The Last Spike: The Great Railway, 1881-1885 (25 page)

The matter of the land subsidy was even more complicated. On paper it all sounded so simple. Every time the railroad moved twenty miles it was to be given a proportionate number of acres from the land grant of twenty-five million. The only Crown land available was situated on the prairies between Winnipeg and the Rockies, but even if every alternate section in the forty-eight-mile belt across the plains had been fit for settlement, it would have been impossible to locate all of the twenty-five million acres in that strip. Some of it, for instance, had already been sold, some of it belonged to the Hudson’s Bay Company, and, in addition, the
CPR
rejected a great deal of it. Clearly, additional land must be found elsewhere.

Stephen’s dilemma, then, was this: since the land that the railway was earning did not exist in large enough quantities along the right of way, the government must be persuaded as quickly as possible to set aside extra tracts in the North West. In point of fact, four-fifths of the grant would have to be located outside the original limits and, being far from the right of way, would be harder to sell. (Nothing, as Stephen told Macdonald. could ever compensate the company for that loss.) Nonetheless it could stand as security for the land grant bonds that the company was issuing as fast as the land was located. The trouble with governments, as Stephen was discovering, is that they do not move very swiftly.

As the fall of 1882 wore on, Stephen’s letters became increasingly importunate. By the end of the season, he realized, the company would have earned ten million acres of land; but there were only three million available along the completed right of way. Where would the rest come from? The government itself was selling land as fast as it could in the North West. It began to look as if there would not be enough left for the
CPR
. “We cannot build and equip the
C.P
. Railway without money,” Stephen complained, “and money can only come from the resources we have at command … we shall need every acre of the grant to enable us to find the money … delay will be fatal to us – we cannot wait.…”

But, of course, he had to wait. A hint of panic crept into the letters that arrived, sometimes daily, on the Prime Minister’s desk: “It is a matter of the utmost importance to the Company that it gets its lands as fast as they are earned, and it is of still greater importance that there should be no question about getting the full grant according to the terms of the con
tract.…” “I … cannot move till I have the patents for the lands earned, up to this time.” “…  The demand on us for money is something appalling.
$400,000
went to Winnipeg last week and one million more to be there on the 10th. Those demands are quite enough to scare timid folks. But I have no fear so long as you stand by and trust us.”

Macdonald, however, was not to be pushed. Politically he was in an unenviable position. If, as Stephen insisted, there were only five million out of a total of twenty-five million acres along the prairie belt, then the government was in a dilemma. Stephen was asking for six and a half million acres of good land south of the railway and another twelve and a half million to the north, along the fertile belt and at the foot of the Rockies. To convey large tracts of this land to a private company would cause an unholy row. On the other hand, to give the railway the even-numbered sections along the line in addition to the odd-numbered ones would intensify the spreading cry of monopoly.

In late October, Old Tomorrow wrote a soothing letter to Stephen: “Let us go by degrees in what we do. The Orders in Council for lands will be passed by next Monday. We are endeavouring to discover some plan for the issue of the patents speedily, but I fear that will need legislation.”

Stephen, who was always impatient with the circumlocutions of politics, was almost beside himself. For most of his life, in the laissez-faire atmosphere of Victorian business enterprise, he had operated on his own, coming to grips with problems speedily, making his swift and often daring decisions with an economy of purpose, his logical mind unfettered by outside interest or political vacillation. That was how he had made his name in the textile business, seizing a sudden opportunity without recourse to his superiors; that was how he had met and solved the problem of the creaky St. Paul railroad. Now, for the first time in his life, he found himself in a kind of political straitjacket, and he was irritated. He did not care about the actual patents; he could deal with the land for some time without them. All he wanted the government to do was to pick out the land that was legitimately owed to the railway and certify it. He began to underline words for emphasis with great slashes of his pen: “It is most
essential
it should be settled
where
we are to get these lands.” The
CPR’S
account at the Bank of Montreal was badly overdrawn. Without the land it had no hope of raising further cash. “Our pinch is
now
,” he wrote in frustration at the end of November. Bit by bit the Canadian Pacific Railway got its land, but it was another twenty-two years before the last acre was finally set aside for the company.

