Bombardier LessonPerhaps the good people at Fairfax should get more aggressive based on the lessons demonstrated at Bombardier. See these excerpts from The Globe and Mail today with Torstar parallels inserted by me:
Companies run by families often operate as if they have a genetic right to ensure their DNA infuses the executive ranks forever. Once in a while, their offspring add value. More often than not, they fail to do so, yet the kids stay in power while shareholders pray for miracles.
So it is with Bombardier. The aerospace and train giant – Canada’s premier technology and engineering company – has been a sorry story of mismanagement and value destruction for years, in good part because its gamble on the C Series passenger jet(see StarTouch and other failed investments) proved reckless. In 2008, Bombardier was a $9 stock (TS.B $19). In 2013, it was a $5 stock. Today, the price is a few pennies above $2.(TS.B $1.55)
Yet Pierre Beaudoin (Honderich), the Bombardier family member who oversaw the near collapse of the company, refuses to leave. True, he had the good sense to step down as CEO in 2015(fired as publisher of the Toronto Star in 2004), when he was replaced by Alain Bellemare, a Canadian aerospace veteran from United Technologies. But he stayed on as executive chairman, blurring the lines between CEO and chairman and leaving shareholders wondering who really had final say on big decisions – Mr. Bellemare, the hired gun, or Mr. Beaudoin, the family guy. (Make no mistake - Honderich is running Torstar. Boynton is the hired gun given no bullets).
The Beaudoins and the Bombardiers, who control 53 per cent of the company’s votes (Voting Trust 100%)even though their equity stake amounts to only 13 per cent (19% of Torstar), are evidently convinced that Bombardier (Torstar) is still a family company and that blood lines cannot be crossed.
As long as Mr. Beaudoin (the Voting Trust) keeps the family blood flowing through the board room, the Bombardiers and Beaudoins (Honderich) will have a bias to put the family, not the company, first. Mr. Beaudoin (Honderich) should go.