Southwestern
Resources
Let's play Financial Trivial Pursuit. First question: How often do companies release quarterly financial results? The correct answer is quarterly. It's something you can count on -- unless you happen to own shares in Nortel or Kinross Gold. This means directors can look forward to gathering at least four times a year to review quarterly financial statements and eat fancy sandwiches. Question two: How many times did the board at Southwestern Resources meet last year? Wait for it. Three times. Oops. At least they disclosed the number of meetings held; a handful of public companies still keep meeting frequency a secret.
Industrial Alliance
Hockey players we can understand. Otherwise, we want justification of multimillion-dollar paycheques. But if there's one guy who deserves his pay it's Yvon Charest, the president and CEO of Industrial Alliance. Yes, he took home $1.2-million last year, but at least we know why. No company on the index comes close to Industrial Alliance when it comes to disclosing how the board calculated the CEO's bonus. There's still room for improvement (tell us the exact targets he's shooting for) but investors can be satisfied that the board used rigid criteria in giving Mr. Charest a $549,000 bonus last year, up 18 per cent from 2003.
Gammon Lake
Resources Inc.
On the surface, Gammon Lake is the model of restraint. The CEO's salary in fiscal 2004 was just $187,500, plus a $75,000 bonus. But take a look at those options! The company gave away options worth 7 per cent of its float in fiscal 2004. In aggregate, outstanding options at the end of the year were equal to more than 17 per cent of the company's shares outstanding. What's worse, most options were immediately exercisable as soon as they were approved by shareholders. At year end, the company's top two executives had exercisable options worth about $25-million -- a fat sum for running a small cap mining company that has yet to post a profit.
MacDonald, Dettwiler
Summer of 2000. Nortel peaked at $123.10. The phrase "dot-com IPO" had not yet become a punchline. And investors still believed the bunk about options being a noble way to "align" the interests of directors and executives with shareholders. Lots of companies still dole 'em out like candy, but a few build restrictions into option plans to protect shareholders. One of the best plans is offered by MacDonald, Dettwiler and Associates. Options issued last year expired after just five years, compared with the more standard seven to 10. Some included performance requirements. And no exercised options can be sold until five years after the grant date.
CHC Helicopter
Corp.
CHC chairman Craig Dobbin became a benevolent shareholder in 1997 when the Irish citizen agreed to buy $33-million worth of CHC shares -- that appeased British regulators who were threatening to take away a subsidiary's operating licence. To facilitate the purchase, CHC lent $33-million to Mr. Dobbin's holding company. The loan bears interest only if it's not repaid within two days of CHC calling the loan. Conveniently, the company Mr. Dobbin controls has not yet called the loan. Eight years later, CHC publicly traded shares are worth five times more, but Mr. Dobbin has yet to pay a penny for the special shares he bought in 1997.
Ivanhoe
Energy Inc.
Say what you will about Robert Friedland, the hippie-cum-mining magnate who once spent six months in jail for dealing LSD. This guy gets disclosure. Yes, Ivanhoe Energy's board includes related directors, but the explanation about why each one is or isn't independent -- at three pages long -- is the most thorough we've seen. Disclosure at Ivanhoe Mines, another company controlled by Mr. Friedland, is also better than most companies provide. In fact, we've discovered some companies that are disclosing fewer relationships to make their boards look more independent. We always prefer companies honest about their relateds to those trying to disguise lame duck boards.
