Mitch Cronin Posted November 14, 2004 Share Posted November 14, 2004 I don't read French very well at all, but elsewhere in this vast dumping ground for one's and zero's, I came across this text... and it raised my eyebrows somewhat: Des millions d'options pour la direction d'Air Canada La Presse (Saturday, October 23, 2004, p. LA PRESSE AFFAIRES1) Michel Girard Dans le cadre de la restructuration d'Air Canada, on avait l'impression que tout le monde avait énormément perdu. Des milliers d'employés ont été mis à pied, les salaires des employés survivants ont été dramatiquement réduits, les créanciers ont dû éponger des milliards de dollars de pertes et les petits actionnaires se sont fait laver. Eh bien, c'est faux. Les grands patrons d'Air Canada, eux, s'en sont fort bien tirés. Si bien qu'ils se retrouvent aujourd'hui plus riches qu'au moment où la compagnie se plaçait sous la protection de la Loi sur les faillites. Grâce au plan de restructuration d'Air Canada, les dirigeants du premier transporteur aérien au pays ont réussi à mettre le grappin sur 3 millions de nouvelles options d'achat d'actions, dont le prix d'exercice est de 20 $ l'action. À lui seul, Robert Milton, le président et chef de la direction de l'entreprise, s'est fait octroyer un million d'options. M. Milton accapare donc le tiers des options accordées à 25 hauts dirigeants de la compagnie. Ainsi au cours actuel des nouvelles actions d'Air Canada (ACE.RV), soit 23 $, les hauts dirigeants d'Air Canada se sont déjà enrichis (sur papier s'entend) de quelque 9 millions de dollars. Robert Milton, lui, se retrouve, après trois semaines, plus riche de 3 millions de dollars. Et plus l'action d'Air Canada va grimper, plus les hauts dirigeants s'enrichiront avec leurs options et ce, sans jamais courir le moindre risque, contrairement aux actionnaires. Ils sont vraiment chanceux ces dirigeants d'Air Canada, car ils ont pu remplacer leurs vieilles options, qui ne valaient plus un cent depuis belle lurette, par des nouvelles options à grande valeur ajoutée. Pendant ce temps-là, les porteurs des anciennes actions d'Air Canada ne pouvaient recevoir qu'une nouvelle action par bloc de 11 895 vieilles actions! Autrement dit: RIEN! Voilà une situation de deux poids deux mesures, selon que vous êtes haut dirigeant d'Air Canada ou simple actionnaire! Quand les options sur actions des dirigeants d'une entreprise ne valent plus rien ou quand le prix d'exercice des options existantes est trop loin du cours de l'action, il suffit donc de les radier et d'en émettre une nouvelle série à un prix d'exercice basé sur les cours du marché. Facile alors de faire de l'argent en Bourse! Voici une partie de la liste des grands patrons d'Air Canada qui viennent de se faire octroyer des blocs d'options: William Bredt, président et chef de la direction de ZIP: 40 000 Montie R. Brewer, vice-président général, affaires commerciales: 300 000 Paul Brotto, vice-président général, planification: 150 000 Duncan Dee, premier vice-président, affaires d'entreprise: 150 000 Rupert Duchesne, président d'Aéroplan: 75 000 Yves Dufresne, vice-président réseau international, alliances: 20 000 Kevin C. Howlett, vice-président, relations de travail: 50 000 Claude Morin, vice-président, fret: 50 000 Allister Paterson, président Vacances Air Canada: 40 000 Robert Peterson, vice-président, affaires financières: 50 000 Danielle Poudrette, vice-président, initiatives: 20 000 Robert F. Reid, premier vice-président, exploitation: 150 000 Marc Rosenberg, vice-président, ventes: 40 000 Benjamin Smith, vice-président, planification: 75 000 Stephen Smith, premier vice-président, action clientèle: 65 000 Susan Welscheid, vice-présidente, employés: 40 000 William Zoeller, président, services techniques: 50 000. When I read that backwards, it almost makes it sound like these people are being presented with the numbers of shares represented by those numbers beside their names? Could it be that all the kings knights are being heavily rewarded for the routing they gave their serfs? As a small distraction from whatever emotions that thought is teasing out of me, I've been amusing myself with whatever understanding I can grasp out of those French titles... the best one: Robert F. Reid, premier vice-president of exploitation - Sounds like it fits to me! So "labour" costs too much, but their services are worth a reward?... The real work of making the stuff happen that earns this company money isn't fit for a milkbone, but put on a tie, plop yourself into an office where you write letters to silence the noise from below, and yell at a peon from time to time, and you're worth handing a large bonus to? (at $20 a share, thats anywhere from $400,000 to $6 million) grrrrrrrrrr.... Can anyone shed some light on this?... or possibly even help me understand it? Why would department heads be worth such rewards while the rest of us are having some real trouble paying our bills after the beatings we've taken? Link to comment Share on other sites More sharing options...
