$5M PAYOUT FOR SNC CEO
Duhaime pockets payments after scandal
MONTREAL • Snc-lavalin Group Inc. is paying the top executive at the centre of its recent payments scandal nearly $5-million in severance.
Pierre Duhaime, who left his position as chief executive of the engineering giant last week, will receive $4.97-million in various departure payments, SNC disclosed in its management circular mailed to shareholders ahead of the company’s annual meeting in May.
The compensation includes $55,000 in “professional development and transition assistance” and $1.9-million in salary continuance payable over two years starting June 28, 2012. SNC said Mr. Duhaime will remain on the company’s active employee list until that time, although he has “no responsibilities for the management of the business and affairs” of SNC or any of its divisions and “does not perform any policymaking function.”
SNC reported last week the results of an internal investigation led by its audit committee. It found Mr. Duhaime approved a series of unauthorized payments worth $56-million requested by the company’s former vice-president of construction, Riadh Ben Aissa.
SNC said last week that Mr. Duhaime breached the company’s code of ethics and business conduct when he allowed the payments. The payments were billed by so-called “agents” — people and firms SNC hires to help the company build relationships with potential clients, get permits and generally provide assistance in places where it wants to win contracts.
The company has not disclosed where the agent payments were made but at least one payment went through its international office in Tunisia.
SNC has turned over materials related to the payments to the RCMP.
“This payout is rich. It’s much too generous,” said Michel Nadeau, executive director of Montreal’s Institute for Governance of Private and Public Organizations, who notes Mr. Duhaime also has rights to thousands of stock options that could net him millions more depending on what happens to SNC’S share price and when he uses them.
Filings show the former CEO had 274,100 stock options outstanding as of the end of 2011. Some 98,000 of those are exercisable at strike prices of $40 or less, which is SNC’S current share value.
“That’s immediate cash” for him, Mr. Nadeau said. “He’s going to profit from the work of his successor well after he leaves. And that’s not right.”
Mr. Duhaime is also owed a payout of special stock awards.
Gwyn Morgan, SNC’S chairman, told reporters last week
that Mr. Duhaime was faced with a situation of being presented with an agent contract arranged by Mr. Ben Aissa.
“This is not in defence of [Mr. Duhaime’s] actions, but ... for various reasons, he felt he was obligated to pay the bill,” Mr. Morgan said. “In hindsight, we all regret that.”
The securities filing states that Mr. Duhaime “was relieved of his duties” as president and CEO. But it suggests he was not formally terminated “for cause,” which would have triggered another set of payment agreements.
Ian Bourne was named interim CEO.
The SNC board’s human resources committee, chaired by Lawrence Stevenson, said in the filing that it took the results of the internal probe into consideration in deciding Mr. Duhaime’s compensation. The company’s failure to meet its 2011 net income target of $447-million also weighed into the decision, it said.
As a result, Mr. Duhaime received no management incentive plan award tied to the company’s performance in
2011 nor any other long-term incentive for that year. Overall, his compensation fell 50% in 2011 from 2010, even with the value of stock options he received in May last year, the committee said.
It also decided to withhold an incentive plan award and salary increase in 2012 for its chief financial officer, Gilles Laramée.
But that’s where the punishment ends.
“The board of directors has chosen not to penalize employees for the actions of a few,” the filing states. “As such ... all of the long-term incentives were awarded to [named executive officers, excluding Mr. Duhaime], and other employees in accordance with the respective plans.”
The filing also notes that Snc-lavalin’s 2010 net income has been corrected downward by $17.9-million. As a result, it is seeking related performance bonus clawbacks of $184,000 f r om Mr. Duhaime and $42,800 from Mr. Ben Aissa.