Dramatic changes have been made at Waterloo, Ont.-based mobility player Research in Motion. Chairman and Co-CEO Jim Balsille has removed the chairman’s title, but will stay on as co-CEO along with company founder Mike Lazaridis.
The company’s CFO Dennis Kavelman will also be stepping down from his job to be RIM’s Chief Operating Officer in charge of administration and operations.
All these changes come after RIM’s voluntary internal review of its stock option grants and other related accounting practices.
Under the direction of a special audit committee lead by board members Jim Estill (who is also CEO of Synnex Canada) and John Richardson (who is also chair of the Ontario Pension Board), the committee found accounting errors in connection with the administration of certain stock options granted during RIM’s initial public offering in 1997. The company is preparing a restatement to the Canadian securities regulatory authorities and the U.S. SEC. However, RIM requested more time to properly prepare this filing.
“Speaking on behalf of the board and the senior management of RIM, we are treating this issue very seriously and have already made significant progress in rectifying this matter. We are also committed to evolving our processes to be consistent with our philosophy of achieving excellence throughout RIM’s operations,” said Balsillie and Lazaridis in a joint prepared statement. “We wish to thank the members of the special committee and all their advisors who contributed to the in-depth review and recommendations.”
Based on the recommendations made by this special committee, RIM has already implemented new measures for benefits and stock options grants.
For example, all directors and all C-level officers have agreed in respect of options that were incorrectly priced to return any benefit on previously exercised options and to re-price unexercised options that were incorrectly priced, in both cases to the price that should have been used. All vice-presidents of the company will be asked to agree to similar treatment for their options that have dating issues, where these options were granted after the employee’s commencement of employment. For exercised options, the gain will be recovered through a cash payment made by the respective director or officer, together with interest. No options that are to be re-priced will be permitted to be exercised prior to re-pricing.
The company also made changes to its stock option granting practices and pending completion of the review, whereby all stock options (including stock options for new hires during a fiscal quarter) would be issued and priced quarterly and approved in advance by the compensation committee or the board.
RIM also formed an oversight committee for any future cases such as this one.
RIM is blaming some of their mistakes on its overwhelming growth over the past decade. Both the review, and the special committee has provided recommendations to expand and enhance the RIM’s governance practices to address issues identified during the review and to better reflect the magnified size and complexity of the company’s business today.
Richardson has been appointed as lead director of the board of directors.