After years of paying controversial fees to foreign agents to help it win contracts around the world, Bombardier Inc. will face pressure to disclose such spending if a new shareholder proposal gains support at its annual meeting next month.
The proposal, filed by OceanRock Investments Inc. and endorsed by proxy firms Glass Lewis and ISS, would ask Bombardier to disclose its direct and indirect lobbying activities in Canada and abroad. Bombardier’s board would be requested to prepare an annual report on payments made for such lobbying.
The scheme could have implications for Bombardier’s work in countries such as South Africa, where it paid millions of dollars to a Tunisian middleman as a “success fee” for a multibillion-dollar rail contract. Bombardier also developed a document called a “capture plan” that listed personal information about key officials involved in awarding the contract, including their interests in wine, cigars and automobiles.
The shareholder proposal, opposed by Bombardier, will be voted upon at Bombardier’s annual meeting on May 3.
Although it has little hope of winning a majority of the vote because of the company’s objections, its advocates hope it will win enough support to persuade the company to act. Bombardier is controlled by the Beaudoin-Bombardier family through a class of super-voting stock.
The proposed rules are intended to cover not only traditional lobbying on government policies and regulations, but also lobbying for contracts from foreign governments or state-owned enterprises.
The plan is backed by Shareholder Association for Research and Education (SHARE), a Canadian organization that works with investors to develop ethical investment policies. It cites the South African rail contract as an example of the concerns that led to the shareholder proposal to seek disclosure of Bombardier’s lobbying activities.
“For a company as active as Bombardier, with as many controversies thrown at it as Bombardier, there should be more than just a report to the board that the company hasn’t broken the law in its lobbying activities in that quarter,” said Kevin Thomas, director of shareholder engagement at SHARE.
“We’d like to see, at the board level, some serious attention to the scope, the content and the purpose of the lobbying activity, to make sure it’s meeting their ethical standards,” Mr. Thomas told The Globe and Mail in an interview.
Similar proposals are being made by shareholders at dozens of other North American corporations, including SNC-Lavalin Group Inc., where a vote will also be held next month.
An investigation by The Globe last year found that Bombardier had won hundreds of millions of dollars worth of international contracts after making success-fee payments to agents in foreign countries.
A former employee of Bombardier’s rail unit, who had worked in its bid-preparation team, said he helped prepare bids for foreign contracts that included success-fee payments in South Africa, Malaysia and South Korea.
A Tunisian middleman, Youssef Zarrouk, told The Globe that he received US$3.5-million in success-fee payments from Bombardier in 2005 in exchange for helping a Bombardier-led consortium win a contract for the 80-kilometre high-speed Gautrain project, which links Johannesburg and Pretoria.
South Africa’s public protector, an ombudsman’s office with the power to investigate corruption, opened an investigation into the Gautrain contract in 2015.
Bombardier has said that it hired Mr. Zarrouk as a “sales representative” on the Gautrain contract. It said the payments to him were “within the norms of the industry practice at the time.”
But the payments only became public because of a dispute between Mr. Zarrouk and a South African lobbyist, who went to court in 2012 to seek a bigger payment from Mr. Zarrouk.
Under the new shareholder proposal, Bombardier would have to disclose these kinds of payments.
“It’s difficult for shareholders to have a fine lens on what the company does, so our first goal is to make sure the company itself has a fine-tuned lens on this and is paying attention at the deepest levels, and that there’s enough disclosure to shareholders that we are reassured that this situation is under control,” Mr. Thomas said.
“That’s the key. We can’t manage the company but we do need to know that somebody is minding the store.”
Bombardier has urged shareholders to vote against the proposal. It said it already files reports on its lobbying activities to the Canadian commissioner on lobbying, the Quebec registry of lobbyists and the U.S. government.
Bombardier said the shareholder proposal “would impose an unnecessary administrative burden and costs on the corporation when sufficient public disclosure already exists.” It said the company is already committed to “the highest ethical standards” in its government relationships.