point Capital and would prefer that you find a way to do this.” CBAM Partners of New Yo rk. It struck many as an The clearest signal that Cirque’s revival is underway came odd fit. A company that embodies hope and joy was this April, when it officially announced its long-awaited now controlled by one of Bay Street’s most ruthless return plan. After Nevada’s governor set a goal of reopening dealmakers in Glassman, who once told a reporter, the state at full capacity by June 1, Cirque picked two shows “You have to be unaffected by conflict to be decent at to lead its relaunch—Mystère at Treasure Island in late June distressed [debt investing] because it’s a highly adver- and O at the Bellagio on July 1. It was a symbolic choice: sarial process…You are dealing with desperate people, The two shows were Cirque’s first resident performances in and desperate people try desperate things.” Vegas in the 1990s and helped rewrite the idea of the city as The deal received court approval and closed in an entertainment destination while also catapulting Cirque November 2020. Most of Cirque’s existing manage- to new heights as an international brand. ment team stayed in place, and Jim Murren, the former Cirque’s remaining Vegas shows, Love, Michael Jackson One CEO of MGM Resorts International—Cirque’s biggest and Kà, will follow this fall. (Missing from the list: Zuman- partner in Vegas—was named co-chair with de Alba. ity, the Cirque’s R-rated venture into erotic cabaret. After As for TPG, Fosun and Caisse, their equity holdings 17 years, it was closed for good last November.) In Florida, were wiped out. For the Caisse, that meant not just the the company is hoping to launch Drawn to Life sometime in US$71 million it invested in 2015, but also the US$75 the fall. Two of Cirque’s touring shows also got start dates— million it paid Laliberté only four months before the Kooza will begin performances in the Dominican Republic in bankruptcy filing. When Caisse CEO Charles Emond November, followed by Luzia at London’s Royal Albert Hall was later grilled by the Quebec National Assembly’s next January. “The intermission is over,” says Lamarre. public finance committee, he defended both the Febru- Cirque’s revival is a moment Diane Quinn has been pre- ary purchase, which he claimed would have given the paring for. When the COVID-19 crisis began, Cirque’s chief fund more sway to address Cirque’s swelling debt, and creative officer threw herself into the world of pandemic the decision to write off its stake. “The Cirque went research. As her understanding grew, her questions for the from $100 million per month to zero, with employees experts became more specific. What effect does virus shed- to pay and suppliers to pay, in 48 hours,” he said. “It ding have on the distance particles travel when Cirque’s was probably the first business to close. It will most singers are performing live? How far apart should clowns be likely be the last to reopen.” when speaking to each other or to audiences? What types of HVAC facilities are in place in different venues? “I don’t pre- tend to be an expert, but I feel like I’ve had quite an education O in COVID,” says Quinn. Last December, she got an opportunity to put some of what One year after Cirque du Soleil’s nightmare began, in she’d learned into practice. In Kissimmee, Fla., a small cir- March, Lefebvre and Lamarre held a video call with cus show Cirque had acquired was gearing up to perform employees. The message was simple, says Lefebvre: over the holidays. Quinn recorded the square footage of all “We might not be out of the worldwide health crisis at the rooms, traced the paths everyone would walk backstage this time, but the company is definitely out of its finan- to ensure they didn’t get too close and established an isola- cial crisis created by the public health crisis.” tion booth in case someone showed symptoms. It was also a Normalcy has begun to return, slowly. In March, chance to test the company Cirque has hired to conduct daily Dubé-Dupuis, who was among the contractors still testing—to gain access to the theatres, employees will have waiting to be paid for work completed before the pan- to display a QR code on their smartphones proving they’ve demic, got a call from his bank asking why $70,000 had tested negative. “I was filled with anxiety, wondering, How just been deposited into his account. He’d reached out can I keep all of these artists and staff safe?” she says. The to Catalyst after it won control of Cirque and told the work paid off. “There were no issues, no cases, no sickness, new owners of the contractors’ situation, and de Alba and we provided a socially distanced show for the audience.” assured him Cirque was working on it. In all, US$3.6 That show had nine performers. Replicating that for a million was paid out to Cirque’s former contractors complex 90-minute spectacle like O with a cast of 85 is next. and freelancers that month. “This is a step in the right “Regardless of whether we have one show up and running or direction,” Dubé-Dupuis said the day after getting 20 shows, these are the policies and procedures everyone is paid. “Good things can happen.” going to abide by,” Quinn says. Payments from the special US$15-million employee Even so, relaunching just one Cirque show will be a huge fund are also close to being issued, Cirque officials say. undertaking. Each will require roughly two months of intense

JUNE 2021 / REPORT ON BUSINESS 27 training and rehearsals, and cost between US$2 mil- believes Cirque “will be able to rebuild scale with limited lion and US$4 million to restart. The decision to pro- investment by leveraging a portfolio of shows with longstand- ceed in Vegas is also a wager that another wave driven ing popularity.” by COVID variants doesn’t force another shutdown. Fisher, the man in charge of remounting Cirque’s touring So far the news is good. At the end of April, Nevada’s division, is philosophical about the challenge. “How do you seven-day average for new cases was 372, roughly in eat an elephant? You do it one bite at a time,” Fisher says. line with where it had been two months earlier, while When the world has sufficiently reopened, touring shows 43% of adults in the county had received at least one will be launched gradually, likely two at once, he says. Mean- vaccine dose. while, Lefebvre says the US$375-million capital infusion A quick scan of ticket-booking sites for O and Mys- Cirque received from its new owners means he doesn’t antic- tère revealed both had sold roughly half the seats to ipate needing to raise capital to finance the revival. their first few performances in a matter of days. For One question facing Cirque is how many of its former the following weeks, however, most seats were still employees will come back. “I don’t think people understand up for grabs. Lamarre is betting that will change as how difficult it is to let go of 4,000 acrobats and then just will the vaccine rollout accelerates and stir-crazy Cirque them back one day,” says former chair Mitch Garber. fans from other parts of the country desperately flee In one troubling sign, En Piste, the National Circus Arts their lockdown digs. “If you’re an American and you Alliance of Canada, surveyed nearly 400 circus artists late are vaccinated, then you’re going to want to travel,” he last year and found 94% were considering a career change. says. “But guess what? There’s almost nowhere in the Cirque, however, has contacted many of its former employ- world for them to go, so they’ll probably decide to go ees and found more than 90% are eager to return. to Vegas or Orlando.” Perhaps a bigger question—after the layoffs, the bank- ruptcy and the ownership change—is whether Cirque can recapture the edge that once defined it. Quinn, Cirque’s chief E creative officer, predicts the crisis will give birth to a “cre- ative renaissance…We’ve all gone through a lot of hardship Early in April, a TV crew from Mark Burnett’s L.A. over the last year, but the ideas people are already having are production company arrived in Las Vegas. Burnett, hopeful and joyous and full of positivity.” the creative mind behind Survivor and The Apprentice, Ultimately, though, Cirque’s creative future depends had already been working with Cirque pre-pandemic entirely on the new owners, says Yasmine Khalil, Cirque’s for- to develop a reality show centred on the casting pro- mer chief executive producer, who left the company last fall. Is cess. Now the cameras are following the on- and off- their goal to stabilize their investment or take on new risks? “A stage lives of Cirque performers as they prepare to brand that is loved and known for innovation, creativity and bring its famous water show, O, back to life. “We really joy at a time when that’s what we need the most is a tremen- want to shine the spotlight on the artists, technicians dous opportunity for Cirque to leap into new opportunities,” and individuals throughout the company moving for- she says. “But ultimately, if you don’t continuously reinvent ward, not just for this project but for our global con- yourself, I think you run the risk of ending up like Polaroid, a tent slate,” says Sébastien Ouimet, director of global company that was very strong in one field but failed to pivot.” content and strategic partnerships at Cirque. “We’ll So far Cirque’s new owners have said little about their continue filming until O is back performing, and we long-term vision. In the only public comments Catalyst’s de can feel the excitement of mission accomplished.” Alba has made since the takeover, he said Cirque’s future No one at Cirque is under any illusion that mounting lies in the digital realm. “You’ve seen that Disney is bring- a handful of shows means the company has reclaimed ing some theatrical shows to Disney+, like Hamilton, with its former glory. Putting the massive machinery of great success,” he told The Globe and Mail last August. “I Cirque’s touring division back together is expected to foresee that Cirque shows can also be part of these types of stretch well into 2022. Cirque will eventually have to streaming platforms.” It’s a strategy Cirque had been inch- find a way to move its people and gear back into place ing toward prior to the pandemic, and its success with its in a world where vaccine passports and COVID flare- CirqueConnect digital hub and ongoing projects to bring a ups may be the norm. Tour schedules are also typi- Cirque-related animated children’s show to life prove the cally mapped out up to 18 months in advance to line strategy has potential. up promoters, secure locations and ensure shows can As for Lamarre, he’s optimistic (as usual) about Cirque’s move from city to city with minimal downtime. “The new owners. “People fall in love with Cirque du Soleil, and reboot of Cirque is not like just putting Lady Gaga that’s what I’m observing again right now,” he says. “We’ve back on tour. This is going to take months to years of spent a lot of time together, which is as important to me as it investment,” says the source familiar with TPG’s origi- is to them, because I want them to understand our business nal Cirque plans, now watching from the sidelines. inside and out.” Moody’s, a more impartial observer, likewise noted Above all, Lamarre is aching to experience a live Cirque in December that Cirque’s relaunch will burn through performance once again. “I cannot wait to do what I love in much of its cash by the end of 2022, “leav[ing] Cirque life, which is go to all these shows, go backstage, and chat du Soleil with limited flexibility to absorb any material with our artists and be fed by their passion,” he says. “For the underperformance against their business plan during last year I’ve tried to visualize Cirque’s revival. Now I don’t the extended ramp-up phase.” However, Moody’s also have to force myself to visualize it, because it’s happening.”

