In this Blog
Post:
- inappropriate severance paid out by
Government to former Nalcor CEO
- inappropriate bonuses awarded Ed Martin, too.
- Ed Martin’s employment contract offers no
legal basis for either severance or bonus
- Premier Ball has obscured the reason for Ed
Martin’s departure and failed in his
obligation to tell the public the truth.
Introduction
The assertion by Premier
Ball that he was contractually obligated to pay severance to former CEO Ed
Martin who resigned from Nalcor on April 20th, 2016 is neither based
in law, nor in fact, at least not as it applies to his employment contract.
The Premier stressed, according to CBC, that Martin's resignation was a
"personal one". Ball said it “was first discussed at a meeting
between the two on Sunday, and later confirmed on Tuesday evening". The
timeline is just one important detail.
Ed
Martin also made the following public statement: "I’ve thought about the
work that has been done, and when would be the natural time for me to move on
to the next stage of my life. Today, I have come to that time and I will be
stepping down as President and CEO of Nalcor Energy."
Ed
Martin made it clear he was stepping down due to family considerations.
A
Nalcor statement said: “Mr. Martin's contract entitled him to severance of two
times his salary, bonus and vehicle allowance which is a total of
$1,387,815.74.”
The Telegram reported on May 5, 2016 the Premier stating: “The government had
no control over the $1.38 million paid in severance to outgoing Nalcor CEO Ed
Martin”.
The
statements of the Premier, Nalcor, and Ed Martin are important. Each one reinforces
and illuminates the other. None state that Martin was dismissed, either by the
Nalcor Board of Directors or by the Government. Indeed, both Nalcor and the
Premier assert that Martin was awarded severance in accordance with Nalcor’s
contractual obligations.
In
short, both Ed Martin's and the Premier’s claims are consistent; that his departure
was entirely voluntary, and that the decision to step down was a "personal
one".
There
is a problem here. It has to do with the fact that Mr. Martin had an employment
contract which makes no provision for severance to be paid in a case where he
voluntarily retires from Nalcor.
The
Premier has seriously misled the public as to Martin’s entitlements.
The
contract is quite specific and describes the circumstances under which Martin is
entitled to severance. When you quit, you get no severance.
Mr.
Martin has been given a large amount of public money to which he is not
entitled. That, alone, is a big problem.
But
it is also a problem because either:
1)
one or both of them is not telling the truth; or
2)
Nalcor has breached its obligations under the law governing access to
Information, if it failed to disclose, in its entirety, the former CEO’s employment
contract.
The
public needs to know, deserves to know, the truth.
Politicians
and public servants, however senior, cannot be permitted to bamboozle the
public with either their own incompetence or misinformation. We have had enough
of that already.
Martin’s Employment Contract
Uncle
Gnarley Blog has a copy of the "EXECUTIVE EMPLOYMENT AGREEMENT FIRST RENEWAL BETWEEN NALCOR ENERGY AND EDMUND MARTIN-EXECUTED November 2-2009. The Contract’s public release was sought in a formal written
request made by David Vardy, under ATIPPA. Nalcor complied on May 19, 2016 and
the document is available via the Link.
The
employment contract is very straightforward, even to a lay person, though I
have had the benefit of the advice of two senior lawyers who confirm the
analysis described here.
The
larger question right now, given the amount of public money involved, is why
Martin was awarded such severance? Did the Premier mislead the public?
Tying the Premier to Ed Martin’s contract
Before
dealing with the details of the contract, it is important to consider exactly
what the Premier said in his attempt to justify the monetary award to Martin.
"Ed
Martin's severance was part of a contract that was approved by the previous administration
in 2005, renewed again in 2009 by the previous administration and executed upon
by the previous board," said Nancy O'Connor, a spokesperson for Premier
Dwight Ball, in an email on Friday, stated a CBC story.
The
Premier reinforced his Communication Director’s assertion. According to The Telegram the Premier stated: “What you work with is language that are in
contracts, you know, signed initially in 2005 by the PC government, or under
their mandate, and then again in 2009”.
It is important to add that if Mr. Martin's contract was altered by the Nalcor Board of Directors any such change also required, under the Energy Act, approval of the Lieutenant Government in Council (the Cabinet), in which case the Premier would be aware of the amendment.
