WASHINGTON/MONTREAL (Reuters) - Pierre Beaudoin is expected to step down as executive chairman of Canada’s Bombardier Inc BBDb.TO in early 2016, according to a source familiar with discussions about the issue, a move that could erode family control of the plane and train maker.
The source, who was not authorized to speak publicly, said the change was still being discussed and it was not clear who would replace Beaudoin, a member of the family that controls the company. A decision could only be taken during a board meeting.
One option would be to appoint Chief Executive Alain Bellemare as chairman, rewarding his successful drive to secure investors and improve the company’s balance sheet, said the source.
“Alain’s done a great job since he got there, and it would be a natural succession plan to have him assume the role of chairman,” the source said. “It’s time for new leadership.”
Bellemare questioned the report that Beaudoin could be stepping down. “I don’t know where this is coming from,” he said at a Montreal-area event on Friday morning.
Shares in Montreal-based Bombardier initially rose 9 percent on Friday, after news that the company’s CSeries 110-seater plane received certification from Canadian regulators. The stock, which moved nearly 14 percent higher in late morning trade, has dropped by 67 percent in the last 12 months.
Canadian law would allow Bellemare to hold the roles of both CEO and chairman, but good governance would favor an independent chair, said Paul Gryglewicz, senior partner at Global Governance Advisors.
“In lieu of an independent chair, where the CEO is also chair, then a company is strongly advised to appoint a lead director, who is independent,” he said.
If an outsider is appointed as chairman, after the surprise appointment of Bellemare as CEO in February to replace Beaudoin, it could signal that family control is eroding.
“We believe the market would view the appointment of an independent chair as a positive, in terms of further improved corporate governance … and possibly signaling further independence by the CEO as it relates to the family,” RBC Capital Markets analyst Walter Spracklin said in a note.
Indeed, Beaudoin’s appointment as executive chairman created the impression among some investors that he might be influencing company operations that are the purview of Bellemare, said Michel Nadeau, executive director of the Montreal think-tank Institute for Governance of Private and Public Organizations.
“It gave the impression that there were two pilots steering the plane,” Nadeau said by phone on Friday.
Quebec’s public pension fund, the Caisse de depot et placement du Quebec, secured the rights in November to vet new independent directors named to Bombardier’s board through a $1.5 billion deal to buy a 30 percent stake of the company’s rail business. When that was announced in November, the pension fund’s chief executive, Michael Sabia said the fund would not aim for direct board representation but would push for qualified outsiders.
Additional reporting by Susan Taylor in Toronto; Editing by Meredith Mazzilli and Leslie Adler