28 JUNE 2021 / REPORT ON BUSINESS Being the best starts with you. Thank you to the SAP community –our customers, partners and staff– for enabling SAP Canada to be recognized by Report on Business as one of the best B2B brands in Canada. www.sap.com/Canada 30 JUNE 2021 / REPORT ON BUSINESS OUR FIRST-EVER RANKING OF THE TOP BUSINESS-TO-BUSINESS BRANDS REVEALS WHICH COMPANIES HAVE IMPRESSED CANADIAN EXECUTIVES THROUGH INNOVATION, CULTURE AND SOCIAL RESPONSIBILITY STRIKEUP THEBRANDS

When the pandemic tossed millions of people from their offices last BY AALIYAH DASOO year, many companies relied on Microsoft to help figure out how to work from home. Microsoft Teams, the company’s business communications app, ILLUSTRATION ANDRÁS BARANYAI reportedly now has 145 million daily active users, up from just 32 million at the start of the pandemic. It was the key tool Lisa Gibson and her team recommended to help their clients work and learn remotely. Gibson, who is business manager and head of communications for Microsoft Canada, says customers all have their own unique needs, and it is her company’s job to understand what will work best for each. The ability to act upon consumer feedback is part of what has made Micro- soft into a trailblazer, Gibson says. “It’s not about coming into a conversation with the customer, thinking you know all the answers,” she says. “It’s really trying to learn from them about what they need.” Indeed, Microsoft has made myriad upgrades to Teams as its popular- ity has skyrocketed, including features to celebrate colleagues’ accom- plishments and a virtual “commute” that offers uninterrupted time at the start and end of the day. This constant iteration is part of what

JUNE 2021 / REPORT ON BUSINESS 31 landed Microsoft in the second spot on is most important to consumers—and Report on Business’s inaugural ranking then giving it to them. of the best business-to-business brands “Customers enjoy the fact that we in Canada, just behind Shopify. Among METHODOLOGY really care about them and their busi- the 406 Canadian executives (68% ness,” says Gales. “But it’s also very of them at the vice-president level or The 2021 Report on attractive to the people who work for above) surveyed by market research Business ranking of Best us. People enjoy that philosophy and firm Ipsos in partnership with The B2B Brands is based on being part of a culture that really cares Globe and Mail, Microsoft received the research produced in about customers.” In addition to rank- highest marks for being trusted more partnership with Ipsos. ing third overall, AWS was among the than other companies in its sector. We developed an online top five companies for many attributes It was also ahead of many competitors survey designed to of client engagement, such as being in leading a digital transformation and evaluate 74 brands in easy to work with, responsiveness and offering unique tools and technology. seven industry categories agility during the pandemic. Overall, the ranking covered 74 com- (accounting, banking, Gales says it’s been “really satisfying” panies in seven different sectors to communications, to see the company support customers define what B2B excellence looks like consulting, enterprise in the COVID-19 emergency. today. The language, wording and over- software, group benefits Showing that kind of social respon- all themes of the survey were refined and legal), with evaluated sibility was another common factor through interviews with an advi- brands chosen based among many of the top-ranked compa- sory group of 10 executives. “Insights on market share, size nies. “When the pandemic is over, it’s obtained from the interviews ensured and national reach. We likely that brands will not be judged on our study captured the most critical fielded the survey to a what they said, but what they did,” says and relevant issues for Canadian exec- select pool of business Steve Levy, a senior leader at Ipsos. utives,” says Mary Beth Barbour, senior leaders from Jan. 7 Levy highlighted two brands—RBC vice-president at Ipsos. through Feb. 16, 2021. The and Telus—that scored well on social Survey participants were asked survey results are based responsibility. Neither is the most about 10 randomly selected companies on the feedback of 406 innovative or fast-moving, but both they were familiar with and whether 42 respondents in executive worked to show support for Canadians different statements, from being “more roles. Each respondent through the tough times of the pan- innovative than peers” to “allows rated a randomized demic. Levy says that is what got them employees to be themselves” to “dem- assortment of business into the Top 10. “I suspect that when onstrated agility in COVID,” applied to brands they were familiar we look back, they will both be brands those firms. that we judge well and that I think this with, using 42 different To aid in determining the brands’ business community is already judging attributes related to individual strengths, Ipsos applied a [well],” he says. client engagement, model to classify various attributes by Telus has put more than $150 million culture, innovation, social five broad categories. Different com- toward COVID-19 efforts. Initiatives responsibility and talent. panies showed strength in different like Tech for Good (a program that The 25 brands that scored dimensions. For example, Shopify— provides specialized assistance, train- highest overall, as well our top company overall—was viewed ing and assistive technology to Cana- as the top three brands in by respondents as excelling at “trail- dians with disabilities) and Health for each industry category, blazing,” meaning it ranked highly in Good (which funds mobile health clin- areas related to digital transformation, are included as 2021 Best ics) reflect the telecom’s commitment innovation and growth. In comparison, B2B Brands winners. to supporting Canada’s vulnerable seventh-place RBC received its highest populations, says Navin Arora, who is marks for its efforts on community and charitable projects, making it president of Telus Business Solutions. a leader in “social responsibility.” Other firms, like 11th-place Deloitte “Doing good in our communities and Consulting, built their brands on “talent attraction,” or their skill in find- doing well in business are mutually ing and retaining top employees, clients and leaders. inclusive,” he says. A dominant theme across the ranking was a high regard for companies TD Bank similarly tries to find areas leading the digital transformation of the economy, according to Barbour. where its business interests intersect To wit, the top six brands—Shopify, Microsoft, Amazon Web Services, with societal good. It ranks second Salesforce, Zoom and Slack—are all tech companies. in the banking category behind RBC Like Microsoft’s Gibson, executives at other top-ranked firms say suc- and ninth overall, just behind Telus. cessful innovation is guided by customers’ needs. “This past year has “Authenticity is finding those areas shifted industry norms, how we use products, and increased the desire where we can both grow the business for more innovation,” says Ian Black, Shopify’s managing director of and contribute positively to society, Canada, in an email interview. “A s a leading commerce company, the key and that is really, really impactful,” is to be user-obsessed or, as we call it, merchant-obsessed. At Shopify, says Andrea Barrack, global head of everything on our product road map is directly correlated to a problem ESG and corporate citizenship at TD. our merchants worldwide are facing.” She says companies looking to build While Shopify is merchant-obsessed, Amazon Web Services Canada a strong brand should do more than is guided by a principle of “customer obsession,” according to Eric simply pick “a flavour of the month” Gales, the company’s country manager. That means understanding what to support, but instead consider what

32 JUNE 2021 / REPORT ON BUSINESS matters most to both the business and its stakeholders. Many brands likely earned respect for their actions over the past year. But “WHEN THE PANDEMIC IS OVER, others succeeded not because of recent IT’S LIKELY THAT BRANDS WILL events, but in spite of them. McKinsey & Co., which has faced multiple contro- NOT BE JUDGED ON WHAT THEY SAID, versies (including advising U.S. Immi- gration and Customs Enforcement on BUT WHAT THEY DID” managing detention facilities under the Trump administration and drug company Purdue Pharma on ways to increase sales of the opioid OxyCon- tin) was the top-ranked consulting company. The strength of McKinsey’s brand lies in the deep reservoir of trust it has, according to Levy. ing a desirable corporate culture. “We understand everyone’s journey Such a PR storm would be more diffi- here is different,” says Black. “We don’t hire people for what they can cult for brands newer to the market that do—we hire for what we believe they can figure out. It’s up to each indi- don’t have McKinsey’s history, Levy vidual to figure out how to create the biggest impact at Shopify and help says. Other large companies have made solve the biggest problems in commerce.” potentially brand-killing mistakes—for Microsoft, meanwhile, received the highest scores of any company example, Samsung faced a scandal with for both attracting and retaining top talent. Over the course of the pan- its smartphones catching fire—but demic, the firm has accommodated employees by offering paid leave for their strong equity has allowed them to child or elderly care, wellness days and flexibility with timing and dura- work through the struggles tion of meetings. “We’re empowered to work how, when and where we An often-overlooked component of want and need to work, in order to do our best job,” says Gibson. a company’s brand is its ability to take She says the company remains focused on improvement—of its cul- care of its own employees. Shopify was ture, along with its technology. “We feel really good about our culture, also tops on attributes like “allowing being diverse and inclusive, and allowing people to be their authentic employees to be themselves” and hav- selves. But it’s something you’ve got to keep working at.”

