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Bombardier Inc. has made enough progress on governance issues and with its turnaround effort over the past year to avoid another clash with institutional shareholders ahead of the company’s annual meeting on Thursday. But some investors say the company still falls short of best practices in key areas.

Proxy advisory companies Glass Lewis and Institutional Shareholder Services are both recommending investors support the company’s full slate of directors as well as its executive-compensation policy. The Canada Pension Plan Investment Board is among those heeding the advice, signalling on its website that it will back all 14 board nominees as well as the company’s pay practices.

Bombardier’s largest outside shareholder, the Caisse de dépôt et placement du Québec, is also voting in favour of the company’s executive-compensation plan and the directors proposed. It says the performance of chief executive Alain Bellemare’s management team getting the company back on track after a brush with bankruptcy justifies their 12-per-cent pay hike last year.

“We think you have to recognize the remuneration being received by the management team,” Caisse chief executive Michael Sabia told lawmakers in Quebec City on Tuesday afternoon. “Is it perfect? No. Is the company in full evolution on several levels? I think so, yes. And I believe we contributed to a profound reflection by the company’s board and management team last year” on certain issues including pay.

The pension-fund manager owns roughly 30 per cent of Bombardier’s train business, which it bought in late 2015. The unit has seen a significant improvement in performance under Mr. Bellemare, which is lifting the company as a whole, Mr. Sabia said. Asked what he thought about Bombardier ceding majority control of its flagship commercial airline, the C Series, to Airbus SE for no cash compensation, Mr. Sabia said it was “a reasonable transaction” given the competitive challenges the aircraft faced.

Bombardier shares inched up 0.26 per cent to $3.88 in morning trading on Wednesday. They’ve gained 75 per cent over the past year.

The company was in the throes of a public storm one year ago following its decision to boost the 2016 pay of its top executives by nearly 50 per cent after taking more than US$1-billion in taxpayer aid. Quebeckers held street rallies denouncing the plan and lawmakers who’d supported the company expressed their discomfort. After Bombardier corrected course and delayed most of the payments, several of the company’s big investors weighed in and admonished the manufacturer for what they said was a corporate-governance lapse. They said Bombardier’s board had failed to properly appreciate and balance the interests of its stakeholders, including governments and communities.

Several large pension funds, including the Caisse and Ontario Teachers’ Pension Plan, then called for a shakeup of the Bombardier board, saying the company should be chaired by an independent director and withdrawing their support for Pierre Beaudoin as executive chairman. He subsequently relinquished his executive duties but stayed on as chairman, winning re-election to the board with roughly 92 per cent support. The company’s revised executive-compensation policy was approved with 93.5-per-cent support.

Mr. Beaudoin’s family controls Bombardier through a special class of shares with 10 votes each, giving it about 52 per cent voting control despite owning less than 20 per cent of the equity. The company doesn’t break out the results of votes by class so it’s difficult to get an accurate picture of how shareholders not affiliated with the family voted.

“This year, there are fewer things that could blow up and become controversial,” said Mehran Ebrahimi, professor of management at the University of Quebec at Montreal. There are issues that are still aggravating for some investors, such as Bombardier’s dual-class share structure, but the company’s improving finances and partnership with Airbus has helped blunt much of the criticism, Dr. Ebrahimi said.

Shareholder rights group Médac will present four proposals to shareholders at Thursday’s meeting, including one calling on Bombardier’s board of directors to discuss at the meeting the changes it made to the compensation policy over the past year. Most of the proposals will likely be voted down.

Excluding Mr. Beaudoin, remuneration for Bombardier’s five most senior executives rose 12 per cent in aggregate in 2017 versus the year before, to about US$31-million. Not counting exchange-rate fluctuations, total pay rose 10 per cent. Mr. Bellemare earned US$10.6-million, an increase over the US$9.5-million he earned the year before, making him Quebec’s top-paid CEO last year.

Bombardier spokesman Simon Letendre said the company reviews its approach to executive compensation every year to make sure it is line with peer groups of global companies of comparable size and complexity and seeks advice from advisory firms Mercer and Meridian in this effort. With input from investors, Bombardier has provided more disclosure in the 2018 proxy circular on performance measures and targets, individual achievements and the decision-making process for incentive awards, he said.

The composition of Bombardier’s board is also changing. Mr. Beaudoin’s father, Laurent Beaudoin, who is widely credited for building Bombardier into the manufacturing multinational it is today through shrewd deal-making, will not stand for re-election Thursday. Board members Sheila Fraser and Patrick Pichette are also leaving the company. In all, nine of Bombardier’s 14 directors will be independent if the proposed candidates are elected at the meeting.

That’s still not good enough for British Columbia Investment Management Corp., which manages the nest eggs for B.C.’s public sector workers. It is voting against all non-independent directors on the ballot except Mr. Bellemare because the board’s independence level does not meet its guideline of two-thirds representation. It is also voting against the company’s executive compensation approach, saying it does not sufficiently align pay with performance and still lacks disclosure.

Mutual fund company NEI Investments is also among Bombardier shareholders who say more needs to be done to improve governance, even if it acknowledges the manufacturer has made efforts to address investor concerns. One issue it singles out is the large peer group Bombardier uses to set pay for most of its top executives, with many of those peers being larger U.S.-based companies that typically pay management more.

“We find it a little awkward that the company is kind of focused on the U.S. when it comes to the pay, but then when the company has faced problems, it’s very much a Canadian company at that moment,” said Michelle de Cordova, director of corporate engagement and public policy at NEI. “When the company needs [public help, I mean]. We think there’s a little bit of a contradiction there.”

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