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A judge has removed two members of Stelco's board of directors after
their appointment raised cries of conflict of interest.
Roland Keiper and Michael Woollcombe, who were named to the board and
its critical restructuring committee as representatives of Stelco's
shareholders, were stripped of their positions yesterday by Justice James
Farley.
They were also ordered to keep confidential everything they have learned
about the bids to buy or refinance Stelco and not to trade in the
company's stock until permitted by the court.
They are also not to advise anyone in the trading of Stelco shares.
While this was happening in court, union and company lawyers worked out
an agreement allowing the union free access to the bids and bidders for
the steel company. The company had been trying to prevent that.
Keiper and Woollcombe, who between them control about 20 per cent of
Stelco's outstanding Class A shares, were named to the board after
holders of another 21 per cent of shares submitted letters to the company
urging the appointments.
The appointments raised immediate howls of protest from retirees and
unionized workers who claimed giving shareholders access to critical
information about plans to reshape Stelco was unfair to all the other
groups who depend on the company.
Farley agreed with those views.
In writing, he said "I find it appropriate, just, necessary and
reasonable" to remove the men immediately.
Farley's decision followed passionate arguments by lawyers for
salaried retirees and the United Steel Workers of America against what
they saw as an unfair advantage for one group.
"Mr. Keiper and Mr. Woollcombe are associated with a particular
stakeholder interest," said lawyer Murray Gold, acting for the
retirees. "Their clear economic interest ... is in maximizing the
value of the shares they have been purchasing.
"Their interests are in clear conflict with those of the
corporation," he added.
Union lawyer David Jacobs was even more direct.
He argued that the decision to appoint Keiper and Woollcombe sparked a
crisis of confidence in Stelco's management.
"There is a crisis here, a crisis of trust," he said.
"It is profoundly unfair ... for shareholders to be placed on the
board of directors in the middle of a structuring process."
Jacobs represents all Stelco's USWA locals except Local 1005 at Hilton
Works in Hamilton.
Stelco lawyer Michael Barrack defended the appointments as a necessary
response to a petition from 40 per cent of Stelco's shareholders and
"a matter of business judgment and corporate governance entitled to
considerable judicial deference.
"Forty per cent of Stelco's shareholders came knocking on the
door of the board of directors," he said. "It is the strongly
held view of the board that it would have been inappropriate to disregard
those views."
Farley, however, dismissed the appointments and company assurances
that Keiper and Woollcombe had been instructed that as directors they
owed their first duty to the corporation and not to shareholders.
"Let's be realistic," he said. "This 40 per cent of
shareholders is a power play. They weren't interested in putting two
altruistic people in there."
Outside the courthouse, Stelco president Courtney Pratt said the board
of directors will continue to function despite losing members he thought
brought special knowledge.
Also outside the courthouse, union leader Bill Ferguson said the
removal of the controversial directors was a necessary step to keep the
restructuring process from falling apart.
"It had to happen that way, otherwise the union would have had to
do something really extroverted and vengeful," he said.
While Farley wrote his decision to remove the directors over an
extended lunch hour, lawyers for the company and union huddled over
another thorny problem -- demands by the union to be allowed to continue
talking directly with bidders, grilling them on contract concessions and
their plans to solve Stelco's crushing pension shortfall.
The union, other than Local 1005, had been negotiating directly with
one bidder, Russian steel maker OAO Severstal, and was hopeful of
reaching a deal before a letter from the company and its court-appointed
monitor banned further contact.
After hours of hallway caucuses, a deal was hammered out allowing the
union free and open access to all bids and bidders willing to talk to the
workers.
Ferguson, president of the union local at the Lake Erie plant, called
that a great victory that promises workers will now be an essential part
of the restructuring of Stelco.
"We will be able to see the bids and make a judgment. We can look
at them and make our own determination," he said. "The
important thing is that decisions on the bids aren't going to be made in
isolation by the company now. The union is going to have its say, which
is what we wanted all along."
A suggestion for a bid review committee of all stakeholders was
rejected by Farley.
sarnold@thespec.com
905-526-3496
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