Magna left executive in a 'twilight zone'
Wednesday, February 27, 2008
Hypocrisy can afford to be magnificent in its promises; for never intending to go beyond the promises, it costs nothing. - Edmund Burke
Fair-weather friends, empty promises: Both cost nothing and are worth nothing. But employers' promises are a different matter. However blithely and disingenuously proffered, those have an ultimate cost.
Graham J. Orr relied on the word of his employer, Magna, and specifically that of Frank Stronach. He was recently awarded $1.65-million when those promises proved empty.
In the fall of 2000, Stronach offered Orr the position of executive vice-president and chief financial officer of his new Magna Entertainment Corp.
Orr had worked for Magna for 13 years and had risen to a very senior position, earning $1.4-million a year.
Stronach made Orr an offer he couldn't refuse, including a $2-milllion signing bonus. But Orr wisely insisted on an employment agreement with generous conditions if he was ever fired, particularly in the early days of the job. Perhaps it was to protect himself from the vicissitudes of fortune or the new venture, or his position not working out in the manner Stronach foresaw. If he was fired in the first three years, Magna Entertainment would pay him severance of 24 months. If he survived those first three years, that would drop to 12 months.
Orr started with Magna Entertainment on
Discussions ensued, including with Stronach, about a comparable position. Orr was told on
Finally, Orr was given the title of executive vice-president, special projects, at Magna International, and his contract was assigned to that division. This was a lesser position than he was accustomed to, but he was told they were still looking for a comparable one.
On Jan. 9, 2004, just nine days after the three years were up, Magna International gave Orr one year's working notice of termination. When Orr asked Stronach about the notice, he said Stronach replied it was of no significance, just a formality and he hoped a permanent job would still come along. In June, Orr was told not to bother going into work. There would be no other position for him at Magna.
He sued Magna Entertainment, Magna International and Stronach personally, claiming 24 months severance pay from the March, 2003, notice of termination. The case was defended on the basis that Orr had taken another job with Magna International after the termination from Magna Entertainment. Because he stayed at Magna past three years, he was only owed 12 months severance under the contract.
In a decision released last month, Madam Justice Klowak of Ontario's Superior Court of Justice awarded Orr two years severance, plus interest. She had little time for Stronach's "remarkably convenient lack of memory and extraordinary ability to skirt around and evade inconvenient answers." Nor was she pleased by Stronach's comment that paying Orr two years instead of one was a waste of shareholders' money.
Madam Justice Klowak found that the promise of a comparable position was the only reason Orr had remained and that he had agreed to forego demanding a generous severance in return for the assurance a new position was being sought.
Ultimately, Madam Justice Klowak found that only Magna Entertainment and Magna International were liable to pay the two years severance.