Frank Stronach was absent from the annual meeting of Magna International Inc. for the first time since the company started holding them 50 years ago, but chief executive officer Don Walker is taking up arms in the company’s decades-long battle with institutional investors.
“If somebody thinks they can do a better job running the company, then they should come in and run the company,” a feisty Mr. Walker told reporters Thursday after Magna’s annual meeting in Toronto.
He was responding to criticism of a transaction last year that involved the sale of surplus Magna land to Mr. Stronach and former co-chief executive officer Siegfried Wolf.
The land deal, which was vetted by an independent committee of Magna’s board of directors and involved more than one appraisal of the properties, prompted shareholder advisory firm Glass Lewis and Co. to urge shareholders to vote against Mr. Stronach’s reappointment as a director by withholding their votes.
“It’s a bit frustrating,” Mr. Walker said. “If [shareholders]have a better idea, we’re all ears. When you’re running a company, you’re making tons of decisions all the time.”
Mr. Stronach’s absence on Thursday – although he remains a director and honorary chairman – is a sign of the transformation of the auto parts giant since a controversial and expensive buyout by the company of the multiple-voting shares with which he controlled Magna for more than three decades.
The outspoken 79-year-old founder of Magna has long been a lightning rod for criticism by institutional shareholders because of the dual-class share structure, his compensation, which annually runs into the tens of millions of dollars, and his oft-repeated advice to them that if they didn’t like the way the company was run, they should sell their shares.
In an interview, he said he couldn’t remember when the first Magna annual meeting was held. Magna said its first annual meeting was held on Dec. 5, 1962.
“I wanted to see that the guys put on their own show,” Mr. Stronach said in explaining his absence, noting that if he had been there, shareholders would have been asking him questions instead of Mr. Walker and other members of management.
That management is trying to focus on operations, put corporate governance issues behind it and maximize shareholder value, Mr. Walker said.
“We are trying to clean up anything that somebody could criticize us on,” he said.
That includes major changes in governance, including the adoption of majority voting, which requires directors to submit their resignations immediately if they don’t receive the support of more than 50 per cent of shareholders.
The three members of the board’s independent committee who examined the real estate deal – and presided over the $860-million (U.S.) buyout of Mr. Stronach’s shares – decided not to stand for re-election this year after 62 per cent of shareholders withheld their votes a year ago. The three directors include former Ontario premier Mike Harris, who was chairman of the committee and lead director of Magna until becoming chairman in 2011 when Mr. Stronach stepped down.
Eight of 10 directors are now independent. One of them, William Young, chairman of Queen’s University and co-founder and managing partner of a private equity fund, was elected as chairman to replace Mr. Harris.
In other moves, the company increased its dividend three times last year and bought back the maximum number of shares possible under a share buyback plan.
“Now we just need to perform,” Mr. Walker said. “We need to be growing our sales, we need to be growing our profitability.”
Sales will grow this year, the company forecast yesterday – to between $29.5-billion and $30-billion from $28.7-billion in 2011.
Much of that growth will come from emerging markets such as Brazil, China, India and Russia, where 30 new manufacturing facilities are scheduled to be built by 2014.
Four plants are under construction in China, for example, where Magna will have 28 factories generating annual sales of $1.5-billion by 2014.
The company’s capital spending is expected to hit a record $1.5-billion this year.