The transformation of Magna International Inc. into a professionally managed company with modern corporate governance practices is almost complete.
Chairman Mike Harris, who came under fire for his stewardship of an $865-million buyout of founder Frank Stronach, will resign from the board along with two other directors who joined Mr. Harris on a committee that examined the controversial buyout but refused to make a recommendation on it.
The three will be replaced by new independent directors at the 2012 annual meeting in May.
That will mark the end of a two-year odyssey that began with the deal to buy out Mr. Stronach’s controlling stake in the company and included his resignation as chairman, the elimination of an unwieldy management structure with co-chief executive officers and a wholesale revamp of the company’s corporate governance policies.
“A lot of the stuff that made Magna ‘Magna’ is gone,” said one shareholder who was among the 62 per cent of shareholders who withheld approval from Mr. Harris and long-time directors Donald Resnick and Louis Lataif at the 2011 annual meeting. “It needed that because this is a large company with an international scope with a lot of capital to deploy in a lot of different areas.”
Mr. Harris, who was Magna’s lead director when the buyout of Mr. Stronach’s controlling stake was announced, was elected chairman after Mr. Stronach stepped down last year.
He became a lightning rod for criticism of the deal, which included an Ontario Securities Commission hearing where the former Ontario premier revealed he did not make a counter offer to Mr. Stronach, suggested by the board’s advisers, that would have cut his buyout to about $470-million.
Shareholders ultimately voted in favour of the transaction but there was strong opposition.
The elimination of the multiple-voting shares and changes in corporate governance mean the auto parts giant’s policies “now fully align with best practices in Canada,” Mr. Harris said in a letter in the company’s annual meeting circular, which was submitted to regulators Friday.
“We knew when we started out that taking the steps to bridge Magna to its future would not be easy, but they were possible and they were worth it,” he wrote.
But there was also pressure from institutional shareholders, whose criticisms of Magna’s practices were often derided by Mr. Stronach, who said for more than a decade that they should sell their shares if they didn’t like the way the company was governed.
It was a lawsuit from shareholders that led Magna to disclose last December that the three directors received support from only 38 per cent of shareholders. That disclosure was followed in January by changes to board practices, such as the introduction of majority voting, which means directors who don’t receive the support of at least 50 per cent of shareholders will resign.
The proposed new directors are: Scott Bonham, co-founder of GGV Capital, a venture capital firm; Peter Bowie, former chief executive of Deloitte China; and Peter Harder, a long-time senior federal civil servant who left the government in 2007.
If they are elected, the Magna board will consist of nine independent directors, Mr. Stronach and chief executive officer Don Walker.
In addition to corporate governance changes, the circular said the percentage of profits paid to senior executives will be reduced if profits rise above specified levels. An increased share of compensation will be deferred and paid out as restricted share units.
Mr. Harris received compensation of $684,930 last year as chairman. A new chairman will be elected from among directors at a board meeting following the annual meeting.