It is important to add that if Mr. Martin's contract was altered by the Nalcor Board of Directors any such change also required, under the Energy Act, approval of the Lieutenant Government in Council (the Cabinet), in which case the Premier would be aware of the amendment.
The
Tories are responsible for much irresponsible behaviour. On this occasion Premier
Ball is the one playing fast and loose with the truth.
The Contract
The
contract is specific and does not leave much room for interpretation; a view confirmed by the
two senior lawyers who offered their consultation. The terms and conditions as
to when severance is available is covered under Article 16. Retirement from Nalcor is not one of those conditions
The contract makes provision termination benefits to be provided for several reasons but, again, not on the basis asserted by the Premier.
So
where does that leave us?
Had
the Nalcor Board of Directors arbitrarily awarded the $1.39 million to him under
article 16(c) which permits an award of termination benefits “at its sole
discretion…”?
If
that is the case, why did the Premier and Ed Martin engage in a charade over
his immediate retirement?
Had
the Premier engaged in a “cover-up” anticipating that Martin’s contract might
not receive public scrutiny?
Ed
Martin’s retirement story just seems not to work given an ordinary reading of
the contract language; that is, unless there exists an Addendum or other
Agreement between Nalcor and Ed Martin that Nalcor failed to disclose to David
Vardy under ATIPPA.
Besides
the mess at Muskrat Falls, there is also the issue of Ed Martin’s performance
overseeing NL Hydro. Ed Martin left Nalcor under a very large cloud.
The $1.39 million severance is not the only award over which we must be
concerned.
A BIG BONUS, DOUBLED!
In
addition to the severance pay of $1.39 million (2 times salary, bonus, and vehicle allowance) Martin also received bonus of $156,000 shortly before he quit ($103,641 for 2015 plus “$52,636, which is the 2016
prorated amount” for 2016) according to Nalcor.
The
reader will note, again, the Muskrat Falls project is seriously over budget and
so far behind schedule that Ed Martin was unwilling to reveal a new one. The project
cost overruns threaten the province’s finances.
In
addition, the Liberty Group, an independent consultancy, reported to the PUB
that NL Hydro was poorly managed and based upon its damning 88 page Report
denied NL Hydro many of the capital costs it had claimed. It blamed management for the #DarkNL winter blackouts and for
delaying essential maintenance.
Bonuses
are typically awarded in line with performance. There is no tie, in the
contract, to such remuneration or to any specific set of Key Performance
Indicators (KPI) which are quantifiable measures for determining
performance. There is only reference to "an
annual bonus of up to thirty percent (30%) of the current salary as determined by the Board
through an incentive plan” (article 6, page 5).
Even
if the standards of the bonus award were wobbly, as seems to be the case, how
could Martin be considered to have achieved “performance” on any reasonable
level?
In
addition, Martin was given bonus “pro rata” 2016 only four months into the
year, when bonuses are commonly assessed at the end of the annual period; the
year in full rear view. In this case, the Board of Directors awarded Martin the
bonus before he had actually quit. That is peculiar to say the least.
The May 19 Edition of the Telegram reported the Premier making this comment “there was a legal opinion that if
Nalcor didn’t pay bonuses, they could be in breach of contract”.
That
is nonsense. The Premier should be required to produce the legal opinion (and
get rid of the lawyer who provided it), unless, of course, we have not been
told the whole story.
Bonuses
are inherently discretionary. They are commonly assessed by the Board based
upon pre-set criteria, and in accordance with job performance. If bonuses are a
legal obligation, as one of the lawyers advised, they are not discretionary. They
are salary. On this basis, too, Mr. Martin can claim no such entitlement.
Evidence
that the Premier cannot be trusted on this issue simply mounts. What a state of
affairs for a new Liberal Government only six months into its term of Office!
Conclusion
The
conversation around Ed Martin’s departure is not one of award for a job
well-done or of concern he has been fairly treated.
On
the contrary, this is one of those GOOD RIDDANCE events in which the public is
aghast that Martin is permitted not just a huge gift of public money, he is
allowed to walk away with his dignity.
This
is no longer Ed Martin’s battle. He is gone and, yes, good riddance.
But
the Premier is the culprit in this narrative. He has either received terrible
legal advice OR he has not told the truth. It looks like it is both.
