Bellemare’s 2015 compensation signals power shift at Bombardier

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Bombardier Inc.'s new chief executive received significantly more compensation last year than executive chairman Pierre Beaudoin, a signal of the shift in leadership power at the transportation company.

Bombardier released its shareholder proxy circular Friday, revealing Alain Bellemare received $6.4-million (U.S.) in total compensation last year, including stock options valued at $3.1-million and a cash bonus of $1.2-million. His pay outstripped compensation for Mr. Beaudoin, who earned total compensation of $3.8-million, a reduction from $5.1-million in 2014.

Mr. Beaudoin, a member of the family that controls Bombardier, gave up the CEO title last February when the company brought in Mr. Bellemare – an outsider who previously worked at U.S. manufacturing giant United Technologies Corp. – to help turn around its flagging fortunes.

Mr. Bellemare received a grant of 1.8 million stock options when he joined Bombardier, valued at $1.1-million, and was granted a further 5.2 million options in August worth $2-million. None of his options are currently exercisable. Mr. Beaudoin received 4.6 million options last August, valued at $1.8-million at that time.

Bombardier also confirmed in its circular that it will add two new directors from outside Quebec as part of a longer process to renew the board, bringing the total number of directors to 15 from 14 previously. The company has been under fire from investors for its governance, with critics urging major reforms including changes to the company's long-standing dual-class share structure.

Beatrice Weder Di Mauro, 50, is a Singapore-based economist who has worked at the International Monetary Fund. August Henningsen, 65, is a Hamburg, Germany-based aerospace consultant with Plane View Partners. He previously led Lufthansa's maintenance and repair business as chief executive.

As previously reported by The Globe and Mail, Denis Desautels, the former auditor-general of Canada, will step down from Bombardier's board after a tenure spanning more than a decade. He's reached the mandatory retirement age for Bombardier directors of 72. Daniel Johnson, former premier of Quebec, remains on the board for the moment though he's expected to take up new duties as chairman of Bombardier's C-Series aircraft joint venture with the Quebec government.

The company also revealed Friday it is seeking shareholder approval to expand its stock-option plan by 65 per cent to permit the board to issue options equalling almost 225 million Class B shares, up from 136 million currently. The increase would allow options to be issued equal to a maximum of 10 per cent of all Class A and Class B shares outstanding, an increase from 6 per cent currently.

Bombardier additionally said it is seeking shareholder approval to increase the maximum number of Class A and Class B shares that it can issue to 3.6 billion of each class from 2.7 billion. The company said it needs the expansion to cover warrants issued to the Caisse de dépôt et placement du Québec and the Quebec government in exchange for new investments in the company, which are convertible into Class B shares, and "to provide for the flexibility required to access the capital markets for future financing needs."

The proxy circular also outlined more details of Bombardier's share consolidation plan, which will help boost the company's share price by reducing the number of shares outstanding. The company said it has not decided its final consolidation ratio, but expects to reduce outstanding shares by a ratio of between 8 to 1 and 16 to 1 by no later than Oct. 31.

The information contained in the circular came as Bombardier announced it had struck a deal to sell 20 Challenger 350 luxury jets to an unnamed customer, a firm agreement worth $534-million (U.S.) at list prices.

It's a welcome sale as the company works to rebuild an order book for both commercial and business aircraft that has weakened over the past year. The book-to-bill for both business units, representing the number of new orders received versus the number of finished planes delivered, is well below the 1.0 ratio considered healthy in the industry.

"With a stretched balance sheet and a week backlog, we think that Bombardier is not well-placed to weather a storm which may be brewing," Scotiabank analyst Turan Quettawala said in a recent note. "Unless order flow picks up substantially on CRJ [regional jets] and Q400 [turboprop planes], we think that production rates may need to be adjusted."