The boss is gone but nothing really changes at Ontario utility
The deal that sent Hydro One chief executive Mayo Schmidt out the door in Ontario changes almost nothing about the semiprivate company other than the names on the stationery.
Schmidt, Premier Doug Ford’s scapegoat for everything that’s wrong in Ontario’s electricity system, retired this week rather than spend the summer as the premier’s punching bag. The terms of his departure are neither as good as Ford says they are, nor as bad as the opposition New Democrats say.
At the highest level, Schmidt’s exit is most definitely a win for the Progressive Conservatives.
“You can take this to the bank,” Ford said last spring. “The CEO’S gone and the board’s gone. We need to start respecting the taxpayers. The $6-million man is gone. The party’s over, it’s done. The party’s over with the taxpayers’ money.”
Schmidt is gone. The board is gone. Promise made, promise kept. Schmidt, the former head of Viterra/saskatchewan Wheat Pool, gets no severance money, as Ford happily said when Schmidt quit last Wednesday night, not a dime of the $10.7 million he’d be entitled to under his contract if the provincial government had fired the Hydro One board and installed new directors to fire the guy. He does get a $400,000 buyout of any post-retirement claims. He can also cash out Hydro One stock he’s been given as performance bonuses, an amount that could add up to as much as $9 million. That’s what Ford’s opponents have attacked.
“Doug Ford needs to tell people what kind of backroom deal he worked out with Mayo Schmidt to get him to walk away, and if he’s going to replace the board with his own high-priced insiders,” NDP energy critic Peter Tabuns said upon the announcement that Schmidt would go.
The thing is, the $9 million is a payout that’s already accounted for. When Ford called Schmidt “the $6-million man,” much of the stock we’re talking about was included in the $6 million. Some of it’s from the previous year and the year before that.
The $9 million is not new money Schmidt is being paid to go away. It’s not severance in disguise. If Schmidt had hung on and insisted on being fired, he’d have been entitled to the $10.7 million in severance plus the $9 million in stock. That’s all explained in public Hydro One documents.
Schmidt could have done it the hard way and walked out with a bigger payday. But he’s already a multimillionaire who made nearly as much at Viterra (a descendant of the Wheat Pool) before becoming the chief executive at Hydro One. He’s an award-winning CEO who just happened to be a convenient target for the Ford campaign — it would easily have been Ontario Power Generation’s boss Jeff Lyash (paid $1.2 million last year), if OPG sent customers bills directly — and he’ll find well-paid other work if he wants it.
More importantly, the terms of Schmidt’s departure make it clear that the Tories are supposed to stop messing with Hydro One now. They get to appoint four new directors; the major private shareholders get to name six. Between them, they’ll choose a new chief executive.
But all the rest of the management team stays. Paul Dobson, the new chief financial officer, becomes the fill-in chief executive. Dobson’s a new hire this year and paperwork hasn’t come out with his pay package in it, but his predecessor made $1.8 million a year in cash and stock. Dobson and the other top executives all keep their salaries and bonuses and stock packages.
The departing directors get all the payments they’re entitled to for their work so far, including in stock. The deal rolls back a $25,000 raise the current crew gave themselves, but their replacements will be paid what the current directors were last year. That’s still $160,000 for 20 to 25 meetings a year.
Provincial officials have vowed in writing that they won’t complain about any of it. They have to stop saying anything that “defames, criticizes, ridicules, disparages or is derogatory or otherwise would reasonably be expected to be deleterious or damaging to any of the directors, officers, employees, agents and/ or representatives of Hydro One,” the deal says. The only exception is in legislative debate, which a contract couldn’t control anyway. Energy Minister Greg Rickford signed on for the government.
Investors knocked $400 million or so off Hydro One’s capitalization on the stock market, about four per cent of its worth.
In short, Hydro One is the same company it was a few days ago, minus its boss. If it was, in fact, a millionaires’ scam before, that hasn’t changed. If it’s a value-creating corporation, its owners think it’s less valuable now than it was. But the scapegoat’s gone. So there’s that.