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Visit CIBC.com/business to learn more FOR EACH OF THE LEADING COMPANIES, WE’VE HIGHLIGHTED WHICH OF FIVE BROAD DIMENSIONS SETS THEM APART FROM THE MARKET: TRAIL BLAZING, CLIENT ENGAGEMENT, SOCIAL RESPONSIBILITY, TALENT ATTRACTION OR CULTURE. PLUS, WE SHARE TWO ATTRIBUTES WITHIN THAT DIMENSION THAT TRULY MADE THEM SHINE

FIRST ATTRIBUTE TOP25 SECOND ATTRIBUTE

SECTOR SOFTWARE

STRONGEST DIMENSION TRAIL BLAZING 2

1 SECTOR SOFTWARE STRONGEST DIMENSION TRAIL BLAZING Have competitive advantage over its competitors 81% 71% 79% Leader in their sector Ahead of others leading digital Demonstrated 69% transformation considerable growth in recent years

3 SECTOR SOFTWARE STRONGEST DIMENSION TRAIL BLAZING

Demonstrated considerable 73% growth in recent years

Have competitive advantage over its competitors 64%

64% Leading the way in the In addition to top company, Shopify also boasted adoption of new tech/tools strongest marks for “treating employees well”

34 JUNE 2021 / REPORT ON BUSINESS 72% 58% Demonstrated considerable growth Leading the way in recent years in the adoption of 4 SECTOR COMMUNICATIONS new tech/tools STRONGEST DIMENSION TRAIL BLAZING 5

SECTOR SOFTWARE STRONGEST DIMENSION 7 TRAIL BLAZING SECTOR COMMUNICATIONS 6 STRONGEST DIMENSION TRAIL BLAZING SECTOR BANK Respondents STRONGEST DIMENSION said it does the SOCIAL RESPONSIBILITY best job overall Demonstrated Ahead of others of attracting considerable leading digital 56% successful clients growth in transformation recent years 67% 55%

64% 61% 37%

SECTOR COMMUNICATIONS STRONGEST DIMENSION SOCIAL RESPONSIBILITY 8

Set example in the support of charitable and community causes 43% Set example in Demonstrate Demonstrate more than its peers they care about their the support of more than its social impact on communities where it operates charitable and peers they 36% community care about causes their social impact on communities Tied with Microsoft as top firm for investing where it more than its peers in environmental policies operates

Among or ading tion

ct the top le se s banks for rma fo her 42% 32% attracting their

ot 9 talent and ans

in Demonstrate more of tr having

al Set example than its peers they ad SECTOR BANK strong ader care about their social in the support of leaders Le digit Ahe STRONGEST DIMENSION charitable and impact on communities SOCIAL RESPONSIBILITY community causes where it operates

Known for attracting 50% top talent

SECTOR CONSULTING Do a better job than others in 46% attracting successful clients 10 STRONGEST DIMENSION TALENT ATTRACTION

JUNE 2021 / REPORT ON BUSINESS 35 SECTOR SOFTWARE 11 12 STRONGEST DIMENSION TRAIL BLAZING

SECTOR CONSULTING Offer Leading Leader STRONGEST DIMENSION TALENT ATTRACTION unique the way in their suite of in the sector 36% capabilities, 47%3adoption 8% 38% products of new Known for and tech/tools attracting 31% services top talent Has exceptional leaders

SECTOR COMMUNICATIONS

STRONGEST DIMENSION TRAIL BLAZING

Leader in their sector 47%

Leading the way in the 13 adoption of new tech/tools 35%

Seen as one of the leaders 37% among software 14 Ahead of others leading digital transformation companies for its strong 33% corporate SECTOR SOFTWARE and ethical STRONGEST DIMENSION TRAIL BLAZING Offer unique suite of capabilities, products and services reputation

SECTOR SOFTWARE 15 STRONGEST DIMENSION TRAIL BLAZING 16 SECTOR COMMUNICATION

Offer unique STRONGEST DIMENSION SOCIAL RESPONSIBILITY suite of Leader in capabilities, 48% their sector 45% 49% products, and services Set example in the support of charitable and community causes 33%

Stronger participation in conversations about improving society, country at large 17 STRONGEST DIMENSION SOCIAL RESPONSIBILITY SECTOR BANK

40% Set example in the support of charitable and community causes 25% Corporate responsibility is truly in their DNA

36 JUNE 2021 / REPORT ON BUSINESS A leader in its sector for having a “solid SECTOR LEGAL STRONGEST DIMENSION TALENT ATTRACTION coporate 19 Known for attracting top talent 40% and ethical reputation” 18 Known for retaining top talent 26%

SECTOR BANK 20 STRONGEST DIMENSION 21 SOCIAL RESPONSIBILITY STRONGEST DIMENSION TRAIL BLAZING SECTOR SOFTWARE 34% SECTOR SOFTWARE 44% 42% STRONGEST DIMENSION TRAIL BLAZING Leading the way Ahead of others in the adoption of leading digital new tech/tools transformation

35%

Leader in their sector 20% 22 SECTOR CONSULTING STRONGEST DIMENSION TALENT ATTRACTION

31% Known for attracting top talent 33% 31% Known for retaining top talent Offer unique suite of Ranked highest among consulting firms for capabilities, products “being more innovative than peers” and services

23 SECTOR CONSULTING 24 Set example Demonstrate STRONGEST DIMENSION TALENT ATTRACTION SECTOR BANK in the more than its support of peers they STRONGEST DIMENSION Known for attracting top talent 34% charitable care about SOCIAL RESPONSIBILITY and their social community impact on causes communities Known for retaining top talent 21% where it 38% operates

Set example in the support of charitable and community causes Viewed as best in its sector for SECTOR GROUP BENEFITS STRONGEST DIMENSION SOCIAL RESPONSIBILITY taking time 25% 23% to develop Demonstrate more than its peers they care about their Demonstrate more relationships social impact on communities where it operates than its peers they with clients care about their social 19% impact on communities Stronger participation in conversations about 25 improving society, country at large where it operates

JUNE 2021 / REPORT ON BUSINESS 37 FOR THESE SECTOR LEADERS, WE’RE CELEBRATING WHICH DIMENSION DISTINGUISHED THE FIRMS FROM OTHERS IN THEIR CATEGORY TOP3

STRONGEST DIMENSION bySECTOR

SOCIAL 13% Stronger participation in conversations about improving society, country at large RESPONSIBILITY 13% Corporate responsibility is truly in their DNA

COUNTING 27% Leader in their sector TRAIL BLAZING AC 22% Recommended more often than others in its sector

TALENT 30% Known for retaining top talent ATTRACTION 23% Known for attracting top talent/Do a better job than others at attracting top clients

TALENT 36% Do a better job than others in attracting successful clients NK ATTRACTION 32% Known for retaining top talent BA

TALENT 27% Known for retaining top talent ATTRACTION 25% Has exceptional leaders

SOCIAL 40% Set example in the support of charitable and community causes/projects in Canada RESPONSIBILITY 25% Corporate responsibility is truly in their DNA

72% Demonstrated considerable growth in recent years

ION TRAIL BLAZING 58% Leading the way in the adoption of new tech/tools AT

67% Demonstrated considerable growth in recent years TRAIL BLAZING 55% Ahead of others leading digital transformation COMMUNIC SOCIAL 43% Set example in the support of charitable and community causes/projects in Canada RESPONSIBILITY 36% Demonstrate more than its peers they care about their social impact on communities where it operates

TALENT 50% Known for attracting top talent ATTRACTION TING 46% Do a better job than others in attracting successful clients

SOCIAL 20% Set example in the support of charitable and community causes/projects in Canada CONSUL RESPONSIBILITY 18% Corporate responsibility is truly in their DNA

37% Leader in their sector TRAIL BLAZING 27% Improved offer/business model over time

S CLIENT 30% Strong solid corporate and ethical reputation ENGAGEMENT 30% Would be easy to work with them

BENEFIT TALENT 11% Has exceptional leaders ATTRACTION 10% Known for attracting and retaining top talent OUP GR SOCIAL 21% Corporate responsibility is truly in their DNA RESPONSIBILITY 18% Set example in the support of charitable and community causes/projects in Canada

TALENT 40% Known for attracting top talent GAL ATTRACTION 26% Known for retaining top talent LE

21% Known for treating employees well CULTURE 17% Allows employees to be themselves

SOCIAL 15% Corporate responsibility is truly in their DNA RESPONSIBILITY 13% Set example in the support of charitable and community causes/projects in Canada

49% Allows employees to be themselves RE CULTURE 43% Desirable culture WA

SOFT SOCIAL 29% Stronger participation in conversations about improving society, country at large RESPONSIBILITY 26% Demonstrate more than its peers they care about their social impact on communities where it operates

TRAIL BLAZING 73% Leading the way in the adoption of new tech/tools 64% Have competitive advantage over others

38 JUNE 2021 / REPORT ON BUSINESS Your trustand respect areour greatest rewards.

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*2021 Report on Business Best B2B Brands- Globe &Mail &Ipsos survey of 406 Canadian business executives across Canada from January-February,2021. ®Registered trademarks of The Bank of Nova Scotia HIS LAST TECH

UNICORN DIED.

WILL THIS ONE

LAST LONG

SUBSTACK, THE ENOUGH TO

NEWSLETTER COMPLETE HIS

PLATFORM MISSION?

