RE:Dual Share Structure![url=Governance. Governance. Governance. In the maelstrom surrounding Bombardier, why isn’t anyone talking about governance? More specifically, the company’s voting and non-voting share structure, which puts control of the company in the hands of the Beaudoin and Bombardier families. There are 10 votes attached to each A share held by the families and one vote linked to each B share, held by retail and institutional investors. When it comes to matters like appointing directors and auditors — and all other business items put before shareholders at annual meetings — those retail and institutional votes don’t matter a whit. In the investment and finance world, companies with dual share structures are viewed as private companies run with public money, from the retail and institutional crowd. In Canada, most dual-share companies have their roots as family-founded entities, like Rogers Communications, Teck, Shaw Communications and ATCO, to name a few examples. Magna was among that group before its board eliminated the dual share structure seven years ago. While it cost the company almost $1 billion in cash and shares to make it happen, Magna’s shares have been on a fairly steady upward trajectory. Trading around $17 in 2010, they’ve been as high as $55.22 in the past 52 weeks. The dual share structure allows a family to retain control over the company and, by extension, appointments to its board of directors. And that’s where it can get tricky. At Bombardier, four family members sit at the board table. It’s difficult to argue that in approving the outrageous compensation to its senior executives — after receiving federal and provincial money, selling 30 per cent of its train business to the Quebec Caisse de Depot et Placement for $1 billion and continuing in layoff mode — that the Bombardier board acted in the best interest of the company and all shareholders. Pierre Beaudoin, a former Bombardier president and the board’s executive chairman, is a member of the family that controls the company. At Shaw Communications, former CEO Jim Shaw, a son of the company’s founder, was awarded an annual pension of $6 million when he left the company in 2010. He was also granted a $5.3 million interest-free loan in 2002. The difference between Shaw and Bombardier is that Shaw is profitable and has not asked for government money. In Alberta, having witnessed the profound challenges in the oilpatch since 2014, a significantly different narrative has played out. As companies saw bottom lines decimated by the oil price rout and took the path of laying off employees, senior executives eschewed bonuses and salaries were frozen, if not cut. Some companies, including Canadian Natural Resources Ltd., instituted across-the-board salary cuts to avoid cutting staff. Contrast that with Bombardier, which has laid off 14,500 employees over the past two years, and whose board still thought management deserved salary increases and bonuses. A look at the composition of Bombardier’s board reveals the talent and experience resident around the table — retired executives from companies like Citigroup, Google, Bell Canada, Nestle and Lufthansa, and a former federal auditor general — doesn’t necessarily ensure the level of governance is commensurate with that expertise given the share structure. Bombardier has been financially challenged for some time. It was close to bankruptcy in 2015 and it’s a safe bet the dual share structure has scared away joint venture opportunities. In 2015, Airbus passed on a potential stake in the beleaguered CSeries jet. It would be foolhardy to think Bombardier’s ownership structure wasn’t among the factors that caused Airbus to decline the offer. It can be argued Bombardier is the architect of its own challenges. Eliminating the dual-voting share structure could improve the company’s access to capital. Many arguments have been made for supporting Bombardier with government money, including the fact it’s a cornerstone of Canada’s aerospace industry and that other aircraft manufacturers, such as Brazil’s Embraer and the Airbus consortium, also receive government subsidies. Others have made the case the dual voting share structure ensures Bombardier remains a Canadian entity and isn’t vulnerable to a foreign takeover, or that family control ensures the long-term view is maintained. But there are other ways to accomplish this. The family could buy a 30 per cent stake in the company — which would function as a healthy poison pill in the event of a takeover bid. They now control 53 per cent of the company, but own only 12 per cent of the shares. It’s time Bombardier — and other Canadian entities with a dual share structure — changed their capital structure to better serve all shareholders. Deborah Yedlin is a Calgary Herald columnist dyedlin@postmedia][/url]