The senior executives of Laurentian Bank will not find themselves empty-handed if the financial institution is sold: they will share 13 million in severance pay if they are dismissed following a transaction.
Alone, the president and chief executive Rania Llewellyn, in office for less than three years, will be entitled to nearly 6 million. These details appear in the Quebec lender’s most recent management circular sent to its shareholders.
The calculations were made as of October 31. The amounts could be higher depending on the price that would be offered for each Laurentian share in the event of the conclusion of an agreement – which is not a certainty at the present time. This mechanism providing for severance benefits in the event of termination of employment in the event of a change of control is commonplace among listed companies. It offers some protection to employers in the event that a hostile or unsolicited offer leads to job loss.
The example of Laurentian, which itself made the decision to put itself up for sale, testifies, however, to the undesirable effects of these indemnities, believes François Dauphin, director of the Institute for the governance of private and public organizations (IGOPP ).
“Compensation committees usually don’t consider this option [une vente], he said. It is a mistake. We are often too generous. »
It’s almost an incentive to sell in some cases. There should be a different clause. We are not in a situation where [le processus] is involuntary.
François Dauphin, director of IGOPP
Professor at the National School of Public Administration, Marie-Soleil Tremblay is less severe. In the current environment, the bank must be able to retain its key employees despite the uncertainty, she says.
“We want to make sure that we maintain stability in the event of a sale or acquisition,” explains the expert. We want there to be an alignment for the shareholders. We could give nothing to anyone, but would it benefit the organization? »
For sale
The country’s seventh-largest bank by assets announced last Tuesday that it was reviewing its “strategic options”. In fact, it has rather retained the services of JPMorgan Chase to find a buyer, according to our information.
Approaches have even already been attempted, particularly with Quebec financial institutions.
As for M.me Llewellyn, she would leave with the equivalent of two years of her base salary, or 1.4 million. To this would be added the equivalent of an annual bonus of 1.4 million as well as a payment of 2.8 million for his stock options. The manager would also receive $355,000 in compensation for her pension plan and other unspecified benefits. This is in addition to the salary the bank offered him when he was hired. Mme Llewellyn was entitled to a signing bonus of $700,000 as well as $2.3 million in stock options and awards.
Although Laurentian has started knocking on various doors, analysts who follow the activities of the financial sector are wondering which of the six major Canadian banks might be interested. AT The Pressthe professor of strategy at HEC Montreal Louis Hébert has already explained that the prospects for the Montreal headquarters of Laurentian were not bright if it is a Canadian player who gets their hands on the Quebec bank.
“If it is a consolidation acquisition of a Canadian player, it is certain that the head office will disappear, related the specialist in mergers and acquisitions. We want to achieve economies of scale and reduce management costs. »
Founded in 1846, Laurentian operated 58 branches at the end of its last fiscal year (October 31). It offers loans in Quebec, the rest of Canada and the United States.
On the Toronto Stock Exchange on Friday, Laurentian Bank shares closed at $43.10, up 69 cents, or 1.7%. On Monday, the day before the announcement, the stock ended at $33.53.
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- 51 billion
- Laurentian assets
SOURCE: laurentian bank