Prominent business people, executives and former executives in North America
Introduction
Executives in the News (EITN) is a site that provides information about current and former business personalities as well as up-and-coming business people who appear in media, both tradtional and social media.
Does Michael Sabia, former CEO of BCE really deserve all that money for selling an under-performing company, resulting in thousands of lost jobs? When the CEO can exercise options worth tens of millions of dollars, happily granted by the board, only to then lay off thousands of employees-- something doesn't quite feel right. From Geoffrey Laxton... BCE Inc. insiders stand to reap hundreds of millions of dollars in gains from their stock options and other long-term compensation in the proposed sale of the company to a group led by Ontario Teachers Pension Plan for $42.75 per share.
Information in company filings shows that, as of March 31, an unspecified number of BCE employees had 23-million stock options outstanding, with an average strike price of $33, or the price employees can pay to buy stock during the life of the options.
Since options are expected to automatically vest with the closing of the transaction, the gain will be an average of $9.75 per option, for a total of $224-million. That is a significant improvement over just four months ago, when the stock was trading for $30 and the majority of options held by employees were essentially worthless, after five years of flat performance by the stock.
Other compensation awards will likely be released to employees and directors in the event of a sale. Executives and other key employees held a total of three million "restricted share units," (RSUs) at the end of the last quarter, which should vest into the same number of common shares when the deal closes, at a value of $128-million.
Among top executives, chief executive Michael Sabia and president George Cope stand to gain the most from the sale. Mr. Sabia's 450,000 options granted in March at a strike price of $30.72 in March would deliver a pre-tax gain of $5.4-million at the proposed sale price.
Between Mr. Sabia's 134,124 shares and other compensation awards, he should be able to cash out more than $30-million under the deal announced Saturday. Mr. Cope, meanwhile, is sitting on $10-million in potential gains from the 693,000 options he has been granted since joining the company two years ago.
Mr. Sabia or whoever replaces him should expect to see an even larger portion of pay tied to long-term performance under private ownership. That is because leaders of companies bought out by private equity firms are expected to align their interests with the owners by tying their pay to the achievement of long-term returns leading to a sale or public offering. Based on some estimates by investment bankers, the CEO of BCE could earn hundreds of millions of dollars if the company hits its return targets over a five-year period.
But if Mr. Sabia loses his job within a year of the change of control, he stands to make three year's worth of his salary and target bonus, equal to a severance payment of $8.4-million. BCE directors also stand to gain from the sale. Directors receive their fees in the form of "deferred stock units", which turn into common shares when they leave the board or if the company is sold. Based on information in the company's most recent proxy circular, eight of the company's 15 directors are sitting on more than $1-million worth of deferred units each. In total, the 1.3-million DSUs granted to directors and key executives would be worth $55-million at the sale price. The biggest gainer on the board is chairman Dick Currie, who bought about 1-million shares after ascending to that position five years ago. His current stake in the company, including units paid for his services on the board, will be worth $45-million if the deal closes at the sale price.
Former CEO of BCE, Michael Sabia, was recently asked to chair the advisory board for the Canadian HIV Vaccine Initiative Implementation. The honourable Tony Clement, Minister of Health, was the one to name Sabia to the board. The Canadian HIV Vaccine Initiative Implementation Advisory Board has a mission of making a significant contribution to the Global HIV Vaccine Enterprise, and accelerate the development of a preventative HIV vaccine globally. Addressing a crowd of Canadian delegates at the XVII International AIDS Conference in Mexico City, Minister Clement announced that Mr. Sabia will chair the board, made up of Canadian leaders in the business, philanthropy, public policy, scientific and non-governmental sectors. The CHVI Implementation Advisory Board will provide advice to the Minister of Health, the Minister of International Cooperation, and the Minister of Industry on how to raise the profile and promote the sustainability of the CHVI through expanded partnerships and linkages both in Canada and around the world. Additional board members will be named as their commitments are finalized.
"I am honoured to say that Mr. Michael Sabia has agreed to take on this role," said Minister Clement, "I am confident that with his successful career in Canadian business, his participation will open doors for the CHVI that will allow the Government of Canada to continue to be a leader in HIV vaccine development until we have reached our global goal."
