July 1 (Bloomberg) -- Research In Motion Ltd., facing a shareholder vote on whether to split its chief executive and chairman roles, agreed to study the overhaul of its management structure to avoid a public showdown at its investors’ meeting this month.
Northwest & Ethical Investments LP had proposed a split in the chairman and chief executive officer roles at the Waterloo, Ontario-based company, where Jim Balsillie and Mike Lazaridis are both co-CEOs and co-chairmen. Investors were scheduled to vote on the measure at RIM’s shareholder meeting on July 12.
Instead, RIM reached an agreement with NEI to withdraw the proposal so no vote will take place. The company will establish a committee of independent directors to study its board structure, the merits of a lead director versus a chair and the “business necessity” for the company’s co-CEOs to hold “significant” board-level titles, RIM said yesterday in a statement.
“At this point, they want to acknowledge there’s an issue that they want to look at and can’t ignore,” said Alkesh Shah, an analyst at Evercore Partners Inc. in New York. “If they hadn’t said they would at least consider this split, they would have had a bigger problem.”
RIM has come under pressure to shake up management as the BlackBerry smartphone maker loses market share to Apple Inc. and handset makers that use Google Inc.’s Android operating system. RIM said on June 16 that quarterly revenue may decline for the first time in nine years, sending its stock down 21 percent the next day. The shares have lost half their value this year before today.
Proxy Firm Support
NEI’s proposal had won support from Glass Lewis & Co. and Institutional Shareholder Services Inc., proxy firms that advise shareholders how to vote on such measures.
The committee of directors will also “propose and provide a rationale for a recommended governance structure” that will include clarification of the CEO and chairman roles, RIM said yesterday in the statement. The committee will issue a report on the matter by Jan. 31, 2012.
“RIM and NEI Investments are pleased to have reached an agreement on this matter,” the company said in the statement.
Robert Walker, vice president, ethical funds at Northwest & Ethical, who led the shareholder proposal, didn’t immediately return a call seeking comment.
Walker said in a June 24 interview that RIM’s shareholders are increasingly in favor of management change and the resolution would likely get the support to pass.
“It is a bit of a perfect storm in terms of long-term shareholder coalition around the concept that chairman and co- CEO should be separated,” he said at the time.
Charlie Wolf, an analyst with Needham & Co., said the proposal may have been withdrawn because it wasn’t likely to pass.
“It was a silly proposal,” said Wolf, who is based in New York and has a “hold” rating on the stock. “It was obviously withdrawn because it had no chance of passing.”
RIM responded separately yesterday to what may have been an open letter posted on the Internet by an employee, saying that the company takes the operational challenges it faces ‘seriously’ by taking steps including cutting staff.
“Regardless of whether the letter is real, fake, exaggerated or written with ulterior motivations, it is fair to say the senior management team at RIM is nonetheless fully aware of and aggressively addressing both the company’s challenges and its opportunities,” the company said on its BlackBerry blog.
--With assistance from Devin Banerjee in New York. Editors: Donna Alvarado, Stephen West
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