Everything about Stephen Smith’s office in downtown Toronto fits the mold of a 21st-century finance company: the quiet warren of workstations, the bank of TV screens on the wall, the CEO’s favourite espresso machine, even pictures of him heli-skiing in western Canada. Everything, that is, except a large annotated novel on his coffee table. The copy of Persuasion, Jane Austen’s final work, is the annotated edition by Queen’s University scholar Robert Morrison, and was given to Smith by Principal Daniel Woolf.
Not many CEOs would display a novel, let alone an early 19th-century work, so prominently. Then again, not many CEOs are like Smith, the self-made financier who built a billion-dollar mortgage company and in October gave $50 million to the school of business at Queen’s. It is the largest gift ever to a Canadian business school, and will be directed to faculty chairs and scholarships for graduate students.
A lover of words, a student of history, a disciple of economics, Smith often turns to Austen for the universal truths of human behaviour that she captured in Persuasion, and in his favourite work, Pride and Prejudice, which he rereads every five years or so – and the emerging sense of social obligation that shaped that century, which he believes is needed more than ever.
“I was extremely lucky to grow up in Ontario and in Canada at a time when we had a first-rate education system, and Queen’s was the epitome of that,” Smith said in a series of interviews before his gift was announced.
Nearly five decades after he first set foot on Queen’s campus, Smith is hoping his record gift to the business school, which now bears his name, will inspire other alumni to give to the university, while supporting its faculty and students to push themselves to the highest standards in the world.
His endowment comes at a time when the economic and social relevance of universities is actively debated, and the competition for top-flight professors and students is both fierce and global. Rather than focus on buildings or technology, Smith wanted to strengthen Queen’s intellectual muscle in line with Dean David Saunders’ drive to make the business school among the best in the world.
“We need to up our thought leadership,” said Saunders. “In 10 years, we should be, indisputably, the best business school in Canada and among the best in the world.”
Two-thirds of the endowment will fund faculty research chairs to be held by professors who, Smith proposed, should enjoy complete academic freedom for their research. “The foundation of all great universities are great faculty,” Smith said. The final clause of the endowment contains a line crafted by the donor himself, calling for “vigilant protection for the rights of freedom of speech, academic freedom and freedom of research.”
The remaining third of Smith’s gift will finance scholarships. Competition is particularly tough among business schools worldwide to attract the best and brightest students. The availability of scholarships is often the deciding factor to choose one school over another. Smith’s priority is to ensure that students gain as much access to advanced learning as their minds can allow. “In the sense that you want to have a society based on meritocracy, which I think is good, it’s becoming increasingly difficult,” he says.
Like universities, Smith fears, societies that don’t allow for the free movement of people and ideas are likely to become prisoners to their past. As a teenager in the 1960s, he thought he would be a product of his family’s own past, and stay in Ottawa. Then, in July 1968, as North America was engulfed in social upheaval, his parents took him on a day trip to Kingston, asked him what he thought of the campus (“pretty good” was his answer) and told him their decision had been made: he’d be attending Queen’s that fall. His father was an admirer of John Deutsch, a prominent economist and government adviser who had just been named principal, and the elder Smith thought Queen’s was the place for his son, a star student, to excel.
While the younger Smith agreed to the university, he chose electrical engineering rather than public policy or economics. He was an avid ham radio operator and was also dabbling in the new field of computer coding, specializing in Waterloo Fortran, or WatFor, as the popular script was then known. Away from the campus mainframe, he soon found economics to be as alluring. He made special arrangements with the dean so he could take some economics courses under the academic titans of their day, Richard Lipsey and David C. Smith.
Despite summer work as a coder and a job upon graduation in 1972 with Bell Northern Research in Ottawa, Smith’s mind was restless. “Coding drives you crazy after a while. It’s not intellectually stimulating,” he says with a laugh. He pursued, instead, a master’s degree at the London School of Economics, and at 21, found a new course in life. England was in the midst of political and economic upheaval, which captured Smith’s imagination.
At the LSE, where he specialized in micro-economics, he began to see the relationship between business decisions and public policy, and soon began to test it in the real world. After graduation, he worked as a market researcher for Mullard Electronics, the storied British firm, and then returned to Canada to join Canadian Pacific and later Hawker Siddeley, the aircraft manufacturer. His interest in free markets collided with his free spirit, and in 1980 he was fired for speaking his mind. “If my boss told me to do something and I didn’t think it was right, I didn’t hide that,” Smith recalls. “I thought I was smarter than my bosses. I was insolent, which is probably the character of entrepreneurs.”
