Bombardier CEO Rushes to Quell Taxpayer Fury Over Pay Jump
The firestorm over an almost 50 percent pay raise for corporate leaders added a self-inflicted wound to Bombardier, which is struggling to land new orders for an airliner plagued by development delays and cost overruns. The company said it would delay more than half of 2016 compensation by one year to 2020 for six of its highest-paid executives and would pay the deferred amounts only if performance targets are met. Details of the plan will be filed this week.
“If we perform, not only will the executives benefit, but Quebec will benefit, our employees will benefit, and we’ll be capable of continuing to create jobs here,” Bellemare said on Montreal’s 98.5 FM.
Bombardier stoked public ire after the maker of planes and trains boosted 2016 compensation. Quebec last year invested $1 billion in Bombardier’s C Series jetliner program, which entered service more than two years late and billions of dollars over budget. The company last year also announced plans to eliminate more than 14,000 jobs. Quebec Finance Minister Carlos Leitao urged the company’s board to rethink the compensation policy.
“We are obviously not pleased with the decision that Bombardier made around its remuneration for its executives, but we are happy to see them make decisions that are fixing that for Quebeckers’ and Canadians’ confidence,” Canadian Prime Minister Justin Trudeau said in the House of Commons.
Union leaders weren’t happy, either. The International Association of Machinists and Aerospace Workers said it would express its “displeasure to the representatives of the company in due time during the next rounds of negotiations.”
Quebec’s Liberal government “committed errors when it gave its financial assistance to Bombardier without imposing the necessary conditions as to how the funds were to be used,” David Chartrand, Quebec coordinator for the union, said in a statement. “We must act so that this problem does not recur.”
The shares rose 1 percent to C$2.06 at the close in Toronto. Bombardier has fallen 5.1 percent this year, compared with a 1.9 percent gain for the Canada’s benchmark S&P/TSX Composite Index.
Quebec Premier Philippe Couillard tweeted Sunday night that he was satisfied with Bombardier’s decision to defer compensation. Opposition leader Jean-Francois Lisee called the move “scandalous” and said the bonuses should be canceled.
Bellemare said he received a call from Couillard on Sunday about the compensation, “which encouraged me to go faster. We’ve learned a big lesson here,” the CEO said on yet another outlet, RDI television. Bombardier didn’t respond to Bloomberg requests for an interview.
“Alain ate humble pie and recognized after a few days that they had to backtrack,” said Karl Moore, an associate professor at McGill University’s Desautels Faculty of Management in Montreal.
Bellemare defended the compensation plan, saying the leadership team ushered the C Series into service last year, won key orders for the plane from Delta Air Lines Inc. and Air Canada, supervised the first flight of the Global 7000 business jet and helped shore up the company’s finances. About $16 million in total compensation will be postponed until 2020, he told Ici Radio-Canada.
Sixty percent of Bellemare’s 2016 compensation won’t be payable before 2020, “and that’s a lot,” the CEO said on 98.5 FM. His compensation is in line with that of other chief executives in the industry, he said.
Moore, the McGill professor, said the company is caught in a tight spot.
“Being a senior executive for Bombardier is a little bit like playing hockey for the Montreal Canadiens — you are constantly in the public eye,” he said. As a Quebec taxpayer, he wants Bombardier to succeed, Moore said. “If you want global talent you have to pay, the way the Canadiens have to pay for their stars.”
About one-third of the jobs Bombardier is set to eliminate by 2018 are in Quebec. That means about 5,000 people in the province will be affected. Hundreds of people gathered Sunday in front of the company’s downtown Montreal headquarters to demonstrate against the payouts, with some chanting, “Shame on Bombardier.”
Executive Chairman Pierre Beaudoin on March 31 offered to forfeit his pay gain, yet Bombardier initially declined to comment on whether Bellemare, who replaced Beaudoin as CEO in February 2015, and other senior managers would also give up pay increases.
Ninety-three percent of respondents in a Leger Marketing online poll published Sunday by the Journal de Montreal said they disagreed with Bombardier’s decision to boost the compensation of senior executives. Eighty-four percent also said Quebec should review its support for the company.
Bombardier’s five-year turnaround plan aims to reach break-even cash-flow in 2018 and $25 billion of annual revenue by 2020. The company posted a $981 million net loss last year, its second consecutive year in the red. Revenue dropped for two consecutive years, falling to $16.3 billion in 2016.