RB Global, formerly known as Ritchie Bros., is the world’s largest industrial auctioneer.Rick Wilking/Reuters
RB Global RBA-N, the heavy equipment auctioneer formerly known as Ritchie Bros., appointed a new chief executive officer Wednesday in the wake of a compensation dispute, with the stunning management change sending the company’s shares plunging as much as 14 per cent.
RB Global said former chief operating officer and president Jim Kessler would take over as CEO and join the board after the departure of Ann Fandozzi, who served as the company’s CEO since the end of 2019.
The company said chief financial officer Eric Jacobs had also left, with both executive departures first reported by Bloomberg News.
The company is the world’s largest industrial auctioneer. It said the management changes were unrelated to RB Global’s performance, financial reporting or operating results.
Instead, the company said its board of directors had rejected an ultimatum from Ms. Fandozzi that for her to remain as CEO the board must approve a “front-loaded compensation program that would bring forward five years of equity compensation.”
The company said after “extensive negotiations” with her, the board determined the proposal was “far beyond peer group benchmarks” at which point it said Ms. Fandozzi resigned.
In a statement to The Globe and Mail, the company provided further details about the pay package at the heart of the dispute, which would have led to a US$65-million upfront equity grant to Ms. Fandozzi, and a total of US$145-million when five other executives were included. “The structure and magnitude of such a payout far exceeded market standards and peer practices and was not in the best interest of the company or RB Global shareholders,” it said.
In a statement to Bloomberg, Ms. Fandozzi said she did not resign and that until recent weeks she believed “negotiations were still being pursued in good faith in the hope that this matter could be brought to an amicable resolution.”
In a separate statement, Ms. Fandozzi said she would decline to “respond to misrepresentations and speculate on motivations today” and that her goal in the compensation negotiations was to implement an “all-equity, at-risk incentive program to align management with long-term performance and shareholder value.”
A source familiar with Ms. Fandozzi’s negotiations with the board said the compensation package she was seeking for her management team would have been made up of performance-based stock units and stock options that would only become available if executives stayed at least three years and then it would vest over the remaining two years, serving as a golden handcuff to keep management in place.
The source said the two sides informally agreed to the structure last fall, prior to RB Global’s contentious US$7-billion deal to buy IAA Inc., a company that specializes in auctioning damaged cars, trucks and motorcycles. In March, RB Global finalized the deal after narrowly winning a battle with proxy advisory firms Institutional Shareholder Services and Glass Lewis, as well as two of its shareholders, Luxor Capital Group and Eminence Capital, all of which opposed the transaction.
The source said Ms. Fandozzi only learned the board took issue with the compensation plan in recent days when she received a call from directors while on a flight back from a business trip in Europe.
Shortly after Ms. Fandozzi joined RB Global she was faced with steering the auctioneer through the tumult of the pandemic. She spearheaded a digital transformation, and was in the midst of a turnaround plan that aimed to turn the 60-year-old company into a broader marketplace for used equipment that provided analytics, services and financing to customers.
Under the deal to buy IAA, RB Global’s official head office moved from Burnaby, B.C., to Chicago. In June that change led S&P Dow Jones Indices to drop the company from the S&P/TSX Composite Index after 15 years.
Mr. Kessler, the new CEO, had previously worked with Ms. Fandozzi at other companies she’d been hired to turn around and she appointed him chief operating officer early in her tenure.
The company said it has hired an executive search firm to find a permanent replacement for Mr. Jacobs as CFO. It gave no explanation for his departure.
Analysts said the management change came as a shock to investors. After the initial plunge, shares in the company, which has a market cap of $14.6-billion, recovered half their losses on the day, closing down 4.9 per cent.
“The market never likes management turmoil,” wrote Maxim Sytchev, an analyst with National Bank, in a note, adding that Ms. Fandozzi was the public face for completing the IAA deal and that her relationships in the automotive collision industry were trumpeted to investors as a way to ensure the acquisition was a success.
On the other hand, he wrote, “the board has balked at compensation demands, something that we do not see very often and ultimately the board is there to protect the interests of shareholders.”
According to RB Global’s 2023 management circular, Ms. Fandozzi’s total compensation in 2022 was US$7.9-million.