In
short, there is no contractual basis for either the severance or bonus awards
to the former Nalcor CEO. We need to
know why a total of $1.39 million severance plus $156,000 bonus was awarded to this
man.
The
Premier stated that the new Liberal Government would “open the books on Nalcor”.
He has done nothing of the kind. Indeed, his foot dragging on virtually any
follow-through compels us to ask: was this severance affair just another
deception?
On
this matter of openness and honesty, the Premier needs to give the public a new
resolve.
He
should begin by coming clean on any deal with Ed Martin because the content of
Martin’s employment contract, obtained by David Vardy, just doesn’t cut it.
The
Premier must also produce the full agreement, now.
*******************************************************************************************************
UNCLE GNARLEY BLOG ANALYSIS OF ED MARTIN’S EMPLOYMENT CONTRACT WITH NALCOR REGARDING THE
ISSUE OF SEVERANCE
Article
16 provides that the employment of the Executive (Ed Martin) may be terminated:
(a)
upon death in which case various benefits are accessible;
(b) for just cause, upon written notice by
Nalcor, in which case Martin is entitled to receive the SERP (Special Executive Retirement Pension) benefits payable in accordance with paragraph 14(b); and
(c) at the sole discretion of Nalcor
including the absence from duties for medical
reasons for more than six months, Ed Martin is entitled to:
reasons for more than six months, Ed Martin is entitled to:
(i) Salary and benefits for the equivalent
period of two (2) years in lieu of notice plus the equivalent of the highest
annual bonus he had received in each prior year of the two year pay period;
(ii) Any other benefits to which he was
entitled had he continued working;
(iii) SERP benefits;
(iv) Outplacement services up to $25,000
Let’s
stop there for a moment for review:
1. We know Ed Martin did not die, he
having represented himself at a press conference announcing his retirement.
2. If Ed Martin was dismissed for “just
cause” he would not have been entitled to receive any benefits other than SERP (Special Executive Retirement Pension
benefits pursuant to Article 16(b).
benefits pursuant to Article 16(b).
3. The Premier and Ed Martin made it clear
the resignation was for personal reasons.
4. Therefore, he was not terminated at
the discretion of the Nalcor Board of Directors.
So,
the question is: under which condition of the employment contract did he
received $1.39 million termination benefits plus a bonus?
There
is one other possibility under the contract.
Under
clause 16(d) Ed Martin had the legal right to terminate the contract if a
particular set of circumstances occurred. Those include:
(i) A material reduction in the mandate of
Nalcor;
(ii) A material erosion or reduction in the
role and responsibilities of his position as
outlined in the contract;
(iii) A transfer or sale of Nalcor, or a merger
with, or an acquisition by, a private
company;
(iv) After a leave of absence of six (6)
months due to medical leave during which Martin
qualified for Long Term
Disability, and there is no imminent return to work;
Had
either of those conditions existed, at Ed Martin’s “sole discretion” the clause
states he “…may give notice of termination amounting to not less than thirty
(30) days….” in which case he would become entitled to the termination benefits
already described above, under clause 16 (c).
Again
a brief review is necessary.
Ed
Martin, we are told gave the Board no notice of termination of his contract
under this section 16 (c). In fact, you
are reminded Premier Ball said his retirement “was first discussed at a meeting
between the two on Sunday, and later confirmed on Tuesday evening". That
was April 19th. His decision to step down was announced the following day,
Wednesday April 20th. So, implicitly, no thirty day notice was given anyone.
Besides:
- No material reduction in the mandate
of Nalcor was ever announced by the Ball Government.
- No erosion in Ed Martin’s
responsibilities as CEO occurred. The Government did not cancel the Muskrat
Falls project; nor did it close down any major or minor roles the previous
Government had mandated Nalcor to perform;
- There was no sale, acquisition or
merger;
- Ed Martin did not take a leave of
absence, not even for a day let alone six months.
Even if Ed Martin had invoked clause 16 (e) wherein he had the right to cancel the
contract or retire “at/or a upon six (6) months written notice after age 60” he
would only have been entitled to benefits, like extended health coverage,
drugs, life insurance and to SERP. Under this section, he would still
not have been entitled to termination benefits or a bonus.
