Ottawa, Quebec City defend Bombardier executive pay hikes

theglobeandmail.com
By NICOLAS VAN PRAET and STEVEN CHASE
April 4, 2017

The Liberal governments in Ottawa and Quebec City appear to be trying to close the door on the pay hike controversy at Bombardier Inc., saying the plane maker took appropriate action in wake of the uproar.

But opposition politicians pressed on with criticism of the compensation increases, hammering the Liberals at both levels of government for offering Bombardier public money that helped fund millions in raises for its senior leadership.

“It would be one thing if we knew that the money was being used to create jobs or maybe to balance the budget, but instead, part of it is going to Bombardier so it can pay its [executives] millions of dollars,” interim Conservative Leader Rona Ambrose said. “How can...the Prime Minister continue to defend this deal?”

Prime Minister Justin Trudeau was not in the Commons Tuesday. Innovation Minister Navdeep Bains, whose portfolio includes economic development, acknowledged public anger over the pay issue but sought to portray Ottawa’s Feb. 7 pledge of $372.5-million in loans to Bombardier as having a wider benefit than to the plane maker itself.

“I understand the concerns of Canadians and Quebeckers,” the minister told the House of Commons. “This investment was not only about one company but it was about a supplier base to help the small businesses that support the aerospace sector.”

Meanwhile, Conservative Senator Leo Housakos is trying to get the Senate’s transport committee to probe the federal government’s recent loan to Bombardier in the wake of the public backlash over the pay increases.

Mr. Housakos plans to move a motion as early as Wednesday seeking the consent of the Senate to launch a transport committee inquiry into the federal aid. He wants to learn whether the Trudeau government set conditions on how the money is spent in light of Bombardier’s pay proposal.

In Quebec City, the province’s three opposition parties demanded the government make an official request to Bombardier asking for senior executives to renounce their raises. The ruling Liberals blocked their motions on this and two related matters from being debated.

“We don’t believe that it’s the role of government to stick its nose into the internal management of companies,” Quebec Premier Philippe Couillard said after being asked why he isn’t taking any further action in the matter.

The Premier said Quebeckers’ trust and affection toward Montreal-based Bombardier has been “considerably weakened” since last Thursday when news spread that the company’s 2016 compensation package included a collective 48-per-cent pay increase for its six top executives. Indignation has centred on how the company could offer such pay increases when it was saved from the brink of bankruptcy by a $1-billion (U.S.) equity investment by Quebec in its flagship C Series airliner.

However, Bombardier’s response since then has been the right one, Mr. Couillard said. Pierre Beaudoin, Bombardier’s executive chairman, renounced his pay raise on Friday. Chief executive officer Alain Bellemare then proposed to delay half the $32.6-million the company planned to pay its senior executives in 2016 an extra year to 2020 while making it contingent on reaching “performance goals” in line with the company’s five-year strategic plan.

Targets contained in the plan include boosting the margin on earnings before interest and taxes to 8 per cent, growing revenue to $25-billion and generating $1-billion in cash. The company posted a $981-million loss last year on revenue of $16.4-billion.

Mr. Bellemare was hired to put Bombardier back on track after the company nearly collapsed amid a cash crunch in 2015, assembling a strong team of senior executives with international calibre. He suggested that he needs a competitive pay policy to keep his team intact.

If the investment Quebec made is not profitable, there will be no increases for the executives, Mr. Couillard said. “[And if it is], everyone wins.”

The trouble with the Premier seeking to push past this controversy is that it risks putting him at odds with the mood of Quebeckers. In a Leger poll released Sunday morning by Le Journal de Montreal, 90 per cent of respondents said Bombardier’s senior executives should renounce the pay increase they were awarded.

“The coals are still very hot” on this issue, said Christian Bourque, Leger’s executive vice-president. “People were hurt by it.”

Quebec’s three opposition parties argue the fact that the government was blindsided by Bombardier’s pay package shows it needs to flex some muscle with the company given the level of taxpayer support that was pledged to rescue the manufacturer.

“Bombardier showed a disregard for Quebeckers, thinking that this would be acceptable,” Parti Quebecois leader Jean-Francois Lisee told reporters. “It’s scandalous.”

“When a company like Bombardier makes the choice to find a public or semi-public partner there are consequences,” said Francois Legault, head of the Coalition Avenir Quebec party. He said it is no longer beholden to shareholders alone.