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George Cope admits shock, disappointment and a sense of having failed shareholders and employees. But a day after BCE Inc.'s privatization plan collapsed, the company's chief executive says he's not about to try to make up to investors with a big cash handout.

The smartest thing the company can do for shareholders in this troubled economy is maintain extra cash in its coffers, said Mr. Cope after the company reinstated its dividend yesterday, but ruled out a big one-time payout.

“Given the capital market we're in, I believe, the board believes, that it's important at this point to maintain maximum liquidity,” he said in an interview. The company is sitting on $2.8-billion today, but has about $1.5-billion worth of debt maturing in 2009.

Mr. Cope took the helm at Canada's largest phone company five months ago at the insistence of the would-be purchasers. Only now able to speak in some detail about events, he said he and the board of directors did everything possible to salvage the $35-billion deal. It formally ended this week after auditors at KPMG said the leveraged buyout by the Ontario Teachers' Pension Plan and its partners would load so much debt on the company that the value of liabilities would exceed those of its assets.

One of BCE's biggest shareholders is its employees, which hold more than 10 million shares in aggregate, and Mr. Cope said he wanted the deal to succeed for them as much as anyone.

“They had one star left in their portfolio, given what's happened in the capital markets. They had nothing to do with the solvency opinion. And the concept that BCE would not pass the solvency test, is something that isn't the first thing to come to mind. So from a personal perspective, [there is] the sense that we let down, not just the shareholders but the team.”

BCE reinstated its quarterly dividend of 36.5 cents after suspending it in July as a condition of the leveraged buyout. But it opted not to make a special one-time payment to help compensate for losses during the course of the privatization efforts.

It will instead repurchase as much as 5 per cent of its common stock, or 40 million shares, which would cost about $860-million based on the current share price.

Analysts had hoped for a bigger buy-back commitment. Peter Rhamey of BMO Nesbitt Burns Inc. expected that the company would budget $1.5-billion over two years. Vince Valentini of TD Securities Inc. calculated that there is an “overhang” of between 50 million and 100 million shares that are held by arbitrage traders who had hoped to profit on the buyout. “The share buyback program is unlikely to soak up all of this supply,” he said in a research note.

Mr. Cope said if BCE manages its finances conservatively, it will weather the recession well. “Around our house we have food and then the Internet – you know, one, two. Some of Bell's products are pretty important to people's lives.”

The sweeping overhaul of the company that Mr. Cope designed and began implementing when he took the top job in July will continue with the board's full support, he said.

The next two years will see BCE focused on improving its high-speed wireless and land line networks, reducing unnecessary costs and maximizing results so the company can start regularly raising dividends, after doing so only twice in the last decade.

Jim Leech, president and CEO of Teachers, also reaffirmed the fund's support for the current leadership yesterday. “We are supportive of George Cope and his team as they pursue their operating vision for BCE,” he said in an e-mail exchange. Teachers remains the company's largest shareholder, holding more than 6 per cent of outstanding shares at the end of September.

Mr. Cope had used the anticipated privatization of BCE as wake-up call to the company's more than 54,000 employees that the status quo was no longer acceptable after years of stagnation.

His early moves as CEO included cutting 2,500 management jobs. Indeed, the executive floor of BCE's downtown Toronto office shows corridors of empty rooms and workstations as the company prepares to downsize to the suburbs.

Mr. Cope said cultural change will continue at BCE. “Going private gave us a platform for change,” he said. “The employees saw that the changes we were going to make looked pretty positive and had a strategic direction.”

With a file from Andrew Willis.

BCE Inc. (BCE)

Close: $21.23, down 80 cents