Robert Benzie and Paul Vieira
National Post
June 1, 2002

TORONTO – The embattled board of directors at Ontario’s hydro utility yesterday caved in to a government ultimatum to reduce the lucrative salaries and compensation packages being awarded to senior executives.

But Conservative and corporate sources said the move casts doubt on plans to privatize the publicly owned utility.

After days of controversy surrounding seven-figure golden parachutes for executives of the publicly owned Hydro One – and its $360,000 sponsorship of a racing yacht – the board agreed "to review the salary and compensation packages of its senior executives," said Chris Stockwell, Minister of Environment and Energy.

"The board has agreed to comply with the government’s directive that salaries and compensation paid to Hydro One senior executives be renegotiated," he said.

At issue are the wages and severance agreements of the five-member senior-management team at Hydro One, which the Conservatives were planning to privatize for up to $5.5-billion until an Ontario Superior Court ruling in April blocked the sale. In the event Hydro One is privatized, the executives could walk away with $13.5-million in buyout fees – including about $6-million for CEO Eleanor Clitheroe, who would also be eligible for a hefty pension.

Sources said yesterday’s capitulation has caused irreparable damage to the Hydro One team and the prospects for privatization.

"We think the sale is all over. It’s irrelevant now," one financier said. "[Ms. Clitheroe] has lost credibility completely."

The board’s decision to renegotiate is "a truce," he said. "It’s not a surrender, and this issue is not quite resolved. [But] they’ve managed to destroy the credibility of the company."

Others close to the situation predicted the political turmoil swirling around Hydro One will take more casualties.

"I’d be amazed if there aren’t some resignations over the weekend at this stage," another Bay Street source said. "I don’t know how many survivors there will be from this carnage."

Said one senior Conservative who supports the sale of Hydro One: "At some point, [the executives] can only suck it up for so long before they realize that their credibility has been shot and it’s time to walk away and do something else."

Prior to the 5 p.m. deadline, Ernie Eves, the Premier, warned that he was prepared to "take appropriate action" if the board did not acquiesce.

"The severance package . . . in its entirety is very inappropriate," said Mr. Eves, who helped create the company in 1998 when the old Ontario Hydro was broken up and noted that he hoped it would be "run like a private-sector model."

Both Ontario opposition parties, who have attacked the Conservatives over the proposed privatization and the compensation, were unimpressed by yesterday’s developments.

"Chris Stockwell and Ernie Eves [the Premier] are kind of like the babysitters you always wanted to have because they’ll let you get away with murder," said Liberal MP George Smitherman.

Howard Hampton, the NDP leader, said the move was just "government spin doctoring."

But Tom Adams, executive director of Energy Probe, said reforms at Hydro One are essential.

"[Ms.] Clitheroe’s tenure has become clouded," he said. "The province can’t leave Hydro One the way it is – it’s a poorly performing company that’s become a political embarrassment."

Mr. Adams added the proposed privatization is "dead," because the province "can’t get the confidence of the [stock] markets or consumers."

"They need to go back to the drawing board and come up with a plan that has wider public support and can secure the long-interests of the market."