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SNC’s chief executive plots a path for growth

CEO Robert Card vows to compete aggressively – but ethically – against the company’s European and Asian rivals.

Kevin Van Paassen/The Globe and Mail

Robert Card inherited a legendary Canadian company at one of its lowest moments.

SNC-Lavalin Group Inc.'s new chief executive officer arrived last year as the engineering and construction firm was reeling from corruption and bribery cases in North Africa, North America and South Asia.

The RCMP twice swept through the company's Montreal headquarters. Numerous executives departed; former SNC officials and contractors, including the company's former CEO, were accused of bribing officials around the world – for a power plant in Algeria, a hospital contract in Montreal and the six-kilometre-long Padma bridge project in Bangladesh.

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Mr. Card spent his first year calculating the damage and breaking down the organizational silos he believes allowed the costly – and possibly criminal – mistakes to happen. That work is not yet complete, but the first American to lead SNC has made enough progress to start looking forward. That means restoring its reputation, buying up some of its North American rivals, and competing aggressively – but ethically – with the European and Asian conglomerates he says are the company's real rivals.

"We are deal-hunting," Mr. Card told The Globe and Mail in an interview. "We're imagining, in five to seven years, we need to be nearly twice as big as we are now. We need to be bigger in oil and gas."

For now, the former U.S. Department of Energy official is still rebuilding a company that has been battered by corruption allegations. Instead of empire-building, Mr. Card has the task of shoring up ethics and reporting standards in order to ensure that SNC's employees – and their various fixers in emerging markets – do their job without endangering the company.

At the same time, Mr. Card has also been forced to revise down SNC's 2013 financial guidance as executives sift through the contracts and projects SNC has scattered about. The company expects to earn just $10-million to $50-million this year, compared with previous guidance of $220-million to $235-million.

There's "no way we can guarantee" that there won't be any more negative surprises, he said.

"Some of them are just not good projects," Mr. Card said, "and frankly, until they're absolutely dead, I'm going to view them capable of causing harm."

After the previous CEO, Pierre Duhaime, resigned, Mr. Card arrived at SNC's Montreal headquarters and said he was surprised by how underdeveloped the company's internal structures were, despite its size and stature. He said he has tackled everything from outdated IT systems to a lack of political savvy in dealing with global financial institutions, such as the World Bank. He said he's not quite sure whether some of the knowledge gaps were previously filled by executives who have since departed.

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"Having worked for nearly 40 years in companies of this scale, and seeing [SNC's] tremendous historical success, I expected a much more mature business environment," Mr. Card said. "It's almost as if the company got so busy with its success that it forgot to bring itself from a $2-billion company to an $8-billion company."

Some think gaps remain, however. Stephen Jarislowsky, the billionaire founder-chairman of Jarislowsky Fraser Ltd. and a former director at SNC, believes Mr. Card may have cleaned house too quickly, losing valuable expertise; that he needs a stronger chief operating officer and chief financial officer; and that the board lacks experience in both project management and risk control. Mr. Jarislowsky's firm is SNC's second-largest shareholder after the Caisse de dépôt et placement du Québec, with a nearly 10-per-cent stake.

"If you let all kinds of important people go, you create some kind of a temporary vacuum," Mr. Jarislowsky said. "On the whole, I think that Mr. Card is a definite improvement … He's a sincere and honest man. I like him. He has been for dinner at my house."

Everyone knew Mr. Card would be dealing with the fallout from the scandals for years, as court cases continued to make headlines. The executive has tried to address these issues actively, implementing an amnesty program in which 32 employees eventually came forward with tips. E-mails alleging everything from impropriety to casual complaints are now forwarded directly to an investigations team, rather than being dealt with first by lower-level managers.

Payments made in the field on projects now flow through an executive with overall geographic responsibility, Mr. Card said, rather than project managers. That means at least 12 people have knowledge of such transactions compared with just one or two people under the previous system.

He also said that ethics and safety protocols are now fully priced into contracts in advance, and that if customers won't pay up, "we don't bid." As SNC knows too well, the global infrastructure business is notorious for ethical problems that result from the often lax rule of law in emerging markets and greater emphasis on personal relationships.

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But Mr. Card is adamant that this won't stop the company from growing in the coming years, even as as he concedes that competitors are probably seizing on the opportunities.

"I don't see any limits to our growth by having to be absolutely squeaky clean," Mr. Card said. "You look at what happened, we've not profited in the end from anything [illegal] that was done."

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