A change of the family guard is coming at Bombardier Inc.
The Canadian plane and train maker is proposing new faces on its board of directors as two older members of the company’s founding Bombardier-Beaudoin family make way for their children after 44 years of service. They will be the third generation of Bombardiers to oversee the manufacturer, joining 12 other directors up for election at the company’s annual meeting in May.
Close observers of the company have been anticipating such a change. Two years ago, amid an uproar over executive compensation at the company, Charles Bombardier, grandson of founder Joseph-Armand Bombardier, said the issue had sparked discussions among family members about who should represent them on the board.
“This is a good sign,” said Louis Hébert, a professor at Montreal’s HEC business school. “It shows there’s a continuity, that the family remains engaged. In old family companies like this, such as Ford, DuPont, we’ve seen these types of orderly transitions.”
Charles Bombardier, 45, an inventor and mechanical engineer, will now join the board, according to Bombardier’s management circular filed Friday. He’s taking a spot being vacated by his father, J.R. André Bombardier. Diane Fontaine, 55, a portfolio manager at RBC Dominion Securities, will assume a spot left open with the departure of her father, Jean-Louis Fontaine. Mr. Fontaine’s wife, Huguette, is the daughter of the founder.
The family loosened its grip on the company in 2017, when Pierre Beaudoin, grandson of the founder, ceded his position as executive chairman – becoming chairman and handing full daily management of the company to industry veteran and current chief executive Alain Bellemare. Mr. Beaudoin’s father, Laurent Beaudoin, who is widely credited with building Bombardier into the manufacturing giant it is today, retired from the company last year.
If Bombardier’s proposed slate of directors is elected, as expected, the board would include four members of the founding family and nine independent directors plus the CEO. Eleven of the 14 directors would have joined within the last five years.
Mr. Bellemare is now into the second half of a five-year turnaround effort at the company, which nearly collapsed under the weight of heavy spending bringing new aircraft to market. He raised more than US$7-billion from governments and public markets to stave off worries about insolvency, sold off businesses such as the Q-Series turboprop to focus on assets with higher growth potential and cut thousands of jobs as the company exits a heavy product-development phase.
Bombardier turned an annual profit for the first time in five years in 2018 and boosted adjusted earnings before interest and taxes by 42 per cent over the year before. The corporation says it is on track in its goal of delivering an EBIT margin of at least 8 per cent on revenue of US$20-billion by 2020.
It still faces major challenges, particularly in executing on train contracts in North America and elsewhere. Total compensation for Bombardier’s five top executives fell 4 per cent last year versus 2017 because of a decline in short-term incentive payouts, the filing shows. Mr. Bellemare made $10.6-million.
As heirs to Joseph-Armand Bombardier, who invented the snowmobile, members of the Beaudoin-Bombardier family control the Montreal-based multinational through a special class of stock that carries 10 votes a share.
The arrangement, which gave the family about 52 per cent of the voting rights as of May, 2018 despite owning less than 20 per cent of the equity, has long been criticized by some for perpetuating bad management and failing to deliver acceptable returns for shareholders. Supporters of the system say it has provided stability to a company that develops long-term plane and train programs.
The board renewal comes as investor rights group Médac signalled its intention to make a shareholder proposal to dissolve the dual-class structure, an effort that appears largely symbolic and has little chance of success. Bombardier opposes the plan and says it would require the adoption of special resolutions by holders of both Class A and Class B shares, each class voting separately.