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Lord Strathcona, High Commissioner for Canada

Robert Borden/Library and Archives Canada/C-014100

Only once during its long fur trading history did someone rise through the ranks of HBC to become Governor: Donald Smith.  Does the name sound familiar? Perhaps. But if you remember him at all it’s probably because of his involvement with the Canadian Pacific Railway. Smith is the central figure of the famous 1885 photograph commemorating the driving of “The Last Spike” of the transcontinental railroad: he’s the white-haired gentleman in the tall hat wielding the sledgehammer. But long before then he had begun a career path that is extraordinary by any standard – a 75-year career with Hudson’s Bay Company.

But that was not the only accomplishment of this most interesting and unique individual. Over the course of a very long and productive life he also managed to serve 42 years with the Bank of Montreal; 32 years with the Canadian Pacific Railway (CPR); 18 years as a Member of Parliament; 18 years as Canada’s High Commissioner in London; and 6 years as an MP in Manitoba.

Donald Alexander Smith was born in 1820 at Forres, Scotland, a town on the coast about 35 km. northeast of Inverness. Through his father he was first cousin to George Stephen, first head of the CPR. Through his mother he was distantly-related to Cuthbert Grant, the North West Company’s “Captain-General” who led the Métis at the Seven Oaks Massacre in June, 1816. By the end of his life, 93 years later, Smith’s accomplishments would outshine them both.

Smith’s maternal uncle, John Stuart, was a fur trader, having served in the North West Company and later as a Chief Factor with HBC. It may well have been his tales of adventure that led the young Donald to give up his position as clerk-apprentice at the Town of Forres in favour of a career in the fur trade. In 1838 the eighteen-year-old set out for Montreal armed with his uncle’s letter of introduction to George Simpson. Smith was hired at £20 per year to grade and count muskrat pelts in the Company’s warehouse at Lachine.

His stay in Montreal exposed Smith to a number of key HBC people including the often-absent Simpson and his much younger wife Frances. There is some speculation that Smith’s departure from Montreal in 1841 was the result of a rather too-close friendship with Mrs. Simpson. Suffice it to say that upon Simpson’s return to Montreal that year Smith was promptly posted to Tadoussac.

Located at the confluence of the Saguenay River and the St. Lawrence, Tadoussac was one of the “King’s Posts”. Lying outside the traditional land grant of Rupert’s Land, HBC leased these locations from the Crown. For years they had been considered the back of beyond.  “Dull and unprofitable”, as one writer has put it, to be sent there was tantamount to banishment. Over the next seven years Smith served at Tadoussac as well as Godbout, Sept-Iles, Bersimis and Mingan. His stewardship seems to have been satisfactory although he was reprimanded by Simpson for his lax account-keeping. Apparently Simpson’s assessment was not unique: surviving ledgers from these posts include marginal notes such as “Damn Donald Smith! I cannot make head nor tail of this!”

“Labrador” Smith

In 1847 Smith hurried back to Montreal seeking medical attention for the effects of snow blindness. Once given a clean bill of health, Simpson accused him of malingering. As luck would have it word had recently arrived that the factor at North West River in Labrador had been taken seriously ill. Simpson immediately dispatched Smith to relieve him. Smith arrived in Labrador in early 1848 at the age of 28 – after a thousand mile winter journey that almost killed him. He ended up staying for the next 20 years.

House once occupied by Donald Smith, Rigolet, Labrador, 1923

Tidal and Current Survey/Library and Archives Canada/C-87356

Leaving his colleague James Grant at North West River, Smith took charge of the coastal post at Rigolet. Chief Factor Richard Hardisty and his family arrived at North West River in September. Although Hardisty liked and respected Smith’s hard work and sent favourable reports to Simpson, the younger man was already waging a letter campaign implying Hardisty was not up to the job. When Hardisty requested a furlough in 1852, Smith was confirmed as his replacement and promoted to Chief Trader. Simpson wrote: “I have much confidence in your energy … but trust you will adopt a greater degree of regularity and system than characterized your management at Mingan.