Out of work as the Canadian economy spiralled toward recession, Smith watched a friend flip a duplex for a profit, and figured he, too, could make it in real estate speculation. He fell flat on his face, losing what little he had. Picking himself up after a few bad deals, he decided to try his hand as a mortgage broker, teaming up with a young Guaranty Trust manager, Moray Tawse, to form their own business, First National Financial. Their timing was exquisite. After the Progressive Conservative government opened up Canada’s financial sector to competition from non-banks, the young business partners quickly figured out how to bundle and sell mortgages to investors. In 1988, their first full year, First National booked about $200,000 in revenue – a quarter of which was profit.
For Smith, the mortgage business was an accidental blend of micro-economics and computer coding. He and Tawse had figured out how to price and package mortgages more aggressively than their bank competitors. They also realized that to stay ahead of the banks, they needed sophisticated computer programs, which Smith wrote at night after putting his three young children to bed. He remained the First National’s IT director until the turn of the century, when he realized he couldn’t both keep pace with the changes in coding and run a business.
As First National grew, Smith maintained an interest in public policy, joining the board of the C.D. Howe Institute and increasingly turning his mind to history. On a 2007 trip to Vimy Ridge in France, for the rededication of the Canadian war memorial, he discovered a passion for Canadian history, and desire to do more. He joined the boards of the Historica Foundation and Dominion Institute, which merged in 2009, and more recently, with his wife, Diane Blake, a librarian, archivist and fellow history buff, granted $3 million to a project to create a Toronto history museum. The past and present, they felt, were inseparable.
Smith’s life is about more than books and history, though. Once his business was off the ground, and his three children growing, he took up skiing seriously, learning to tackle mountains only when he was in his late 30s. Ten years on this morphed into his true passion – heli-skiing. “A helicopter takes you to the top of the mountain and drops you in 30 cm of powder snow,” he says. “I was hooked.” The challenge of the terrain and the thrill of navigating the unknown, played to his appetite for risk and discipline of control. He now heli-skis with either family or friends in British Columbia, four or five times a year.
Smith is out for more than solo thrills. In Toronto, he belongs to a cycling club called Les Domestiques, the term used for the support groups that cycle with Tour de France contenders. “They sacrifice their chance to win in order to support the team and the leader,” he says. His group, whose members range from bank executives to police officers, cycles 30 kilometres, three early mornings a week.
It was his love of history, however, that created an instant bond with Woolf, when the new principal, after his appointment in 2009, called on the alumnus. He wanted to know if Smith might add to the nearly $2 million he had already given to Queen’s, for a bursary program for engineering and economics students and for a faculty fellowship in economics. Smith invited Woolf to join the Historica board, and as they discussed Queen’s, they agreed the business school would make the most of a major gift.
Canada was already in the midst of a boom in large-scale donations to universities, and professional schools in particular. In 2002, oil man Richard Haskayne put University of Calgary’s business school on the map with a $16-million gift. Smith’s business friend, Hal Jackman, gave $30 million to University of Toronto for humanities. Joe Rotman’s gift to U of T, however, resonated most with Smith as he debated whether to attach his name to the business school at Queen’s. Like Rotman, he felt it would encourage others to do more.
The negotiations coincided with the aftermath of the global financial crisis, and while First National emerged stronger from the turmoil, Smith does not discount the impact that the ensuing malaise will have on business, the study of business, and public confidence in business. Recent banking scandals and the current Volkswagen debacle have only heightened his concern that business and ethics have drifted too far apart. “There is such a premium on making money that people lose their moral compass,” he says. “Business schools have to bear some responsibility.”
For bearings, Smith sometimes turns as much to the past as to the future. Even in a free market system, he has found, government and business must work together and yet respect one another’s strengths, just as he believes faculty and students need to be given their space on a thriving campus. His views were strengthened when he recently read Nation Maker, the second volume of Richard Gwyn’s biography of Sir John A. Macdonald.
Without Macdonald’s resolve, Smith concluded, the national railway would not have been built, and what is now western Canada most likely would have been absorbed by the United States. Macdonald was able to broker competing points of view, in the national interest. The same ability to bridge public interest and private concern, with policy, economics and the fine art of the deal, may again serve Canada well. In Smith’s eyes, it may also inspire business education.
“A society that cares is a successful society,” he says. “It’s important to pay taxes. It’s important to give back. It’s important to be civically engaged.”
An expression of gratitude
On Oct. 1, Stephen J.R. Smith announced his $50-million gift to Smith School of Business. Here’s part of his speech to the packed crowd at Goodes Hall that morning.