As part of the settlement with the Ironworkers Ontario Pension Fund, RIM’s co-chief executive officers Jim Balsillie and Mike Lazaridis will each pay $2.5-million to RIM to help with its legal costs. According to the Toronto Globe and Mail, RIM also agreed to beef up its corporate governance procedures, including not giving stock options to independent directors – but denied the allegations made in the lawsuit under the settlement, according to a RIM statement.
A year ago, RIM first disclosed it was voluntarily looking at how it recorded stock options. Within a few weeks, it had found errors related to those grants, according to the Globe and Mail. Last October, the Ironworkers sent letters to RIM questioning how it was handling the internal probe, citing three different occasions where RIM handed out options a short time before releasing positive news.
In January, the pension fund filed a lawsuit on behalf of RIM against certain of the company’s directors and employees, and two months later, RIM announced it would have to restate results by $250 million,(U.S.) after discovering that all options granted before February 27, 2002, were incorrectly accounted for under U.S. bookkeeping rules. However, the firm said at the time that the errors were the result of reporting errors, not misconduct (see Blackberry Maker Finds No Wrongdoing in Stock Options Grants ). RIM acknowledged that while “hindsight was used” to choose favorable dates to grant options, the grants were not recorded as a benefit.
At the time Balsillie and Lazaridis agreed to pay up to $5 million (Canadian) each for the costs of the review – and that they, as well as any senior executives and directors, would repay the benefits they received from the incorrectly priced options. They also vowed to improve corporate governance, including separating the roles of chairman and CEO – as Balsillie agreed to step down as head of the board. As part of the settlement, RIM’s co-CEO’s, Jim Balsillie and Mike Lazaridis, have agreed to pay RIM a further $2.5 million each to defray the costs incurred by RIM.
The settlement includes:
- a commitment to exclude independent directors from the receipt of stock options,
- the preparation of a Compensation Committee Charter by an independent corporate governance expert for the Compensation Committee’s consideration, and
- certain refinements to the rules governing Board and Committee meetings relating to executive compensation.
With those measures in place, “The Ironworkers also have acknowledged the extraordinary success and shareholder value achieved by RIM during the period covered by the allegations…,” RIM said in its statement , and that “the additional corporate governance measures and the measures agreed to be adopted by RIM as announced by RIM on March 5, 2007 sufficiently and appropriately address Ironworkers’ stated concerns regarding RIM’s compensation practices.”
The settlement still requires approval from the Ontario Superior Court of Justice. A hearing is set for November 5.