RIM Investors Should Vote to Split Top Roles, ISS Says

Research In Motion Ltd. (RIMM)’s investors should back a proposal to split the roles of chief executive officer and chairman, said Institutional Shareholder Services Inc., the second major proxy adviser to recommend the move.

“The board’s mandate is to represent the interests of shareholders through overseeing management and instilling accountability,” the Rockville, Maryland-based firm said today in an e-mailed statement. “Conflicts of interest may arise when one person holds both the Chair and CEO positions.”

Jim Balsillie and Mike Lazaridis are both co-CEOs and co- chairmen at Waterloo, Ontario-based RIM.

ISS, which provides advice on corporate governance issues to more than 1,700 clients, weighed in amid increasing calls for RIM to shake up its leadership structure to lead a turnaround. The company is losing share in the smartphone market to Apple Inc. (AAPL) and handset makers that use Google Inc.’s Android operating system. RIM said on June 16 quarterly revenue may decline for the first time in nine years, sending its stock down 21 percent the next day.

Glass Lewis & Co., which advises investors that manage more than $15 trillion, said last week that RIM shareholders should support the split proposal from Northwest & Ethical Investments LP. Shareholders will vote on the measure at RIM’s annual meeting on July 12. Billionaire RIM investor Stephen Jarislowsky also called for a split earlier this month.

‘Financial Underperformance’

RIM fell 40 cents, or 1.4 percent, to $28.17 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has dropped 52 percent this year.

The BlackBerry maker’s “financial underperformance strengthens the idea that the separation” is in the best interests of RIM’s shareholders, ISS said.

Marisa Conway, a spokeswoman for RIM, declined to comment beyond the company’s earlier filing on the issue. RIM said shareholders shouldn’t support separation because management already has sufficient oversight from independent directors, including its lead director who has a role similar to chairmen at other companies.

ISS said that John Richardson, a director since 2003, has been lead director since March, 2007, when Balsillie stepped down as chairman following an Ontario Securities Commission investigation into stock-option backdating. Balsillie returned as co-chairman in December.

‘Satisfactory Balance’

The lead director structure does not provide a “satisfactory balance” to the unified co-CEO and chairmen positions, and RIM’s board “does not possess the counterbalancing governance mechanisms to ensure independent oversight of management and accountability to shareholders,” ISS said.

Ultimately, the company appears to have no grounds to argue against the resolution, ISS said.

“There seems to be no compelling rationale for the company to resist handing over all the duties of Chair along with that title to an independent director.”

Egan-Jones Ratings Co., which provides proxy services and ratings, today disagreed with ISS and Glass Lewis, issuing a recommendation to reject the shareholder proposal. RIM has done enough to address the concerns raised and there are no U.S. or Canadian rules that require a company to have a separate CEO and chairman, the Haverford, Pennsylvania-based firm said in its statement.

“We do not believe that implementing the proposal would justify the administrative costs and efforts, nor would it provide a corresponding meaningful benefit to the company’s shareholders,” Egan-Jones said.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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