MONTREAL -- The chairman of Bombardier Inc. is defending the multimillion-dollar compensation plan handed to former CEO Alain Bellemare.
Pierre Beaudoin, grandson of the Quebec giant's founder, told shareholders at the company's annual meeting Thursday that the board "respected the company's contractual obligations" to the former chief executive.
"They were not atypical in regard to what other corporations are paying senior management," he said.
The package Bellemare received when he stepped down in April could reach $17.5 million, including $10 million in severance and nearly $2.7 million in share awards. He will rake in an additional $4.9 million if the sale of Bombardier's rail unit to France's Alstom SA goes through following regulatory scrutiny.
Bellemare's five-year tenure saw the plane-and-train maker struggle to manage a debt that now stands at more than US$9 billion as the company sold off division after division, leaving it a pure-play producer of private jets -- a high-end luxury product in a recession.
Quebec pension fund manager Caisse de depot et placement has criticized the compensation arrangement, calling it "excessive."
At the virtual meeting Thursday, new CEO Eric Martel told investors that developments under his predecessor's watch were "unacceptable."
"Repeated program delays and technical challenges have tarnished our reputation for operational excellence," Martel said. "We understand your disappointment, but I am convinced that we will rebuild this Quebec flagship."
Martel ruled out the possibility of more layoffs and the need for government financial support for the time being.
"We are discussing with the (federal and Quebec) governments, but we are not at a point where we need any of that support," Martel said, expressing a preference for private financing or none at all.
"Clearly, in the end, we remain open to having those discussions if things change or the market fluctuates," said the former head of Hydro-Quebec.
Two weeks ago, Bombardier announced 2,500 layoffs -- 1,500 in Quebec -- or about 11 per cent of its aviation division in anticipation of a 30-per-cent decline in deliveries over the next 12 months.
Nonetheless, there have been fewer than a dozen order cancellations, Martel said, far less than during the 2008-09 financial crisis.
On Thursday, the board of directors proposed a non-binding resolution on executive compensation which was opposed by a group of institutional investors. The resolution was adopted following a vote, though the precise tally was not released immediately.
The Beaudoin-Bombardier family controls 50.9 per cent of voting rights while holding a small fraction of the nearly 2.4 billion outstanding shares.
Major North American pension funds including the Caisse said they would vote against the compensation plan.
The Caisse -- Bombardier's second-biggest investor at 2.24 per cent -- highlighted issues with severance pay and the non-recurring bonuses that will be granted to other executives if the Alstom sale is completed.
"These elements of compensation are considered excessive," it said.
Other institutional investors that opposed the proposal included the Quebec Labour Federation Solidarity Fund -- the investment arm of the province's largest labour group -- the Canada Pension Plan Investment Board, California Public Service Pension Plan, California State Teachers' Retirement System and Florida's State Board of Administration.
Several of the pension funds also opted not to support re-election of board members August Henningsen, Vikram Pandit and Douglas Oberhelman, because they sit on the board human resources and compensation committee.
The Caisse supported a proposal by Montreal-based investor rights group MEDAC to disclose voting results by class of shares.
The proposal was voted down. Whether that was due to Class A shareholders remains unknown.
Glass, Lewis & Co., a leading shareholder advisory agency, strongly criticized the compensation amount given to Bellemare, recommending late last month that shareholders oppose a compensation policy that marks a "considerable jump from previous arrangements."
"When considered alongside the significant, expanded actual severance benefits for Mr. Bellemare despite the company's performance during his tenure, we believe that the company's pay practices warrant serious concern and a vote against this proposal," Glass Lewis said.
Institutional Shareholder Services Inc., the other large proxy advisory agency, gave the policy a thumbs-up in a separate report.
Bombardier spokesman Olivier Marcil said the company is respecting the opinion "expressed by certain investors," stating that the compensation policy has been supported by 97 per cent of shareholders on average over the three last years.
Nonetheless, governance expert Michel Nadeau said the resistance of institutional investors constitutes a "very strong message" to the board of directors.
"It means that the majority of the shareholders are not satisfied," he said. "They say, 'You haven't done your job, we're not happy."'
This report by The Canadian Press was first published June 18, 2020.
