What a contrast is the deathwatch that now grips many RIM analysts. Years ago, they were bedazzled cheerleaders. We had some thoughts on the folly of that short sighted thinking at the time. Today, they seem more like jilted fanboys in the face of the company’s announcement of record losses, shrinking sales and shipments and other setbacks in its new product launch.
What is happening at RIM is sad for the company, its employees and investors. What is sadder, still, is that, just like what happened at three other now vanished Canadian icons — Nortel, Livent and Hollinger — it was avoidable, and almost entirely the product of management arrogance that was unstopped because of bad corporate governance.
We wrote about these same issues in these same companies long before anyone else because they foreshadowed the crisis that history predicted was coming. In RIM’s case, it was a lesson that even major shareholders who claim a strong commitment to good corporate governance, like the Ontario Teacher’s Pension Plan, were too blinded by the prospects of giddy returns to see. So they and others gave a pass to the weak board structure and the mesmerized cast of directors who bought into a loopy management style.
These are not popular positions to take, as we often discover. When we raised issues about RIM’s boardroom culture and ethically challenged top management — and we were the first on record to do so — a barrage of nasty, vindictive and occasionally threatening emails and telephone calls followed. RIM, it seemed, could do no wrong even when it did (remember the stock option backdating fiasco?), and absolutely no one was interested in hearing a critical word because of the company’s success at the time. “Who needs a board when you have Jim and Mike?” seemed to be how most saw it. No one considered for a moment that RIM’s success might be fleeting, least of all entranced directors on its board. But being a director, investor or analyst is about more than being a captive of a shiny object, whether it is a glittering gold watch or a spellbinding (co-) CEO.
Next on the agenda will be a succession of directors who start to bail out, not wanting their reputations to be tarnished when the Chapter 11 filing is made and not admitting that they, too, took too long to use their mentality to wake up to reality, as Frank liked to urge on Cole Porter’s behalf.
Early clues to RIM’s fast approaching demise, which is clearly underway as the stock hurtles toward the five-dollar mark, were there for all to see, as they were, and are, for many other companies. They always begin with how the boardroom culture dictates the exercise of power and accountability or whether it plays any meaningful role in that process at all. But that is a view that too many inside and outside the boardroom, often caught in a hypnotic state of denial on the one hand and over-deference to the beguiling CEO on the other, remain unwilling to see. A change in fortune can always happen to the beneficiaries of great success and especially to those who make the mistake of assuming previous success is a guarantee for future wins, as JPMorgan’s board is in the process of discovering today in its widening scandal of losses, and as GM’s, Nortel’s, Lehman’s and Penn Central Railroad’s directors before them learned the hard way. It seldom announces its impending arrival in a corporate wide email.
For those interested in learning more about the missed boardroom clues that brought RIM to the brink, our full series of 25 posts over the past six years can be found here.
* * *
Happy Birthday, Canada. Having survived the theatrics of Conrad Black’s renunciation, the vanishing of the Canadians icons he once headed like Hollinger, Dominion Stores, Massey Ferguson and Argus, and now his coming back to your forgiving embrace after being a guest of the U.S. penal system, you can survive anything. More significant, however, and worthy of recognition and praise on such a day, is the sacrifice and courage shown by the men and women of Canada’s armed forces who serve to protect freedom and democracy here and in far off lands, along with their families who give so much. A different kind of war is fought daily at home as well by those who battle poverty, injustice and the tyranny that is often inflicted by power on the part of governments, corporations and the media when that becomes untethered from moral values and human decency. They seldom receive plaques or medals, unlike Mr. Black who continues to hold his Canadian distinctions despite disgracing them (it was on Canadian soil in Toronto that Mr. Black engaged in his obstruction of justice for which he was convicted in the U.S.). These foot soldiers of a civilized society represent in their often unremunerated and unsung work the best of what Canada stands for in the world.