The Stel Salaried
Pensioners Organization wishes to thank The Hamilton Spectator for permission
to post the following article by Reporters Steve Arnold Naomi Powell, published
in the January 10, 2006 edition
By Steve Arnold and Naomi Powell
The Hamilton Spectator
(Jan 10, 2006)
Courtney Pratt has been told to step down as chief executive
officer of Stelco, after leading the steelmaker through one of the most
troubled stages in its history.
Pratt was asked to leave his post by three major Stelco
financiers who will control the majority of the firm once it emerges from
bankruptcy protection. "I would have liked to continue in the job,"
Pratt said yesterday. "But I recognize that it was the prerogative of the
new owners to make the decision so I respect it."
The 58-year-old will stay on as chair of the company's board
of directors.
Pratt, who was hired for his ability to win friends and heal
the rift between unions and management, led Stelco through two tumultuous years
and one of the most difficult restructurings in Canadian history. His departure
will mark a new chapter for the steelmaker as it emerges from creditor
protection and struggles to become competitive again.
"We'll come out of here, we'll be well financed,"
he said. "There are an awful lot of good things that are happening to the
company."
Under the terms of a restructuring deal approved by
creditors in December, Tricap Management will own at least 34.5 per cent of
Stelco in exchange for bankrolling the company's exit from bankruptcy
protection. Hedge funds Sunrise Partners and Appaloosa Management will share a
minimum of 34.9 per cent of the company. These three players will name a new
nine-member board of directors for the company by the end of the week.
Tricap will select four directors, with Appaloosa and
Sunrise choosing one each. The remaining three directors will be agreed upon by
all three financiers.
Court approval for the restructuring plan and the new board
will be sought Jan. 17.
Representatives from Tricap, Appaloosa and Sunrise were not
available for comment yesterday.
Although Pratt would not comment on his severance package,
regulatory filings show he is entitled to up to three times his annual salary
of $810,000 -- a total of $2.43 million -- if terminated due to a change in
ownership of the company.
As chair of the board, Pratt would be part of the search
committee to find a new CEO. That search has yet to begin and Pratt said he
will stay in his role until a new leader is found.
Removal of a chief executive at the end of a period of
bankruptcy protection is not uncommon, said Richard McLaren, an insolvency
expert at the University of Western Ontario.
"It often happens because they want to get rid of the
baggage," McLaren said. "It's important to do it because there is
often a lot of animosity built up during the process."
The financiers' decision to retain Pratt as chair of the
board suggests "they're not totally unhappy with him," McLaren added.
"One thing you want to keep is institutional memory. You need, at least
for the first 18 months or so, to keep a few people around who know what's
happened over the last two years."
When Stelco's restructuring deal was approved after a
dramatic creditor vote in December, salaried employees spokesman Rob Moffat
credited Pratt with leading the negotiations.
"We want him to stay," Moffat said at the time.
"He's the best leader we've had and I've been here 31 years. He could
bring (Stelco) back to what it once was, a family."
Yesterday, Moffat said Pratt brought a respect for people
back to the company.
"I think he would have been a tremendously positive
force as CEO going forward," Moffatt said. "There's no question
Courtney has brought real value to this organization and this project. He was a
real force in getting us where we are today."
Union leader Bill Ferguson who led five of six Stelco union
locals through intense negotiations with Pratt and other stakeholders said
Pratt's departure was "not a big surprise."
"I got along with him personally, although we had some
disagreements," he said. "I hope they replace him with someone as
forward looking."
John Dolbec, chief executive officer of the Hamilton Chamber
of Commerce, praised Pratt for doing an outstanding job in a tough situation.
"I can't imagine a better person in that job for the
last two years than Courtney Pratt," he said. "Without him Stelco may
not have survived. He did a great job of dealing with stakeholders, some of
whom weren't in the least co-operative or understanding of the reality of the
situation."
When Pratt took over as president on Jan. 1, 2004, Stelco
was buckling under the weight of a massive pension shortfall, faltering profits
and high production costs. Pratt said his first goal was to convince Stelco's
stakeholders of the need to cut costs and to work together to put the
steelmaker back on a sound financial footing. A major obstacle, he admitted,
was the company's 60-year legacy of mistrust between management and unionized
workers.
Yesterday Pratt said he felt he'd made some progress in that
area.
"I think at least in some respects, the relationships
with our labour unions have improved. They're not where they need to be, but I
think they've improved ... Bill Ferguson and I feel totally comfortable just
picking up the phone and talking to each other about anything."
To get the worker support he saw as so important, Pratt
promised a new degree of openness with leaders of the United Steelworkers of
America -- an openness he said could go as far as opening the battered
company's books.
That effort was damaged however, when the company filed for
bankruptcy protection Jan. 29 without notifying the unions. Things only got
worse when lawyers demanded union leaders sign confidentiality agreements
before being allowed to see information on the company's financial condition.
The chances for worker support were strained even more when
steel prices soared leaving the company in the awkward position of being
legally insolvent while reporting record profits.
Before taking over as president of Stelco, Pratt served two
years on the company's board of directors where he was chairman of the human
resources and compensation committee and a member of the pension committee.
In previous jobs he had been president of Toronto Hydro
Corp. where he oversaw the merger of six local utilities into the largest
municipal utility in the province and the reduction of total staff from 2,600
to 1,700. Before that his only previous experience with corporate restructuring
was at Noranda in the mid-1990s when he restructured himself out of a job. He
was chairman of the company and agreed with its president that the firm didn't
need both of them.
npowell@thespec.com
905-526-4620
sarnold@thespec.com
905-526-3496