Conflicting advice for Bombardier investors

Shareholder vote on executive compensation

MONTREAL • The two biggest proxy advisory firms are offering conflicting advice over whether

shareholders should support the planemaker’s executive-compensation plan, potentially throwing more fuel on the fire of public outrage.

Investors should vote against the proposal, according to Glass Lewis & Co., which cited insufficient transparency and bonus payments that didn’t correspond with financial performance.

Institutional Shareholder Services Inc. expressed similar concerns yet recommended that investors cast “a contentious vote in favour.”

The vote on pay is merely advisory and the plan likely will pass, since executive chairman Pierre Beaudoin’s family holds a controlling stake in the Montreal-based company. Nevertheless, a significant number of rejection votes could put the company back in the spotlight, embarrass its board and draw the attention of activist investors.

“Any time a proxy advisory firm comes out against a recommendation, it’s just going to provide more fodder for critics,” said Dan Fong, an analyst at Veritas Investment Research Corp. “Bombardier’s disclosure is not great in terms of how they adjusted compensation. They use a complicated formula.”

A spokesman for the planemaker declined to comment. Bombardier will hold its annual meeting May 11 near Montreal.

Bombardier generated public outcry last month in Quebec after saying it would boost compensation almost 50 per cent despite receiving taxpayer aid and announcing plans to cut more than 14,000 jobs. Quebec Finance Minister Carlos Leitao urged the company’s board to rethink the plan.

The company eventually backed down somewhat. It cut Beaudoin’s pay and delayed more than half of 2016 compensation for him and five other top executives.

Glass Lewis and ISS on April 28 issued reports saying that Bombardier’s disclosure on how payouts were determined was insufficient. The firms also noted that adjustments to bonuses didn’t align with financial results.

“Shareholders may reasonably question the board’s judgment in sanctioning pay increases during a time of government funding, given the negative optics,” Glass Lewis wrote.

Quebec last year invested $1 billion in Bombardier’s CSeries jetliner program, which entered service more than two years late and billions of dollars over budget.

Since his appointment two years ago, Bombardier CEO Alain Bellemare has overhauled management, bringing in executives such as commercial aircraft boss Fred Cromer.