Alex Jones is the majority owner and CEO of Harbour City Investments Inc (HCI). He is well-known
Question:
Alex Jones is the majority owner and CEO of Harbour City Investments Inc (HCI). He is well-known in the British Columbia business community. For over three generations his family owned and operated several fast-food restaurants, including all the A&W franchises on Vancouver Island. When Alex became involved with the family businesses, he realized that most of the businesses the family operated had reached the mature stage of the business cycle and that meant that opportunities for growth were constrained. He immediately set out to diversify the group of companies. He witnessed tremendous growth on Vancouver Island during the past 10 years and sought to take advantage of the ever-expanding commercial real estate market. And thus, HCI Inc was born. He soon discovered that when he developed parcels of land and constructed commercial buildings that were anchored by one of his many successful franchises the commercial value of the property increased and sold well above average commercial real estate prices in the Central Vancouver Island area. By taking advantage of the opportunity this presented Mr. Jones had become one of the richest persons in British Columbia. Another interesting fact is that Alex Jones is an Indigenous person whose family had migrated from the Alberta three generations earlier.
Now that Mr. Jones is nearing retirement, he wishes to leave a legacy for the next generation of his family by building a high-tech state of the art light industrial park in a profitable location on Vancouver Island. He hired a consulting firm to conduct a feasibility study and decided the most profitable place to locate the industrial park was midway between Duncan and Nanaimo, on the site of a former dairy farm, along the only major highway that ran along the Island. The location is also close to the airport and major ports in and out of the Island, and near other feeder highways allowing access up and down the supply chain. Logistically, this was an ideal location for the industrial park. Construction costs would be minimal as much of the off-site infrastructure was in place, and there was ready access for bringing in the equipment and materials he needed to build the on-site infrastructure and buildings. Future tenants would profit hugely from the location and the great access to markets from the location. Given the lower costs of development he could allocate more of the start-up budget to technology that would modernize the warehousing and logistics industry on Vancouver Island. And, although he does not need additional financing, he decided to mitigate financial risk by looking for equity partners. The potential for profit was great in the medium and long term.
Some challenges existed, however. The now defunct dairy operation that once operated on the location was not for sale. The farm had been established by the first settlors to the area and descendants of the original family had plans of their own for the land. One of the reasons the farm was not sustainable was because there was not enough water in the summer for the animals to drink and to also raise enough food for the cows to eat during the winters. The total number of cows the land and existing water supply could support was limited to the point that farming was no longer a profitable endeavour. Over the years the farm family had developed a close relationship with their neighbouring First Nation - Stz'uminus First Nation (SFN). SFN was looking to recover the farmland since it was it was originally taken from them when the family's ancestors had first arrived on the Island. The family acknowledged this and wished to return the land to SFN as part of a treaty settlement between British Columbia and SFN. The family even agreed to sell back the land at a price that was much lower than the appraised value - an altruistic gesture acknowledging the family's appreciation of the fact that the land had supported and enriched the family over the years and that it was now appropriate to give some of that back.
Stz'uminus First Nation had plans for the land once the treaty settlement is ratified. They wanted to use part of the land for a housing development to address the lack of housing they currently were experiencing. In their planning they also allocated some of the land for a new school, a medical centre, and an Elders' Lodge. They also wished to establish a light industrial park that would generate revenue for the First Nation. So, they were also looking at real estate development that would include development for social and commercial purposes but on a much smaller scale than what Alex Jones had in mind.
Both Mr. Jones' HCI Inc proposal and SFN development project would require water. Although there was not a large supply of water on the farmland SFN was located on a large aquifer of pristine, even potable water and could use sustainable amounts of that water to supply their projects on the adjacent farming land. Mr. Jones did not have access on the property to the water supply he would need but he had planned for this contingency.
Alex called the family together for a dinner at his estate on Salt Spring Island where he announced his ambitious plans. He informed the Jones family of his plan, including the contingency plan for obtaining the water he would need for his commercial development. They were shocked to hear that he planned to get water by conducting lateral drilling into the aquifer and taking the water from underneath Stz'uminus First Nation. The younger family members (all millennials) were appalled and cautioned him about going ahead with the development without consideration for the environment and for the potential impacts on the local communities, including the Indigenous communities that are in proximity and within whose traditional territory the development would be located according to the proposal. In fact, they knew that the old farm was being claimed in treaty negotiations with Canada and British Columbia by the Stz'uminus First Nation. The farmland was also the subject of an Aboriginal rights and title lawsuit lead by the Cowichan Nation Alliance. Jaqueline, his daughter who recently graduated from the MBA program at University Canada West, alerted him to a slide show highlighting two stakeholder approaches that she saw at the last mining convention that she attended. She indicated that there could be some lessons learned from the experiences of both Platinex Inc. and DeBeers in their dealings with stakeholders. The PowerPoint deck was authored by Peter Siebenmorgen.
