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'THE HEIGHT OF LUNACY'
In March 2007, the issue of the company's management structure came to a head when Balsillie resigned as chairman after he, Lazaridis and other members of the senior management team were implicated in a stock option backdating scandal that had come to light the previous fall.
"Consistent with current best practices in corporate governance, the roles of Chairman and CEO are being separated," RIM said in a statement disclosing the resignation. In addition, Balsillie agreed to step down as a director of the company as part of a February 2009 settlement agreement with Canadian regulators.
Garfield Emerson, a Toronto-based lawyer and corporate director who publishes GovernanceCanada.com, noted that these changes, especially Balsillie's resignation from his role as chairman, made way for some fresh strategic thinking.
"The fact was that there was no countervailing, challenging discussion about anything because it was dominated by these two guys ... Lazaridis would give a report on technology, developments and that kind of thing, but the board agenda was controlled by Balsillie and he controlled the dialogue and the debate," Emerson said.
But RIM's changes were short-lived. Balsillie, who still retained his title as co-CEO during the board shuffles, was re-appointed director three years later. By the end of 2010, RIM also re-appointed Balsillie as chairman -- a role that had remained vacant since he stepped down from it in 2007. Lazaridis also was appointed co-chairman.
The company said the new structure was seen as an "appropriate and effective leadership structure."
Voicing concerns about RIM's revisited management structure was Toronto-based RIM investor NEI Investments. NEI issued a proposal for a vote at RIM's July 2011 annual general meeting on whether the roles of co-CEO and co-chair should be separated and an independent chairman be appointed, explained Bob Walker, vice president, Ethical Funds and ESG Services, at NEI.
"The proposal was prompted by the board's decision to recombine the positions of chair and CEO," Walker told CRN. "Our efforts to engage the company in a dialogue on this topic ... were rebuffed, so we filed."
But two weeks before the vote would have taken place, RIM placated NEI by committing itself to establishing a review committee to study the governance model and determine "the business necessity" of Lazaridis and Balsillie holding both titles. RIM said in a statement announcing the internal review that the joint titles assisted the two CEOs in "their selling and other responsibilities with certain large customers in overseas markets." The board's preparation of that report would later prove to have tremendous repercussions for Lazaridis, Balsillie and RIM as a whole.
For Vic Albioni, CEO of Jaguar Financials, another RIM investor located in Toronto, RIM's implication in June 2011 that Lazaridis and Balsillie needed to maintain both roles to keep a leg up in the industry was what finally prompted him to step forward and voice concerns of his own. He told CRN he felt the characterization demonstrated the extreme influence the two men had over the board's line of thinking.
"To me, this was the height of lunacy," he said. "It showed the extent to which the board would buy into their rationale."
On Sept. 6, 2011, Jaguar Financials went public with its concerns. In a press release, the company called upon the directors of RIM to spark a period of "transformational change." According to Jaguar Financials, a "lack of innovation" seen in the BlackBerry brand, coupled with steep competition in the mobile market, were making RIM less and less relevant in the market. And with a co-CEO and co-chair board structure in place, finding room for any outside thinking that potentially could turn things around was nearly impossible.
"Messrs. Balsillie and Lazaridis are first-class entrepreneurs, but the current management arrangement with the board impedes the board's effectiveness, in turn impacting RIM's strategy, operations and performance," Albioni said in the statement.
There were other indicators, apart from an apparent tight grip on the board, that the Balsillie-Lazaridis duo may not be ideal for RIM. Albioni pointed to "poor execution" and BlackBerry product delays as further evidence of a transformation being needed within RIM.