Bloomberg News

RIM Investor Jarislowsky Joins Demands for Chairman-CEO Split

June 18, 2011

June 18 (Bloomberg) -- Billionaire Stephen Jarislowsky, one of Research In Motion Ltd.’s largest shareholders, added his name to the call for the BlackBerry smartphone maker to split the roles of chairman and chief executive officer.

“You should not have these two people at both positions because they have worked together all their lives and they are basically the same person, from point of view of policy,” Jarislowsky, chairman of Jarislowsky Fraser Ltd., said yesterday in an interview.

The Montreal-based investment firm -- formerly the company’s sixth-biggest investor, with 10.2 million shares of RIM at the end of the first quarter -- has sold more than half its stake, he said.

RIM investors are becoming increasingly vocal about their dissatisfaction with co-CEOs Jim Balsillie and Mike Lazaridis, after the company’s second-quarter sales and profit forecast missed analysts estimates, hurt by sluggish demand for its aging BlackBerry portfolio. Lazaridis, who invented the BlackBerry to handle mobile e-mail, has shared the role of CEO with Jim Balsillie since 1992. They are also both co-chairmen.

Northwest & Ethical Investments LP has called for RIM to separate the roles of chairman and CEO, and shareholders will vote on that question at the company’s shareholder meeting July 12, according to a RIM proxy statement last week. Separating the two posts does put the board in a better position “to ask the CEO the kind of hard questions they have to ask from time to time,” Robert Walker, vice president of ethical funds at Northwest & Ethical, said in an interview last week.

Shares Tumble

RIM, based in Waterloo, Ontario, plunged $7.58, or 21 percent, to $27.75 yesterday in Nasdaq Stock Market trading, dropping to its lowest level since 2006. The stock has fallen 52 percent this year.

Other analysts have criticized the co-CEO structure. Northern Securities Inc.’s Sameet Kanade suggested in April that the company should put Lazaridis in sole charge.

Jarislowsky is critical of Balsillie, who he says has lost focus.

“I believe he is taking his eye off the ball,” Jarislowsky said. “He’s gotten involved in all sorts of things outside the business.”

Balsillie has tried unsuccessfully to bring U.S.-based National Hockey League franchises to Canada in recent years. He also is the founder of the Balsillie School of International Affairs and chairman of the Centre for International Governance Innovation, both in Waterloo.

Inefficient Setup?

Beyond Balsillie’s own suitability for the role, other analysts have criticized what they see as the inefficiency of the co-CEO structure, because it creates an unnecessary duplication of responsibilities that slows product development.

“With dual CEOs, you have a challenge,” said Brian Modoff, an analyst at Deutsche Bank Securities Inc. in San Francisco. “There are teams that are working on certain functions, but only reporting to one or the other CEO.”

Lazaridis acknowledged the investor frustration on a conference call with analysts this week, saying he knew the past few months had been “difficult” for shareholders.

“While I can’t promise that there won’t be bumps in the road ahead, I can assure you that Jim and I have never been more committed to the business,” Lazaridis said.

Both men defended the co-CEO structure and gave no indication they plan to abandon it.

“I just don’t think it’s the issue,” Balsillie told analysts. “I think I have expertise in what I do. I think Mike has distinctive expertise in what he does. I think there’s parts that overlap and we highly coordinate it.”

Four analysts downgraded the company yesterday, including Caris & Co.’s Rob Cihra. RIM has proved “painfully slow” in getting new models including its touch-screen Bold into stores to keep BlackBerry customers from defecting to Apple Inc.’s iPhone or devices that run Google Inc.’s Android software, he said.

“It appears RIM has slipped into eroding mismanagement,” he said.

--Editors: Nick Turner, Lisa Rapaport

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Jonathan Erlichman in New York at jerlichman1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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