Jean Monty does the right thing in making clean break from BCE (gam)
Eric Reguly
Jean Monty took it like a man.
Corporate Canada has a long and inglorious history of protecting the underperformers, coddling the meek, shielding the slackers. Chief executives who disappoint investors typically are not frog-marched to the nearest golf course and abandoned. They are eased out, in peculiarly inoffensive Canadian ways. Sometimes this subtle process can take years. Even if the CEO in question makes an epic, confidence-crunching move, he can survive for a time. Firings are rare; voluntary resignations even rarer.
To his credit, Mr. Monty, the boss of BCE, decided that neither he nor the BCE board would stage-manage his exodus. There would be no nudging, no announcement that he would drop one of his two titles -- he's also chairman -- and go on to "new challenges" as the head of a committee overseeing "long-term strategic direction" or something else equally meaningless. Mr. Monty would just make a clean break. Adieu. End of story, end of Mr. Monty, neatly pinned on his sword.
It was a courageous move. Even though BCE shareholders celebrated his resignation and the partial unwinding of his legacy by driving the shares up 20 per cent to $27.55, the fact that the shares did go up will guarantee that Mr. Monty, for all his mistakes, will handily escape Ogre of Bay Street status.
Imagine if Mr. Monty, with the help of a pliant board of directors, had hung on as CEO. To pull off a delicate PR move like that, he would have had to justify salvaging what was left of Teleglobe, known on Bay Street as "Monty's folly," the centrepiece of his diversification strategy and the most costly acquisition he made during his four-year reign. Pumping hundreds of millions more into Teleglobe could easily have shattered what little investor confidence remained in BCE. The shares, already down by more than a third from their 2001 peak of $42.10, would have fallen. Resentment against Mr. Monty would have intensified, potentially guaranteeing him membership in the Value Destruction Hall of Fame even as he hung onto his job.
Mr. Monty's move was doubly courageous because the board of directors gave him the opportunity to, in effect, start all over again. We know this because Richard Currie, the George Weston president and new BCE chairman, said so yesterday. Mr. Monty offered to resign at a board meeting on Friday. "We did not accept it on Friday," Mr. Currie said.
Why not? Did Michael Sabia, the CEO in waiting, decide at the last minute that he might not want the job? Highly unlikely. Mr. Monty was distinctly lacking in friends, as a glance at the prices of BCE stock and Teleglobe bonds would tell you, and the board was saying that all was forgiven. Hey, we all make mistakes, son, get back to work. Over three subsequent board meetings, the last on Tuesday night, Mr. Monty stuck to his position. He would break the pattern of hanging on for dear life.
If the board's offer was sincere, it reflects badly on the directors' independence and power. Wishy-washy boards are one of the reasons that unloved CEOs are allowed to linger in Canada. In the brutally competitive U.S. market, bosses generally get fewer chances to prove themselves. Miss an earnings estimate for two quarters running and investors can turn surly. Miss another two and you can be out the door.
Last month, for example, Revlon, the cosmetics company, accepted the resignation of its fifth top executive in 16 years. In 2000, Durk Jager resigned as boss of Procter & Gamble after only 17 months on the job -- the shortest tenure of any CEO in the company's 165-year history. In the same year, the board of Mattel asked for the resignation of Jill Barad after only three years as CEO. Douglas Ivester left Coca-Cola about the same time after only two years at the top.
In Canada, CEOs can make mistakes -- big ones -- and keep their jobs. Just consider the billions lost in the early 1990s in the real estate bust. Name one senior executive who lost his job as result of that debacle. You can't -- in fact, some even got promoted.
Mr. Monty's cool, clean and courteous exit was not inevitable, although it was probable. Paying $7.4-billion to buy the 77-per-cent stake it didn't already own in Teleglobe in late 2000 was a colossal mistake, coming after the peak of the market. At the time, the market for international telecommunications carriage was well on its way to ruin. Since then, several Teleglobe competitors, among them 360networks and Global Crossing, filed for bankruptcy protection. Teleglobe itself has been cut off from further BCE funding and will likely go that way, too. BCE said yesterday that the Teleglobe mess will probably cost it $7.5-billion to $8.5-billion in the second quarter.
There were other mistakes, but none as big. Bell Canada International was a calculated gamble that went against BCE. BCE Emergis, the financial software unit, has fallen from grace but could still emerge as a profitable leader in its field. In the end, it was all about Teleglobe.
When CEOs create value and make shareholders happy, they, of course, are visionaries. When they do the opposite, the natural inclination is to look for someone or something to blame. If Mr. Monty wanted to save himself, he could have made all sorts of excuses about the market going against him, that Teleglobe wasn't the only victim, that the world has changed and it wasn't his fault.
That he took the blame for his blunders marks a refreshing change from the usual waffling, finger-pointing and excuses of CEOs on the defensive. Don't feel sorry for Jean Monty -- he sold BCE's stake in Nortel near the top of the market, and he took home $27.8-million last year.
In spite of the recent plunge, BCE shares are still up more than 50 per cent during his tenure. What he will be best remembered for, though, is doing the honorable thing when his biggest strategic move turned sour. Investors can only hope his example will be followed by other corporate bosses who let them down.
ereguly@globeandmail.ca |