In addition to consideration for the Indigenous stakeholders Jacqueline also pointed out that Alex ought to think about the diverse and pluralistic community that had developed on the Island in the last few years. There were many new immigrants with diverse cultural backgrounds in the community. Jacqueline noted that many of the graduates from the local Universities were women with quality skills who could become part of the labour force bringing Alex's dreams to fruition. Her point was that Alex would do well to integrate these important stakeholders in his strategic plan. Alex's wife, Mrs. Jolene Jones also cautioned Alex on the potential for financial loss to the company and to the family legacy if he failed to mitigate risk. And his son Joe, a lawyer, advised him that any number of stakeholders could influence his plans. Furthermore, Joe indicated that there would be several issues that should be contemplated and that the Green Coalition Group would be concerned about marine and land environmental degradation not just from the development but by the increased traffic caused by it. The farm had streams on it that were home to marine grasses and used by schools of fish to spawn and regenerate. The land was also home to several birds and animals that were on the endangered species list. An environmental assessment certificate would need to be obtained from Canadian and British Columbia ministries. The Supreme White Nationalist Organization could be a problem for the project as well since they controlled the trade unions in the area, including the powerful Builders Trade Union. Alex's other son, Jaxon said that the whole stakeholder thing was overrated and that all the stakeholders would see the benefits of building the industrial park, including jobs and training and economic growth for all stakeholders, and most importantly, profits for the shareholders. It is our right he said - we have the means to modernize the warehousing and logistics businesses on Vancouver Island and this would benefit all stakeholders, whoever they are.
Alex had become successful in part by listening to his shareholders, and the Jones family members were his nearest and dearest shareholders. But he was also a businessman who was used to getting things done on a handshake and by consulting his network of business associates whom he often met locally at the Chamber of Commerce Social Club. He knew that the local Member of the Legislative Assembly (MLA) of British Columbia was also the Minister of Land and Marine Resources, and for a bit of kickback the Minister could likely help Alex to manage the current landowners and the Indigenous stakeholders and to obtain the necessary land and permits, including the license to drill and extract water from the aquifer underneath the First Nation land. Mr. Jones knew that the Province of B.C. could expropriate the farmland and obtain ownership of the land by paying the going appraised rate for it. Since the land was still zoned as agricultural land this would not cost the Province as much as if it was zoned commercial. Then Alex figured it would be easy enough to have the province rezone the land to commercial so he could proceed with the development. After all, he could point out the increased tax base the business would create and the number of people the project would employ, and he knew that several key government officials "owed him". Alex figured with the right words and the appropriate ongoing political funding support, he could also influence the Canadian Minister of Federal Resources, who owed him a favour due to a previous generous funding contribution by Alex during the last federal election. Alex also heard that the Chief and Council of Stz'uminus First Nation (SFN) were looking for funds to build a new school, and that SFN always sought an equity position in development in their territory. He could ensure that his financial partners would be open to a small (2 to 5 %) equity ownership by SFN by giving the financiers a bigger piece of the pie as well. Perhaps a donation to SFN for the school would be helpful, and he could likely convince other stakeholders such as his suppliers and his financial partners to contribute to the local hobby farmers in the area as well as to the Indigenous communities. A bit of kickback (i.e., larger dividends from the profits of the companies to suppliers and investors perhaps) would do the trick. Alex also thought he could visit the local Newcomers Welcome Society in the community and offer to provide jobs and training for their support for the project. He considered wining and dining the Society's president.
At work on Monday Mr. Jones consulted with Jacqueline about these thoughts and the slide show she mentioned at the dinner. Jacqueline was taken aback by Mr. Jones' "old school" intentions and cautiously advised a more professional and expert approach. And after discussing the contents of the slide show with him she convinced him that the most critical stakeholders to deal with were the local Stz'uminus First Nation and the Hul'qumi'num people, who comprised 5 individual First Nations that collaborated collectively under one First Nation for the purpose of negotiating over large-scale project proposals that had the potential of adversely impacting their Aboriginal rights and titles in their traditional territories. Jacqueline emphasized though that all stakeholders were important to some degree. She also suggested that the company ought to do a full-scale review of its overall stakeholder concept and consider creating a systematic approach to working with stakeholders. As part of this approach she encouraged Alex to consider the benefits of being proactive in relation to equity, diversity, and inclusion issues that might arise.
Alex succumbed and wanted to do the right thing socially and to mitigate financial risk of the enterprise. But he had never had to worry about the social impact of his other operations. He instructed senior management of Harbour City Investments Inc. to retain you, the consultant, to draft a 2 to 3 page report analysing the two approaches taken by the mining companies in the slide presentation and the issues at stake in his proposal. Alex heard that you were a recent graduate specializing in strategic planning with a focus on CSR, and an up-and-coming superstar in the field. There was a lot to consider. He was conscious of price and wanted to hire you before you became too famous and unaffordable. He wanted to know who the stakeholders would be and whether he should deal with all of them or have some sort of priority management system. He wanted to know whether he was correct in focussing on the Indigenous stakeholders. Specifically, Alex wanted to know what approach he should take in engaging with the local Indigenous communities and why. And whether the approach Jacqueline witnessed in the slide show at the conference could be used in all stakeholder dealings.
What will be your advice to Mr. Jones?