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Into the Blast Furnace

The Forging of a CEO's Conscience

by Courtney Pratt & Larry Gaudet

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business ethics, sustainable development, leadership
list price: $22.00
also available: Hardcover
published: 2009
imprint: Vintage Canada
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From one of Canada’s top CEOs, a heartfelt invitation to reimagine the business world as a place in which conscience and empathy count.

Steel manufacturer Stelco Inc. went into bankruptcy protection in early 2004. There was a lot at stake during the company’s gruelling court-mandated restructuring: 6,000 jobs, 10,000 pensions; the struggling economy of a company town; and the egos and pocketbooks of lawyers, investors, union leaders, politicians and hedge fund managers, each with a special interest to flog and no interest in compromise.

Also on the line was the reputation–and conscience–of CEO Courtney Pratt, who was hired to clean up the mess. To Pratt, survival for Stelco meant attempting to keep the company alive as he ethically reconciled the competing interests, a task made absurdly difficult by the circus-like atmosphere that reigned among those fighting over its future. But at what cost?

To answer that question, Pratt has joined forces with novelist and non-fiction writer Larry Gaudet in a collaboration the two almost jokingly call “magic corporate realism.” Their book provides a thoughtful challenge to the very tired notion that, in the age of Enron and Worldcom, all CEOs are incubated for the sole purpose of looking after their own selfish interests. Pratt’s story, told with imagination, honesty and wit, is about a more important challenge: how to stay human in a bottom-line world.

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September ­2007

It’s a blustery lakeside morning, threatening rain. From the upstairs family room in our townhouse, located in a suburb west of Toronto, I have views to the marina around the next cove, a ­five-­minute walk along the pedestrian path that skirts Lake Ontario. The marina isn’t a big operation, and is used mainly by recreational boaters. Surrounding it is persuasive evidence of gentrification: a hotel, shopping malls, condos, swatches of new parkland under which lie the remains of commercial life from generations ­past–­the lost world of factories, shipping depots, stockyards. The jetty, constructed from boulders, slices out into the lake for perhaps three hundred metres, and my gaze tends to wander to where it ends. A tanker has been scuttled out there, parallel to the shoreline, and now functions as a sea wall. Up close, the vessel is probably a barnacled ruin, all rust and missing rivets. But from here it looks beautiful to ­me.

I’ve long been fascinated by industrial infrastructure: manufacturing plants, construction sites with soaring cranes and giant dump trucks, mining operations, oil rigs, harbours, electrical transmission towers. It’s a cliché to say that men have a special attachment to machines, or to technology in general. But for much of my career, spanning more than thirty years in business, I’ve been at the helm of companies involved in heavy industrial activity. I know all too well that what looks benignly impressive from a distance feels different–­more ­dangerous–­once you’re up close. But if you get past your awe (or fear) of ­large-­scale mechanized activity, you realize these operations need people, and lots of them, to function effectively. When I stare admiringly at that tanker, I also see what’s missing: the crew on deck or below, sweating in the boiler room and the cargo hold, everyone doing ­back-­breaking labour, day in, day ­out.

This ship has a story to tell, or many stories. And while a good detective could likely dredge up ­old-­timers who swabbed decks, coiled heavy ropes and set the rudder, before long only a few will be left to talk about what happened on those stormy nights on rough seas when the ship nearly went down. And while that’s a shame, it’s also reality. Stories die out if they’re not shared, and the same goes for the insights that good stories offer. That’s one reason why Larry Gaudet and I crafted this story about my tenure as the CEO of the steelmaker Stelco Inc., one of the great names from Canada’s industrial heritage and the pride of Hamilton, Ontario, for nearly a century now. It’s a story like no other in the history of Canadian ­business–­a rollicking corporate soap opera, at times comic, but very nearly tragic. The resolution was in doubt until the very end, after playing out for two years in bold headlines in the media, where the reporting, on occasion, seemed to me a little less than informed or objective and more like character assassination, often directed at ­me.

When I joined Stelco in January 2004 after having served on its board of directors for nearly two years before that, my assignment was to help steer the revival of what had become an uncompetitive steel producer, struggling under high debts, including the $1.3 billion it owed to its employee pension plans. For two years or so, I was involved in making exceptionally difficult decisions that moved Stelco through a ­painful–­and insanely ­protracted–­process to emerge from the protection of the Canadian bankruptcy court into which we’d taken the company after years of losing ­money.

How to convey what that experience was ­like?

I was flipping TV channels one night a while back and found myself watching a show about a magician attempting to set a world record for holding his breath underwater, submerged in a glass tank with the cameras and lights on him, the crowd cheering. He intended to stay ­there–­and remain ­alive–­for something like eight or nine minutes. It was excruciating to watch. When it became clear that he was on the verge of unconsciousness and was inhaling water, his assistants went into the tank in scuba gear and pulled him out, just in time. All this was broadcast in prime time, a riveting spectacle, although also completely ridiculous, a manufactured crisis. But that’s entertainment for you. The analogy to ­Stelco–­and it’s not perfect, I ­realize–­is that we, as a company, were submerged underwater for the corporate equivalent of ten or maybe fifteen minutes, pretty much breathing water toward the end, floating face down in bankruptcy court and actually prevented from surfacing at times by those who put our survival at risk to serve their own ­needs.