Even the acreage the company received at the time did not produce
the hoped-for revenue; the land grant bonds were not selling. The only other possible source of ready cash was stock. In December, 1882, the company increased its authorized capital stock from twenty-five million dollars to one hundred million. Stephen, in New York, persuaded a number of leading American financial houses (including that of his friend and fellow director, John S. Kennedy) to form a syndicate to take a potential thirty millions in three equal instalments over a nine-month period. To get cash Stephen had to offer a substantial discount: he sold the stock at slightly better than half price. (The average was $52.50.) Moreover, the purchase of the second two instalments was conditional on the successful sale to the public of the first. Stephen set off immediately for London to attempt the impossible: to find buyers for the new issue in a market which, as Macdonald’s confidant, the British financier Sir John Rose, wired, was “practically shut against Canada Pacific.”

Stephen succeeded. He convinced financial houses in London, Amsterdam, and Paris that they should purchase blocks of the stock from the Americans (
CPR
shares were listed on the New York exchange but not in London). It was a considerable piece of financial legerdemain, given the business climate, “almost entirely due,” Rose told the Prime Minister, “to the untiring efforts of our friend Stephen, whose zeal, energy, confidence in himself and the enterprise seemed to inspire everybody else with like confidence.” The first instalment of ten million shares was paid on February 1, 1883, netting the company five millions in cash – a payment that arrived almost at the eleventh hour. The Canadian Pacific Railway was now, on paper at least, in the hands of Americans; as of October 28, 1883, when the final instalment was taken up, 50.3 per cent of all
CPR
shares were held in the United States.

This did not mean, however, that Americans controlled the Canadian Pacific Railway. The American-held stock was spread among 320 investors. Another thirty per cent was held in Britain and Europe by 157 shareholders. The remainder – just under twenty per cent – was controlled by a tight group of forty-two Canadians. All but a few thousand of these Canadian-held shares was in the hands of four men – Stephen, Angus, McIntyre, and Donald Smith – or their friends.

This Canadian control of the
CPR
was even more pronounced at stockholders’ meetings. At the general meeting of March 3, 1884, sixteen Canadians by their presence or by proxies voted 96,141 shares. By contrast, the forty-two Americans voting could muster only 90,212 shares. There were ten shareholders represented from continental Europe, voting 17,437 shares, and eighteen from Great Britain voting 51,795 shares. Many of
the latter were Stephen’s friends and supporters: his son-in-law Harry Northcote, for example, his Scottish friend Lord Elphinstone, and, more important, Sir John Rose’s old firm, Morton, Rose and Company, which voted 36,832 shares.

This tight ownership of a substantial slice of the company by a Canadian group was one of the reasons for the continuity of management that continued well into the following century. For almost thirty years, the
CPR
was run by members of the original Stephen-Angus-Van Horne-Shaughnessy combination which built it. The dynasty was continued when Baron Shaughnessy stepped down in 1918. His successor, Edward Beatty, was the son of Henry Beatty, a charter member of the original syndicate of 1880 who was placed in charge of the company’s lake transportation division in 1882. When Beatty’s son took over as president, fourteen of the
CPR’S
seventeen directors were Canadians as were thirty-one of its thirty-four executive officers.

But even in 1883 it would have taken a major proxy battle to have ousted the Canadians from control of their own railway. Such a move was unthinkable; the shareholders had every confidence in Stephen – and with good reason. His efforts in London that January attested to his abilities. The work, as Rose told Macdonald, had been uphill, “greatly aggravated by the gross misrepresentation and unfriendliness of those whose interest in Canada should have led them to maintain silence even if they did not help.” By this he meant the Grand Trunk Railway and, to a lesser but still significant extent, Charles Brydges and Sir Alexander Galt.

Stephen, whose assessment of people was generally black or white depending on how they viewed the Canadian Pacific Railway, was virtually refusing to speak to Galt. During a trip west in the summer of 1882, the High Commissioner had made some disparaging remarks about the quality of the land west of Moose Jaw Bone Creek. Stephen called him a “sorehead” and wanted Macdonald to get rid of him. He was equally disaffected towards Brydges, a former Grand Trunk general manager, who. as Hudson’s Bay land commissioner, had made some slighting references to the Canada North-West Land Company.