Smith’s personal life was a little “irregular” as well. When Hardisty left with his wife he left his two married daughters behind. Isabella, the younger, had married James Grant in the informal “manner of the country”, with her father officiating although he had no legal authority to do so. This union produced a son, James Hardisty Grant, in 1850, but soon afterward the couple separated. Before her parents left Labrador, Isabella and Smith announced their intention to marry. This they did in 1853. This time the groom officiated, claiming that he had been appointed a lay preacher by the Governor of Newfoundland and that as a result this was Isabella’s first legitimate wedding. For the first three years of their life together James Grant was still stationed at North West River – a situation that must have been uncomfortable for all of them, particularly as James Hardisty Grant used Smith’s name and was raised alongside Smith and Isabella’s own daughter Margaret. For the rest of his life Smith was very sensitive about the legality of his marriage to Isabella and the persistent rumours that he had stolen another man’s wife. His solution was to go through no less than four subsequent marriage ceremonies with her.

His time in Labrador cemented Smith’s personality: cold, calculating, self-sufficient and ambitious. He established a farm at North West River that astonished visitors. He sowed grain, potatoes, pumpkins and peas, grew more tender fruits and vegetables in a greenhouse and raised cattle, poultry and sheep. Under his stewardship the area’s fur-trade profits grew. But Smith also diversified HBC’s business, establishing a salmon fishery, exporting seal oil and sending out rock samples for testing. His conviction that the region would eventually prove rich in minerals was prophetic. In 1863 he was made Chief Factor and the following year decide to take his first furlough in 26 years.

During his visit to London he met HBC Governor Sir Edmund Walker Head as well as Deputy Governor Sir Curtis Lampson and future Governor Eden Colville, impressing all three with his knowledge of Labrador and the Company’s business there. In 1866 he was on the move again, this time visiting Montreal, New York and Boston. It was during this trip that he established contact with his cousin George Stephen, then one of Montreal’s leading financiers and entrepreneurs. The two men would later be key players in the future of the new country called Canada.

Donald Smith (Lord Strathcona) at North West River, ca 1860

William Hind/Library and Archives Canada, Acc. No. 1988-245-1

Smith spent the next three years in Labrador waiting for the opportunity he knew would eventually arrive. In charge of the Labrador District since 1853, Smith’s only opportunity for promotion in the east lay in the Montreal District. After the death of George Simpson in 1860 his successor Alexander Grant Dallas had relocated the Company’s North American HQ from Lachine to Red River. Lachine remained the seat of the Montreal District which included not only the King’s Posts on the St. Lawrence but also the Ottawa and Mattawa River routes. In 1869 the Chief Factor of the Montreal district, E.M. Hopkins (husband of well-known water-colourist Frances Anne Hopkins) retired and Smith was appointed to succeed him. At the age of 49, Donald “Labrador” Smith headed back to Montreal.

The Turning Point

But it was a different place he returned to. Two recent events had changed the political landscape forever. First, on July 1, 1867 the provinces of Nova Scotia, New Brunswick, Quebec and Ontario had been federated as a new self-governing entity – the Dominion of Canada. Second, the United Kingdom had orchestrated an arrangement whereby Hudson’s Bay Company gave up its territories and rights in North America to the new government of Canada in exchange for £300,000 and generous land concessions. This agreement, known as the Deed of Surrender, was signed April 9, 1869 and went into effect December 1st that same year.

Circumstances now conspired to throw Smith into the centre of events. The Red River colony had been established in 1811 by Lord Selkirk, who had purchased its lands from HBC at the bargain basement price of ten shillings thanks to his clout as the Company’s largest shareholder. Since then the colony had grown and its Scots and Métis residents had established a viable settlement. Yet the colony was still in Rupert’s Land and subject to the overriding authority of HBC. But the Deed of Surrender called for Rupert’s Land to be transferred to Canada and both parties understood this to include Red River. The settlers, however, had different ideas. When Canadian officials arrived unannounced in August 1869 to perform a land survey of the unoccupied lands in the Colony, they met with resistance. Charismatic Métis leader Louis Riel set himself up at the head of a provisional government to deal directly on the settlers’ behalf. The Red River “rebellion” was underway.

