The jury is proverbially out on whether family-owned corporations perform any worse than those without a genetically entitled controlling shareholder. Despite all the family empires felled by the so-called third-generation curse, others make it all the way to the century club.
The third generation of Bronfmans vaporized its Seagram's inheritance by ditching the booze business for the entertainment one. The Eatons made it to the fourth generation before the retailing genius had been bred out of the family DNA enough to force their eponymous department-store chain into bankruptcy.
Yet, it was a fourth-generation Weston who resurrected Loblaws after a near-death experience under non-family management. That feat last year helped earn scion Galen G. Weston the top job at the family holding company, and all without the benefit of multiple-voting shares or government subsidies.
Bombardier is a different beast altogether. Its very name conjures up nostalgic images of Canadiana. Generations of rural Canadian kids (including yours truly) learned to operate a Ski-Doo long before they ever learned to drive a car, thanks to Joseph-Armand Bombardier's 1937 invention of the snowmobile. His son-in-law, Laurent Beaudoin, built the family business into a global rail and aerospace giant, shrewdly tapping the stock market and countless Canadian politicians for cheap financing. The company was once such a national icon it could evoke its "Canadian spirit" in its TV ads without anybody wincing.
Bombardier began to falter well before the third generation took over in 2008. But it was on Pierre Beaudoin's watch that the company truly came close to failing after betting on a new jet to challenge Boeing and Airbus in their own airspace. This would have been a tough assignment for any chief executive officer. But Mr. Beaudoin seemed particularly ill-suited for the job.
By the time Mr. Beaudoin handed the CEO's reins to Alain Bellemare in 2015, while staying on as executive chairman, the C Series program was billions over budget and years behind schedule. The firm was on the brink of bankruptcy. That fate was averted by a $1-billion (U.S.) cash injection in the C Series by the Quebec government, and a separate $1.5-billion investment in Bombardier's rail division by provincial pension fund manager Caisse de dépôt et placement du Québec. Ottawa stepped up in March with a $372-million (Canadian) loan to fund the C Series and another plane.
In public, the Caisse and the politicians all stood by Bombardier. But in private they expressed deep reservations about extending yet more of pensioners' and taxpayers' money to the firm as long as the Bombardier-Beaudoin family continued to exercise control through its lock on multiple-voting shares. After Bombardier's directors voted this year to give Mr. Beaudoin and other top managers a massive pay raise, such frustrations could no longer be contained.
That the board of directors, led by five family members, could be so out of touch was enough for the Caisse to announce this week that it would withhold its support for the 54-year-old Mr. Beaudoin's continued board membership at the company's annual meeting on Thursday. The pension-fund manager also said it would vote against even a revised compensation plan that reduces Mr. Beaudoin's pay and pushes back bonus payments to five non-family executives by a year.
"Our concern is that the initial decisions were made in the first place and what that reflects about the governance of the company," the Caisse said. Several other large pension and investment funds have since joined the chorus.
Bombardier's defenders insist it has turned the corner since Mr. Bellemare's hiring. But the company still faces such enormous challenges – a massive debt load, no recent C Series sales, a looming trade war with Boeing, executives at its Swedish division facing bribery allegations – that taxpayers and minority shareholders need assurance that he can actually do his job free of unhelpful family meddling. That would require Mr. Beaudoin's departure, a truly independent board of directors and the abolition of the dual-class share structure that ensures the family's control.
The family has always resisted such demands. One Bombardier recently suggested that, at best, elderly family members on the board (including Laurent Beaudoin, who is 78) could soon cede their spots to younger ones. "The key is keeping control of the company and passing it on to the next generation while making sure that shareholder value is generated along the way," 43-year-old Charles Bombardier told Reuters last month.
Hopefully, a scathing public disavowal by the Caisse will be enough for him and the rest of the family to finally get the message. There can be no more business as usual at Bombardier.