MONTREAL (Reuters) - Bombardier Inc Executive Chairman Pierre Beaudoin is giving up management responsibilities after an outcry over compensation, but will continue to lead the board, the company said on Thursday as it reported better-than-expected quarterly results, sending its shares up about 10 percent.
Beaudoin, a scion of Bombardier’s founding family which control the company through a dual class share structure, will continue as non-executive chairman, despite calls from several key shareholders for an independent director at the helm of the Canadian plane-and-train-maker.
Maxime Chagnon, a spokesman for Caisse de depot et placement du Quebec, the company’s largest outside investor, called the change in Beaudoin’s role a “step in the right direction,” but said the pension fund still believes “Bombardier needs an independent chair.”
Other Canadian funds like Canada Pension Plan Investment Board (CPPIB), and Ontario Teachers Pension Plan (OTPP), which joined Caisse in withholding their votes for Beaudoin’s re-election at Bombardier’s annual meeting in Montreal on Thursday, declined to comment.
Michel Nadeau, director of the Montreal-based Institute for Governance described Beaudoin’s new role as an example of the founding family stepping back and a “new chapter in the history of the company,” although he told reporters he would have also preferred an independent director at the board’s helm.
A non-executive chairman does not interfere with day-to-day matters and the separation of executive and non-executive chairman roles is often seen as a way to improve corporate governance.
Earlier in the day, the company reported better-than-expected free cash flow usage, a key metric watched by investors, because of lower expenses. Bombardier shares jumped as much as 9.8 percent to C$2.25, logging their biggest one-day percentage gain since April 26, 2016.
While Bombardier executives faced a small protest outside the meeting at a Montreal plant, shareholders approved Beaudoin as board chairman, with 92 percent voting in favor, while 93 percent of shareholders also backed the company’s new executive pay plan.
Beaudoin, Bombardier’s former chief executive, was named executive chairman to assist current Chief Executive Officer Alain Bellemare’s transition into his new job in 2015. Bellemare told reporters on the sidelines of the meeting that Beaudoin’s new role comes at a “good time” after his “smooth and stable transition.”
It also follows a March decision by the company to award its top five executives and chairman raises of up to 50 percent a few months after announcing thousands of layoffs and receiving more than $1 billion in government funding. The move sparked widespread protests and a dressing down by Canadian Prime Minister Justin Trudeau.
Beaudoin later agreed to forgo his raise while other executives deferred them.
When asked on the sidelines of the meeting whether the public should still have confidence in the family, Pierre Beaudoin’s father Laurent Beaudoin told reporters: “They (the public) should have because we built the company.”
Beaudoin’s 2016 executive chairman compensation of $3.8 million will be changed, although the company did not reveal his new salary.
Shareholders like Caisse also reiterated their support for Bellemare, who is leading a five-year turnaround plan praised by analysts on Thursday.
Strength in Bombardier’s train-making unit helped the company report a smaller-than-expected adjusted first-quarter net loss.
The adjusted net loss attributable to shareholders was $1 million, narrower than the loss of $22.8 million that analysts estimated, according to Thomson Reuters I/B/E/S.
In an analyst call, Bellemare said an anti-dumping petition filed by Boeing Co against the sale of the new CSeries aircraft in the U.S. would have a “serious” impact on airlines, innovation and competition in the aerospace industry..
“We’ll fight this,” Bellemare said later of the petition.
Reporting by Allison Lampert in Montreal and Arathy S Nair in Bengaluru; Editing by Jeffrey Benkoe and Bernard Orr