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RIM Investors Should Back Leadership Split, Glass Lewis Says

Research In Motion Ltd. is facing rising pressure to overhaul its management as a proxy advisory firm said the BlackBerry maker’s combined chairman and chief executive officer structure provides “inadequate independent checks” at a “turbulent” time.

Glass Lewis & Co., which advises investors that manage more than $15 trillion, said RIM shareholders should support a proposed split in the chairman and CEO roles. The proposal, made by Northwest & Ethical Investments LP, will be voted on at RIM’s annual shareholder meeting on July 12. Jim Balsillie and Mike Lazaridis are both co-CEOs and co-chairmen at the Waterloo, Ontario-based company.

“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,” Dimitri Zagoroff and Marian Macindoe, Glass Lewis analysts, wrote in their report.

RIM has been losing share in the smartphone market to Apple Inc. and handset makers that use Google Inc.’s Android software. 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. The shares have lost about half their value this year.

Shareholders are increasingly in favor of management change and the resolution will likely pass, said Robert Walker, vice president, ethical funds at Northwest & Ethical.

“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,” Walker said in an interview. “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 percent.”

Independent Directors

Marisa Conway, a spokeswoman for RIM, declined to comment beyond the company’s statement in the proxy filing that included Northwest & Ethical’s proposal. 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.

Glass Lewis disagreed with that assessment. The firm recommended shareholders withhold their votes from John Richardson, the company’s lead director.

The firm justified its recommendation because of Richardson’s role on the audit committee while the company was investigated for stock-option backdating. Balsillie stepped down as chairman of RIM in March 2007 following an Ontario Securities Commission investigation into backdating, and then returned as co-chairman in December.

“In our opinion, the director has failed in his oversight responsibilities,” the firm wrote in its report.

Investor Dissent

Richardson, 78, has been a RIM board member since 2003 and lead director since March 2007. He is former chairman of the Ontario Pension Board and is current chairman of The Boiler Inspection and Insurance Company of Canada, a machinery insurance provider.

Stephen Jarislowsky, a billionaire RIM investor, has added his name to the call for the BlackBerry maker to split the roles. His Montreal-based firm -- formerly the company’s sixth-biggest investor, with 10.2 million shares of RIM at the end of the first quarter -- has sold more than half its stake.

“You should not have these two people at both positions because they have worked together all their lives and they are basically the same person, from point of view of policy,” Jarislowsky, chairman of Jarislowsky Fraser Ltd. said in an interview last week.

RIM fell $1.20, or 4 percent, to $28.57 at 4 p.m. on the Nasdaq Stock Market. The stock has dropped 51 percent this year.

Institutional Shareholders Services Inc., which advises more than 1,700 clients on corporate governance, will probably release its report on RIM early next week, said Ted Allen, a spokesman for the firm.

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