Bombardier under fire over ex-ceo’s pay

aerospace

Montreal- based plane and train maker Bombardier Inc. is shedding 2,500 employees as the pandemic takes a toll on the business, which is also under fire from proxy advisory firm Glass Lewis over compensation practices.

Industry-wide business-jet deliveries are expected to be down 30 per cent year-overyear, Bombardier said in a statement Friday, adding the majority of the job reductions would be in Canadian manufacturing operations and would be rolled out “progressively” through 2020.

The firm, which has 60,000 employees across two business segments, will take a $40-million charge to cover the reduction.

Glass Lewis, which advises institutional investors on how to vote on shareholder issues, criticized Bombardier in a report this week for paying outgoing chief executive Alain Bellemare as much as $ 17.5 million in severance and other compensation.

The firm’s “lagging returns over Mr. Bellemare’s tenure as CEO pose an uncomfortable juxtaposition for this eight-figure separation package,” Glass Lewis noted.

Bombardier posted a loss of US$1.61 billion in 2019.

Glass Lewis criticized the payments to Bellemare, who was replaced in March, which included a special $ 4.9- million award following the completion of the sale of Bombardier’s rail business to France’s Alstom SA. The package also included severance of about $ 10 million, plus share awards of up to $2.7 million. The “total possible separation cost” is more than double the termination amounts calculated for him at the end of 2018, Glass Lewis noted.

The advisory firm was also critical of Bombardier’s “single- trigger” special transaction awards, a benefit payable “solely” upon a transaction.

“These awards are also quite significant in size, reflecting material proportions of recipients’ total pay levels in recent years and in all cases handily exceeding $1 million,” Glass Lewis said it its report, adding recipients are being rewarded “for tasks that we already consider to be intrinsic to the job of leading a public company.”

Benoit Poirier at Desjardins Securities, characterized the workforce reductions as neutral.

“While a difficult decision, we believe the workforce adjustments are necessary in light of COVID-19 to protect profitability,” the analyst wrote in a note to clients.

Poirier estimates Bombardier’s workforce reduction will affect about 15 per cent of Bombardier Aviation’s business- jet workforce, and he forecasts a 35- per- cent reduction in deliveries for Bombardier in 2020 excluding the Global 7500 business aircraft. Deliveries of that aircraft would reduce the overall decline in deliveries to 20 per cent.

Bombardier shares fell three per cent Friday to close at 47 cents in Toronto.