Research in Motion is facing more pressure from investors to split the roles of CEO and chairman, as the company continues its nose dive from the top of the smartphone ladder.
San Francisco-based investor voting firm Glass Lewis & Co. urged shareholders to support the proposal put forth by RIM investor Northwest & Ethical Investments to split the roles currently shared by Jim Balsillie and Mike Lazaridis. The vote will take place on July 12 at the company’s annual shareholder meeting.
Glass Lewis said the Waterloo, Ontario-based company’s executive structure is doing more harm than good as the company continues to lose market share to Apple handsets and those running on Google’s Android operating system.
“We are concerned that the current co-chair/CEO structure provides inadequate independent checks on executives and management, particularly since the co-CEOs founded the company and are its largest shareholders,” said Dimitri Zagoroff and Marian Macindoe, Glass Lewis analysts, in their report.
Northwest & Ethical believes the time is now for the move to split the CEO and chairman roles. The company, which just a year ago controlled half the smartphone market, no longer adequately competes. RIM’s desperate need for a turnaround is fueling Northwest’s charge for change.
“It is a bit of a perfect storm in terms of long-term shareholder coalition around the concept that chairman and co-CEO should be separated,” said Robert Walker, vice president, ethical funds at Northwest & Ethical. “That, combined with the drop in share price, I think will lead to a big vote here. I’d be surprised if we don’t get 50 per cent.”
Investors believe having Balsillie and Lazaridis leading the company is counter-productive because both men have worked together for so long that they both have the same opinion of how the company should be run, preventing new ideas from being put into place.
Investors allege RIM’s two executives have played a key role in the company’s downward spiral. RIM has been slow to update and retool its line of smartphones, leading the company into stagnation. The company failed to realise early on the importance of app-centric devices, which connect to the Internet quickly and offer a portal to activities such as gaming.
The lapse has allowed RIM to shrink its 50 per cent market share to just 15 per cent this quarter.
Executives, like Balsillie and Lazaridis, aren’t the only group affected by RIM’s poor sales. Last week, the company began its first round of layoffs to help combat declining profits. The company laid off as many as 200 of its 900 total workers in from its Waterloo headquarters, many of them in manufacturing positions.
Investors hope by splitting RIM’s executive roles will bring new ideas and faces will breathe new life into the stale company. If they don’t get the vote needed to split the roles, it appears RIM could continue down this road towards irrelevance as its competition continues to grow.
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