"The CHVI is a great example of creative public policy," said Mr. Sabia, "By bringing together the public resources of the Government of Canada and the private capabilities of the Gates Foundation, this initiative can accelerate progress being made in the global fight against HIV. Our goal, as the Implementation Advisory Board, will be to leverage the strengths and ideas of the public, private and philanthropic sectors to ensure that this initiative moves quickly and has the maximum possible impact."
The Canadian HIV Vaccine Initiative was launched in February 2007, and is dedicated to accelerating worldwide efforts towards the development of safe, effective, affordable, and globally accessible HIV vaccines that are essential to ultimately overcoming the HIV/AIDS pandemic. Through the CHVI, the Government of Canada and the Bill & Melinda Gates Foundation have dedicated, over 5 years, $111 million and $28 million respectively, to support the global fight against HIV and AIDS.
The CHVI will strengthen global capacity to manufacture HIV vaccines for high quality clinical trials. Its ultimate aim is that an affordable, safe, effective and globally accessible vaccine will be made available to those who most need it but can least afford it, particularly those in low-and-middle income countries.
The Canadian International Development Agency, the Public Health Agency of Canada, Industry Canada, the Canadian Institutes for Health Research and Health Canada all partner in this global collaboration, which involves developed and developing countries, researchers, non-governmental organizations, the private sector and governments.
Diane Francis of the Financial Post sits down with one of Canada's top money men to discuss the latest opinions of BCE. With Michael Sabia out, and George Cope in, as well as the supreme court's ruling on the legality of the BCE Board of Directors actions regarding bond-holder rights, Stephen Jarislowsky speaks his mind. Q: BCE? A: “It’s outrageous that the board of directors took $1 billion from BCE’s bondholders. It’s also just plain stupid that the Supreme Court of Canada, in a 7 to 0 opinion, briefly heard the case and overturned the Quebec Appeal Court’s unanimous 5 to 0 opinion upholding the rights of bondholders.”
Q: The Supreme Court’s overturning of the Quebec Appeal Court’s unanimous decision in any other issue would have sparked a constitutional crisis? What was this all about? A: “The whole field of investor law is a joke in Canada. What was allowed to happen to BCE bondholders is unbelievable. The dividends were cut for BCE shareholders to reduce the price paid. The board did not look after the bondholders as well as the shareholders. The Quebec Appeal Court’s decision was the correct one.”
Q: Wasn’t this lack of protection for bondholders in the fine print of the deal? A: “In Canada, the board is responsible to the company and not the shareholders or bondholders. Thomson Reuters just sold bonds and had a clause which stated that bondholders were not protected or subordinate to shareholders. We would not buy bonds like that which mean that they can go from As to junk based on board decisions in the future.”
Q: How is it that BCE is now run by the buyers even though the deal hasn’t closed? A: “It’s unacceptable.”
Q: Will BCE get the debt it needs to close the deal? A: “I don’t know. The banks have been out of control and are now having difficulties.”
Q: What legal reforms should occur in Canada? A: “Much work needs to be done and I am setting up a foundation with others to come up with legislative ideas. Take Conrad Black. He stole more money in Canada than he did in the U.S. and he wasn’t even pursued here. We do not have police or securities commissions who are on the ball. We do not have specialized courts who understand what to do. Suing in Canadian courts is not a remedy because it takes ten years to get anywhere and why should shareholders have to suffer when a board has done something wrong?” “Arbitration, not lawsuits, is the best way to handle disagreements and problems.”
Q: Why has BCE been so badly managed for so long? A: “All the company did for decades was go to Ottawa and ask for higher rates of return. They blew money on bad investments and never fixed their customer relations problem. This is a company that has been disliked as much as Air Canada with its hated, high-handed employee behaviour toward customers. That still hasn’t been fixed. I used to have lunch with Michael [Sabia, former CEO]. I like him but he never fixed it.”
former President and Chief Executive Officer, BCE and Chief Executive Officer, Bell Canada
Michael J. Sabia was President and Chief Executive Officer of BCE Inc. and Chief Executive Officer of Bell Canada. He is also Chairman of the Board of Bell Aliant Regional Communications, as well as director of BCE Inc., Bell Canada and The Thomson Corporation.
