Robert Benzie and Paul Vieira
National Post
May 30, 2002

 Faced with embarrassing revelations about Hydro One’s lucrative executive compensation and its sponsorship of a racing yacht, the province yesterday scrambled to rein in the utility’s directors with an ultimatum to reduce salaries and benefits.

Chris Stockwell, the Minister of Environment and Energy, said the board of Hydro One – which sponsors Team Defiant’s 40-foot Canada’s Cup champion for $360,000 in a three-year deal – must shape up or ship out.

"I’ve written a letter to them saying that they have to agree to reduce their respective salaries, benefits and compensation. They will have to get back to me by 5 p.m. [today] to agree to . . . do that and give me timelines on when they’re going to be done. That’s it. If they don’t – watch me."

"I’m prepared to take the necessary action. They understand what the necessary action is. It’s not a threat, because a threat implies that you may not carry forward with something. This is more of a promise," he said, adding that sponsoring a boat was "completely unacceptable."

Terry Young, a spokesman for Hydro One, defended the yacht sponsorship, saying it "promotes awareness" of the company, but he declined comment on Mr. Stockwell’s demands regarding executive compensation.

The Tories have been considering privatizing Hydro One, the power transmission grid that is worth up to $5.5-billion. But an Ontario Superior Court ruling last month blocked the sale, sparking a political crisis for the new government of Ernie Eves, the Premier.

Lucrative perks awarded to senior executives at the utility have only served to fuel the furor swirling around the provincially owned grid.

In the eye of the storm is Hydro One president and CEO Eleanor Clitheroe, a Royal Canadian Yacht Club member, who describes sailing as her "passion." Along with her boat-builder husband, Randy Bell, Ms. Clitheroe races around the world and had plans this summer to sail the couple’s own 40-foot cutter, Endeavor III, in a 1,020 kilometre race from Newport, R.I., to Bermuda.

Last year, Ms. Clitheroe earned total compensation of $2.18-million, which was made up of: $750,000 in base salary; a $806,250 bonus; and $625,930 in "other" compensation, which included $174,644 for her car and $172,484 in vacation pay.

After her, the four most senior executives were paid total annual compensation of $3.13-million. There are escape clauses in their contracts that could be exercised should the province decide on a different corporate structure for Hydro One, such as a not-for-profit entity or income trust. Those clauses would trigger $13.5-million in buyout fees – including about $6-million for Ms. Clitheroe, who would also be eligible for a pension of up to $1-million.

The escape clauses were amended by the board earlier this month after the government signalled it was reviewing its options regarding the privatization of Hydro One.

While Bay Street insiders maintain the compensation terms are in line with private-sector companies – walkout rights are common in the contracts of corporate executives – Ontario’s two opposition parties have forced the Conservatives to intervene.

"Not only does Captain Clitheroe have a golden parachute, but apparently she’s got a yacht to land on," said Michael Bryant, a Toronto Liberal MPP, brandishing a poster of the Farr 40 racer.

"You can’t control Hydro One as a public company – how on Earth are you going to control it as a private company?" Mr. Bryant said, mocking Mr. Stockwell.

Howard Hampton, the NDP leader, blamed the Conservatives for what he described as the "excesses" of Hydro One brass.

"It’s just another example of the sort of bloated, greed, gross misuse [of funds] that’s going on at Hydro One under this government. Six months ago, I said there are real problems over at Hydro One. There are reportedly million-dollar salaries and expense accounts and I said to the government: ‘You owe it to the public to check into this.’ This government did nothing," said Mr. Hampton.

Tom Adams, executive director of Energy Probe, an industry watchdog, said this latest imbroglio just feeds into the confusion surrounding the electricity sector.

"What an awful situation. Now we’ve got politics thoroughly at work in the future of our transmission system…. and it’s hard to see how we are going to get ourselves out of this one," said Mr. Adams.

"But at the same time, Stockwell has a problem he has got to solve. Hydro One has been exploiting this partly private, partly public company model and [the Minister] has to do something to rein in this out-of-control board of directors," he said.

"I can’t criticize him for standing up for this thing, but if one of the outcomes here is that the board is removed, there could be legal consequences [wrongful dismissal suits]. An atmosphere has developed around this company that is highly charged, highly politicized and is definitely not in the best interest of the power system."