You're describing my American Eskimo. I got her at the age of two, and she had been both abused and neglected. Neglect at a young age can cause dogs to act like they've been abused. I suspect this poor pup was not socialized at all in the first important three months of his life. It has left this emotional scar.
First, you must be patient. Working through issues like this takes years. Please note that. In fact, I'll repeat it. This takes YEARS to recover from, and your dog will never fully recover. However, in the home environment, Cainan will recover quite nicely. I don't think it said in the post how old Cainan is.
First, I'd keep the kennel door closed. My dog, Laika, used to run to her kennel, too. If I made any movement, swoosh, she was off. I also began using baby gates to block her into whatever room I was in. This kept her from running off whenever I made a movement.
You're reaction to hear fears will either help increase them or decrease them. Are you comforting her, saying something like, "IIt's OK. Don't be afraid. I'm here." If so, you are making the situation MUCH worse. Dogs interpret that as, "It's OK to be afraid. You're good to be afraid." They think if you think it's OK to be afraid, then, man, this must be a terrible thing!
Your reaction should instead be one of joy when she gets scared. When Laika gest scared, my immediate reaction is a happy, joyful tone. "Did that noise scare you? You silly girl! Look, it's just me setting down a soda can! See, that's not scary at all!" All done in a happy tone. Now, she'll still sometimes get scard, but as soon as I start my happy talk, her tail comes into a slow wag and she gets a sheepish look as if to say, "Boy, I was silly to get scared over that!"
My strong advice to you is to get the book, "Help for Your Shy Dog" by Deborah Wood. She'll have TONS of good information in there on things you can do. You can get it through amazon.com, I believe. It's a very easy read. You will find it incredibly helpful.
Also, enroll Cainan into an all-positive obedience class. Doing obedience work with shy dogs makes a huge difference. However, the class MUST be all positive. Adding any negative punishments into the mix with a dog this soft will have disasterous effects. If you don't know what all-positive is, ask me, and I'll tell you. Swatting him on the butt for peeing or flicking his nose are both too much punishment for this boy, and indeed, they did play into his problems. Some dogs can't handle any physical punishments. You need to learn how to train using NO punishment at all. It can be done, and it can be powerful.
As shy dogs learn obedience, they gain confidence. They begin to believe in themselves, and they begin to unfurl like a flower opening. I loved watching Laika grow in confidence as she learned obedience. With each task she completed, you could see the fear and shyness slowly begin to drip off of her. It was so cool. Training is extremely important for such dogs.
So, get the book I mentioned, develop patience, get baby gates, change your tone of voice and join an all-positive obedience class. There is much hope for your baby!
MACH Aslan RE, MX, MXJ, EAC, EJC, OCC, Wv-N, TN-N, TG-N, R-SN, J-SN, R2-CL, CGC, TDI, FFX-AG (five year old sheltie)
Jericho OA, NAJ, R1-MCL, CGC, FFX-AP (three year old sheltie)
Laika NAJ, CGC (nine year old retired American Eskimo)
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