Mr. Sabia was President and Chief Operating Officer of BCE from March 2002 to April 2002, and Chief Operating Officer of Bell Canada from March 2002 to May 2002. He was President of BCE from 2000 to March 2002 and Executive Vice-President of BCE from July 2000 to December 2000, and Vice-Chair of Bell Canada from 2000 to March 2002. He was previously Vice-Chair and Chief Executive Officer of Bell Canada International Inc. (BCI) from 1999 to June 2000 and then Vice-Chair of BCI from 2000 to November 2001. Before joining BCI, Mr. Sabia was an executive of Canadian National Railway Company (railway company) where he joined as Vice-President, Corporate Development in 1993, and was appointed Executive Vice-President and Chief Financial Officer in 1995. Prior to 1993, Mr. Sabia held a number of senior positions in the Canadian Federal Public Service, including Director-General of Tax Policy in the Department of Finance and Deputy Secretary to the Cabinet (Plans) in the Privy Council Office.
Sabia, the son of the feminist Laura Sabia, held a number of senior positions in Canada's federal public service during the 1980s and early 1990s, including:
* Director-General of Tax Policy in the Department of Finance * Deputy Secretary to the Cabinet (Plans) of the Privy Council Office.
Sabia's supervisor, Clerk of the Privy Council Paul Tellier, left the public service to assume the presidency of Crown corporation CN Rail in the early 1990s and subsequently persuaded Sabia to follow him to help in privatizing the company. Sabia's partnership with Tellier led to increasing respect within the Canadian business community for the rapid turn-around of the company's financial performance. Sabia held a number of executive positions at Canadian National Railway during the 1990s such as Vice-President, Corporate Development and Executive Vice-President and Chief Financial Officer.
Sabia subsequently left CN to the executive offices at BCE.
On April 28, 2006, BCE announced that CEO Michael Sabia was taking a 555% pay increase, his salary being raised from $1.21 million CAD a year to $6.71 million CAD a year. The pay included a $1.25 million CAD salary, a $29.2 million CAD bonus that Sabia converted to deferred share units, a long-term incentive payout of $3 million CAD and other compensation, the filing shows. Bell Canada also posted record revenue increases for the previous fiscal year.
On September 21, 2007, Sabia announced he will leave BCE after the privatization deal closes.
Profile from Macleans magazine:
In her day, the late Laura Sabia was never shy about poking establishment noses. Tart and outspoken, the founding president of the National Action Committee on the Status of Women in 1972 was a champion upender of the status quo. Now her youngest child, Michael, has suddenly vaulted into the top job at BCE INC., the bluest of the blue chips - it's telephone giant Bell Canada's parent after all - albeit in one of its periodic slides from glory. Thank goodness, shareholders may say, the apple doesn't fall far from the tree.
When 48-year-old Michael Sabia takes the dais this week at BCE's annual meeting, he will be wearing his darkest suit, speaking in his most careful tones and doing his best to keep his electric hair under control. Don't be fooled; he is truly the iconoclast's son. In two previous incarnations, Sabia took his lack of specific training, his distanced eye, and turned it into an asset. "If you want to know about water," he once said, "don't ask a fish." Ask instead, the one getting thrown in the deep end.
His first dunking was the GST. Somebody had to think that sucker through and figure out how to implement a new federal consumption tax across an unwieldy and unwilling economy during the all-consuming '80s. Might as well be the new kid in the Finance Department, you know, the one with the political science degree from Yale who had wanted to be an academic.
Then came a six-year stint as Paul Tellier's sidekick at Canadian National Railway Co. Just a couple of old civil service buddies fixing up a clunker. Actually, two pretty intense, ferociously driven ex-bureaucrats, who made a pig fly, as one business book had it: first by privatizing the former Crown corporation and then by turning it into one of the most efficient railways in North America. "This was a business miracle that business people were not able to produce," observes Stanley Hartt, chairman of Salomon Smith Barney Canada Inc., a commercial banker, and a deputy minister of finance during the Brian Mulroney years. And in the course of producing it, Sabia became, in Hartt's view, "the quintessential CFO," a chief financial officer who was routinely sought after by other corporations for his strategic thinking. "And he doesn't even have an accounting degree!" says Hartt. "He's not trapped by 'thinking inside the box' because he hasn't been in any single place long enough to be in a box."
