A day’s pay for a day’s work

People come and people go, but the culture at CIBC never changes. Succession is poorly handled. Senior executives seem more attuned to internal politics than corporate profits. The board of directors rarely reacts. Maybe this is why CIBC has shrunk in size and stature from second-largest of the Big Five Banks in the 1980s to fifth place today when measured by assets. 

The most recent goings-on, as revealed in the current proxy statement by Tim Kiladze of the Globe and Mail, are certainly the most expensive. Former CEO Gerry McCaughey and former COO Richard Nesbitt were paid a total of almost $26 million, apparently because of inappropriate succession planning. Both announced their retirement in 2014, but promised to remain in their jobs. Then suddenly, the board made up its mind about a new boss, so accelerated the departure of the duumvirate. In return for leaving early, the board approved the massive payouts.

No institution of such size should be so bereft of planning or talent but CIBC has been thus for decades. In 2002, then CIBC CEO John Hunkin approached Dominic D'Alessandro, CEO of Manulife, about a merger. Hunkin promised D'Alessandro that he would be CEO of the merged firm. D'Alessandro had the distinct impression that Hunkin just wanted to get out and get on with the rest of his life. The deal did not go ahead; politically it was a non-starter. 

An even screwier scenario occurred during the regime of Russ Harrison who was CEO from 1976-1984. He appointed Don Fullerton as CEO, then deposed him. This time, the board reacted, fired Harrison, and reinstated Fullerton. They just made one mistake; they left Harrison on the board. The tone of subsequent meetings was toxic.

But at least the directors acted. Others have done so, most recently Amit Chakma, Western University president, who voluntarily returned nearly half his almost $1 million salary after a brouhaha arose over the fact that he was paid for a leave he did not take. If McCaughey and Nesbitt won't volunteer, the board should conscript and take back the payment for the time they did not work.