RIM's information circular says it all

The end of the mail strike has delivered all the news that shareholders of Research In Motion (RIM:TSX) need to know. Equity Research Analysts can publish reports, and CNBC has a posse of talking heads to wheel out whenever the topic turns to “what’s wrong with BlackBerry?” But the company’s own Information Circular does a pretty good job of summing up where we are at on the momentum front.

RIM’s annual senior management bonuses are determined using eight different goals laid out for the fiscal year in question. For fiscal 2011, they included:

#1 Continue to enhance the BlackBerry user experience by launching the new BlackBerry webkit browser….

#2 Bring to market several new BlackBerry smartphones to invigorate BlackBerry’s strong North American presence….

#4 Continue to grow awareness and value of the BlackBerry brand through focused integrated marketing efforts.

#6 Aggressively grow the BlackBerry subscriber account base.

#8 Continue to focus on delivering strong financial performance for the Company’s shareholders.

By my own count, the outcome has been a mixed bag. Whether or not #1 worked, I still have a hard time finding the telephone number for a pizza place on my Bold 9000. #2 hasn’t seemed to pan out, based upon large market share losses in the U.S.; and I’m patiently waiting for a suitable keyboard size to upgrade my own phone (boo Torch).

For better or worse, #4 is entirely within management’s own control: sponsor the U2 tour, and spend more money on NHL playoff advertising. #6 has worked out in spades, even if the numbers haven’t met stock market forecasts. RIM’s more profitable than ever, so #8 is also on the mark.

According to RIM’s Board, management delivered 81.98% against these goals. For most management teams, that sounds pretty good: a bonus payout based upon hitting 80-85% of your targets. Achieving 100% is usually impossible unless the Board’s Compensation Committee was sandbagged. That being said, in RIM’s case, the trend is not our friend.

FY2009 Payout Factor Total: 97.6%
FY2010 Payout Factor Total: 91.54%
FY2011 Payout Factor Total: 81.98%

Everyone at RIM knows that the company isn’t performing against its own goals; and pain extends to the fact that most of the options issued during the past five years are underwater. The year-over-year growth is stellar, and the popularity of RIM’s products in many new markets may well be meeting expectations. But, try as the team may to sound upbeat on the quarterly conference calls, they’ve dropped from being 98% students to 82% in the space of two years.

That’s no longer scholarship territory.

The proposal tabled by Northwest & Ethical Investments LP to separate the role of Board Chair from that of CEO may well pass merely because of the mood of shareholders. Since our shares are down almost 65% over the past two years, despite a 40%+ increase in the NASDAQ, I suppose you either sell or squawk.

Not a happy choice.

MRM
(disclosure – I own RIM)