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Attacking a Canadian Icon

by Randall on January 23, 2009 · 2 comments

Posted in: Investing,Public Policy,Randall Howard,Social Enterprise,Society,Wireless

Jim Balsillie

Jim Balsillie (Credit: Laurier)

While I’m hardly a shrinking violet, I generally shy away from newspaper coverage. That being said, after saying no several times to Gordon Pitts at the Globe and Mail, I finally agreed to be quoted. Here’s why.

Yesterday, Jim Balsillie won the Laurier Outstanding Business Leader of the Year Award. With his business, economic and philanthropic contributions to our area and Canada as a whole, I can’t imagine a more deserving recipient. It is truly inspirational to have people like Jim making a real difference to all of us.

In an unfortunate coincidence, on the same day, both Jim Balsillie and Mike Lazaridis were the subject of media coverage regarding a possible (and staggering) $100 million penalty regarding a stock options pricing case dating back to 1996.

In the current financial meltdown, many might believe that ever more zealous regulation is the answer, but this really isn’t the root issue here. And, bearing in mind that I don’t have all the facts that the OSC and SEC possess,  I present some key  points in questioning the motives of the timing and magnitude of this regulatory action:

  • from my reading of this case, the company, when made aware of the concerns, proactively launched a board-level investigation and, upon the release of the report, about $1.6 million was repaid, this being the estimated amount of gain based on the differential of pricing and dates of the option strike prices.
  • further, that committee, found that the mis-pricing was inadvertent and not done for the purposes of financial gain.
  • when compared to other securities regulation actions, this case seems minor, especially given the wealth most people have generated with RIM. In other words, there don’t seem to be any real victims here.
  • And yet, over the last 10 to 15 years, the OSC has been colossally  impotent when it comes to prosecuting real shareholder frauds, such as:
    • the many cases of equity monetization that allowed senior management of many companies pocket tens or hundreds of millions while ordinary investors ended up suffering staggering losses.
    • real abuses and frauds around income trusts, such as is the case of the many people in my home town of Listowel who lost life savings on the fiasco in which a long term business,  SpinRite, was hollowed out in the process of becoming an income trust.
    • Diane Urquhart, an ex Bay Street investment banker and now expert shareholder crusader, is a great source to provide anyone who is interested the documented evidence of how much of a wussy our own OSC has been in stock market regulation.
  • Jim, and his partner Mike, have each given countless hours and hundreds and hundreds of millions of dollars to major philanthropic initiatives that, in addition to helping to transform Waterloo Region, have national and international stature.

It’s this background that left me feeling compelled to comment to Gordon at the Globe & Mail. Clearly, this feels like a desperate OSC acting on the basest political motives.

I’m not sure why Canadians feel that we have to attack our winners. At a time of economic meltdown and too few national champions left standing, why can’t we celebrate the great heroes we do have?

About Randall

Randall Howard is a serial entrepreneur and long term technologist with a passion for social innovation.

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  • Joseph Fung

    Good commentary. Something that may be impacting the settlement though, is that it could be providing the both of them with settlements in the US and keeping them at the helm of the company. Although $100 million may be a lot for the back-dating, it may be worth it to be allowed to stay in the driver’s seat without interruption. Andrew Willis at the Globe and Mail has an interesting view on it here: http://tinyurl.com/au24rf

  • Yes, Andrew Willis seems to be suggesting that $10 million is more reasonable than $100 million. And, yes, the SEC, rather than the OSC, may well be in the driver’s seat.

    I’m sure more facts will emerge, but want to re-iterate that the OSC has been an abject failure in stemming billions upon billions of “real” fraud and insider trading. Having stood on the sidelines for so long, they lack the credibility to suddenly get self-righteous with RIM, a big league company involved in a little league transgression.

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