None of this was produced for entertainment purposes, although there were certainly blockbuster costs. Our restructuring tallied $200 million plus in legal and consulting ­fees–­money that would have been much better invested in making the company more competitive. But this was the price the company and its employees and shareholders paid for letting Stelco slide perilously close to ruin through years of losing money and of never resolving the fractious relations between management and the unions. Stelco’s situation was far from unique, with dozens of steel companies in North America having already been through a major restructuring involving the courts. But Stelco was among the last holdouts to face the reality that it needed a total financial makeover to compete in a North American steel market increasingly subject to powerful global forces. And because restructuring had been delayed for so long, the disease of uncompetitiveness had progressed very deep, making our task much more ­difficult.

We stayed underwater until we fixed our finances. If we hadn’t, in all likelihood a ­corpse–­not a ­company–­would have floated up. By the time we did come to the surface, we’d been in bankruptcy court for ­twenty-­six months, an achievement one shouldn’t be proud of. However, with so many cooks crowded into our restructuring ­kitchen–­company executives, a battalion of lawyers, a Superior Court judge, court monitors, financial advisors, creditors, restructuring consultants, angry shareholders, hedge funds, government bureaucrats, union leaders and media ­commentators–­it’s a wonder we made it out at ­all.

The Stelco story, as I hope you’ll come to agree, is rich with conflict and conflicted characters, including myself, and it has everything you’d want in terms of suspense and plot twists that brought out the best and the worst in the people involved. This is only one version of the Stelco story, my version, a snapshot through the lens of my memories and biases. It reflects my way of looking at the world, supported by the facts as I understood them to be, if not always how I wanted them to be. The stakes for Stelco and for me, as its CEO, had never been higher, and the consequences of failure would have been ­disastrous–­liquidation, layoffs, economic catastrophe for Hamilton. It was the wildest, most challenging assignment of my professional life. And while this restructuring process unleashed plenty of rage and a few tears, the sound that lingers in my ears is the laughter of my ­colleagues–­and pretty much everyone on all sides of the ­story–­as we worked together, argued, negotiated and fought through long days and even longer nights to save the company from being ­scuttled.

Even when things were at their absolute worst, there was ­laughter–­the most redemptive of all human ­sounds.

I hear Alexa in the next room on the phone, talking to our ­daughter-­in-­law about the new baby, an exchange between mother and grandmother about sleeping patterns, dietary quirks, teething. Our two sons are grown men, both fathers themselves, and by now I consider myself fairly fluent in ­on-­demand parenting advice. But listening to my wife is always a tutorial on empathy in ­action.

In Alexa’s voice are proven reserves of patience and wisdom shared without conveying that she always knows best. Still, after our ­thirty-­nine years together, it never fails to amaze me how judicious she can be, how sensitive to the nuances in a conversation. As I eavesdrop for a minute, I hear that she listens at least as much as she talks, reacts as much as initiates and always responds on the basis that the quality of the ­ritual ­is as important as the advice ­dispensed.

In the midst of the restructuring, Alexa was diagnosed with cancer. There’s not much I will divulge about that, out of respect for her privacy and mine. Anyone who has had a ­life-­threatening illness understands the fear that metastasizes in you, and everyone close to you, through rounds of medical consultations, invasive surgery and the worries that come at night when the data you found on the Internet about mortality rates presents itself for sleepless contemplation. Alexa is in remission now, a full recovery, although the ­scars–­in every ­sense–­are fresh ­enough.

Her illness was one of many factors that affected how I made decisions that had consequences for thousands of other people at Stelco. And the fact that we were facing her illness probably affected those decisions for the better, if truth be told, even in those moments when all I could really focus on was her terrible confrontation with ­cancer.

You can choose not to learn from the hardest life experiences. Or you can absorb the blow and, if you’re lucky, use it to humanize ­yourself–­to focus your attention on the people who ­matter.

There’s no such thing as ­work-­life balance when a life could hang in the balance. On the day Alexa was in surgery for something like ten or eleven hours, I was as lost as I have ever been in my life, sometimes in the hospital coffee shop, other times wandering the streets of Toronto in a daze, occasionally responding to the BlackBerry on my hip that kept me informed of developments at Stelco as our restructuring careened out of control. At times the digital intrusion felt obscene, and it was, but let me tell you something else: a man flinging ­e-­mails to his colleagues while his wife is on the operating table had better be making principled decisions on matters of substance only. He’d better be functioning with the fear of God in him, and with respect for those who are not in his position of responsibility and ­influence.

