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Telus chief executive Darren Entwistle boasts that 60 per cent of the company’s performance bonus pool is linked to customer service.

MARK BLINCH/REUTERS

The surprise departure of Telus Corp. chief executive officer Joe Natale has vaulted long-time boss Darren Entwistle back into the job, returning him to the managerial seat some felt he never truly left.

The Vancouver-based telecom giant surprised industry watchers Monday by announcing that Mr. Natale, who joined Telus in 2003 and took over as CEO in May, 2014, was stepping down immediately. The company cited his reluctance to move his family from Toronto to Western Canada, where the board expects the company's top executive to reside.

The energetic, hard-charging Mr. Entwistle, 52, who served as CEO from 2000 to 2014, is back in the job. His return brings to an end Telus's 15-month experiment with an unorthodox structure that had kept Mr. Entwistle at the helm as executive chairman, straddling both management and board roles, which drew criticism for exposing Telus to the appearance of undue influence in its senior ranks.

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As part of the shuffle, Dick Auchinleck, who has been the board's lead director under Mr. Entwistle, is now independent chair. Mr. Natale will stay on in an executive capacity as he hands off his duties, then leave the company at the end of the year.

The rationale for the leadership shuffle, according to Telus, is rooted in the board's long-standing desire that the company's top executive be based in Western Canada, the heart of the company's subscriber base. (One analyst noted that chief financial officer John Gossling is moving to Vancouver this fall.)

The board allowed Mr. Natale to start his tenure as CEO in Toronto, where he lived while serving as chief commercial officer since 2010, but expected him to head west by 2017. That's when Mr. Entwistle was set to move from executive chair to independent chair, giving up his operational authority. This succession plan was outlined in Telus's April proxy circular.

"Joe recently indicated that a move to Western Canada would not work for him and his family for several years," chief corporate officer Josh Blair said in an interview.

That triggered a board review, Mr. Blair said, where directors reaffirmed that they wanted a western-based leader – the executive wouldn't have to choose Vancouver, but could make other western cities such as Calgary or Edmonton home, a spokesperson said. The board asked Mr. Entwistle to return to the CEO's role and the decision was sealed late Friday – the same day the company reported encouraging second-quarter earnings, boosting revenue 5.1 per cent and outstripped its competitors by adding 76,000 net postpaid wireless subscribers.

Mr. Natale was paid $9.4-million in total compensation last year, according to company filings, and has a non-compete clause in his contract that keeps him from moving to a competitor until July, 2017. Mr. Entwistle was paid $9.3-million in 2014. Telus declined a request to interview Mr. Entwistle or Mr. Natale.

Most analysts took the news in stride, as the company's stock dipped 1.46 per cent on the Toronto Stock Exchange. Mr. Entwistle and Mr. Auchinleck have promised to stay in their roles long-term – at least three years, Mr. Blair said – which provides stability.

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"We do not believe the management change was due to any internal disagreement and we do not expect any additional follow-on changes to the management team," Phillip Huang, an analyst at Barclay's Capital Inc., said in a research note.

Still, not everyone is convinced the transition will be so smooth.

"It's a succession failure. The fact that you have a boomerang CEO is highly anomalous," said Richard Leblanc, an associate professor of law, governance and ethics at York University.

Mr. Leblanc, who once advised U.S. hedge fund Mason Capital Management LLC on a proxy fight with Telus, has cautioned the executive chair-lead director structure tends to muddy power structures and contaminate succession planning. Mr. Entwistle's move to the executive chair role suggested "entrenchment," he said, and created a situation for Mr. Natale where "you're CEO, but you're really not CEO."

"It suggests potential undue influence," he said. "I think what happened is they tried this model and it failed."

Mr. Blair, however, said that wasn't so.

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"It was really a succession planning discussion," he said of the board review, adding that Mr. Entwistle and Mr. Natale worked "well and collaboratively" for more than a decade.

"This is purely about Joe making a family decision that I really respect, and Telus needing to make a business decision as a result," he said.

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