Loss complicates succession planning

Canada's second-largest family empire is reeling from the unexpected and simultaneous loss of two key family members. How the Irvings respond to these events will have a significant impact on their complex succession process, writes Jennifer East.

JE (Jack) Irving, 78, son of empire builder KC Irving, passed away in July after a brief illness. Just hours before his death, Jack's nephew Kenneth Irving announced he was leaving Irving Oil for health reasons. More recently, Kenneth has indicated that he expects to recover fully from the unidentified health setback.

The loss of these two central players comes at a pivotal time in the Irving family succession process. For more than two generations, the family's interests have been controlled through a series of offshore trusts established by KC Irving. Once Kenneth's generation began to assume operational roles in the family business, he and others expressed concern over the centralised nature of the ownership structure. After a complex reorganisation, Kenneth, his siblings and cousins now have significant independence in their respective business units.

Although Jack left the family's core businesses to his more aggressive brothers JK and Arthur, he oversaw a series of smaller enterprises for the family including construction, steel and property. Perhaps his most significant role was as a calming force in the family. Jack's civility and his quiet, humble personality enabled him to lead the family through tumultuous change. For the family, and for New Brunswickers of all walks of life, Jack was a congenial, decent citizen who led by example and will be greatly missed.

Kenneth's departure also represents a blow to the Irving succession plan. Considered a rising star in the fourth generation, Kenneth 49, has built a high profile for himself in the media. As head of Irving Oil since 2000, he has been acclaimed for his successes, including pioneering low-sulphur gasoline and building Canada's first LNG terminal near Saint John, New Brunswick.

This is a precarious time to lose the top gun in the family's oil business. Kenneth's dreams of building a highly diversified energy business for the 21st century have had setbacks in recent years. Irving Oil has had to cancel plans to pursue a tidal power feasibility study, a $30 million headquarters in Saint John, a biodiesel plant and an $8 billion Saint John refinery in partnership with BP PLC.   

For a family-focused and deeply private group, these two losses represent an important turning point. Observers speculate that Kenneth, who is known as an intense and energetic leader, will return to the business if and when his health permits. In the interim, Kenneth's father Arthur has stepped in to fill the void. Arthur has always had his finger on the pulse of the oil business, but at 79, is not a long-term solution to the leadership void. Kenneth's younger brother Arthur Jr. has left day-to-day operations to pursue other business interests.

Although not a replacement for family leadership, the Irvings have bolstered the ranks of non-family members in the oil business. Mike Ashar of Suncor Energy was hired to play a pivotal role long before Kenneth's departure and Bank of Nova Scotia chairman John Mayberry joined the board of Fort Reliance Ltd, the Irving holding company that controls Irving Oil.  

Succession is clearer in other branches of the Irving empire. Jim and Robert Irving, sons of JK, lead the forestry division. This is an offshoot of the Irvings' original entrepreneurial venture. It began in 1882 with a sawmill, gristmill, carding mill, general store, lumber business and three farms. Jim was the first member of the fourth generation to join the family business, and has already weathered his first storm over a controversial article published about Canada's Prime Minister, Stephen Harper.

With control of the family empire shifting away from a centralised decision-making structure, the Irvings are at a crossroads. As the fourth generation assumes control of their respective business ventures, it is essential to have strong leadership in each family branch. Simultaneously, the family must select and empower one or more individuals to fill the large shoes left empty with Jack's departure. For the family and for the economy of Canada's East Coast, the Irvings must be successful in this new venture.