Louis Riel, 1865

Library and Archives Canada/C-006688d

In Ottawa John A. Macdonald’s government was in a quandary. Aware that American interests were actively wooing Riel, the Prime Minister realized that the transfer of Rupert’s Land could not take place until the situation had calmed down. Since the area was still part of HBC’s domain, he looked to the Company for assistance. Accepting the recommendation of Montreal financier George Stephen, Donald Smith’s first cousin, Macdonald summoned Smith to Ottawa to sound him out. Smith’s cool assessment of the situation impressed Macdonald, who immediately appointed him “Dominion Commissioner to Inquire into the North West Rebellion”, charged with the specific task of pacifying the area. By so doing Macdonald hoped to open channels between legitimate representatives of the colony and the federal government. Smith set out for Red River, traveling via Toronto, Chicago and St. Paul, Minnesota, on December 13th, 1869. He arrived on December 27th and was promptly detained – albeit cordially – at Fort Garry.

Smith set to work persuading the settlers to support Ottawa’s plans to integrate the colony into the fledgling Canadian state. Riel finally gave him leave to address the inhabitants. Over the course of two days – January 19th and 20th, 1870 – Donald Smith read a series of documents aloud to the settlers of Red River; with Riel providing translations. Royal Proclamations, the terms of his government commission, communications from the government in Ottawa – all these demonstrated that the Canadians were serious in their desire to settle the affairs to the colonists’ satisfaction. As a result three delegates were chosen to open negotiations with Ottawa and Riel even agreed to an elected constituent assembly which would take over from his provisional government.

Smith’s triumphant departure for Ottawa was marred by the violent and illegal execution of an Irish Protestant troublemaker named Thomas Scott, an incident that would later prove to be Riel’s undoing. This time Smith’s attempt at persuasion was unsuccessful. However the three delegates from Red River had better luck: their negotiations resulted in the passing of the Manitoba Act, which on May 12, 1870, saw the newly-created province of Manitoba admitted into Confederation. The following year Smith was elected to the House of Commons as MP for Selkirk.

Chief Factors of the Hudson Bay Company, Montreal, ca. 1870

Cole, Jean / Library and Archives Canada / PA-143226

His role in defusing the rebellion enhanced Smith’s reputation in both Ottawa and London. He was soon named President of HBC’s Northern Department. In July 1870 he convened the last of the great Northern Council meetings at Norway House. By the end of the session the Chief Traders and Chief Factors had chosen him to act on their behalf in discussions with London for their fair share of the £300,000 purchase price of Rupert’s Land. According to the Deed Polls of 1821 and 1834 these two classes of officers were partners in the Company, and entitled to a 40% share of the equity and profits from the fur trade, which formed their primary source of income. Smith was successful in brokering an agreement that saw them receive a one-time payment of £107,055, as well as continuance of their 40% share. In return they signed off on a new Deed Poll specifically excluding them from the profits earned from future land sales.

Although the majority was happy with the deal, the wisest among them realized that the exemption would seriously compromise their long-term financial success. Smith, too, realized that the Company’s future profits lay in selling off its land assets. Made Chief Commissioner in 1871, he voluntarily resigned this post in 1874 to become the Company’s first Land Commissioner. A colleague complained “The Chief Commissioner cares nothing and hopes nothing from the fur trade.”  The fur trader had become a real-estate speculator.

At this time Smith’s role as an investor and stock speculator took off. During his Labrador years he had invested his own money – as well as that of colleagues – in a number of ventures, primarily HBC and the Bank of Montreal. By 1870 he was a Director of the Bank. The number of trust accounts he was managing led to the founding of Royal Trust Company – and his position as its first President and chief shareholder. The money he made at this business, plus his large lines of credit with the Bank, allowed him to buy up vast amounts of HBC stock, then depressed because of the recent ending of the Company’s monopoly. Peter C. Newman refers to Smith as “Canada’s father of insider trading”, certainly a fair description. But the times and customs were different from our own, and rather than being reviled Smith was looked upon as consummate businessman, someone almost incapable of failure.

Politics, Railroads and Ambition

By 1879 the position of Land Commissioner was no longer of interest to Smith and he resigned it. Now 59, Smith had already spent almost 40 years in the fur trade, had helped to quell the Riel rebellion, had entered politics – both federal and provincial – and had begun yet another career as a railroad baron which would make his a household name.

