Telesat CEO Dan Goldberg sits beside a model of a Ariane 5 rocket that launched the Anik F2 satellite in 2004, at the company's headquarters in downtown Ottawa on Sept. 4, 2020.Justin Tang/The Globe and Mail
Governments across Canada have lined up to help Telesat Corp. TSAT-T with its ambitious satellite plans, promising the company more than $2.6-billion in contracts, investments and loans in the name of bringing broadband to lesser-served communities.
If the public largesse indeed helps launch Telesat’s new satellite venture to success, there will be at least one big, big beneficiary: chief executive Daniel Goldberg.
In April, 2021, a few months before the company’s listing on the Toronto Stock Exchange, Telesat gave Mr. Goldberg an award of nearly 850,000 shares of stock. The company reported the value of this award in its proxy circular to shareholders as $53.2-million, part of an overall $64.1-million pay package for Mr. Goldberg in 2021.
Telesat acknowledges, however, that it based that figure on the prices of private transactions in the company’s shares before it went public. It also obtained a valuation opinion, which yielded a much higher value for the stock awards: a jaw-dropping $87.4-million. Using that amount, instead, makes Mr. Goldberg nearly a $100-million man for 2021.
It’s a huge sum for any CEO, but it particularly stands out given Telesat’s history, its current state and how the people of Canada, not private investors, offer its best hopes of success.
The Ottawa-based company is more than five decades old, founded in 1969 by the federal government to provide satellite communications to Canadians. It’s been launching satellites ever since, but it’s been operating in the private sector since a 1991 divestiture. Most recently, it merged with Loral Skynet, backed by Canada’s Public Sector Pension Investment Board.
Last year’s TSX listing is part of a broader plan to overhaul the company’s network into low-Earth-orbit (LEO) communications satellites that can provide speedy internet connections to people with little to no access to fibre. Telesat dubbed the new network “Lightspeed.”
It’s not the buyers of the company’s stock that are the biggest funders of the plan, however. Those honours go to a number of Canadian governments:
- In 2019, the federal government said it would contribute up to $85-million to support the development of Lightspeed through the Strategic Innovation Fund. In return, Telesat said it would conduct more than $200-million of research and development activities in Canada and expand its Canadian work force.
- In 2020, the federal government agreed to spend $600-million with Telesat over 10 years “to bring affordable, high-speed internet connectivity across rural, underserved areas of Canada.” Telesat expects to draw an additional $600-million in revenue over the decade from internet and mobility service providers as a direct result of the federal agreement.
- In February, 2021, the Quebec government agreed to invest $400-million in Lightspeed via $200-million in preferred equity and a $200-million loan. That deal is not yet finalized.
- In August, 2021, the Ontario government agreed to spend $109-million over five years “to bridge the digital divide in Ontario” by providing broadband capacity to Canadian internet service providers, particularly Indigenous owned and operated ISPs.
- Also in August, 2021, the federal government agreed to invest $1.44-billion, consisting of a loan of $790-million and a $650-million preferred equity investment in Lightspeed. Lightspeed agreed to make expenditures in Canada and “create hundreds of Canadian, high-quality, full-time jobs and co-ops and to provide academic scholarships,” according to Telesat’s description of the agreement. (The government also will get warrants to purchase Telesat common stock once the deal is finalized.)
Telesat would like you to know several things to put Mr. Goldberg’s stock grant in context.
One is that there are performance requirements attached to the share grants, requiring the value of a Telesat share to reach US$65.28 on or before Nov. 19, 2025. If not, the stock awards will not vest, or become sellable by Mr. Goldberg, and will therefore have no value.
Two is that Telesat shares have fallen sharply in its life on the TSX: They now hover around $15 apiece, which would make the current value of the stock grant more on the order of $12-million, not $53-million or $87-million.
And three is that Telesat designed Mr. Goldberg’s 2021 share grant to replace virtually all the stock awards it gave him and other executives in past years. They had no value because they were out-of-the-money and “were no longer an effective retention vehicle,” Telesat said in its proxy circular. In 2021, the company cancelled all the stock awards it gave out as a private company since 2009, with the exception of one batch.
All of these explanations should not distract from the fact that the Telesat board intended to give Mr. Goldberg a pay package reasonably valued at roughly $100-million. It did not intend for the shares to lose two-thirds of their value once they got listed on the TSX.
In addition, one might suggest that an executive who owns years of worthless stock awards might not have created the value to merit a $100-million retention package.
Telesat spokesperson Lynette Simmons says “we would disagree that we have not built equity value,” with Loral and PSP Investments approving the share cancellations and the new awards “owing, in large part, to their belief in the management team and as an acknowledgment of the value that had been created over that time.”
Let’s turn to Institutional Shareholder Services for another view. This spring, the proxy-advisory firm recommended withholding votes from all three Telesat directors who sat on the company’s compensation committee, citing “significant problematic pay practices have been identified, including the excessive share-based awards granted to the CEO and internal pay disparity.” ISS dislikes the fact the shares can vest solely through achieving certain price targets, versus some other financial performance measure.
Of course, ISS’s audience is the shareholders who bought Telesat on the TSX. There seems to be an even more important constituency here: the people of Quebec, Ontario and the rest of Canada who have propped up Telesat and made it possible for the company to envision a future in which Mr. Goldberg can reap his rewards. What might they have said if they had been delivered the news of Mr. Goldberg’s pay this spring?
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