rotor-rooter
4th Oct 2002, 00:09
If any of you do not read the Toronto Globe and Mail, you might have missed these stories in the last couple of weeks! Interesting reading!
CHC's top gun rudely awakened by his shareholders' clout (http://www.globeandmail.ca/servlet/GIS.Servlets.HTMLTemplate?current_row=4&tf=tgam/search/tgam/SearchFullStory.html&cf=tgam/search/tgam/SearchFullStory.cfg&configFileLoc=tgam/config&encoded_keywords=chc&option=&start_row=4&start_row_offset1=&num_rows=1&search_results_start=1&query=chc)
And the background to the activities that they took such exception to!
What not to do as model of probity
Fabrice Taylor 00:00 EDT Thursday, September 12, 2002
Toronto Globe and Mail.
What we need, in this age of mistrust, is a role model of corporate behaviour, a poster boy to hold up to all the miscreant value subtractors in the world.
If you like your exemplars contrarian-style, you've got one in CHC Helicopter,which seems to be going out of its way to show its peers exactly what not to do.
CHC is in an oil patch concern, a decent one, too.
Basically, it ferries people and gear from land to oil platforms. Business is swell. First-quarter revenue and earnings per share were up 20 per cent year over year. CHC is renegotiating contracts, generally on better terms, which may bode well for the future.
But it seems all this success is going to management's head. Browse the company's latest proxy statement and the corporate governor in you will be aghast.
The proxy, issued on Aug. 30, reveals that the board granted the company's main executives 670,000 new stock options on May 1.
The trouble is that under the stock option plan, the directors -- who have done nicely on their own stock grants -- are allowed to offer options totalling only 10 per cent of the company's stock outstanding.
Guess what? CHC has been busy printing calls over the past three years, and it's already surpassed the allowable limit.
So the May option grants will be exercisable only if shareholders approve a proposed change that would raise the limit to -- wait for it -- 17 per cent. That's right, dear shareholders: You will be asked, in two weeks, to allow the company's executives to increase your potential dilution by 70 per cent -- and that's off a high base point.
Of course, your votes will be meaningless, because you've chosen to invest in a multiple-stock enterprise. This one has not one, not two, but three classes of stock. The multiple votes -- 10 each -- belong to Craig L. Dobbin, OC, chief executive officer and beneficiary of 260,000 fresh options. We think we can guess how he'll cast his majority votes.
According to the proxy, "the purpose of the ESOP is to encourage participants to promote the financial interests, growth and development of the corporation by providing them with the opportunity to acquire a proprietary interest in the corporation."
That must be why a third of the May options, which were issued at the money, vest immediately, with another third vesting in a year and the rest in two. Nothing like building long-term incentives into a compensation package. CHC also will lend your money to option holders who want to exercise, in the event they're short of cash.
As things stand, the loans, if made, should be short-lived. The vested portion of the May options is already worth $2-million. Not bad for four months work.
The proxy isn't without its lighter moments, however ironic they may be. The company includes a list of the TSX's hard-hitting corporate governance guidelines and whether or not the company is meeting them, complete with comments.
Example: Board should approve CEO's corporate objectives. Does the corporation align? Yes. Comments: Corporate objectives are approved by the board. To this we add: The chairman of the board is the CEO and the vote-controlling shareholder.
It's presumably that kind of setup that allows a helicopter operator to expand into the plastics composites business -- as CHC recently did, running the risk of ending up face down in the liquid polymer, like so many that came before.
Pick up the paper these days and you'll find investors screaming two commands at corporations: Excessive stock options are bad, and not sticking to your knitting is worse.
Furthermore, there's a good chance that stock options will soon have to be expensed.
You have to question the judgment of anyone who doesn't get the message.
CHC's top gun rudely awakened by his shareholders' clout (http://www.globeandmail.ca/servlet/GIS.Servlets.HTMLTemplate?current_row=4&tf=tgam/search/tgam/SearchFullStory.html&cf=tgam/search/tgam/SearchFullStory.cfg&configFileLoc=tgam/config&encoded_keywords=chc&option=&start_row=4&start_row_offset1=&num_rows=1&search_results_start=1&query=chc)
And the background to the activities that they took such exception to!
What not to do as model of probity
Fabrice Taylor 00:00 EDT Thursday, September 12, 2002
Toronto Globe and Mail.
What we need, in this age of mistrust, is a role model of corporate behaviour, a poster boy to hold up to all the miscreant value subtractors in the world.
If you like your exemplars contrarian-style, you've got one in CHC Helicopter,which seems to be going out of its way to show its peers exactly what not to do.
CHC is in an oil patch concern, a decent one, too.
Basically, it ferries people and gear from land to oil platforms. Business is swell. First-quarter revenue and earnings per share were up 20 per cent year over year. CHC is renegotiating contracts, generally on better terms, which may bode well for the future.
But it seems all this success is going to management's head. Browse the company's latest proxy statement and the corporate governor in you will be aghast.
The proxy, issued on Aug. 30, reveals that the board granted the company's main executives 670,000 new stock options on May 1.
The trouble is that under the stock option plan, the directors -- who have done nicely on their own stock grants -- are allowed to offer options totalling only 10 per cent of the company's stock outstanding.
Guess what? CHC has been busy printing calls over the past three years, and it's already surpassed the allowable limit.
So the May option grants will be exercisable only if shareholders approve a proposed change that would raise the limit to -- wait for it -- 17 per cent. That's right, dear shareholders: You will be asked, in two weeks, to allow the company's executives to increase your potential dilution by 70 per cent -- and that's off a high base point.
Of course, your votes will be meaningless, because you've chosen to invest in a multiple-stock enterprise. This one has not one, not two, but three classes of stock. The multiple votes -- 10 each -- belong to Craig L. Dobbin, OC, chief executive officer and beneficiary of 260,000 fresh options. We think we can guess how he'll cast his majority votes.
According to the proxy, "the purpose of the ESOP is to encourage participants to promote the financial interests, growth and development of the corporation by providing them with the opportunity to acquire a proprietary interest in the corporation."
That must be why a third of the May options, which were issued at the money, vest immediately, with another third vesting in a year and the rest in two. Nothing like building long-term incentives into a compensation package. CHC also will lend your money to option holders who want to exercise, in the event they're short of cash.
As things stand, the loans, if made, should be short-lived. The vested portion of the May options is already worth $2-million. Not bad for four months work.
The proxy isn't without its lighter moments, however ironic they may be. The company includes a list of the TSX's hard-hitting corporate governance guidelines and whether or not the company is meeting them, complete with comments.
Example: Board should approve CEO's corporate objectives. Does the corporation align? Yes. Comments: Corporate objectives are approved by the board. To this we add: The chairman of the board is the CEO and the vote-controlling shareholder.
It's presumably that kind of setup that allows a helicopter operator to expand into the plastics composites business -- as CHC recently did, running the risk of ending up face down in the liquid polymer, like so many that came before.
Pick up the paper these days and you'll find investors screaming two commands at corporations: Excessive stock options are bad, and not sticking to your knitting is worse.
Furthermore, there's a good chance that stock options will soon have to be expensed.
You have to question the judgment of anyone who doesn't get the message.