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TIM KILADZE

Tuesday, February 13, 2018

He is one of the original fearless voices, a crusader who took on Canada's corporate elite - from lazy corporate directors to overcompensated investment bankers.

As an independent money manager who founded his own firm, Stephen Jarislowsky had free range to say whatever he wanted to.

Now 92, Mr. Jarislowsky has sold that firm to Bank of Nova Scotia for nearly $1-billion.

There are no guarantees he will be as candid any more - not with all of the checks and balances of a bank, such as investor relations and communications teams, standing as potential obstacles.

Mr. Jarislowsky famously criticized Frank Stronach in 2010 for trying to extract an "unconscionable" amount of money from Magna International Inc. Will he be as biting about a similar transaction in the future, if Scotiabank is one of the corporate advisors to the deal?

Admittedly, Mr. Jarislowsky's acerbic commentary was already getting harder to come by. He started to retreat in recent years - less publicly visible, it seemed, and less pithy when he was quoted.

But in his prime, there was hardly anyone in the country who was as daring when it came to taking on Canada's richest men and most establish companies. One particular gem, about the credibility of fairness opinions that get written in support of mergers and acquisitions: "Christ, [investment bankers] will sign anything for a million or so."

Although he has been quieter of late, Mr. Jarislowsky still has a few pet issues. He has been particularly vocal about central bankers flooding the financial system via ultra-low interest rates, which he argues propped up a housing boom (or bubble). He's also rather outraged at Canada's personal tax rates. "You do not build a prosperous country by excessively taxing those who create prosperity and jobs, now and in the future," he wrote in an op-ed in The Globe and Mail last year.

By taking on Corporate Canada, Mr. Jarislowsky could be miscast as some kind of socialist. But he is very pro-business.

"I think that we're not strong enough against environmentalists. We have to look after our industry and we have to survive," he told Business News Network last September.

What really matters to him isn't driven by politics. Mr. Jarislowsky has long advocated for better governance in public companies, and in 2002, he co-founded the Canadian Coalition for Good Governance with Claude Lamoureux, the former head of the Ontario Teachers' Pension Plan. Issues he's championed throughout the years include: ending excessive executive compensation, especially when it comes to stock options; getting fair and equal treatment for shareholders; and pushing for regulators to have more bite.

His campaigns spanned nearly every industry. He railed against special payments to some Astral Media shareholders in its takeover by BCE Inc.; he tried to blow the whistle on Conrad Black and his governance of Hollinger Inc.; and he argued against BHP Billiton's attempt to buy Potash Corp. of Saskatchewan Inc. in 2010.

That his asset-management firm is getting sold, sadly, isn't much of a surprise. The banks have described this as the "decade of wealth" - whereas the last one was driven by lending. Baby boomers have a lot of money they need managed.

There were signs of changes to come at the independent firm as far back as 2012, when Jarislowsky Fraser abruptly shook up its management ranks. For many years, Mr. Jarislowsky worked in tandem with the firm's president, Len Racioppo - the former was the sharp edge, while the latter was the calmer voice. Mr. Racioppo left that year, and it all seemed very awkward. At the time, Jarislowsky Fraser had started to see its assets under management decline.

In 2007, it managed roughly $60-billion. By the time of the management shakeup, it had fallen to $37-billion.

Scotiabank is acquiring $40-billion in assets under management, which means there's been some modest growth in the past five years. But some of it might simply have come from rising markets, rather than new business, and the value is still small relative to behemoth independents such as CI Financial Corp. Scale matters in wealth management because it allows companies to spread costs over as many assets as possible, in order to lower their fees to investors.

Still, the sale signals some major changes. Jarislowsky Fraser was one of the few major independents left with a rich history. The banks already swallowed the likes of DundeeWealth and Phillips Hager & North.

Canada used to have a reliable cast of straight shooters on the buy side who would happily speak their minds on business issues. Today, most asset managers prefer to wage silent wars, subscribing to the theory that "withholding" their votes on crucial matters is a strong enough scare tactic.

It isn't. When we lack sharp tongues, it only leaves room for short-term, profit hungry "activist investors" that masquerade as do-gooders to flood the market.

With files from Sean Silcoff, Jacqueline Nelson and Janet McFarland

© The Globe and Mail