What Bombardier and the non-family directors who sit on its board fail to get is that you can only seek government financial aid so many times before you have virtually nationalized your company.
The outrage over Bombardier's decision to increase by 50 per cent the pay packages of top executives, including controlling-family scion Pierre Beaudoin, illustrates that even Quebeckers have now come to see the transportation giant as a ward of the state. So, it should act like one, with salaries that seem more in line with those of civil servants than Wall Street bankers.
Jean Monty – the former Bell Canada chief executive and current Bombardier director who oversaw the recommendation to boost executive pay – defended the move in a letter published in La Presse and The Globe and Mail.
He can go on all he wants about the "high-quality results" Bombardier's management delivered in 2016. About the need to pay well to retain top talent. About how most of the pay its linked to performance through to 2019, now pushed backed to 2020. About how company's "transformation is in full motion."
Bombardier's own CEO has admitted the company was "on the brink of bankruptcy" in 2015. Customers were reticent about buying planes without the assurance Bombardier would be around long enough to deliver them.
Only a total $2.5-billion (U.S.) investment by the Quebec government and its pension-fund arm in two transactions in late 2015 rescued the company from its mayday call.
Add on the $372-million (Canadian) that Ottawa ponied up in February to support the development of the C Series aircraft and a new luxury business jet and you've pretty much reached taxpayers' tolerance for corporate aid that never really seems to trickle down to Joe Average. Indeed, this whole flap over compensation illustrates why Quebec and Ottawa should have pressed harder for a corporate governance overhaul at Bombardier before handing over more of taxpayers' money in the first place. This salaries controversy should prompt them to take another kick at the can.
Bombardier can argue that CEO Alain Bellemare, brought on in early 2015 to redress the flailing enterprise, has assembled a good team of top managers. But even Mr. Monty, in a note to shareholders accompanying the salary disclosures, conceded that it was the investment by Quebec that "successfully de-risked the business."
And what of Pierre Beaudoin, whose 2016 pay was set to rise by 37 per cent to $5.25-million (U.S.) before, late Friday, he asked that the board "reset" his compensation at 2015's $3.85-million level?
Mr. Beaudoin, now executive chairman, was CEO between 2008 and 2015, the period that led Bombardier into its near-death experience.
He is also the son of Claire Bombardier and Laurent Beaudoin, the accountant who oversaw Bombardier's rise from the 1960s until the beginning of its turbulence in the 2000s.
Whatever his ineffable talents, it is a bit rich to suggest that Pierre Beaudoin deserves a salary increase under any circumstances.
That's why Prime Minister Justin Trudeau and Quebec Premier Philippe Couillard dropped the the ball last week when the salaries controversy exploded. "We respect the free market and the choices that companies will make," Mr. Trudeau offered. By Monday, his Industry Minister Naveep Bains was channelling the "profound frustration" of many Canadians. Maybe his government should channel that frustration into a demand for corporate governance reform.
As long as the Bombardier-Beaudoin family continue to control the company through multiple-voting shares, good luck to any outside director who defies Mr. Beaudoin, his 78-year-old father (now chairman emeritus) or the two other family members on the board.
This is not to suggest that board members such as Mr. Monty, former federal auditor-general Sheila Fraser or ex-Google chief financial Patrick Pichette are pushovers.
But Laurent Beaudoin and the family are known to cling their "owners" prerogatives.
Ownership is a relative term when it comes to Bombardier. Family members possess barely 12 per cent of all outstanding shares in the company but control 53.23 per cent of the votes. Quebec's $1-billion cash injection in the C Series unit gave the provincial government a 49-per-cent stake in that aircraft program, but no representation on the parent company's board. Caisse de dépôt et placement du Québec's $1.5-billion investment in Bombardier's rail unit gave it 30 per cent in that division and an undertaking from the company to "work collaboratively" in selecting outside directors.
Mr. Monty is stepping down from the board at the company's April 28 annual shareholders meeting, as is former Quebec premier Daniel Johnson. They might want to skip the assembly altogether. Bombardier's long-suffering minority shareholders won't be dishing out any praise.
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