CREATED BY

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CHRIS BEST,

IS PROMISING

TO UPEND

TRADITIONAL JOE CASTALDO

MEDIA. photographs by

LUCAS FOGLIA

40 JUNE 2021 / REPORT ON BUSINESS

among others. Writers can offer some or all of their content for free and set their own subscription fees. Five dollars a month is fairly common. Others are pricier: A finance indus- try newsletter called Petition is US$49 a month. One value- investing blog has hundreds of subscribers at US$125. Best has ambitious goals for Substack, which he sees as a balm for a broken media landscape. “Substack is about creat- ing a new model for quality writing in the age of the internet,” he says via Zoom from his basement in San Francisco, where he has lived since 2018. Best, 33, is the kind of person who can’t stop moving, hopping up and down in his chair and run- ning his fingers through his hair. With Substack, he explains, writers get control, independence and a relationship with subscribers. Readers, in turn, choose who to reward directly through subscriptions. “It’s creating a lot of great writing that otherwise wouldn’t have been economically viable,” he says. For some, it’s a tantalizing pitch. Journalism, you may have heard, is in crisis. Publications are fighting against falling ad revenue, budget cuts, layoffs, buyouts and outright closures. A number of high-profile writers in the U.S. have left their employers to go solo on Substack, sometimes lured by large advances and earning substantial incomes. These days, everyone in the media seems to have an opin- ion about the company, and it has been the subject of many piping-hot takes and Twitter threads. Substack has been praised for freeing writers from corporate and editorial con- trol and derided for posing a threat to traditional news media. It’s allowing new and diverse voices to flourish or just ampli- fying established names. It’s a respite from the toxic social media swamp but also hosts writers who espouse harmful seven years as a opinions, according to some critics. reporter for the Montreal Gazette, Christopher Curtis The various debaters might be getting ahead of themselves. was starting to feel stagnant. He was working in a shrinking Before Substack can save journalism or murder journalism newsroom, with a dwindling roster of reporters scrambling or fulfill any other promises and foreboding prophecies, it to cover the news—a problem that only worsened when the has to achieve longevity as a business. The company is worth pandemic arrived. “We were chasing our tails,” Curtis says. a reported US$650 million, which seems like a lot for an out- He worried he’d be out of a job one day, competing with fit that has effectively married mass emailing with payment his similarly unemployed colleagues for a small number of processing. (Substack doesn’t even handle the latter part; it gigs. Moreover, Curtis felt like he wasn’t doing his best work uses Stripe.) It doesn’t disclose revenue, but Best concedes anymore. He preferred to spend time with a story, but in an it’s not yet turning a profit. There’s also growing competition understaffed newsroom, that became increasingly difficult. in the newsletter space from Twitter and Facebook. So last year, Curtis quit his job and launched a paid newslet- Best expected that. “There’s just no way you’re going to ter called The Rover. It was a sizable financial risk, especially make a wildly successful independent company,” he says, considering Curtis and his girlfriend are expecting their first “and not have Twitter and Facebook trying to copy Sub- child, but he says it has been worth it. The work is meaning- stack.” Indeed, launching a startup only to have much bigger ful, and he’s secured around 700 subscribers who pay $12.50 a competitors try to crush you is something Best experienced month to support his reporting from Montreal and Val-d’Or, before. It didn’t end all that well. along with personal columns. “It could go up in flames,” Cur- If he wants things to be different this time, he’ll have to hus- tis acknowledges, “but I’m happy to be part of a failed effort.” tle. Substack hopes to remain independent—it doesn’t want Curtis operates The Rover through Substack, which to sell—and grow big enough to change the media landscape. makes software for writers to publish and distribute email The hitch is that it’s only as valuable as the writers on its newsletters. It’s run by Chris Best, a Canadian now based in platform, and it’s easy for them to leave. Some already have. San Francisco who oversees about 41 employees. Newslet- ters are an old concept, and Substack is not the first to offer them, but somehow it’s become an obsession for the media industry and secured millions in funding from Andreesen Horowitz, one of the biggest VC names in Silicon Valley. idea for Substack origi- More than 500,000 people pay for newsletters on Substack, nated a few years ago, when Best found himself with a lot which typically takes a 10% cut of a writer’s subscription of time on his hands. He had just capped eight years at Kik revenue. There are newsletters devoted to politics, original Interactive Inc. in Waterloo, Ont., an instant messaging com- journalism, cryptocurrency, pop culture, distressed invest- pany he co-founded. “It had been this crazy, wild ride,” he ing, reviews of tinned seafood, the New York Knicks, recipes, says, “and I didn’t want to blindly leap into something.” Canadian public policy, meticulous recaps of Judge Mathis Best grew up in Richmond, B.C., the son of two public episodes, drugs, dogs, the Bible and artificial intelligence, school teachers. (His sister is a teacher too.) He took a differ-

42 JUNE 2021 / REPORT ON BUSINESS BEST’S FIRST STARTUP, KIK, GOT CHASED OUT OF THE INSTANT MESSAGING ent route and studied systems design engineering sue Kik for conducting an illegal offering. A U.S. at the University of Waterloo. Through a mutual MARKET BY court found the digital tokens amounted to a secu- friend, he met fellow student Ted Livingston. FACEBOOK. NOW rity, meaning Kik violated federal law when it con- Together, they started developing a music player HE’S UP AGAINST ducted an unregistered offering. These days, Liv- for BlackBerry devices before pivoting to messag- THE SOCIAL MEDIA ingston is working on Kin with a small team. The ing and co-founding Kik in 2009. With Livingston GIANT AGAIN chat app was sold in 2019. as CEO and Best as chief technology officer, Kik As for Best, he didn’t want to think about what went on to attract 240 million registered users and to do next for at least a year after leaving Kik. He’d raise US$120.5 million in funding over the next always wanted to try writing, so he started draft- few years. ing an essay railing against the detrimental effects Others took an interest in messaging too—namely Face- of social media. The ad-driven business model that priori- book. The social media giant launched its standalone Mes- tized likes and clicks was polarizing society, degrading jour- senger app in 2011 and later acquired rival WhatsApp. There nalism and contributing to a mental health crisis, he argued. was no shortage of ways to contact people; every social media Best showed his writing to Hamish McKenzie, a former app incorporated messaging, and there was always plain old journalist from New Zealand who attended the University texting. Kik found itself fighting to keep pace. “It was very of Western Ontario and later worked at Kik as an editorial challenging because we were competing in this big category adviser. McKenzie suggested it would be more worthwhile against competitors who didn’t need to make money,” Liv- to explore solutions, and they started discussing new media ingston says. “We didn’t have that luxury.” business models. Livingston looked at Kik’s leadership and decided to put Subscriptions, the pair realized, were a more sustainable someone who reported to Best in the CTO role. Best offered model than advertising, and newsletters created a direct to resign instead, reasoning that was the only way someone relationship between writers and readers. (They drew some new could succeed. He left in 2017. For Livingston, who says inspiration from Ben Thompson, of the tech newsletter Strat- he didn’t expect his co-founder to quit, the episode represents echery.) From those conversations emerged Substack. Best a certain selflessness on Best’s part. “He was sort of making bashed out the first version of the code but convinced Jairaj a sacrifice for what he felt was the benefit of the people,” he Sethi, another Kik alum, to join as co-founder and CTO. says. Livingston deeply regrets parting ways. “That was one Substack launched in 2017, and Best and McKenzie pub- of the biggest mistakes I’ve made in my career.” They’re still lished a manifesto of sorts promising “a new day” for writers. friends, and Livingston was an early investor in Substack. You might assume that three tech bros, only one of whom Kik, meanwhile, continued to struggle. In 2017, it launched had worked as a journalist, making bold promises about the its own virtual currency as a way to make money and raised future of news and touting subscriptions as something novel US$100 million through the sale of a digital token called Kin. would engender deep skepticism among professional writ- Some of the money was raised from American investors, ers. And they did. prompting the U.S. Securities and Exchange Commission to Substack spoke to writers and journalists about what they’d

JUNE 2021 / REPORT ON BUSINESS 43 Glenn Bari Roxanne Seth Dan Garrison Cheryl Charlie Greenwald Weiss Gay Abramson Rather Keillor Strayed Warzel Journalist Controversial Writer, Columnist Journalist and Storyteller, Author of the Former New who broke former New professor and and political former CBS author and bestselling York Times the Edward York Times author of analyst Evening News creator of A memoir Wild writer Snowden columnist Bad Feminist anchor Prairie Home documents Companion

A list of want in a newsletter platform. Best reached out to Substack empowers journalists to report “with- Jen Gerson, a journalist in Calgary. He struck her some of out the shackles of corporate editorial control or as a passionate guy, but as soon as Gerson hung the people liberal pieties.” up the phone, she said to herself, Well, that’s going who’ve As a result, Substack earned a reputation as a nowhere. The idea that professional journalists home for aggrieved writers to spout unpopu- would take a flyer on newsletters in hopes of cob- joined lar opinions. It’s worked to dispel that image bling together enough subscribers to make a liv- Substack and often points to Heather Cox Richardson, a ing struck her as “bonkers,” she recalls. little-known Boston College professor who has But Substack managed to find takers, in part by amassed tens of thousands of subscribers as she making it dead simple to start publishing instantly, analyzes current events through a historical—not zero technical skills required. McKenzie pitched ideological—lens. hundreds of established journalists, columnists and essayists Jude Doyle, a writer in New York, was approached to to join, and some made a big deal of doing so. Glenn Gre- join Substack in 2018. But Doyle, who is trans, soon became enwald and Bari Weiss torched their former employers, The uncomfortable sharing a platform with writers they viewed as

