Changes at RIM's board could only cause more upheaval, experts suggest

TORONTO - For all the sound and fury, and calls for upheaval at Research In Motion's annual meeting this week, little has changed for the BlackBerry maker, which is still facing the make-or-break proposition to bring its new operating system to market.

Inside the meeting, at least one vocal shareholder pushed for a major shakeup of the company's board — and even the resignation of CEO Thorsten Heins, who stepped into the role earlier this year.

As the dust settled around the event, it became clear that most shareholders weren't ready for such a significant change, even though a vote to re-elect the directors showed a notable level of dissatisfaction.

While shareholders did not vote down any of the board nominees, an increasing number chose to withhold their votes in a sign of dissent.

On Friday, the official tallies were released, showing that director John Richardson had 30.25 per cent of votes withheld, while Roger Martin, dean of the University of Toronto's Rotman School of Management had 22.69 per cent withheld.

Other board members also saw declining support: former co-CEO Mike Lazaridis had 19.12 per cent of votes withheld and chairwoman Barbara Stymiest had 23.16 per cent withheld. Heins saw 14.85 per cent of shareholders abstain.

But as the level of seemingly disgruntled shareholders rises, the key question is: would a massive makeover of RIM's board during its current strife make sense?

"Changing a number of the board members is not really going to get the new operating system developed any faster," said Colin Cieszynski, market analyst at CMC Markets Canada.

"Shareholders are very understandably angry ... (but) there's only so much they can do to influence a company."

Several shareholders have called for change at RIM, but none more vehemently than Vic Alboini of Jaguar Financial, who stepped to the microphone on Tuesday and presented a case similar to the one he has been making since last year.

At one time, he wanted co-CEOs Jim Balsillie and Lazaridis bumped from their positions, but after that shuffle happened in January, Alboini turned his sights to the board, including Heins.

"I think he should be gone from the company,'' Alboini said in an interview earlier this week. "He was there for the last five years and he was part of the problem."

Leaders at RIM have expressed their disagreement with Alboini in the past, and took a similar stance against comments he made earlier this week.

"Thorsten is more committed than ever to building long-term stakeholder value and is moving forward decisively to make the changes necessary for the future of RIM and BlackBerry," RIM spokesman Nick Manning said in an emailed statement.

"Mr. Alboini is entitled to his opinions and RIM has reviewed his proposals, but does not believe they have been advanced in the best interests of RIM or its stakeholders."

Observers have also suggested that ousting a CEO at any company during such a transitional period can cause too much instability.

"Every time someone of that (calibre) is leaving it's totally negative," said Michael Smedley, portfolio manager at Toronto-based Morgan, Meighen and Associates.

"I don't see anything to be gained in just effecting the departure of the new chief executive."

Alboini has declined to outline the size of his stake in RIM, and under securities law anyone holding less than 10 per cent of the company is not required to provide that information. But how much he holds could play a significant role in the success of his cause.

A successful change atop a large company often requires support from at least one big institutional investor, but even that doesn't guarantee a major shift in how a company operates, as in the recent cases of food processor Maple Leaf Foods (TSX:MFI) and Magna International (TSX:MG).

At Maple Leaf, the Ontario Teachers Pension Plan — one of its oldest and largest investors — opposed an overhaul of the company's operations.

In the midst of the dispute, Teachers sold its entire stake in the company to activist investor West Face Capital, which threatened a shareholder revolt and was somewhat successful in making changes at the board level.

At Magna, a disagreement over a massive payout to company founder Frank Stronach, as part of a share consolidation, led to a legal battle with major shareholders Teachers and the Canada Pension Plan Investment Board. In the end, Magna went ahead with its initial plan.

The shareholders who have pushed for further board changes at RIM prefer to reference the board shakeup at Canadian Pacific Railway (TSX:CP) as the way they'd prefer any changes at RIM to play out.

Last month, a successful campaign by activist shareholder William Ackman led to CP Rail naming Hunter Harrison as its new president and chief executive officer. Harrison had previously led competitor Canadian National Railway (TSX:CNR) and is credited with turning around its lagging operations.

Alboini faces a steeper uphill battle, partly because many of RIM's top shareholders are also on the company's board, including Lazaridis and Prem Watsa, who is also chairman of Fairfax Financial Holdings (TSX:FFH), which also has a stake in RIM.

Despite RIM's preference to carry on, chairwoman Stymiest has suggested that discussions are ongoing with potential new board members, which suggests that further changes will happen, though the timeline is uncertain.

For now, RIM says it's focused on delivering that revolutionary smartphone it has promised since last year.

News from © The Canadian Press, 2012