BOMBARDIER CHAIRMAN TAKES A STEP BACK
Beaudoin leaves executive role on board amid outcry over compensation proposal
TORONTO Despite public outcry from major institutional shareholders and protests in Quebec, Bombardier Inc. has approved its executive compensation plan and re-elected Pierre Beaudoin, who relinquished his role as executive but will remain chairman of the board.
Beaudoin, a member of the family that maintains control of the company through multiple voting shares, was re-elected with 92.32 per cent of the vote at Thursday’s annual general meeting in Montreal. A total of 7.68 per cent abstained from the vote, the highest abstention vote among the 15 directors re-elected at the meeting.
The non-binding advisory vote on the company’s remuneration plan for executives passed with 93.47 per cent voting in favour, while six per cent voted against.
Beaudoin, whose leadership was criticized by several pension funds earlier this week, will step down as executive chairman effective June 30, the Montreal-based company said in a statement, but will continue to serve as non-executive chairman.
Jean Monty, the lead director and chair of Bombardier’s human resources and compensation committee, told shareholders that Beaudoin was initially asked to assume the role of executive chair in order to facilitate “a seamless transition of responsibilities” following the hiring of chief executive Alain Bellemare in 2015.
“However, we’re able to see that with the success of this transition, the presence of executive president of the board is no longer necessary,” Monty said through a translator.
He also said the board has openly discussed and scrutinized Beaudoin’s role over the past several months, including during a board meeting Wednesday in light of comments made by major Canadian pension funds earlier this week. Monty said Beaudoin’s compensation will be adjusted as a result of his new role.
Institutional investors came out this week against the board’s controversial compensation plan and withheld support for Beaudoin. Bombardier’s board has been the target of public outrage for offering executives a roughly 50 per cent increase in compensation, a few months after the federal government announced it would provide a $372.5 million loan.
The Canada Pension Plan Investment Board (CPPIB) was the most recent pension fund manager to withhold its vote for Beaudoin’s re-election and oppose the compensation plan on Wednesday, following the footsteps of Caisse de dépôt et placement du Québec, British Columbia Investment Management Corporation and the Ontario Teachers’ Pension Fund.
Maxime Chagnon, a spokesperson for the Caisse, said the change removes ambiguity within Bombardier’s leadership and “in that sense, it’s a step in the right direction.” However, he added that the pension fund believes “Bombardier needs an independent chair.”
Anita Anand, a professor and J.R. Kimber chair of investor protection and corporate governance at the University of Toronto, said while change in Beaudoin’s role on the board is positive, it is only the tip of the iceberg.
“The change is minor though it indicates that Bombardier was receptive to the views of pension funds in Canada,” Anand said. “It is positive on the one hand but it barely scratches the surface on the other. More must be done to address the governance problems at Bombardier.”
Karl Moore, a professor at the Desautels Faculty of Management at McGill University, said the change from executive to nonexecutive could mean millions less for Beaudoin.
“This is very typical of what an executive chairman role is,” he said. “It will mean millions less for Pierre. It will mean less involvement in the company, and it will mean that Alain is absolutely, without question the person in charge.”
The announcement of Beaudoin relinquishing his executive role came as the company reported a first-quarter net loss of US$31 million, or two cents per share, an improvement from US$138 million, or seven cents per share, at the same time last year.
Revenue fell nine per cent to US$3.6 billion, down from US$3.9 billion last year. Earnings before interest and taxes (EBIT) before special items were $128 million.
BMO Capital Markets analyst Fadi Chamoun wrote in a note that revenues were slightly below expectations, reflecting fewer aircraft deliveries and weaker mix of aircraft. However, Chamoun noted the first-quarter results were “largely better than expected.”
Bombardier’s widely held Class B shares hit $2.21 on the Toronto Stock Exchange at the close, a bump of 7.8 per cent.
It is positive on the one hand, but it barely scratches the surface on the other. More must be done to address the governance problems at Bombardier.