It took RIM until 2012 to accede to having an independent board chair, a practice recommended almost 20 years ago. At this week’s annual general meeting, the minimalist shuffle toward corporate governance continued. Chair Barbara Stymiest, a former banker and regulator, acknowledged there were gaps in board skills.
“Gaps” is an understatement. This board does not have the industry track record, or clout to push back against management. And it also lacks the shareholder mindset and respect to have prevented—and now attempt to restore—the 95% drop in shareholder value. If RIM was complying with good governance practices, the chair would disclose which directors she believes have the relevant skills (including value creation skills), expertise and track record, and direct ability to add to the performance and ultimate value of RIM.
Former lead director John Richardson, former co-CEO Mike Lazaridis, and current Rotman Dean and RIM director Roger Martin each received 30%, 19% and 22% of votes withheld, respectively. These directors should step down, and if not, the chair should insist. The chair herself received 23% of votes withheld. This could be construed as an indictment on her leadership skills.
One shareholder at the AGM lamented that what is needed is an activist shareholder to step in and replace most incumbent directors, as happened at CP Rail. True, but it should not require a long, protracted proxy battle to do what is blindingly obvious. As long as directors dig in and refuse to go, and as long as shareholders lack the ability to remove directors, this sorry state of what once was Canada’s second largest company will continue. Major change must start with the board.
A governance impediment is that independence guidelines for selecting directors are unsupported by empirical research. Remarkably, you don’t need to know anything about a company’s business, industry or its risks to sit on its board. What then happens is choosing independent “profile” directors, with management rather than shareholder input, and with a view to looking good on paper. Such directors are out of their depth when it comes to shareholder value maximization.
Stymiest did say she had retained a firm to assist in the search for new directors. Each RIM director (including the chair) should therefore compete for his or her position against the following search specifications for the new directors.
- An effective chair with a stellar track record of value creation, tough but non-autocratic leadership skills, and a mindset of high expectations and shareholder value maximization.
- Two marketing executives with the track record and experience that would be in alignment with RIM’s needs. The key here is not just marketing experience and track record but the specific type of marketing experience that is directly relevant and of value to RIM.
- Two technology executives with the track record and experience that would be in alignment with RIM’s needs. The key is the same here as noted above for the marketing oriented directors.
- One or two partners from a hedge fund like ValueAct Capital. ValueAct is an activist hedge fund that takes a cooperative approach with boards and management after making an investment and usually seeks one or two board seats. They focus on technology companies and bring very sophisticated and exceptional value maximization skills to the boardroom.
- One or two additional directors selected based on other strategic or operational needs of RIM not addressed by the marketing and technology directors.
With these changes, the focus will be performance-oriented for shareholders and improvements will cascade from there.
But will these changes happen? Will those directors who should step down, do so?
We shall see, but the jury is still out on RIM. So far, governance changes have been too little, too late.