But he is now. If not all that much is known about Michael Sabia - he's turned aside all interviews at least until he has met with shareholders and has all his management ducks lined up - there is no shortage of speculation about what ails giant BCE. Sabia has been at the telecom and communications conglomerate since October, 1999, coincidently just a few months after mentor Tellier joined the BCE board. Sabia started by running Bell Canada's international arm, its investments in phone and Internet companies in Asia and Latin America. But he was quickly moved up the ladder. By July, 2000, he became executive vice-president of parent BCE, and in January was named its chief operating officer, the No. 2 (again) but clearly the heir apparent to the patrician Jean Monty. No one, however, thought the coronation would come as quickly as it did, at the end of April, when Monty unexpectedly lost a protracted battle with the BCE board, fell on his sword, and left it to Sabia to pick up the corporate pieces. Pretty big pieces at that.
Bell's telephone operations were all doing well, aggressively grasping for market supremacy, in fact. But almost all its other big investments were coming apart at the seams. And BCE shares, the once-happy haven of widows and mutual funds, had lost about a third of their value. The biggest headache was Teleglobe Inc., a state-of-the-art subsidiary that was girdling the world with fibre optic cables in anticipation of an e-commerce data boom that never quite materialized. By walking away from Teleglobe in April, after what some estimate as a $15-billion investment, and pushing it into court-ordered bankruptcy protection, BCE has staunched its red ink. But it has also lost its own set of overseas conduits and, more importantly perhaps, the parent company's withdrawal has really ticked off a long list of creditors. Which leads to headache No. 2.
At the end of June, a six-month window opens for SBC Communications Inc. of San Antonio, Tex., one of the more successful of the so-called Baby Bells in the U.S., to require BCE to buy back SBC's 20 per cent stake in Bell Canada for fair market value plus a premium of 25 per cent. Or roughly $7.5 billion. Given SBC's own ambitions - it has reportedly been sniffing around the fire sale possibilities of its former parent, AT & T&T;, as well as Teleglobe - most analysts expect BCE to have to come up with the money somehow. Doing so might also bring it face to face with the underpinnings of the Monty-induced, Sabia-backed strategy, the so-called three Cs: content, connectivity and (e-)commerce. This was the notion that prompted BCE to go out and buy itself a television network, CTV, and a newspaper, the Globe and Mail, to pump through its new-found Internet and Teleglobe connections.
"This won't be his first priority," suggests Lawrence Surtees, senior telecom analyst with IDC Canada and a long-time Bell watcher. "But within six months to a year I can see Sabia dismembering his media properties. They make money. But for BCE that's mostly chump change. And if you want to be a real convergence carrier, you don't want to be just locked in to your own guys, you want to be able to do deals with their competitors."
The end of convergence? Much too soon to say. Sabia's first moves have been very cautious, moving his own executives up into place but no radical house-cleaning. The look is much more one of BCE's time-honoured corrections. For a blue-chip operator, it has a history of buying the wrong assets at the wrong time. During the booming 1980s it saddled itself with real estate and energy appendages. Then, after selling Nortel Networks Corp., its manufacturing arm, two years ago it went on its Internet and media buying spree. But in many respects, Surtees argues, Bell has been retrenching for much of the last decade, solidifying its hold on business and household telephone use in Central Canada, the Maritimes and parts of the West. "There has always been that question," he says. "What does BCE want to be when it grows up?"
You might say the same for Michael Sabia. He's probably taken his talented amateur act as far as he can go. He's not the No. 2 any more, as he was at CN or even with the GST, where his immediate boss was tough-talking David Dodge, now the governor of the Bank of Canada. Sabia's now the one in charge, not the "shit disturber" he once called himself who can afford to challenge everything that's on the table. By most accounts, an impressive, quippy, likeable guy - "as long as you have the smarts to stand up to him," a former colleague says - even former opponents have nothing but praise. "He's brilliant, bulldoggy but always courteous," says ex-Liberal minister Doug Young, who was his party's GST critic in opposition and then worked closely with Sabia and Tellier on the privatization of CN.
So far, Michael Sabia has slipped in under the radar. He's not even listed in the Canadian Who's Who. But his wife, Hilary Pearson, is and there is a story in that. They met at the U of T, in their very first year and married in 1983 when they were both civil servants. She is the granddaughter of a Liberal prime minister; he is the son of the feminist firebrand who ran for the Tories and routinely threatened Mike Pearson with all manner of political devastation. An establishment marriage? Their daughter's name is Laura. Author ROBERT SHEPPARD
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Does Michael Sabia, former CEO of BCE really deserve all that money for selling an under-performing company, resulting in thousands of lost jobs? When the CEO can exercise options worth tens of millions of dollars, happily granted by the board, only to then lay off thousands of employees-- something doesn't quite feel right.