Some of the antipathy undoubtedly grew out of the Regina situation. Galt had an interest in the rival Dewdney syndicate through his son Elliott; Brydges had an interest through his son Frederick; other Hudson’s Bay Company officials were also involved. Donald A. Smith (the major Hudson’s Bay stockholder), who was in England with Stephen, believed that Brydges was personally profiting from sales in Hudson’s Bay lands as a result of inside knowledge; an investigating committee eventually
corroborated this suspicion, declaring that Brydges had “erred on the side of prodigality.” His antipathy to the
CPR’S
land company could scarcely be described as disinterested.

Stephen was up in arms over Brydges’s remarks. “How can he expect us to be friends with him stabbing us in the back that way?” he asked Macdonald. “I get mad when I think of the meanness of the man’s character.…” He added, ominously, that “his time is coming” and so it was. Later that year, Donald Smith made a sudden move that shocked his colleagues; by voting his vast block of stock he was able, single-handed, to overturn the entire Hudson’s Bay board of directors and replace it with his own candidates. Both Brydges and the resident commissioner, James A. Grahame, who had made a killing in Winnipeg real estate through inside knowledge, were forced to resign.

Stephen’s personal antipathies and strong passions disturbed the suave and conciliatory Rose, who had been trying to get the fur-trading company and the railway to combine on land sales in the North West. Though he conceded that Galt was “the reverse of friendly” to the
CPR
and Brydges indiscreet and nepotistic, his own sense of the diplomatic proprieties was offended by Stephen’s public passions. Stephen had “become very imperious, & intolerant of opposition.” Rose was afraid he would make enemies by the bluntness of his attitude. “…  conciliation would be more politic,” he advised Macdonald. “His earnestness and force of character are invaluable qualities, considering the gigantic work he has on hand, but it is no easy matter to hold an even balance between
his
views and those of
more cautious men.”

Rose could not have it both ways. It was Stephen’s very earnestness and force of character, his passionate devotion to and belief in the Canadian Pacific Railway and the Canadian North West that finally persuaded the businessmen of four capitals to take up his new stock issue. “I have never had misgivings about eventual success in spite of all opposition,” Stephen declared, “but sometimes it has taken some courage to keep weak-kneed associates from wilting.”

By “opposition,” Stephen meant the Grand Trunk, which was continuing to fight the railway on several new fronts – political, journalistic, and financial. The
GTR’S
forceful general manager, Joseph Hickson, was no minor adversary. He was a Northumberland man who had been involved with railways since boyhood, working his way up from apprentice clerk to chief accountant and finally to the very top, “a straightforward and fair-dealing man,” a contemporary biographer called him, punctual as a conductor’s watch and tough as a rail-spike. He was known as a
shrewd negotiator, patient and tenacious. One American railway president is said to have remarked that when he put his feet under the table with Hickson he always took off his boots. His brain moved like quicksilver: he had a habit of sizing up a situation almost instantly, recognizing its potentialities, and acting with dispatch. He had the kind of supple mind that grasps the significance of statistics and turns them to account. He could, said one admirer, make pounds, shillings and pence, traffic miles and ton miles, dance in sarabands. In Canada he was a power in both the political and the financial worlds. Married to a member of the Dow brewing family, he was a long-time crony and supporter of Sir John A. Macdonald.

During his tenure of office, Hickson had been creating a route for the Grand Trunk through Ontario and into the American midwest. After saving the railway from bankruptcy in the seventies, he had, in a “masterstroke of railway tact, ability and diplomacy,” managed to dump the unprofitable section of his road onto the Canadian government’s lap and use the proceeds of the sale to seize control of a direct line into Chicago. He did not intend to stand idly by and watch a new railway destroy his creation. As long as the
CPR
stayed in the northwest of Canada, Hickson and his president, Sir Henry Tyler, had no quarrel with it; but now it had invaded Grand Trunk territory, buying up a link with Montreal and controlling the Ontario and Quebec Railway out of Toronto. Van Horne considered this move essential. Had the
CPR
stopped at Lake Nipissing, it “would have existed only as a sickly appendage of the Grand Trunk.” It would be like “a body without arms … dependent … upon the charity of a neighbor whose interest would be to starve it.” Over the next several years, the two rival general managers, both men of stubborn courage and determination, would be at loggerheads.