Bombardier to scrap controversial executive compensation plan

Bombardier Inc. said Friday it will follow the urging of Quebec’s financial market regulator and scrap a controversial executive compensation plan.

The announcement followed a review by the Autorité des marches financiers that found the plane-and-train maker’s roll-out of its Automatic Stock Disposition Plan in August did not breach securities law, but likely incurred a negative perception.

“In the opinion of the AMF, the rapidly evolving situation at Bombardier Inc. shortly after the ASDP was implemented combined with the brief period between its implementation and the start of transactions and the significant volatility in the company’s forecasts and earnings led to a negative perception of the plan,” the regulator said in a release.

Since mid-July, the company’s shares have fallen by more than half to $2.33 in trading Friday, due in part to unease about its hefty debt and ability to generate free cash flow.

Executives would have been allowed to sell shares

Bombardier said in November, when the investigation was launched, that the plan allows some of its senior executives to sell their vested shares as an added incentive in performance-based compensation, so long as the trades are made by independent securities brokers and in line with trading parameters.

Under Canadian securities laws and Bombardier’s trading policies, senior executives face limits on their ability to sell shares in the company. The plan allows trades to be made in accordance with pre-arranged instructions given when the employee doesn’t have any material undisclosed information, the company said in August.

On Friday the regulator, which in November called on the company to suspend all related trades, “strongly recommended that Bombardier Inc. reconsider the merits of maintaining” the plan.

Bombardier said it will ask its board of directors to end the compensation plan at their next meeting.

This is not the first time Bombardier has faced criticism over executive compensation. Two years ago, after successive rounds of layoffs, it faced protests when it OK’d $32 million in bonuses for executives.