In the latter decades of the 19th c. building railroads was the particular purview of extremely wealthy men – men who managed thereby to increase their personal wealth by being careful never to invest too much of their own money in such ventures. By 1915, more than over 40,000 miles (over 64,300 km.) of track had been built and over 65,000 sq. mi. (168,350 sq. km.) of land had been granted to the railroad companies. The total value of this public investment, in the form of cash, loans, bonds and land grants, was in excess of $1.3 billion dollars – and yet all track and all of the companies were privately owned 

Smith caught the railroad bug in 1869 en route to Red River. On that journey he had travelled as far as he could by rail – from Ottawa to Toronto, to Chicago, on to St. Paul and the end of the line at Breckenridge, Minnesota. On his return journey to Montreal Smith met one James Jerome Hill, an expatriate Canadian and St. Paul entrepreneur. The two spent time together talking about the need for and feasibility of a rail link to Red River. Smith knew that land sales would be the next major source of HBC’s profitability. And land sales meant that the west would soon be converted to agriculture, a transition that would require a sophisticated transportation network based on railways. It was a meeting that would have far-reaching consequences.

In 1871, British Columbia joined the young Confederation on the strength of a promise that a railway would be built to the Pacific. The Canada Pacific Railway Company, headed by Montreal shipping magnate Sir Hugh Allan, was incorporated that same year to land the lucrative government contract. To guarantee that his group would win the charter for the railway, Allan started making secret subsidies, to the tune of $100,000, to Macdonald and the Tories. He also arranged for his bank to forgive personal debts of the Prime Minister’s totaling over $80,000.

A desperate Macdonald, late in the throes of the 1872 federal election campaign, asked for and received, more cash from Allan and his group. After the Tories were re-elected with a slim two-vote majority, the telegrams confirming the payments became public. The Pacific Scandal, as it is known, broke wide open and Macdonald’s government faced a make-or-break vote of confidence in the House of Commons. The life of the government came to rest on the vote of a single man: the Tory member for Selkirk, Manitoba, Donald Alexander Smith.

Rushing back to Ottawa, Smith arrived in time for the vote. Macdonald lobbied Smith hard for his support. But Smith had a price in mind: an amnesty for Louis Riel, and repayment of a personal debt of $3,000 he had incurred while “persuading” Riel and his associates of Ottawa’s good faith while at Red River. Macdonald finally agreed to the latter, but dared not pardon Riel and face the wrath of his Ontario caucus. Smith rose in the house and after a lengthy speech, in which he decried the invasion of personal privacy that had allowed the telegrams to be published, finally stated, that in all conscience, he could not support Macdonald. The government fell. In the ensuing election Smith was re-elected in his Selkirk riding as a Liberal under the leadership of the new Prime Minister Alexander Mackenzie. Macdonald was infuriated.

In 1874 Smith enlisted his cousin George Stephen, president of the Bank of Montreal, and together with J.J. Hill and Norman Kittson, they bought up the bankrupt First Division of the St. Paul and Pacific Railway, subsequently re-launching it as the St. Paul, Minneapolis and Manitoba Railway. Over the next 30 years the railway would make the partners seriously rich men, but first the new railroad, which only went as far as the U.S. border, needed to be completed to Winnipeg. For that, federal government approval would be necessary. Thanks to Smith’s participation in the scheme that approval would prove tricky to acquire.

Having managed to remain on the government benches by switching party affiliation, Smith set to work to ensure that he and his partners would get the contract for the branch line. George Stephen lobbied Mackenzie hard to allow his syndicate to lease the new line. When the bill was finally introduced to the house in 1878 Smith’s name was conspicuously absent and Prime Minister Mackenzie denied he had any involvement at all with the project. But Tories made the proposal – and Smith’s participation – into a major issue. While the Liberals got it through the House, the Tory Senate vetoed it. The Stephen/Smith syndicate backpedalled, finally asking only for operating rights, which were eventually granted on the very last day of the government business. The syndicate won operating rights on the Pembina branch line for 10 years. Once linked to the St Paul, Minneapolis and Manitoba main line, it gave the group a de facto freight monopoly in Western Canada.

But it was election time again and Smith was targeted by the Tories, who won handily. Smith won his own seat, but was charged with buying votes. The judicial investigation into his practices was tainted when it was learned that the presiding judge was in debt to him. In a subsequent by-election in 1880, Smith ran as an independent but was defeated. Yet the loss had a silver lining: legislation for the building of the Canadian Pacific Railway introduced by the government as far back as 1874 strictly prohibited MPs from being members of the railway syndicate. No longer constrained by politics, Smith was now free to join the group which would finally complete the line in 1885.