dagger Posted November 14, 2004 Share Posted November 14, 2004 The fast answer is two-fold: All of this was in black and white in the post-Victor Li restructuring deal, granted by Cerberus and Deutsche Bank. The unions knew about it and somehow found this to be preferable to the guaranteed grant of Victor Li shares to Milton and Calin. Secondly, what I don't see in the story is the exercise date - the date at which they are free to use the options. You could give me a million options tomorrow, but if I can't use them immediately, they could be as worthless as toilet paper in a year. As the story makes clear, all their old options got washed away. The same thing could happen here. The reason companies grant options like this is so executives do a good job and do get rich, because if they get rich, the shareholders get rich and ultimately the employees through contract talks or profit sharing do a lot better. I would be surprised if those options are exercisable until at least late 2005. If the stock is worth $23 a year from now, there is no windfall yet. If the stock is worth $30, they can make some coin back, and I would submit to you that AC will be having a pretty decent year. If the stock is worth $50 a year from now, I would say that AC is kicking some big ass and you guys will all have a very secure future. Mitch, I begged people on this board to negotiate profit-sharing agreements. Did any of the unions bite? Milton offered to make profit-sharing part of the negotiations, or is that concept of risk sharing (the WJ model) just too ideological. Nevertheless, I'll go out on a limb and predict that if AC really has great profitability, there will be added benefits for the staff. Anyway, now you are making go back to that 400-page restructuring document to look up the dates. As a p.s., the list in LaPresse is old. Some of these people have been moved around since, yet the approval for the distribution of options was only made in November. So it is hard to say who got what in the end. Vesting would be a minimum of a year, and perhaps up to three years. There could be different dates on different options. In any case, this option package was a requirement of DB for its investment. Link to comment Share on other sites More sharing options...
Guest long keel Posted November 14, 2004 Share Posted November 14, 2004 Wasn't a profit sharing agreement in place with the revised TA that ACPA signed? Link to comment Share on other sites More sharing options...
AIP Posted November 14, 2004 Share Posted November 14, 2004 Mitch, I begged people on this board to negotiate profit-sharing agreements. Did any of the unions bite? Milton offered to make profit-sharing part of the negotiations, or is that concept of risk sharing (the WJ model) just too ideological. Nevertheless, I'll go out on a limb and predict that if AC really has great profitability, there will be added benefits for the staff. Dagger, ACPA and I think the rest of the groups as well, do in fact have a profit sharing deal. I am not 100% certain of the threshold when it kicks in. I think it is stated that between 50% and 70% of PS program will be based on mainline results with a formula of 7.5% of adjusted pre-tax profits at/or below 7% of revenues. If you can spell that out in plain-speak, it would be appreciated. Cheers Link to comment Share on other sites More sharing options...
dagger Posted November 14, 2004 Share Posted November 14, 2004 Dagger, ACPA and I think the rest of the groups as well, do in fact have a profit sharing deal. I am not 100% certain of the threshold when it kicks in. I think it is stated that between 50% and 70% of PS program will be based on mainline results with a formula of 7.5% of adjusted pre-tax profits at/or below 7% of revenues. If you can spell that out in plain-speak, it would be appreciated. Cheers I can't out it into plainer speak without seeing the whole formula, but if it is there, then I think it's a fair sawoff for the options. The Cerberus deal made it clear from the start that 3% of the new share float was being held back for management retention purposes - an option plan. If it vests over two or three years and AC is profitable, chances are you will get a p-s payment at the same time management sees something real out of its options. As I said many times through the CCAA, the goal of everybody should be to make the most money so the pie is really, really big. Then sooner or later, everybody is going to get a bigger slice and we will never hear a whimper about pension deficits. Another idea would be to buy the stock on weakness (under $20) and share the same upside as the execs - assuming there is upside. Link to comment Share on other sites More sharing options...
Mitch Cronin Posted November 14, 2004 Author Share Posted November 14, 2004 Thanks for the attempt to answer Dagger... As for the IAM, all I've seen (or anyone else, to date, I believe) is: "Profit sharing, to be negotiated" There may be some very worthy people on that list, but I'm fairly certain there are also some there who aren't worth a wooden nickel, and are likely a big part of the troubles that have existed within this company. I hope that at least the proportioning of those share options was somewhat based on value! (though when I see the figure beside the "exploitation" chief, I sure have to wonder!) Link to comment Share on other sites More sharing options...
Cargo Agent Posted November 14, 2004 Share Posted November 14, 2004 From the Plan of Arrangement dated July 12th, 2004 : As of the date hereof, seven of the Corporation's unions have agreements entitling them to participate in a profit sharing programme under which (i) 7.5% of adjusted pre-tax profits up to 7% of revenues, and (ii) 25% of adjusted pre-tax profits above 7% of revenues, will be distributed to eligible employees. The full document is found here, the relevant parts are on page 107 of the circular. http://www.stikeman.com/ac/uploads/Final%2...0Prospectus.pdf Link to comment Share on other sites More sharing options...
Stickle Posted November 14, 2004 Share Posted November 14, 2004 Out of sheer curiosity, why wouldn't Joe Randell show up on this list when you have the likes of Allister Paterson. Both are presidents of wholly owned subsiduaries. Link to comment Share on other sites More sharing options...
dagger Posted November 14, 2004 Share Posted November 14, 2004 Thanks for the attempt to answer Dagger... As for the IAM, all I've seen (or anyone else, to date, I believe) is: "Profit sharing, to be negotiated" There may be some very worthy people on that list, but I'm fairly certain there are also some there who aren't worth a wooden nickel, and are likely a big part of the troubles that have existed within this company. I hope that at least the proportioning of those share options was somewhat based on value! (though when I see the figure beside the "exploitation" chief, I sure have to wonder!) That's very true, Mitch, but you can say that about some unionized workers who might end up enjoying some profit sharing. Link to comment Share on other sites More sharing options...
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