Good governance is decidedly on the agenda at blueblood Canadian companies holding their annual meetings this week. Just a day after agreeing to give up the executive-chairmanship at Bombardier, Pierre Beaudoin will be on the hot seat at Power Corp.'s AGM for his spotty attendance at that company's board meetings. Ontario Teachers' Pension Plan opposes his re-election to the Power board for that reason.
The issue that really threatens to generate sparks at the Power meeting, however, is the company's stake in global cement giant LafargeHolcim. Not only has it been a drag on Power's profit, but Zurich-based LafargeHolcim remains engulfed in scandal over allegations it indirectly paid off armed groups, including the Islamic State, to shield its Syrian cement plant during the first three years of that country's civil war.
Through its European affiliate, Groupe Bruxelles Lambert (GBL), Power is LafargeHolcim's second-largest shareholder, with a 9.4-per-cent stake. Power chairman and co-chief executive officer Paul Desmarais Jr. sits on the LafargeHolcim board and has been deeply involved in its efforts to get to the bottom of the Syrian scandal, first revealed last year in the French daily Le Monde.
Since then, the storm surrounding LafargeHolcim has continued unabated in Europe. Its CEO, Eric Olsen, just announced he is stepping down. And during the first French presidential election debate in April, far-left candidate Jean-Luc Mélenchon insisted LafargeHolcim "must be commandeered, or even seized, [because] an exemplary decision must be taken against those who plot with the enemy."
After the 2015 merger of France's Lafarge with its Swiss competitor Holcim, the new entity's stock price plummeted by 50 per cent. While it has recovered some of that loss since, the French and Swiss news media have widely reported on a continuing power struggle between Lafarge's main shareholders (led by Power and their Belgian partners in GBL, the Frère family) and Holcim's biggest investor, Swiss billionaire Thomas Schmidheiny.
Following an internal investigation into the Syrian allegations, LafargeHolcim announced in April that Mr. Olsen will step down in July. The news struck many analysts as odd, considering that the company's directors concluded that Mr. Olsen – who was only appointed in 2015, a year after the Syrian plant was closed – "was not responsible for, nor thought to be aware of, any wrongdoings that have been identified as part of [the board's] review."
That led to speculation that Mr. Olsen, an American who rose up the ranks at Lafarge's U.S. subsidiary, was being ousted to make way for a Holcim alumnus, possibly current LafargeHoclim chief operating officer Roland Kohler. Comments Mr. Olsen made earlier this year about LafargeHolcim's eagerness to bid on contracts for U.S. President Donald Trump's proposed U.S.-Mexico border wall, comments seen as gauche in European circles, may have also contributed to his fall.
At last week's LafargeHolcim annual meeting in Zurich, chairman Beat Hess addressed the Syrian scandal head on. "In hindsight, the measures taken to continue operations and the arrangements with armed groups and sanctioned parties are entirely unacceptable," he told shareholders.
That did not stop several of them from taking to the floor to criticize the board's handling of the Syrian debacle. "HolcimLafarge's reputation is tarnished by this. It has led to a [judicial] investigation in France," said Vincent Kauffman, CEO of Geneva-based Ethos, a sustainable development foundation backed by Swiss pension funds. "We believe the board must assume [responsibility for] possible negative financial consequences from the Syrian case."
Mr. Desmarais was re-elected to the board, with about 89 per cent of shareholders voting in favour of his nomination. That was a lower proportion of votes than most other directors received. Mr. Schmidheiny was re-elected to the board with a 98.92-per-cent vote.
While Power's North American holdings are largely concentrated in the financial sector, its European affiliate has focused on investments in the real economy. Groupe Bruxelles Lambert (GBL) holds 54 per cent of Imerys, the world's largest producer of kaolin, a mineral widely used in ceramics, paint and paper. GBL also owns 7.5 per cent of sports equipment maker Adidas and the same proportion of shares in spirits maker Pernod Ricard.
GBL has gradually sold off its stake in French oil giant Total.
Once Total's largest shareholder, its stake is now down to 0.7 per cent and Mr. Desmarais announced earlier this year that he would leave the Total board.
Power is sticking by LafargeHolcim, however. Despite last year taking a $237-million impairment charge against the value of its shares in the cement giant, and despite the continuing fallout from the Syrian scandal, GBL's website insists LafargeHolcim "is well positioned to meet the challenges of increasing urbanization, with strong positions in most emerging countries."
Power's annual meeting is a chance for minority shareholders to express how they feel about that.
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Konrad Yakabuski