(Updates with closing share price in seventh paragraph.)
July 13 (Bloomberg) -- Research In Motion Ltd. has six months to “prove” that its co-chief executive officers need to retain their co-chairmen titles for business reasons or face the reintroduction of a proposal to split the roles, said the investor that originally called for the change.
Northwest & Ethical Investments LP last month made a proposal to split the roles of chairman and CEO to increase board oversight, and investors were originally slated to vote on the issue at the company’s annual meeting yesterday in Waterloo, Ontario. The shareholder withdrew the proposal after RIM tried to make the case the chairman title helps co-CEOs Jim Balsillie and Mike Lazaridis generate business, particularly overseas. The company also agreed to form a committee to study its leadership and examine the importance of the chairman post.
“We wanted to give them a chance to prove that there is an actual business necessity,” Jennifer Coulson, manager of corporate engagement at Northwest & Ethical, said in an interview at the shareholder meeting.
RIM has come under pressure from investors to shake up its management after losing market share to Apple Inc.’s iPhone and handsets based on Google Inc.’s Android software. RIM’s share of U.S. smartphone subscribers dropped 4.2 percentage points to 24.7 percent for the three months ending in May as Apple and Android gained, according to ComScore Inc.
Packed Meeting Hall
Inside the former whiskey warehouse where the meeting was held, a meeting hall was packed as over 100 people stood crowded around about 250 seated shareholders. After waiters served hors d’oeuvres and drinks, the two CEOs faced shareholder questions about how the company would compete more effectively.
“We will get better,” Lazaridis told investors. A new touchscreen BlackBerry Bold will be one of seven new phones to come out this year, and RIM will also introduce a faster, 4G version of the PlayBook tablet in September, he said.
RIM’s stock tumbled 49 percent last quarter in Nasdaq Stock Market trading, the worst three-month performance since 2002. The shares dropped 33 cents, or 1.2 percent, to $28.15 at 4 p.m. and have dropped 52 percent this year.
The share decline has triggered speculation about a possible takeover, and the co-CEOs were asked by a shareholder whether the company was prepared if it became the target of a hostile bid. Balsillie said the company has a plan in place and outside advisers ready in case of such an offer.
Seeking More Time
Northwest & Ethical will help draft the new committee’s mandate and insisted that the panel reach a conclusion by Jan. 31 so that the proposal could be reintroduced in time for the 2012 annual meeting if necessary, Coulson said. Originally, RIM had wanted longer to study the issue, she said.
“We wanted to secure the potential for filing again next year,” Coulson said. “So if we’re not satisfied, we have that opportunity.”
The firm’s original proposal won support from Glass Lewis & Co. and Institutional Shareholder Services Inc., proxy firms that advise shareholders how to vote on such issues.
RIM has said the board’s independent lead director, John Richardson, already fulfills the typical role of a chairman at other companies and ensures the directors’ independent oversight. RIM’s shareholders yesterday re-elected Richardson, Balsillie and Lazaridis as directors, along with the company’s five other board members, with more than 90 percent support for each director. Claudia Kotchka, a former Procter & Gamble Co. executive, was elected as a new director.
RIM said the leadership committee will study the merits of a lead director versus a chairman and the “business necessity” for the company’s co-CEOs to hold “significant” board-level titles. That hasn’t been enough to placate some shareholders who want a move toward an independent chairman sooner.
“The co-CEO, co-chairman structure is probably the worst solution of all,” said Philip Larrieu, investment officer at the California State Teachers’ Retirement System, which manages $156 billion, including 450,000 shares of RIM.
About 40 percent of S&P 500 companies have already made the change to an independent chairman, up from 23 percent in 2000, and the split roles will become the standard, he said.
“If they come back with a structure that’s similar to what they have now, even if NEI doesn’t come back and ask for a vote, someone else will,” said Larrieu. “This is just delaying the inevitable.”
Steve Grzenda Jr., a 49-year-old accountant and shareholder who attended the RIM meeting with his father, said it may be time for change at the top of the company.
“There comes a point where there has to be change,” said Grzenda, leaning against the meeting hall’s back wall. “Someone has to be accountable.”
As the meeting ended, the warehouse’s sound system blared Bob Seger’s “Against the Wind.”
--With assistance from Jeff Green in Detroit. Editors: Peter Elstrom, Jillian Ward
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