Hon. Donald A. Smith driving the last spike to complete the Canadian Pacific Railway, November 7, 1885

Alexander Ross/Library and Archives Canada/C-003693

Smith’s contribution to the CPR was financial. Along with George Stephen, Smith’s personal reputation opened the doors necessary to acquire loans needed for the massive undertaking. On several key occasions crucial infusions of cash were secured against the personal credit lines of both cousins. The Driving of the Last Spike, in 1885, formally recognized Smith’s contribution: not only was he chosen to wield the ceremonial hammer, but the remote location in Eagle Pass in the Selkirk Mountains was named Craigellachie in honour of his and Stephen’s highland ancestors.

Throughout this period Smith was still an employee of Hudson's Bay Company. Having served as Chief Commissioner from 1871 – 1873, and Land Commissioner from 1874 – 1879, for the next several years he held no official post at all. But he continued to aggressively acquire HBC stock. By 1883 he was the majority shareholder and managed to get elected to the London Committee, the Company’s Board of Directors. There he joined his CPR colleague Sir Sandford Fleming, already an HBC Director and one of Smith’s few close friends. Smith set about having the two of them named to a new subcommittee to supervise Canadian affairs. In this way he was able to exert major influence over the business of the Land Department. The sitting Land Commissioner, Charles John Brydges, was forced to report directly to him. Smith was now well placed to speculate in real estate and began to acquire property in Winnipeg with a view to future profitable sales once the routing of the CPR was finalized.

Last council meeting of the commissioned officers of the Hudson's Bay Company, Queen's Hotel, Winnipeg, 1887

HBCA 1987/363-E-715/10B

The first scheduled transcontinental train of the CPR left Montreal for Port Moody B.C., on June 28, 1886, only seven months after the driving of the Last Spike. That same year Smith was knighted in recognition of his work with the railway. In 1887 he became the President of the Bank of Montreal and presided over the final meeting of HBC’s Council of the Northern Department in Winnipeg. It was at this meeting that the Company announced that there would be no further commissions to the ranks of Chief Traders and Chief Factor. Long-time employees who had looked forward to eventual promotion were effectively capped at their current level. The fur trade would never be the same again.

With the railway now a reality, the newly-minted Sir Donald Smith and Sir John A Macdonald were reconciled. In 1887, after Parliament had lifted the restriction on CPR shareholders holding office, Smith ran once again as a Tory and was elected in the riding of Montreal West, a position he would hold for 9 years.

Governor and Baronet

At the age of 68 Sir Donald Smith, KCMG, was ready to embark on the final phase of his career, one which would see him gain ultimate control over the Company he had served his entire life. The death of Deputy Governor Sir John Rose in 1888 created a vacancy; Smith was named to the post, but would not keep it for long. The following year Governor Eden Colville, son of former Governor Andrew Colville, and the first Governor to actually serve in Canada and have first-hand knowledge of the fur trade, retired, leaving the way open for Smith to succeed him. So it was that the man who had begun his career grading muskrat pelts in the Lachine warehouse now ran the entire enterprise.

Smith’s first major act as Governor was to terminate the services of Land Commissioner Charles John Brydges, who had succeeded him in that post in 1879. Brydges was all for selling land quickly and not necessarily getting the best deal. By the time the Board agreed he needed to go, he had twice initiated significant land sales in Winnipeg without the Board’s approval – both of which resulted in lost profits. Not the sort of behaviour to be tolerated for long by a man like Donald Smith.

Surrounded by a Board of like-minded men, Smith pretty much ran HBC to his own liking. Though the fur trade grew less and less important, it diversified from beaver until over 20 different species were part of its regular offerings. Budgets were tightly controlled, excess and waste frowned upon. The guiding principle was shareholder value, an easy vision to achieve when the Governor and majority shareholder were one and the same. In 1893 Smith finally terminated the Deed Poll. The senior officers of the fur trade – the Chief Traders and Chief Factors, who since 1821 had been considered partners in the trade, and entitled to 40% of its profits – became simple salaried employees of the Company. It was a final recognition, if any were needed, that the fur trade was no longer the primary business of the Company.

