Friday, July 13, 2018

What was the point of Doug Ford's ouster of Hydro One's CEO and board

He seems to think that, by doing so, he will somehow save the humble Ontario taxpayer some money and make electricity cheaper, even though electricity rates are not actually set by Hydro One. In particular, he thinks that respected CEO Mayo Schmidt earns way too much money - sour grapes? - even though his pay appears to be in line with market rates (and downright cheap compared to American ones).
Anyway, the board has resigned en masse, under the not-so-subtle threat of having their contracts shredded by Mr. Ford's pre-prepared emergency legislation, and so Hydro One now needs to appoint a new board, presumably vetted by Mr. Ford for their political views (otherwise what was the point?) This amounts to unprecedented government meddling in the affairs of a private company (the Government of Ontario is, after all, merely a 47% minority shareholder).
And Mr. Schmidt is out - I can well understand why he might not want to continue with Ford's oversized shadow constantly looming over him - which means that the company is in need of a new high quality CEO, one who does not mind open political interference, and preferably for cheaper than Schmidt's $6.2 million a year (otherwise, again, what was the point?) So, the province may save, what, a million or two per year? Oh, and the outgoing CEO is eligible for a $9 million payout, so he is probably not too displeased by the turn of events. The Ontario taxpayer? - not so much. The other directors will also get an estimated $4.9 million for their expiring stock holdings and options.
In the meantime, Hydro One's share price has taken a beating, as several analysts have downgraded the company, what with all the uncertainty and all, falling 6.2% to a record low early Thursday before making up about half of that by the end of the day. This still represents a huge decline in Hydro One's market capitalization, and gives the provincial government a paper loss of about $180 million in one day. Compared to savings of - what was it? - a million or two a year. This is yet another example of Ford (and the Ontario electorate who voted him in) shooting from the hip and not thinking things through.
So, remind me again - what was the point?

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