During that time I often felt like quitting and focusing all my attention on Alexa. I didn’t quit. And I’ve had to ask myself why, given that I didn’t need the Stelco job to support us. Without any doubt I could have walked away from Stelco. Someone would have replaced me and the restructuring would have gone on and things would have worked out. Only an egomaniac would suggest otherwise. But in the stress of the situation, Alexa and I agreed we could get through everything together, with me staying on at Stelco. This decision wasn’t a pragmatic calculation to keep up appearances or prove what fantastic ­multi-­taskers we are. It came out of the spirit of our bond and the deepest beliefs we share. I had taken the Stelco job because I believed I was in the best position to help the company through one of the most difficult chapters in its long history. And once I joined, I was committed. My integrity was on the line; I had to do the best I could, especially for the employees and pensioners who were counting on us. I had jobs and pensions to ­protect–­many thousands of ­them.

There are moments when what you feel or experience or choose to do cannot be justified by logic. All arguments are defeated and all words pointless. All you can do is put one foot in front of the other, and keep walking.

During this difficult time, I needed to be the person my wife believed she had married all those years ago, someone who wouldn’t throw up his hands in defeat when the world demanded more than he could or should give. Rationing your ­integrity–­or conserving ­it–­isn’t always possible. It’s not like making a choice about what kind of car or computer to ­buy.

Alexa isn’t the type to belabour the costs of the sacrifices involved. She is courageous, an inspiration to me in a way I can’t adequately describe within the pages of any book. When I reflect on the decisions we made together, I can see that neither of us complained to each other or to the world, and neither of us boasts today about the rewards, which in any case, like everything else in life, can be taken away in an instant. We both questioned the wisdom of my staying on at Stelco, if not once a day, then often enough. We ­persevered.

It didn’t seem like there was a ­choice.

I’m too nice a guy–

How many times have I heard that ­line?

It has been spoken openly to my face by ­well-­meaning colleagues intent on providing support in hard times. It has been relayed in hushed tones of pretend concern by the office gossips who emerge from the rumour flow with words from anonymous critics, of which there are always too many. Sometimes the message is carried by a complicated smile over lunch before the bill arrives, a weak handshake after a speech I’ve given, a cough at the end of the boardroom table while the vote is taken. It’s a feeling I’ve had now and then after walking into a meeting and recognizing that the conversation I’ve just interrupted is all about how I’m not measuring up to a standard of brutality expected from a ­CEO.

Too nice to succeed in business. Too nice to be an effective ­CEO.

I’m not too nice to say that most of the people who think and say these things probably know less than they should about the recipe for ­success–­not just in business, but in life ­itself.

The business world has its fair share of nasty characters. That’s because business concerns itself with making money. Greed for financial gain can bring out a very visible form of ruthlessness. A flamboyant disregard for ethical behaviour, as I’ve ­seen–­as we’ve all ­seen–­can have ugly consequences when decisions are made to lay off thousands to create enough space on the balance sheet to justify obscene executive bonuses, or to generate even more obscene profits to reward speculators who invest in a company’s shares hoping for a quick ­turnaround.

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Contributor notes

Courtney Pratt is one of Canada’s most accomplished business executives. He has served as a board director, chairman, CEO and president at four large corporations over the past two decades, including Noranda and Toronto Hydro. He is now a director for some of the country’s leading corporations and is involved with charitable, educational and health care organizations.

Larry Gaudet is the author of two acclaimed novels, Media Therapy and The Peacekeeper’s Teahouse, and the recently published nonfiction book Safe Haven. He is also an experienced corporate writer, management consultant and intermittent venture capitalist.

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Editorial Review

"Finally, a business story that reads like a novel, revealing character and plot in a way that no other business book has ever done."
—Anna Porter, author of Kastner’s Train and former publisher and CEO of Key Porter Books

"An absorbing depiction of power in action, Into the Blast Furnace is not your regular business book. The epic struggle of a principled CEO determined to revive a debt-ridden, time-warped grand old steel institution is at times almost poetic and at other times grim. There are rare glimpses of boardroom banter, labour-management discord, tangled court proceedings, and nasty characters fighting over the dying company’s corpse. Above all, the authors demonstrate how deep distrust among stakeholders destroys collaboration for the greater good. This book offers lessons — and entertainment — for business executives, government leaders, board directors, labour leaders and all those interested in the inner workings of corporations in dire straits."
—Dr. Anne Golden, president and CEO, The Conference Board of Canada

"A fascinating read. No matter how deep the alligators, Pratt never forgot that although Stelco was not a swamp he created, it was his job to drain it — without sacrificing decency and basic human principles. Imagine in this day and age a corporate CEO who actually cared about the people whose lives would be affected, possibly ruined, by the decisions of number-crunchers who looked no further than the bottom line! Pratt and Gaudet’s exposé of the cynicism, greed and machinations of many of the key players is particularly revealing."
—Richard W. Pound, Chairman, World Anti-Doping Agency

"An original, dare I say, unique work of art and intellection. Part thriller, part memoir, part history, and for all that I guarantee the best damn business book you'll read this year. Courtney Pratt puts the lie to Mencken's dictum that the businessman is unique "above the hangman and the scavenger...forever apologizing for his occupation." In saving Stelco from the noose Pratt created a model for responsible commercial practice that should serve as an example for generations to come. Into the Blast Furnace is a turning point in business history. Long may it resonate."
—Douglas Bell, author of Run Over and former features editor of Canadian Business

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