Robert Card, the American engineering veteran who helped steady SNC-Lavalin Group Inc. as chief executive officer after a crippling corruption crisis, negotiated a $9.2-million "departure arrangement" with the company but will stay on as a paid adviser until the end of the year, regulatory filings reveal.
Canada's largest engineering firm also slashed its senior leadership team to 11 people from 21, the documents show, and paid out $15.6-million combined to the departing executives.
The compensation details are contained in the company's management proxy circular, filed Friday. They underline both the continued value of Mr. Card to the organization, as well as a new effort under way by his replacement, Neil Bruce, who was appointed CEO on Oct. 5, 2015, to shift the focus from crisis management to improving profit.
"To his credit, [Robert Card] stabilized the ship," said Michel Magnan, a corporate governance specialist at Montreal's Concordia University who also owns SNC-Lavalin shares. "But the performance is still erratic in terms of the earnings and this is what is very troubling right now."
An outsider with both private sector and government experience as former undersecretary for the U.S. Department of Energy, Mr. Card was brought in as CEO in October, 2012, following the shocking arrest of his predecessor, Pierre Duhaime, on fraud charges. At the time, questions about SNC's business practices were nearly daily news and both its reputation and market capitalization tanked.
SNC-Lavalin was formally charged last year with corruption and fraud related to its business in Libya. It rejects the charges and is trying to convince the Canadian government to settle the matter without going to trial.
Mr. Card moved quickly to settle things down by overhauling management, reshaping the company's ethics and compliance system, and selling infrastructure assets. He told The Globe and Mail in 2013 that he wouldn't "feel good" about SNC shares until they rebounded to the $55 to $60 range. They did rebound to that level during the summer of 2014, but have since dropped back down amid spotty earnings reports, trading below $50 for the past 18 months.
Under a deal negotiated with SNC-Lavalin, Mr. Card's $9.2-million pay package includes a cash allowance of $4.5-million and consulting fees of $3.1-million payable monthly until Nov. 30 this year. That's on top of his salary for 2015. He agreed to relinquish most of his stock compensation, worth $5.4-million.
The company notes in the filing that the value of the deal falls between a hypothetical scenario of retirement, which would have paid Mr. Card $4.1-million, and a termination without cause, which would have paid him $11.2-million.
There is evidence the board used its discretion in how Mr. Card's departure would be treated legally, said Paul Gryglewicz, senior partner with Toronto-based Global Governance Advisors. It chose to carve out a continuing consulting arrangement with Mr. Card instead of making a clean break, an atypical arrangement, he said.
The value of Mr. Card's departure package, however, is not out of line with what we've seen before in Corporate Canada, Mr. Gryglewicz said, adding there have been much richer deals. Still, the fact the former CEO was at SNC for only three years also has to weigh in the balance, he said.
"This shows the power of the employment agreement and it exposes to the shareholders really the cost of CEO turnover," Mr. Gryglewicz said. "It just helps to underpin the importance of good CEO succession planning with the board."