Intercept and The New York Times, respectively, upon leav- anti-trans. That includes Graham Linehan, an Irish television WALLACE/GETTY ing, which brought more attention to Substack. writer who was permanently suspended from Twitter last For a spell last year, there was a rash of high-profile writers year for “hateful conduct” and maintains a Substack where he ANTHONY climbing aboard. That caused Gerson to reconsider joining regularly writes noxious missives about trans people. Substack. “I saw a wave there that merited riding,” she says. Doyle wrote about their misgivings about Substack (on

Along with two others, Gerson now runs The Line, featuring Substack) and emailed the post to the company. Doyle found (STRAYED) opinion and commentary from a range of writers. So far, it’s its response defensive and says it also raised the prospect attracted close to 5,600 subscribers, 1,300 of them paid. (It’s of Substack Pro. “It just did not feel right,” Doyle says, “and a part-time gig for Gerson; she still writes for other outlets.) that’s when I was out the door.” Doyle moved to Ghost, a non- BAENEN/AP; Millions in venture capital funding also raised Substack’s profit platform. A number of other trans writers have since profile. McKenzie had approached an entrepreneur and switched to rivals, as well. (A spokesperson for Substack says JEFF writer named Andrew Chen about moving his newsletter it did not attempt to influence Doyle. “The idea of offering

to Substack. Chen wasn’t interested (he preferred to run contracts to change how people feel and what they think runs (KEILLOR) everything himself, McKenzie recalls), but when he joined absolutely counter to the founding principles of Substack,” Andreesen Horowitz, he led a US$15.3-million round in Sub- according to the spokesperson.) stack in 2019, followed by US$65 million this past March. “We’re sad about that,” Best says of the writers who have

Part of the funding will be used to attract more writers left, while adding “we’re delighted to have great trans writ- FRENCH/GETTY; through a program called Substack Pro. The company will ers on the platform.” Substack takes a light approach to mod- fund a select few for their first year on the platform and col- eration, and Best has argued it’s not as difficult a challenge LARRY lect 85% of the subscription revenue. Afterward, Substack’s for the company compared to YouTube or Facebook, which cut falls to 10%. More than 30 writers have signed on so far, use algorithms to surface content. “Our goal is really putting and although the company doesn’t divulge names, some have readers and writers in charge of this,” he says. (RATHER) aired their details. Matthew Yglesias, formerly of digital pub- That message has resonated with some. Gerson says the lication Vox, took a US$250,000 advance. (He later calculated company’s guidelines make it clear what’s acceptable and he would have been better off had he just kept a larger por- what isn’t. “I don’t get the sense the goalposts are going to CORREA/AP; tion of his subscription revenue.) shift,” she says. For that, she’s willing to pay a premium to run LEO Substack’s growth has not been without controversy, and her publication with Substack versus a cheaper competitor. there has been a certain ideological bent to some of the plat- For Doyle, Substack’s position is a dodge and notes the form’s popular early adopters. Some, like Weiss, are writers company is a mess of contradictions. Best has said Substack (GREENWALD) who expound on the perceived threat of “cancel culture” is a platform, not a media company. Yet it launched promising and the supposed excesses of progressive politics, all while “a better future for news.” Substack has also said it doesn’t complaining about the constraints they felt were imposed make editorial decisions, but selecting writers and offering on them by previous employers. Greenwald has tweeted that them money is effectively just that. It’s a bit of sleight of hand PHOTOGRAPHS

44 JUNE 2021 / REPORT ON BUSINESS CELEBRATING CANADA’S 2020 YOUNG LIONS

Each year,the Canadian Young MARKETERS DIGITAL Lions Competitions bring out Galen Howe LeoJanusauskas thebestyoung talent in the Senior Manager, ArtDirector, Studio Sophomore ChannelStrategy -North America, Ellen Porteous advertising and marketing Coca-Cola industry.This year,375 Copywriter,Abacus Agency 8",+: ,'=&:: 5."'&+$"8787&( Kristina Komhyr Customer Growth Manager, PRINT categories tackled achallenging Coca-Cola AntonMwewa brief under extreme time pressure Senior ArtDirector, john st. MEDIA fortheir chance to qualifyand KayBenedek Dustin Wilson competeinthe global Young AssociateCreativeDirector, Cossette Lions Competitions. Competition Senior Communications Planner, OMDCanada 7: 5"='"0<&(;=,8/-,87&(: 8& &/= FILM winning teams! Naveed Ahmed CharlesBoutin Senior AccountStrategist, ContentCreator, Sépaq Shoelace Inc. Alexis Thériault-Laliberté CreativeDirector,Kabane BrandAgency

Eachyear,submissions for theYoung Lions Competitions are judged by an YOUNG esteemed panel of industryexperts. Juries of experienced advertising and marketing executives review, debate and determine thetop winning teams. LIONS JURIES Thank youtoour jurychairs and judges.

PRINT/DIGITAL/FILM MARKETERS MEDIA Mary Maddever Susan Irving CathyCollier SVPEditorialDirector, 31/"!*%-4",/.2'!#$"-( 31/"!0&"$+,/)"'!#$"-( BrunicoCommunications, Kruger Products Ltd, OMD Canada Jury Chair, Print,Digitaland Film Juries JuryChair, MarketersJury Jury Chair, MediaJury

Forafull list of judges,please visit globeandmailyounglions.ca/jury

SEE THE WINNING WORK AT GLOBEANDMAILYOUNGLIONS.CA

OFFICIAL FESTIVAL REPRESENTATIVE CANADIAN PROGRAMPARTNERS

39" 4-&)" ,(% #,7- 7: $=&/% 8& )" 89"&!5'7,- 6":87.,- ="$=":"(8,87."7(<,(,%, !&= 89"<,((": 17&(: 2(8"=(,87&(,- 6":87.,- &! <=",87.78*0 Learnmore about our commitment to supporting marketing creativity and innovation in Canada, visit globelink.ca/canneslions that social media companies have performed in recent years. most popular in various categories. Revue also takes 5% of Facebook has tried to insist it’s a platform, not a publisher, in subscription revenue—half of Substack’s cut. (It’s worth not- hopes of absolving itself of responsibility for the content its ing Twitter has bungled acquisitions before, buying beloved users post. video app Vine only to shut it down a few years later.) Substack, in turn, wants to be seen as charting a bold new “We definitely can’t rest on our laurels,” McKenzie says, media future, while trying to remove itself from the content “and it’s a good incentive for us to make a better product and and the writers it hosts. “You still have to take responsibility build it fast.” Substack is taking more steps to support inde- for what you’re putting out into the world,” Doyle says. pendent writers in the meantime, such as a legal program to deal with defamation threats and putting up US$1 million to help local news writers and providing them with mentoring. “We’re going to put a much greater effort and much larger investment into these areas now,” he says. January, Twitter pur- But for Twitter and Facebook, newsletters are likely going chased a small newsletter company from the Netherlands to be a tiny part of their overall businesses. Each company called Revue. Much like Substack, it’s promising to help can afford to lose money in an attempt to capture the space, writers monetize their audiences. “Twitter is uniquely posi- much like how Facebook used its dominance and financial tioned to help organizations and writers grow their reader- resources against Kik. Best is not one to dwell on parallels, ship faster and at a much larger scale than anywhere else,” though. When asked if there are any lessons he’s applying the company wrote in a blog post. (Twitter declined an inter- to Substack, he seems a little stumped. “Kik gave me a sense view.) Facebook is reportedly looking to get into newsletters of what’s possible,” he says after thinking about it. “A nd the and has plans to court writers, while there are importance of running your own race.” plenty of smaller newsletter players too, such as For Substack, it’s been a fast one. In March 2020, Ghost, Pico and Letterdrop. the company had 100,000 paying subscribers; it None have nearly the profile Substack does, has 500,000 today. Some question whether it can though Ghost is seen as a cheaper alternative for keep up the pace. Om Malik, a former journalist large newsletters. Rather than taking a portion of and venture capitalist, is a supporter of Substack subscriber revenue, Ghost charges a flat fee. The Substack but says the company faces challenges with both cost savings were part of the reason Uri Bram, earned a readers and writers. The willingness of the public who runs a newsletter with 11,000 paid subscrib- reputation to pay for multiple subscriptions is limited, he rea- ers called The Browser, switched from Substack as a home sons, and the number of writers worth paying for to Ghost last year. “We’re paying 90% less than we could hit a wall. “They will have to find thousands were on Substack,” he says. “What’s not to like?” for aggrieved of creators who can build sustainable audiences Best admits there’s a part of him that’s appre- writers that will pay for their content over a long period hensive about the arrival of Twitter and Facebook, to spout of time,” Malik says. “Scaling won’t be that easy.” but no more than that. “The thing I tell the team Best, in turn, says the company will nurture its here is we should let our competitors influence unpopular own stars. “The vast bulk of the opportunity for our speed but not our direction,” he says. opinions Substack over time is having people start from The crowded field does raise the question of relative obscurity and grow,” he says. “Those peo- what makes Substack unique. Best and McKenzie ple who are going to be massive tomorrow might often point to more ephemeral qualities, arguing come because they see the people who are suc- everything the company does is geared toward cessful today.” writers, unlike Twitter and Facebook. Earlier this year, That’s a rare thing, though. Christopher Curtis, the former McKenzie wrote it’s the “calmness of the model that’s the real Montreal Gazette reporter, says the platform “disproportion- killer feature” of Substack. Best emphasizes it’s only success- ately favours people who are established.” He spent years ful if writers are, a principle that will always remain. “Part of cultivating an audience and has some advantages other Sub- my theory on how companies go wrong is if you have a bunch stack writers might not. He’s partnered with another media of principles and you have a business model that pulls you in organization, Ricochet, to run some of his stories and pro- some conflicting direction,” he says. “At some point, you run vide him with editing. It’s also gruelling work to maintain a up against this hard choice of either giving up your principles publication largely on your own. Curtis is making less than or don’t have a successful business.” he was at the Gazette (he supplements with occasional free- Still, will that be enough? “Your commitment to writers and lance work) and putting in more hours, not only for writing your desire to help them publish good newsletters is not a and reporting but also for branding, marketing and dealing proprietary thing,” says Mathew Ingram, chief digital writer with subscribers. “You’re kind of doing everything,” he says. for the Columbia Review of Journalism. Substack, by design, It’s little wonder the most popular Substack newsletters makes it easy for writers to leave (they own their content and skew heavily toward opinion, commentary and analysis, not email list) and take their subscribers to a different platform. labour-intensive reporting. Still, the success of Substack That fits with Substack’s ethos of doing well by writers, but will partly depend on the grit of people like Curtis and on creates an obvious problem. Best’s ability to support them. “We’ll see the next generation Twitter may also have a built-in advantage. It’s the place of institutions being created on Substack,” Best says. It’s a many Substack writers have built their audiences and pro- typically bold claim, and one that won’t be realized for some mote their newsletters. Newsletters seem to be a natural time, if at all. For now, Substack has shown that writing—and extension for Twitter, whereas Substack lacks an easy way for some writers—still have value. And in an industry facing an readers to discover new writers, beyond featuring a handful existential crisis and conditioned to expect terminal decline, each day on its website and maintaining a leaderboard for the that’s a success in its own right.

