BlackBerry's headquarters in Waterloo, Ont. on June 22, 2016.Eduardo Lima/The Canadian Press
Stockholders at BlackBerry Ltd. BB-T and CI Financial Corp. CIX-T rejected the companies’ approach to executive compensation in “say on pay” votes at their annual shareholder meetings on Wednesday and showed their displeasure with some of the directors they saw as responsible.
Say-on-pay votes are a corporate governance practice that allows shareholders to show their approval, or lack thereof, for corporate boards’ pay policies for their companies’ top executives in a vote at annual general meetings.
BlackBerry said it had received 44 per cent support for its pay philosophy, with 56 per cent of shareholders voting against it. CI Financial received 45 per cent support, with 55 per cent opposition.
Both CI and BlackBerry faced negative recommendations from major proxy advisers, which advise institutional investors on how to vote their shares.
Institutional Shareholder Services Inc. (ISS), Glass Lewis & Co. and Egan-Jones Proxy Research recommended “no” votes on CI Financial’s pay measures. It was the second year in a row all three made this recommendation for CI, with ISS and Glass Lewis saying CI needed to do a better job of linking pay to performance for all its top executives.
BlackBerry also got negative recommendations from ISS and Glass Lewis for the second year in a row, with the payout of a portion of a large 2018 stock award for chief executive John Chen a particular issue this year. Egan-Jones recommended a “yes” vote at BlackBerry this year, after saying no in 2021.
Phil Kurtz, BlackBerry’s deputy general counsel and corporate secretary, announced the result at the meeting, and said the company was disappointed. BlackBerry will get more feedback from shareholders after the meeting, he said.
CI Financial lead director Thomas Muir did not comment when announcing the vote results at the company’s annual meeting.
The average support level in Canadian say-on-pay votes is above 90 per cent, according to research from compensation and governance-advisory firms. Both ISS and Glass Lewis expect companies to consult shareholders on what they didn’t like and ways to improve when they fail to get at least 80-per-cent support.
The votes are advisory and non-binding, which means shareholders cannot override a board of directors’ compensation decisions. But the measures are an important way for shareholders to express their views about companies’ pay practices, rather than targeting individual directors who help set compensation.
It was the second year in a row CI failed to get 50-per-cent support from shareholders for its pay approach. In 2021, CI received just 38.1 per cent of the vote.
According to research by Kingsdale Advisors done at the request of The Globe and Mail, only one company has had say-on-pay failures two years in a row since 2010: Copper Mountain Mining Corp., in 2019 and 2020.
BlackBerry got just 59 per cent of shareholders to vote in favour of its pay measure in 2021.
Shareholders in the two companies are now embracing the approach of punishing directors, such as they can. In corporate director elections, the only choices are to vote “yes” for a director or “withhold” votes.
Shareholders withheld 49.3 per cent of votes for Prem Watsa, the CEO of major BlackBerry investor Fairfax Financial Holdings Ltd., who until last year was chair of the board’s compensation committee. Fairfax owns about 8 per cent of BlackBerry shares. A majority of the remaining shareholders voted against Mr. Watsa.
Current compensation committee chair Michael Daniels had 36 per cent of votes withheld for his re-election, and committee member Richard Lynch had 27 per cent withheld.
CI Financial shareholders withheld 27 per cent of votes for director David Miller, chair of the board’s governance and human resources committee.
The two failures doubled the number of Canadian companies to four that have received negative compensation votes from their shareholders so far in 2022.
According to Globe research, CI chief executive Kurt MacAlpine had one of the largest jumps in total compensation last year for CEOs in the Canadian wealth-management sector.
Mr. MacAlpine made $10.6-million in 2021, up more than 75 per cent from $6.01-million the previous year. His annual cash bonus increased to $3.88-million from $1-million in the previous year, while his share awards rose to nearly $5.6-million from $4.2-million. His annual salary increased to $1,125,000 – up 40.6 per cent from $800,000 in 2020.
While CI attempted to retool its pay in 2021 by introducing a performance scorecard for Mr. MacAlpine, ISS and Glass Lewis took issue with the scorecard and other elements of the company’s pay plans. For example, the two said CI should attach performance criteria to at least some of the long-term stock awards given to all executives.
The price of CI Financial’s shares rose steadily in 2021, peaking at $30.88 in November. Since then, they’ve lost more than half their value and hit a 52-week low of $13.85 on June 16.
BlackBerry has given Mr. Chen two large grants of stock, one when he joined in 2013 and another in 2018 designed to extend his stay for five years.
As part of the 2018 grant, he received five million shares that he would earn, and be able to sell, only if BlackBerry’s share price hit targets in five one-dollar increments from US$16 to US$20, each for a certain number of trading days. (The company’s stock was US$10.63 at the time.)
However, a bizarre meme-stock phenomenon briefly quadrupled the price of BlackBerry shares in January, 2021, before they began a decline to half the levels of 2018. The January craze triggered vesting of three million of the five million shares last November, and Mr. Chen promptly sold nearly US$25-million worth of BlackBerry stock on the open market. In an e-mailed statement, BlackBerry spokesperson Matthew Chandler said the sales were made to cover taxes owed when his stock awards vested, and Mr. Chen has never made a “discretionary sale of shares.”
Glass Lewis says the meme-vesting of the BlackBerry stock awards “provides a case study that may be difficult to rival” of the downsides of large stock awards.
Just six Toronto Stock Exchange-listed companies in 2021 failed to get 50-per-cent support for their executive compensation practices. In 2022, BlackBerry and CI Financial join Agnico Eagle Mines Ltd., which got 24.4-per-cent support, and Enghouse Systems Ltd. which got 36.5-per-cent support.
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