Magna International Inc. paid Frank Stronach $52-million (U.S.) in consulting fees last year, but the company's board is taking great pains to promise that 2014 will be the last year he will be paid by the company he founded.
"The Stronach compensation arrangements will not be renewed, extended or replaced with any other form of compensation," the corporate governance compensation and nominating committee of Magna's board emphasizes in the circular for the company's annual meeting.
It's another sign that the end of an era is approaching for Magna. Mr. Stronach, who started the company in a Toronto garage in 1957, was chief executive officer and chairman for decades, but no longer sits on the board. He is honorary chairman and maintains an office at Magna's glittering corporate headquarters in Aurora, Ont.
Mr. Stronach began reducing his involvement in the global auto parts powerhouse in 2010 after a controversial $860-million buyout of the multiple-voting shares with which he controlled the company.
That figure does not include the consulting fees, which were based on a pretax percentage of Magna's profits before profit-sharing, declining every year until this year, when the company's founder is scheduled to receive 2 per cent of Magna's pretax profits.
The $52-million he received in 2013 represented 2.25 per cent of Magna's pretax profit. That was part of 4.1 per cent of Magna's pretax profit that was allocated to Mr. Stronach and the five highest-paid Magna executives.
Compensation for senior executives is capped at 6 per cent of pretax profit.
Magna's profit in 2013 was a record $1.56-billion.
"To give shareholders the certainty that the profit-sharing percentage which had historically been paid to Mr. Stronach will not be allocated to anyone else, the 6-per-cent cap will be reduced to 3 per cent following the expiration of the Stronach compensation arrangements," the circular says.
Since Mr. Stronach's departure as chairman in 2011, Magna has taken several shareholder-friendly actions, including share buybacks, regular dividend increases and a plan to reduce its cash hoard by increasing returns to shareholders further.
The company has also restructured its board of directors. Two new nominees, who will increase the diversity of board members and the percentage of independent directors, have been put forward for election at the annual meeting next month.
They are Indira Samarasekera, president and vice-chancellor of the University of Alberta and a prominent metallurgical engineer; and Cynthia Niekamp, senior vice-president, automotive coatings, of PPG Industries Inc., an automotive paint supplier.
The addition of the two nominees would increase the number of independent directors to 10, or 91 per cent of the board.
Chief executive officer Don Walker is the only management representative.
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