46 JUNE 2021 / REPORT ON BUSINESS Congratulationsto theserecent appointees

Phillip Crawley, Publisher &CEO of The Globe and Mail, extends best wishes to the following individuals who were recently featured in the Report on Business Section of The Globe and Mail newspaper. Congratulations on your new appointments.

Stephen Dent Madhu Cyrus Reporter Cliff Stevenson Stephanie Bowman to Board of Directors Ranganathan to VP, Government to Chair for 2021 to Board of Directors Bank of Montreal to Board of Directors and Regulatory The Canadian Real Empire Life Bank of Montreal Affairs Estate Association Insurance Company Canadian National Railway Company

Melissa Harper Tashia Batstone, Janie C. Béïque Neil Parkinson Sara Alvarado to Senior VP & MBA, FCPA, FCA, to President and to Chair of the to Executive Chief Human ICD.D CEO Board of Directors Director Resources Officer to President &CEO Fonds de solidarité Gore Mutual Institute For Enbridge Inc. FP Canada FTQ Insurance Sustainable Finance Company

Andrew Duncan Jonathan Gitlin Edward Sonshine Hazel Claxton Sean Willy to CIO to President and to Non-executive to the Board of to the Board of RioCan Real Estate CEO of the Trust Chairman of RioCan’s Directors Directors Investment Trust RioCan Real Estate Board of Trustees TELUS Corporation TELUS Corporation Investment Trust RioCan Real Estate Investment Trust

JUNE 2021

To make arrangements for an Appointment Notice, please call 1-800-387-9012 or email [email protected] View all appointment notices online at www.globeandmail.com/appointments AS A SUCCESSFUL BOND TRADER, PAUL MARCOGLIESE

PROVIDES STABILITY AMID CHAOS. HE AND HIS WIFE,

CHERYL, HOPE THAT CAN HELP OVERCOME THE DIRE DIAGNOSIS FACED BY THEIR TWO YOUNG SOONS

In the basement of their Pickering, Ont., home, five-year-old James Marcogliese and his six-year-old brODother, Dan- iel, practically bounce off the walls of their den-turned-classroom. The two boys proudly show off their twin fishbowls (one conspicuously fish-free), their rack of Avengers costumes and the anatomical diagram pasted to the wall. “That’s the liver,” says James, who knows more about his own internal organs than any kid should. When James was born, an enlarged liver was the first sign something might be wrong. He was kept in intensive care for 10 days at Mount Sinai Hospital in Toronto while doctors investigated. The boys’ father, Paul, wasn’t yet overly concerned—Daniel also had a big belly as a baby. The family soon learned why. Both boys were diagnosed with an ultra-rare genetic illness neither parent had Aever heard of. Doctors told Paul and his wife, Cheryl, to make the most of the remaining time with their children. There was some sense to this BY TIM SHUFELT advice. There are almost no approved drugs available for treating Niemann-Pick disease type C (NPC) anywhere in the world. It’s always fatal and many of its victims don’t live to see their 10th birthdays. Niemann- Pick is also known as Childhood Alzheimer’s, a kind of juvenile dementia that results from a gradual loss of basic function, speech and mobility. As a bond fund manager, Paul’s job is to provide stability amid chaos and impose order on the complex and random. Now he was being told to resign himself to a fate that was simply too terrible to accept. So he and Cheryl committed themselves to the world of rare-disease research. Combining his financial acumen with the health-care sensibility she honed as an occupational therapist, the couple started to craft a plan: They would immerse themselves in a non-profit organization dedicated to fighting NPC, connect with the world’s foremost experts in the disease, access the best therapeutic drugs to manage symptoms, mine their connections for charitable donations, find and fund the most promising lines of medical research, cure the disease and save their children’s lives. O ODTHE DS

PHOTOGRAPHS BY AARON VINCENT ELKAIM

JUNE 2021 / REPORT ON BUSINESS 49 “We’re not in denial,” Paul says. “I know the odds are very much against us. As a mathematician, I very much under- stand that. But we’re going to do everything we can for those odds to change—and change dramatically.” The Marcogliese family in March 2020 Niemann-Pick disease type C undermines the body’s ability to move and process cholesterol, which accumulates in the cells of various organs, including the liver and brain. This buildup eventu- ally impedes brain function, slowly robbing other- wise healthy children of the ability to walk and talk, and ultimately to swallow and even breathe. For the disease to occurN, both parents need to be carri- ers, meaning they each have the same genetic mutation but exhibit none of the symptoms. Even then, there is only a 25% chance that two carriers will have a child with NPC. There are about 500 known cases worldwide, and its incidence is thought to be roughly one in 100,000 live births—comparable to the lifetime odds of being killed by a lightning strike. For the Marcoglieses, the grief and despair of the diagnoses was compounded by the realization that mainstream medi- cine only has so much to offer for a disease this rare. Phar- maceutical companies generally require a certain volume of patients to justify the time and expense of developing a drug and then testing it, steering its approval for commercial use and bringing it to market. For the most part, the focus is on disorders with at least 10,000 cases. With only 150 to 180 NPC patients currently living in the United States, just finding enough cases to run clinical trials is difficult, says Sean Kas- in children like Daniel, who now needs hearing aids. sen, director of the Ara Parseghian Medical Research Fund at Families dealing with NPC say their children are living the University of Notre Dame in Indiana. (The organization proof the drug works. While the disease can’t be neutralized, is named after the legendary Notre Dame football coach who the treatment does delay the tightening of its grip, Paul says. lost three grandchildren to NPC.) “That makes it very hard to get a drug approved for a rare disease, so “WE’RE MOVING THE NEEDLE. pharmaceutical companies tend to avoid them,” he says. Daniel’s speech is a little behind, and his balance isn’t per- As the Marcoglieses started researching treatment options, fect. He’s also become aware of his own limitations. “He’ll say, A they learned of an experimental drug called VTS-270 under ‘Daddy, I don’t think I can do that,’ ” Paul says. He recently development by Mallinckrodt Pharmaceuticals, a small U.S. learned to ride a bike and is happy to slowly pedal around. drug company. Studies showed promise in the drug’s ability His little brother is more likely to take a corner too fast and to stabilize NPC symptoms, essentially by cleaning up excess wipe out. “Everything James does is at full speed,” Paul says. cholesterol in brain cells when administered by spinal injec- “Unfortunately, we’re starting to see very small disease pro- tion. While the drug had not yet been approved by the U.S. gression in him, but he doesn’t let it slow him down.” Food and Drug Administration, it was accessible in the States There is enough supply of the drug to keep injections going through a compassionate-use program if the family crossed until October. “It won’t take too long for the disease to take the border for treatment. hold after treatment stops,” Paul says. The race is on to find For two and a half years, the Marcoglieses flew to Chicago a replacement. There is another development-stage drug, every two weeks for spinal infusions under anesthetic—87 called arimoclomol, currently working its way through the and counting for Daniel, 44 for James. By age four, Daniel had approval process in the U.S. It has been effective in prevent- been on so many flights, he earned Air Canada’s 35,000-mile ing the buildup of cholesterol at the cellular level. status. “They almost never complain,” Paul says. “They com- When and if the drug will come to the Canadian market is plain more about getting their tablets taken away than any of unclear. Unlike the U.S. and European Union, Canada does the medical stuff.” not have a regulatory framework for the authorization of But losing access to the drug has been a constant threat. rare-disease pharmaceuticals, also known as orphan drugs. When the pandemic hit last year and cross-border flights Patient advocates have long complained that regulatory and virtually ground to a halt, Paul and the boys’ doctors urged pricing barriers deter drug companies from introducing life- the drug company to allow the treatment to be administered changing medicines to the Canadian market. Most orphan in Canada. They got the okay; the boys have been receiving drugs are launched in Canada many months after they’re their injections at the Hospital for Sick Children in Toronto available in Europe and the U.S., while some never make ever since. Then in January, Mallinckrodt announced it was it here at all. Since treatments for rare disorders tend to be dropping the drug entirely. “We share in the disappointment exorbitantly priced—typically costing six figures per year, of the entire NPC community,” the company wrote in letters per patient—paying for these drugs out of pocket is not an to families. “[But] the risks associated with the treatment option for most Canadians. outweigh the potential benefit.” The drug can impair hearing One way or another, the Marcoglieses are determined to

