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Canada Post owns 91 per cent of Purolator Courier Ltd., which had a loss of $9-million in the first quarter of 2012.


Tom Schmitt is out as president and chief executive officer of Purolator Courier Ltd., Canada's largest courier company, less than two years after the former FedEx executive was brought in to lead the company.

In his place, Wayne Cheeseman will act as interim president and CEO of Purolator, while maintaining his current position as chief financial officer for Canada Post Corp.

The dual roles could suggest Canada Post president and CEO Deepak Chopra is seeking deeper integration between the Crown corporation and the privately held Canadian company.

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Canada Post owns 91 per cent of Purolator and the Canada Post Group of Companies reported a net $7-million first-quarter loss Wednesday. The report noted that there was 6.9-per-cent growth in revenue from the Purolator segment, but an overall net loss of $9-million in the first quarter of 2012 due in part to a 9.1-per-cent increase in labour costs and a 5.5-per-cent rise in operational costs.

The relationship between Canada Post and Purolator is closely watched by Purolator's competitors. United Parcel Service Inc. has frequently accused the Canadian government of cross-subsidizing the courier network, including in the form of a failed suit under the North American free-trade agreement's Chapter 11.

The leadership change was communicated to staff last week, but no official release was issued by Purolator or Canada Post.

Jon Hamilton, a spokesman for Canada Post, said Mr. Cheeseman will be in the role on an interim basis only, during the search for a new Purolator CEO.

"All I can say is Mr. Schmitt has left the company," he said. "Really, at this point, it's a change in leadership and we have an interim president and CEO while the search is under way. That's really what this is about."

The dual role Mr. Cheeseman will play raises some questions of governance.

For instance, Mr. Schmitt registered as a lobbyist in order to meet with government officials. Also, Canada Post is subject to the Access to Information Act, while Purolator is not.

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"All that would have been [approved by]the lawyers," said Mr. Hamilton, when asked how the two responsibilities will be managed. "Purolator remains an important and strategic organization within the Canada Post Group of Companies and the focus continues to be, as it has been for the last while, on serving customers, ensuring that we maintain and grow the business and grow profitability within Purolator."

Governance specialist Luis Navas of Global Governance Advisors says it's common for a chief financial officer to step in and run a subsidiary during a short-term change.

"It's not uncommon to basically borrow someone from headquarters or the mother ship," he said. "If it was to be on a long-term basis, yes it would be a governance issue, but not if it's to be on an interim basis."

Earlier this year Canada Post reported its first fiscal-year loss in 16 years, losing $253-million before tax in 2011 due to a mix of declining mail volume, a pay equity ruling, and the impact of the strike and lockout in June of that year.

Even though the federal government imposed back-to-work legislation later that month, the labour dispute remains unresolved. The original arbitrator, Justice Coulter Osborne, resigned on Nov. 1, 2011. Labour Minister Lisa Raitt then appointed Guy Dufort as a replacement, but the Canadian Union of Postal Workers objected to the appointment, partly because Mr. Dufort is a failed Conservative candidate. The issue is now before the Federal Court. The union is also challenging the constitutionality of Ottawa's back-to-work legislation.

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