Like many millionaires of his era, Donald Smith firmly believed in the moral obligation to put his personal fortune to good use. He became one of the most important benefactors Canada has ever seen. Among the recipients of his largesse was McGill University. A firm believer in higher education for women at a time when many others did not, Smith’s cheque for $50,000 established an endowment for women’s education which later resulted in the creation of the university’s Royal Victoria College. In 1889 Smith became McGill’s Chancellor. The students honoured their founder by calling themselves Donaldas, and naming their debating society Delta Sigma, the Greek letters “D” and “S”. Smith, along with his cousin George Stephen, also provided much of the initial money for Montreal’s Royal Victoria Hospital, which began building in 1887 to mark the Queen’s golden jubilee.

Residence of Sir Donald Smith, Montreal

Albertype Company/Library and Archives Canada/PA-032073

In 1896, Donald Smith was appointed Canada’s High Commissioner to England, Canada’s senior diplomatic post. The job included not only representing Canada’s interests overseas, but also active roles in immigration and finance. Smith was an enthusiastic participant in the celebrations of the Queen’s diamond jubilee the following year. The Queen bestowed upon her “Labrador lordship” a baronetcy that same summer. After some deliberation Smith chose as his title Baron Strathcona of Glencoe and Mount Royal, in recognition of his Scots and Canadian roots. He chose as his armourial bearings a beaver gnawing on a maple; his motto, PERSEVERANCE, was a fitting tribute to his career.

 

 

At the height of the Boer War, Strathcona raised a private cavalry regiment, Lord Strathcona’s Horse, at a cost of one million dollars. He later purchased the barque Discovery, in which explorer Robert Scott had sailed to the Antarctic in 1901-04, and assigned it to HBC’s northern service for five years. Afterward he donated it to the Boy Scout movement, being a staunch supporter of their founder Sir Robert Baden-Powell.

Strathcona remained interested in land sales, and not only in his capacity as HBC Governor. For he was also controlling investor and director of the Canada North-West Land Company (CNWL), which had been formed in 1882 to acquire 5 million acres of the original CPR land grant. By 1909 land sales were strong across the west and Strathcona profited from them at every turn. Immigration was booming: settlers arrived on the CPR’s brand new-shipping line, travelled out west on CPR trains to farm land bought from the CPR, HBC or the CNWL Company – then outfit themselves and their homes at HBC’s retail stores.

In 1907 Leonard Cunliffe joined HBC’s Board, replacing the retiring Sir Sandford Fleming. Two years later Cunliffe invited Harrods Managing Director Sir Richard Burbidge to accompany him to Canada to inspect the Company’s retail business. The results of the Burbidge report had far-reaching consequences for HBC. Shocked by the inadequacy of HBC’s stores Burbidge recommended reorganizing the company into 3 separate departments: Fur Trade; Land Sales; and Retail, each with its own head. He then proposed a series of measures to modernize and reinvigorate the retailing business. In 1910 a number of new directors – Burbidge among them – were elected to the Board with a clear vision to make things happen. In addition to adopting the proposed reorganization they also appointed three Winnipeg businessmen – Sir Augustus Nanton, George Galt and Sir William Whyte – to advise on Canadian operations. This was the nucleus of the Canadian Committee, which would eventually assume day-to day management of the Company’s affairs.

Smith was slowing down. But he had not lost his interest in the deal. In 1909 he was asked to serve as Chairman of the brand new Anglo-Persian Oil Company, a subsidiary of Burmah Oil, a combined consortium established to operate oil concessions in both Burma and Persia (modern day Iran). Smith agreed, eventually investing at least £1.5 million of his own money in the business. This would prove a wise investment: in 1912 the British government decided to invest £2.2 million in the venture, thus securing a reliable supply of oil at a fixed price, just prior to the First World War.

On January 21, 1914, only ten weeks after the death of his beloved wife of sixty years, Isabella Hardisty Smith, Donald Smith, Lord Strathcona, died of heart failure. He was 93 years old and had spent 75 of those years in service with HBC. His state funeral was held in Westminster Abbey. In Canada flags on the Bank of Montreal and the CPR flew at half mast and Parliament was adjourned to mark his passing. It was the end of an era and of the remarkable career of a man who shaped the history of Canada as much as that of HBC.

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