50 JUNE 2021 / REPORT ON BUSINESS access arimoclomol. Enabling their sons’ were gaps in the research. “Family foundations have a sense development to progress as much as pos- of urgency,” Cheryl says. “So we’re willing to try anything, as sible will provide more runway when long as there’s a scientific idea that makes sense.” symptoms start to worsen. Aside from Last year, a University of Michigan scientist who was drugs, challenging them physically and working with the Marcoglieses approached them with a cognitively is another way of holding back novel idea. He suspected the NPC gene affected liver cells the disease. To that end, Daniel and James in a different way than brain cells. If he was correct, it could have also started treatment at Holland change the way the disease is treated with targeted thera- Bloorview Kids Rehabilitation Hospital. pies. All he needed to test his theory was four stem cells, But access to NPC drugs is crucial in order each costing US$15,000. To Paul, who runs a fixed-income to buy time while the science progresses. portfolio at CI Global Asset Management, the numbers made “If we could just know that the drug is sense. Relative to the price tag, the potential scientific upside going to be available to us for an extended was substantial. “One of my most useful skills in all of this period of time, we can put all of our energy is understanding the risk-reward paradigm,” Paul says. The into finding a cure,” Paul says. experiment was a success and led to a grant with the National Institutes of Health—the U.S. government arm responsible Soon after James and Daniel tested for biomedical research. positive for NPC, their parents paid Niemann-Pick Canada has now been running for about a visit to the chair of the Canadian four years and has raised $2.7 million, much of it coming from chapter of the National Niemann- Bay Street—banks, brokerages and asset managers Paul has Pick Disease Foundation, handing marshalled to the cause. The foundation is currently funding her a stack of cheques collected three major lines of research. “How fast they’ve been able from family and friends. But the organi- to do all this has been amazing,” Notre Dame’s Kassen says. zation was pretty much dormant by that “They’ve been a blessing to the NPC community.” point. It’s a common story in the rare-dis- At SickKids, Niemann-Pick Canada is supporting Cohn’s ease space. Families directly affected by lab in using the gene-editing technique called CRISPR, an illness become the fiercest advocates. which enables unwanted genetic material to be removed. When their loved ones succumb, some The “moon shot”—a cure for NPC—is the ultimate goal, lose the will to continue the fight. Cohn says. But it’s not the only measure of success. “If we The Marcoglieses took over the foundation, cleaned up its could find a therapy that could help us even halt the disease structure, rebranded, incorporated and started raising money. and prevent it from getting worse, that would be a game- Figuring out how to spend it was another matter. They joined changer,” Cohn says. “I’m hopeful.” the ranks of citizen-scientists—family members of people For NPC, there are at least 300 different mutations associ- VING THE NEEDLE. with rare disorders who help drive theSresearch. “There’s a ated with each gene inherited from two parents. In a child, network of parents who have really begun to understand the those mutations can combine in countless ways, only some of which are harmful. The AT SOME POINT THERE’S GOING SickKids team’s first goal is to figure out which com- binations of mutations are TO BE A BREAKTHROUGH” disease-causing. They’re disease at such a level that we’re intertwined with the scien- even working with Daniel and James’s specific mutations, tists and we’re all talking together,” says Cheryl. which were determined through genetic testing. While it’s For researchers to qualify for major grants, the science typ- still relatively early days for the science, many researchers ically already needs to be fairly advanced. That’s generally believe the technique could eventually eliminate a variety not a problem for the most common afflictions, like cancer of inherited disorders, from cystic fibrosis to hemophilia. or heart disease. Even better-known rare diseases, like mus- “We’re moving the needle,” Paul says. “At some point, there’s cular dystrophy or ALS, have lots of support from big donors, going to be a breakthrough.” celebrities and the corporate sector. In the ultra-rare space, families like the Marcoglieses have had to fill the void. For someone who sees things through a math and “Family foundations, and parent-advocacy groups raising finance lens, the numbers alone are haunting. The funds for supporting research, in my mind, have become an risk of NPC is so low as to be non-existent. But not anchor of the rare-disease field globally,” says Ronald Cohn, only has lightning struck the Marcogliese house- president of SickKids Hospital. The lab bearing Cohn’s name hold; it has struck twice. at SickKids investigates treatments for rare genetic diseases, There’s not a lot of time to wallow. The boys need including NPC, using cutting-edge gene-editing and gene- their injections twice a month. There’s a foundation to run. therapy technologies. “Family foundations allow us to take a Other families across Canada—newly devastated by an NPC creative idea that maybe only has a small amount of prelimi- diagnosis—need someone to talk to and walk them through nary data to check whether our ideas work,” Cohn says. If a their options. There are donations to drum up, finances to thesis is proven right, that often paves the way for additional track, scientists to keep up with. There are politicians to support through more common medical research funding lobby, drug companies to solicit, research papers to read. avenues, like federal grants. Paul and Cheryl both have full-time careers, in addition to all The Marcoglieses started their crash course in genetic the effort involved in raising two young children. Still, Paul disease by attending medical conferences and meeting with aims to finish work by 4 p.m. so he can go downstairs and play scientists. Pretty quickly, they started to identify where there video games with Daniel and James before dinner.

JUNE 2021 / REPORT ON BUSINESS 51

WEALTH SMART MONEY

MATTHEW STRAUSS VICE-PRESIDENT AND PORTFOLIO MANAGER, CI INVESTMENTS INC., TORONTO

Matthew Strauss concedes that the road to investing in Given that Taiwan Semiconductor emerging markets is littered with potholes—government Manufacturing and Samsung intervention, poor corporate governance, lax reporting Electronics are top holdings, are you playing the chip shortage that has standards and more. But he and his team, including hampered production of everything analysts in Hong Kong, are always primed to do a deep from cars to consumer electronics? dive into a potential investment, and that has paid We have high-conviction bets on off. Over the past decade, his $817.4-million Signature these companies because of their Emerging Markets Fund has outpaced the MSCI cutting-edge technologies, but the Emerging Markets Total Return Index. We asked the shortage is an added reason to hold 50-year-old portfolio manager how he’s playing a them. We see the shortage as tempo- rary, but it could spill over into 2022. global semiconductor chip shortage and why he likes We also own MediaTek, a Taiwanese Chinese e-commerce giant Alibaba Group Holding. semiconductor company, and South Korea’s SK Hynix. We think the the- How do you pick stocks, given the volatility in matic play on semiconductors and memory chips, emerging markets? which stems from the cloud-sector explosion, is a Volatility is not as big a problem as it was 20 years multiyear trade. ago, but tackling it takes more effort than read- What other themes are you betting on? ing a financial report. Networking and building We like e-commerce, which we play through com- trust with management is key, as well as meeting panies such as Alibaba, MercadoLibre (which with suppliers, competitors, sell-side analysts and focuses on Latin America) and Sea, in Southeast regulators. Our portfolio owns best-in-class com- Asia. Another growth theme is electric vehicles panies, such as South Korea’s Samsung Electron- (EV) and batteries. We own Chinese EV makers, ics; secular growth stocks, such as Chinese data- such as BYD and Xpeng, whose cars are compet- centre provider GDS Holdings; cyclical growers, ing against Tesla’s Model 3 in China. We also own such as Brazilian oil giant Petrobras; and defensive South Korean chemical company LG Chem mostly names, such as Wal-Mart de Mexico. We invest in for its EV-car battery business. initial public offerings too. A Chinese regulator slapped Alibaba with a What is your outlook given the sell-off in February? US$2.8-billion antitrust fine in April for treating We started this year with continued strong momen- merchants unfairly, including restricting them tum from 2020, but the market became concerned from selling on other platforms. Are its woes over? with rising U.S. real interest rates and China’s cen- The market became concerned when tensions tral bank withdrawing stimulus. There is also the between Alibaba and the Chinese regulators risk that some emerging markets, such as Brazil flared up last year. The government also blocked and India, don’t have the fiscal resources to deal Alibaba’s US$37-billion IPO of its fintech arm, with COVID-19. Still, we’re positive on emerging Ant Group. With the fine and Alibaba agreeing to GEMENT markets in the medium and longer term because restructure Ant into a financial holding company,

MANA of the strong growth potential. The International the uncertainty is over. There will be fiercer com-

SET Monetary Fund is forecasting annual average petition for Alibaba, but other players will also

AS growth of 4.6% for developing countries from 2022 have to follow regulations. However, Alibaba has a AL to 2026, versus 2% for developed markets. very dominant market position, and we don’t see OB

GL Where are you finding the opportunities? that suddenly being under threat. /Shirley Won CI If you look at the pipeline of IPOs and other share CE

UR issues in recent years, most have come from Asia.

