At his modest, book-lined home in west-end Montreal, Yves Michaud relished his role as a giant killer. He fielded congratulatory phone calls. TV crews came and went. Downtown, and in other Canadian cities, corporate lawyers carefully studied the scale and implications of a courtroom victory scored last week against the big banks by Michaud, 66, a former journalist, politician and diplomat. That judicial decision will effectively force the Royal Bank of Canada and the National Bank of Canada to let shareholders vote on matters that include whether to cut the fat salaries being paid their top bankers. The ruling could empower shareholders of other banks and corporations to pursue similar objectives. Now, the loquacious Michaud, who once during debate on a language bill in the Quebec legislature spoke for 67 hours, is looking forward to March 5, when he will address the compensation issue at the Royal’s annual meeting. He is expecting a tough fight. “The banks can bring governments to their knees,” said Michaud. “It’s David against Goliath.”
Michaud, a former Liberal MNA (19661970), sometime Parti Québécois activist, and Quebec agent general in France (19791980), has been battling the banks for more than three years over executive compensation and the makeup of their boards of directors. He became enraged as a shareholder of General Trustco Ltd. of Montreal when it experienced financial difficulties and was swallowed by the National Bank. He then began to question officials at the annual meetings of the National and the Royal, in which he is also a shareholder. He described the meetings as pure “burlesque” that simply rubber-stamped management dictates.
When his proposals were rejected, he went to court, representing himself against a battery of bank lawyers who repeatedly claimed that he was merely “seeking publicity.” But Justice Pierrette Rayle of the Quebec Superior Court ruled on Jan. 10 that, under the federal Bank Act, shareholders do have the right to propose resolutions. She ordered the Royal and National to allow votes on five Michaud proposals. The Quebec CourJ of Appeal upheld her decision last week. “The lawyers were not in court defending the banks,” said Michaud. “They were defending the abuses and privileges of the high-ranking officers of the company.” Rayle’s decision came as the country’s six
big banks, which together amassed total record profits of $6.3 billion last year, began to publish the 1996 salaries of their chairmen. Although the Royal and the National have yet to report, the Bank of Montreal’s Matthew Barrett received $3.9 million, the Canadian Imperial Bank of Commerce’s AÍ Flood $2.9 million, Toronto-Dominion Bank’s Richard Thomson $2.7 million, and Scotiabank’s Peter Godsoe $2.9 million. Michaud’s proposals would cap top-banker pay at 20 times the average salary of their employees. For example, Royal Bank chairman John Cleghorn, who received $2.28 million in 1995, would have taken home $815,000, or 20 times the average salary of $40,750 earned last year by the bank’s fulltime employees.
Michaud’s revolution would go beyond executive pay. To prevent the chairman from deciding what to pay himself, share-
holders will be asked to endorse a motion ensuring that the bank president would be prevented from also serving as chairman. In addition, the Michaud plan would limit board members to 10-year terms, abolishing interest-free loans as an executive perk, and ban from board membership any lawyer who receives significant fees from the bank. The banks were caught off guard by the court ruling, and Royal officials met for several hours following the decision. But Royal spokesman Langevin Coté said the bank would comply. “We will include Michaud’s proposals in the proxy circular,” said Coté, “together with a statement from the bank about each of the proposals.”
Although Michaud is organizing individual shareholders for the vote, analysts expect the banks will ensure that his plan is defeated by their allies—the many powerful mutual funds and institutions that hold bank stock. “There are too many business lobby groups that will make sure it does not happen,” said Monica Belcourt, an associate professor of human resources management at York University in Toronto. If it does succeed, the banks would be hurt, she argued, bees cause they would be unI able to attract high-quality I management, ï Many top executives in I the banks receive pay pack5 ets that reflect the chairman’s salary, and they would also have to be cut back causing chaos throughout the banking system. “It’s not just the CEOs,” said Belcourt. “There are implications for thousands of people working in the financial services industry.”
Still, Philip Anisman, a Toronto securities lawyer, pointed out that several of Michaud’s proposals address issues that involve basic corporate governance principles. One of them, relating to a non-executive chairman is generally accepted practice in Canada today. “Historically,” says Anisman, “shareholders have tended to be dissatisfied with management when the corporation was performing poorly, and in that context have sometimes objected to management salaries.” But with the banks ringing up record profits, shareholders may not want to rock the boat.
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