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The Power Of The Corporation

August 20, 2012

Corporations that have good fundamentals and have excellent professional managers can weather changes in ownership and economic storms. In essence we have corporations to provide stability and organization in a business. There are a lot of corporations who have contributed significantly to the business economy in the past and continue to do so today even with the original owners have long been gone from the company.

The Power Corporation of Canada (POW) traces its roots back to 1925. It was formed as a holding company by A.J. Nesbitt and P.A. Thomson who where principals in an investment firm that had been underwriting and investing the construction and promotion of Canadian hydroelectric utilities. By forming a public holding company the two could consolidate and solidify a good portion of the power sector. The idea was also to help protect the growing Canadian power sector from outside speculators.

POW was operating 40 power plants and serving more than 1.5 million Canadians by 1930. While its stock prices took a hit during the Great Depression, its focused attention on its power business allowed the company to remain profitable.  In the 1960s the hydroelectric industry was nationalized forcing POW to look for other business opportunities.

It focused on fewer businesses with more controlling interest so it could heavily influence management.  It became more diversified involved in energy, finance, industry and real estate. Aside from a change in direction of its business the company also had a change in the ownership of the controlling shares.  Financier Paul Desmarais became the controlling shareholder in 1968.

He continued to improve the performances of the companies owned by POW. The company’s major assets included Canada Steamship Lines (transportation); Consolidated-Bathurst (pulp and paper); Montreal Trust (financial services) and Gesca (communications).

Now the sons of Paul Desmarais run the company. Paul Desmarais, Jr. is chairman and co-CEO; Andre Desmarais is deputy chairman, president and co-CEO.  The family still maintains controlling interest.  Much of the company’s assets are in the financial sector. This is in stark contrast to its mainly hydroelectric assets when the holding company started.

The company’s corporate structure has helped it weather difficult economic times. Power Corporation of Canada is a very successfully run company. It may have been too successful for its own good often accused of having strong connections to the government with even past prime ministers having worked for the company.

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