SO CI SIGNATURE EMERGING MARKETS FUND (CLASS F) ANNUALIZED % TOTAL RETURN

T That’s reflective of dynamic economies. China’s ByteDance [owner of video apps TikTok and Dou- 1-YEAR 51.5 CHAR ; yin] is a highly anticipated IPO. China is still our 5-YEAR 13.9 AY biggest country weighting, but we reduced it from 10-YEAR 7.3 last year because of talk of monetary tightening. DOCKER MSCI EMERGING MARKETS TOTAL RETURN INDEX ($CDN.) TE For us, India has a lot of potential if it can handle KA the COVID-19 pandemic well, as does Indone- 1-YEAR 40.3

APH sia, with its fast-growing domestic market. South 5-YEAR 11.8 GR Korea and Taiwan both offer opportunities in the 10-YEAR 6.7 TO technology space. PHO

JUNE 2021 / REPORT ON BUSINESS 53 YEAR-OVER-YEAR HOME PRICE INDEX CHANGE, FOURTH QUARTER OF 2020 FOR YOUR CONSIDERATION

TORONTO VANCOUVER MONTREAL OTTAWA GUARDIAN CAPITAL GROUP LTD. 30 TORONTO Kanata REVENUE (2020) Saint-Jérôme 25 $215.8 MILLION

THREE-YEAR SHARE PRICE GAIN Orée-du-Parc 32% 20

(%) P/E RATIO (TRAILING) Bolton Bowmanville 20.4 Verdun TH 15 Duncan OW Guardian certainly isn’t the glitziest GR or most cutting-edge stock on the 10 TSX, but it’s hard to find one with a PRICE more stellar long-term track record for value or growth investors. 5 HOUSE The 59-year-old money management firm’s 154% share price 0 increase over the past decade was New Westminster/Annacis Island almost double (or better) than the gains made by any of the Big Five -5 Canadian banks. It has clobbered 01020304050607080 the S&P/TSX Composite Index DISTANCE FROM CITY CENTRE (kilometres) by an even wider margin. By any key financial metric—assets under DECODER management (about $46 billion at the end of 2020), revenue or profit— THE LURE OF THE SUBURBS the firm has basically tripled in size. Yet even CEO George Mavroudis, There’s an adage that urban exodus was work arrangements. A an FCPA and certified financial the three things that already underway before recent analysis by CIBC planner, understands why Guardian matter in real estate the pandemic hit, as economists found many hasn’t generated much excitement. are location, location young homebuyers employers expect their Over the past few years, “people are and location. But the sought more affordable workers to return to the always looking for the fast dollar to pandemic has taught us digs, the crisis kicked office full time when this be made, the big themes,” he says. that there’s some fluidity things into high gear. is over. In financial services alone, in what counts as a In its most recent There’s also the those themes include the rise of desirable location. After analysis of housing inescapable fact that the low-cost passive index investing, years of big cities like market imbalances boom in rural and small- robo-advisers and do-it-yourself Toronto and Vancouver and household debt, city real estate markets electronic trading platforms. driving Canada’s real the Bank of Canada has been so dramatic, There are also always tsunamis of estate boom, people are looked at markets in it has narrowed the coverage for the latest bubble, be it now paying a premium scores of postal codes premium traditionally cryptocurrency, FAANG stocks or for country—or at in and around Toronto, paid to live in big cities. overheated real estate. least suburban—living. Vancouver, Montreal and It’s to the point where By comparison, Guardian can Statistics Canada’s most Ottawa. It found that homebuyers may have look like a decades-old classic rock recent population count, the farther you go from second thoughts about act. “Unfortunately, we have some as of July 2020, revealed those city centres, the moving. “The pendulum people who, when they hear the 50,400 more people left hotter the market. might have now swung name Guardian, still think of us as Toronto for other parts The obvious question too far,” wrote CIBC circa 1990s,” says Mavroudis. And in of Ontario than moved for both the real estate economists Benjamin the 1990s, the firm was a respected to the city compared and the job markets is Tal and Royce Mendes. active manager of pensions and to a year earlier, while whether this trend will “Should COVID fade into other institutional money, as well as Vancouver’s meagre hold after the pandemic the background, as is traditional mutual funds, working population growth was ends. A lot may depend expected, the vibrancy almost entirely for Canadian clients. outmatched by places in on how accommodating of cities will return, He and the firm believe in the B.C. such as Chilliwack employers decide to and so will the demand benefits of active management— and Kelowna. be when it comes to for housing within with the right strategies and teams, While the so-called continuing remote- them.” /Jason Kirby it produces value-added long term

54 JUNE 2021 / REPORT ON BUSINESS WEALTH

returns. But Guardian has renewed itself in other ways. Mavroudis GUARDIAN CAPITAL GROUP LTD. TSX COMPOSITE INDEX arrived in 2005 and became CEO in 2011. Before Guardian, he’d worked for the British bank Flemings in % CHANGE Moscow and then for J.P. Morgan 200 Asset Management in London as well as Toronto. Two of Mavroudis’s priorities have been international expansion— 100 of Guardian’s clients and its investments—and a push into personalized wealth management for well-heeled clients. In 2017, 0 about 95% of the firm’s asset management revenue came from MAY 3, 2011 MAY 3, 2021 Canadians. That’s now down to 40%. In terms of the market segments, we don’t have the broad shareholder cap of about $850 million, is too institutions account for about 55% base we should have,” Mavroudis small for them to research in depth. of its business, while managing says. Guardian’s shareholders are a Small has its advantages, however. money for intermediaries adds up mix of institutions and individuals. “We can still be nimble and agile, to roughly a third and private clients But attracting more investor and serve our clients very well make up 10%. interest is difficult. Many of the without capacity constraints,” says Patience, diversification and largest institutions in Canada and Mavroudis. And if a financial giant complexity still aren’t hot themes abroad now have so many billions to or two stumbles, that story might for investors, though. “That’s why deploy that Guardian, with a market look very alluring again. /John Daly

58.93319 27 Peaceofmind is an element of nuclear powergeneration.

BrucePowergenerates enough carbon-free electricity to powerone out of every three homes, hospitals and businesses across Ontario. Its reactors also produceCobalt-60,amedical isotope used to sterilize40per cent of the world’ssingle-use medical devices, likemasks and gloves, that areused everydayinthe fight Pm against COVID-19. To learn moreabout Peace Cobalt-60,visit brucepower.com/isotopes. of Mind “Maybe our

Turning Point greatest progress has happened during this pandemic period”

has focused on electrification, and we will have five battery electric vehicles on the market by the end of the year, including two new SUVs. We were one of the first organizations to commit to the Paris cli- mate agreement—we’re committed to getting our vehicle-specific CO2 emissions down globally by 30% by 2025. We want our operations to be carbon neutral by 2050. Audi has invested significant dol- lars—around €17 billion of our €35 billion invest- ment budget up to 2025—on future technologies. So what does that mean for Canada? We’re assessing our CO2 footprint and looking at logistics, at our facilities and our operations on the retail side. On the electrification side, there are definitely things that need to happen—in the business community, in government and in society—to accelerate that. The first part is on the consumer side. We’re mak- ing sure consumers are comfortable with what an electrified mobility lifestyle would look and feel like, and giving them choices comparable to every internal-combustion engine vehicle. Build- Homecoming ing infrastructure is important too. How can we all work together, government and manufacturers, to Vito Paladino, the first head of Audi Canada from make that investment? We’re investing with Elec- this country, on driving toward electrification trify Canada, part of the Volkswagen Group, to add charging stations across the country. By the end of 2021, it’ll be over 30, and then the big push will be to Canada is home. I love it here. So when I was pro- get to 100 stations. So we’re really committed to not moted to president last September, I didn’t need just the technology and becoming this electrified the ceremonial tour. I have a lot of operational 10–12% automotive company, but trying to live this progress Premium vehicle experience, and I knew the team before I became sales as a portion and this kind of sustainability approach that every the leader of it, so we hit the ground running fast. of total Canadian company and every person needs to take seriously. Priority one was ensuring workers’ safety, stabiliz- vehicle sales But it goes beyond electric vehicles. Technology ing the business and making sure the current opera- 26,000 will unlock a lot of things. As autonomous driv- tion was healthy. But we’ve also been keeping our Number of Audis ing becomes more of a proven technology—and eye on the future, because we’re here to make an sold in Canada we’re not talking about the next few years—it will impact. It’s so easy to think, Okay, we’re going to pull in 2020—about improve safety, so there will be fewer accidents. 1.7% of total back on this. But on some of our strategic projects, Cars will become a comfortable place where vehicle sales SCOTT maybe our greatest progress has happened in this you do a lot of your work and leisure as you get pandemic period. 20% from one destination to the other. This is what KYLE We’re in such a pivot period in automotive. It’s Sales dip for Audi is doing—we’re looking at how our interi- all vehicles becoming a different type of mobility industry, and compared to ors can become more of a premium living area. it’s becoming digitalized. A lot of the conversation 2019 /Interview by Alex Mlynek ILLUSTRATION

56 JUNE 2021 / REPORT ON BUSINESS THERE’STHERE’S MMOREORE TTHANHAN OONENE PPICTUREICTURE OOFF HHEALEALTTHH

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