Bombardier Inc. says it increased the pay of its top five executives by 12 per cent in 2017, a year in which the company exceeded key financial targets in its turnaround effort but gave up control of its marquée C Series airliner for no monetary compensation.
The Montreal-based plane and train maker made the disclosure in its annual information circular to shareholders Friday, in which it also said chairman emeritus Laurent Beaudoin will step down from the board after May’s investor meeting. Mr. Beaudoin, who built Bombardier from a small-town maker of snowmobiles to a multinational manufacturer, has been a director for 43 years. He will turn 80 this year.
After his departure and assuming all candidates are elected, nine of the 14 people on Bombardier’s board will be independent directors that are not part of the company’s founding Beaudoin-Bombardier family. The family controls the company through a special class of multiple-voting shares.
Backers of that dual-class share system say it shields the plane maker from a hostile takeover that could wipe out its industrial base in Canada and elsewhere. Others believe it has served more to shield a tight-knit group of people, including the family and some board members, from greater scrutiny.
Pension fund Caisse de dépôt et placement du Québec, Bombardier’s biggest shareholder, is among the investors who’ve called for improved governance at Bombardier. In a rare public rebuke against the founding family last year, the Caisse said it would not back the re-election bid of Mr. Beaudoin’s son, Pierre, as chairman. The fund said Bombardier should be chaired by an independent director.
Bombardier came under widespread criticism ahead of its last annual meeting after it disclosed that its six senior executives were in line for a roughly 50-per-cent increase in compensation. Resentment centred on the fact that the company was awarding pay hikes after receiving $1-billion in taxpayer funding from the Quebec government for its C Series program while announcing plans to cut thousands of jobs.
Chief executive Alain Bellemare subsequently asked the board to delay payment of half the compensation until 2020, saying he understood public sentiment but adding that the company’s pay policy has allowed him to recruit some of the world’s top executives to his team. Pierre Beaudoin voluntarily renounced his pay increase but stayed on as chairman.
The younger Beaudoin will earn US$2.6-million in total compensation for 2017, Bombardier’s latest filing shows. The sum includes his work as executive chairman for roughly half the year, which the company says entailed greater responsibilities. His pay should decline this year after he ceded the executive role.
Excluding Mr. Beaudoin, remuneration for Bombardier’s five most senior executives rose 12 per cent in aggregate last year over 2016, to about US$31-million. Not counting exchange-rate fluctuations – some of the executives are paid in Canadian dollars and one in euros – total pay rose 10 per cent. The compensation rose 7 per cent year over year with Mr. Beaudoin’s pay included. Mr. Bellemare earned US$10.6-million, an increase over the US$9.5-million he earned the year before.
“Under Alain Bellemare’s leadership, Bombardier is making great progress executing its turnaround plan,” the company said in the filing. The operational transformation is in full motion.”
Management did particularly well on two key metrics prioritized by the compensation committee, notably cash flow and earnings before interest and tax, the filing states. More than 80 per cent of the 2017 compensation is linked to meeting short and long-term targets, it states.
Michel Nadeau, executive director of Montreal’s Institute for Governance of Private and Public Organizations, said it’s natural for cash flow and earnings to improve given the company is coming out of a long product-development cycle. A pay increase would be more justifiable if the company secured more C Series orders first, given public money was directed at that program, he said.
“Twelve per cent is unnecessary,” Mr. Nadeau said. “This generosity has come a bit too quickly.”
Bombardier struck a deal with Airbus Group SE last fall that will see the European plane maker take control of the C Series while Bombardier and Quebec become minority partners. Airbus has pledged to put the might of its global sales and procurement system behind the airliner to make it a success.
The transaction could close as soon as this summer.