Friday, April 3, 2009

Jim Leech publicly criticizes BCE about the outcome triggered by his own actions?

This is corporate governance and pension management gone mad.

We learn tonight in the Toronto Star that “The president of the Ontario Teachers' Pension Plan, Jim Leech, says the fund does not support the sort of going-away present that provided up to $21 million to former BCE chief executive Michael Sabia when he left the company last year.”

Well guess what, it was the very actions of Teachers’ and Jim Leech that caused Micahel Sabia to leave the company in the first place, thereby necessitating these payments. Sabia’s leaving was a condition of the deal that was re-cooked in June/July of 2008, at which point BCE and Teachers also decided to screw BCE common shareholders out of some $1 billion of dividends that they had been contractually promised in the bid circular and would now go unpaid and accrue to the new owners. Hey, what’s a billon here or there?

Had Jim Leech not changed the deal insofar as Sabia’s ongoing employment was concerned, then none of these payments that Leech is moaning about, would have been triggered, since absent any such move by Leech, Sabia would still be at BCE today.

Yes, Sabia was planning to leave of his volition when the deal closed, but then the deal didn’t close did it, and nor did Sabia leave of his own volition, did he?

Jim Leech must be a graduate of Jim Flaherty’s “It’s not my fault” school. Now I know what Jim Leech meant today, when he said they were going to drop their emphasis on corporate governance. That way, I guess he is free to bitch about the outcomes of his own actions and be free to deny responsibility.

Can’t wait to see what becomes of the $1.2 billion reverse break fee that BCE claims is owed to it by Teachers’, if there is this much rancour over a “mere” $21 million.

As between Jim Leech and Michael Sabia, one really has to wonder about the state of management of Canada’s two largest pension funds, Teachers’ and the Caisse, on a go forward basis ,assuming Sabia is granted his wish to manage the latter

Rich payouts for CEOs `excessive,' fund says - Business
James Daw
April 3, 2009

The president of the Ontario Teachers' Pension Plan says the fund does not support the sort of going-away present that provided up to $21 million to former BCE chief executive Michael Sabia when he left the company last year.

"The only comment we will make is that we don't look favourably on golden-parachute clauses that we deem to be excessive and vote against them generally," James Leech said yesterday.

Teachers' is BCE's largest shareholder and its aborted bid to buy out the telecom giant last year led to Sabia's departure after several years of poor stock-price performance.

Like other shareholders, Teachers' did not get a vote on executive pay and severance packages.

But Leech said the fund does not support such votes and instead, pressures boards behind the scenes to tie executive pay to performance. Leech's pay fell $1.3 million last year to $2 million, of which $435,600 will not be paid for two years.

Leech said he called Sabia when he was hired recently to run the embattled pension manager Caisse de dépôt et placement du Québec.

"We had a great conversation the day it was announced," Leech said.

"I said I viewed it as a smart guy getting in at the bottom of the market, and that was a good harbinger for me."

1 comment:

Anonymous said...

If you read the proxy circular, you’ll notice a few things:

Donna Sobel got $300K for her good work (in addition to the $150K directors pay themselves)

The severance was actually $9M. The balance were payments made voluntarily. You can’t argue with the $9M but the balance was not legally required.

We never were told if the resignation was voluntary or not. Because everybody knew that Teachers’ wanted him out, it is possible that this was legitimately treated as severance, but who knows.

They vested his RSUs and options on the assumption that the deal would go through (under most plans, RSUs and options vest upon a change of control). The directors felt they could vest him even though the deal had not closed. Talk about being presumptuous.

Sabia’s sly maneuvering is the reason the deal did not get done: had they not tried to squeeze a dollar per share from the bondholders to pay to the equity, they would not have inserted the solvency opinion clause and the deal would have gone through, long before, since there would not have been a lawsuit. Sabia’s obstinacy and cunning, and the board’s naivety, are the reason that the deal fell through.

The acceleration of the options and rsus shows how little the board understood about the deal!

All of this left Sabia free to sell stock after resignation without any disclosure (since he was no longer an insider). We don’t know for example if Sabia did or did not sell stock. If he did there are some interesting questions: did he know KPMG would not provide the solvency opinion. Did he sell and capture part of the merger stock inflation even though the deal did not or would not happen...good questions to raise.

Read Sabia’s article from several months ago in “Crash and Recovery” in the Globe (available to subscribers online). In it he says a) government needs smart people (he was obviously in talks with Charest at the time, since he must have been laying the seeds of his self-justification) and b) we live in a perpetually low return world (whereupon equities rise by 25% from the time he uttered his words, which shows what a good asset manager he’ll make)

Lots of ideas for you in there

Northern Dancer