"It's a change on the administration for the day-to-day management of the business, not the investment side that concerns the investors," new lead executive Pierre Lapointe said of his mentor's departure in an interview Tuesday.
German-born Jarislowsky, 87, will remain chairman of the board of the firm that manages about $37 billion of assets, while management will be headed by a committee of senior executives.
The roles of president and CEO will disappear. A four-member executive committee will be headed by Montreal-based Lapointe, who has been with the company 27 years and has been a member of the executive committee since 1995. Another committee will oversee investment decisions.
Lapointe said Jarislowsky will step down from the day-to-day operations of the company but will continue to be active as chairman and manage personal accounts.
"This is basically the first step of a process for Steve's retirement, it's not the final step," he said.
"Eventually he will have to pull out completely, but that's not in the cards right now and he's certainly not pulling out completely."
Jarislowsky said the board's decision to focus on a team approach reflects "our confidence in our people and their deep market and management experience."
"Jarislowsky Fraser and its entire team of portfolio managers and research analysts remain committed to the disciplined, low-risk, bottom-up approach that the firm has taken throughout our 57-year history," he said in a statement. He was not available for an interview.
Lapointe said the firm has been considering an orderly succession for several years. The departure of senior executives Len Racioppo and Marc Trottier, effective at the end of November, accelerated the process but wasn't the catalyst for the change.
Racioppo is president and chairman of the investment strategy committee while Trottier is a member of the executive committee. They are believed to be starting their own investment firm.
Margot Ritchie, at the firm's office in Toronto, will also be a member of the executive committee. She has 32 years of industry experience, including 20 years with Jarislowsky Fraser.
Other people joining the committee that oversees the firm's management are Erin O'Brien, current chief compliance officer and chief financial officer, who becomes head of operations, and Chris Kresic, who joined the company two years ago.
Frequently compared to Warren Buffett, Jarislowsky is a billionaire investor who has been outspoken about business and political decisions in Canada and has not shied away from criticizing companies or some mergers and acquisitions.
He has opposed foreign takeovers of the TMX, Alcan, Inco and Potash Corp. but criticized suggestions in Quebec that all corporate boards be given a veto to reject takeovers such as a controversial bid for Rona.
Karl Moore of McGill University's Desautels Faculty of Management said Jarislowsky has long been a very incisive observer and commentator on Canadian business.
"He's been pushing for more transparency and more effective corporate governance and he's been an important voice in helping Canadian business to get with the times and to have a better approach to the role of the board of directors and CEOs," he said in an interview.
Moore said Lapointe is a "safe pair of hands" who knows the company well.
"(Lapointe) has been involved at the highest levels for a long time, so I think this is not a big change in terms of their approach and Stephen's influence will still be there."
Claude Lamoureux, former CEO of the Ontario Teachers Pension Plan, said the change in leadership could have an impact on a firm so closely identified with Jarislowsky. But he noted that many companies managing huge sums of money do it as a team.
"For him, he wants to make sure that the firm continues and stays independent. It's a good transition."
He describes Jarislowsky as a renaissance man, a long-term, consistent thinker whose approach is reflected in his investments.
The two men helped to start the Canadian Coalition For Good Governance, a group that pushes companies to better align the interests of boards and management with those of their shareholders.
"I think a lot of CEOs in Canada respect him. He may be critical of them but they will respect his opinion because they know that he's not trying to do it for himself."
Michel Nadeau, executive director of the Institute for Governance of Private and Public Organizations, agreed that Jarislowsky commands a lot of admiration from various groups as one of the last vocal institutional investors.
"I'm expecting that we will see a new generation of leaders who will be able, like Steve, to talk on behalf of the small guy. That's very important in Canada."
He said Jarislowsky Fraser's ability to survive independently for so long is an incredible achievement when so many portfolio managers has folded or been absorbed by banks and life insurance companies.