Quebecor to conduct say-on-pay vote to appease shareholders

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Quebecor Inc. is taking not one, but two steps forward in corporate governance matters this spring: Michel Lavigne, whose presence on the Quebecor board irked governance advocates and a number of shareholders, has decided not to stand for re-election. And Quebecor also says it will conduct its first-ever say-on-pay vote at its May 12 shareholders' meeting.

The latter decision, however, may be seen as a way to ensure Quebecor never finds itself facing the former situation again.

Mr. Lavigne failed to get majority approval from Quebecor's Class B shareholders in both the 2014 and 2015 votes. In 2015, per Quebecor's newly introduced majority voting policy, Mr. Lavigne submitted his resignation after 72 per cent of shareholders withheld their support for him. The Quebecor board, however, rejected his resignation and he continued to serve.

Mr. Lavigne, a former chief executive officer of Raymond Chabot Grant Thornton, chairs Quebecor's human resources and compensation committee. His low support is widely believed to be due to Quebecor's 2014 decision to pay former chief executive officer Robert Dépatie $7.8-million in severance after less than a year on the job.

In May, 2015, Quebecor chairman Brian Mulroney said the board rejected Mr. Lavigne's resignation because it "seems totally inappropriate and unjust … that Mr. Lavigne should alone face an abstention vote when [Mr. Dépatie's severance] was a unanimous decision of the board of directors and has no possible link to the 2015 meeting."

Quebecor spokesman Martin Tremblay says Mr. Lavigne "has informed the board that he would not stand for re-election. So it is his own decision."

Shareholders such as British Columbia Investment Management Corp. and proxy advisory service Institutional Shareholder Services Inc. said Quebecor had not adequately addressed shareholder dissatisfaction in 2014, and Mr. Lavigne, as chair of the compensation committee, should see votes withheld as a penalty. In part, that's because Quebecor, unlike many large TSX companies, did not have a separate advisory vote on executive compensation. These say-on-pay votes allow shareholders to express their dissatisfaction on compensation without necessarily punishing individual directors for the decisions.

Quebecor had resisted say on pay. In 2015, it opposed a shareholder's proposal from Quebec governance group Mouvement d'éducation et de défense des actionnaires, or Médac, to establish an annual advisory vote. Quebecor's board, in its text in the 2015 proxy, said determining compensation is one of the responsibilities of the board, not the shareholders, and the Quebecor board's process, which includes recommendations from a compensation committee full of independent directors, is "the best way to fulfill its responsibilities and to ensure that it acts in the best interests of the corporation and its shareholders."

However, Quebecor says in its 2016 proxy, filed Friday, that its board decided at a November, 2015, meeting to hold the non-binding shareholder vote this spring. The text notes that the vote to accept the company's approach to executive compensation is "on an advisory basis and not to diminish the role and responsibilities of the board of the corporation."

Mr. Tremblay notes that Mr. Mulroney said at the 2015 annual meeting that Quebecor was already considering some sort of say-on-pay voting mechanism for shareholders. "After due analysis, the board has decided to implement this corporate governance measure that will empower shareholders to voice their opinion on executive compensation," Mr. Tremblay says.

Unlike widely held companies such as Canadian Imperial Bank of Commerce and Barrick Gold Corp., though, Quebecor stands little chance of losing a say-on-pay vote, as Pierre Karl Péladeau holds a controlling stake in the company. He, presumably, will always vote in favour of Quebecor's pay approach.

And at the same time, the say-on-pay mechanism may ensure shareholders don't take out their unhappiness on whomever chairs the compensation committee – and create an embarrassing situation where a valued director must turn in a resignation.

"Investors want pay votes at controlled firms as well as at those that aren't," says Peter Chapman, executive director of the Shareholder Association for Research and Education. "The opportunity to vote at Quebecor is a positive step."

"The message sent by shareholders of the election of Class B directors previously was very clear," he adds. "Without Michel Lavigne on the ballot, a repeat of last year's unfortunate events is avoided."

It's a wonder Quebecor didn't take these steps sooner.