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Thursday, May 21, 2015 • ThE WINdsOr sTarC6

Leaf bench boss among highest paid at positionPETEr KuITENbrOuWEr

Financial Post

TORONTO — In signing Mike Babcock as its new head coach, for a reported US$50 million over eight years, the Toronto Maple Leafs have made him the highest paid coach in the history of hockey. Is he worth it?

“Ooof. That’s big,” said Christopher Chen, an expert in executive compensation at the Hay Group, a management consulting firm in Toronto, when he read reports of Bab-cock’s paycheque. “That’s un-believable.”

The Leafs last won the Stan-ley Cup 48 years ago. If Bab-cock can lead the team to the Holy Grail, as he did with the Detroit Red Wings in 2008, then his compensation is a bargain, Chen said. Maple Leaf Sports and Entertainment, which owns the Leafs, are apparently willing to make that bet.

“In looking at the board of MLSE, you have a group of

fairly savvy, sophisticated, suc-cessful business people weigh-ing what they need to do well in Toronto,” said Scott Munn, a partner in the Calgary office of Hugessen Consulting, an executive compensation com-pany. “They probably feel, like Mike Babcock, that they are making a good deal.”

In a news release the Leafs noted that Babcock “posted a 458-223-105 regular season re-cord” in 10 years in Detroit. In the business world, Munn noted that boards of directors typically link compensation not to past glory but to future performance.

While Babcock’s reported deal raised eyebrows across Canada, dramatic spikes in wages for coaches are becom-ing the norm across many sports, notes Bob Boland, a professor of sports business at New York University.

“It’s a trend in all the other sports that have a salary cap,” Boland said. League rules re-quire the Leafs to keep total player salaries below US$70 million, but they can pay coaches whatever they want.

Even so, “it puts him among the highest paid coaches in all sports,” Boland noted.

Steve Keogh, a spokesperson

for the Leafs, said, “we don’t discuss the terms of any of our coaching or management compensation.”

Babcock’s reported salary works out to US$6.25 million per year over eight years, which eclipses the base sala-ries of the chief executives at the two companies that own the Leafs. George Cope, CEO at BCE Inc., earned $1.4 mil-lion last year. Guy Laurence, the CEO of Rogers, earned $1.2 million.

Chen at the Hay Group, a Leafs fan, thinks that Babcock will likely earn his keep be-hind the bench in Toronto.

“You and I aren’t accustomed to the pace, the pressure, the complexity of a job like this,” he said. “Can you control a room of multi-million dollar players? And arguably he’s the most successful coach over 10 years in the NHL.”

In poor, beleaguered Toronto, starved for any pro sports vic-tory — but most especially for success on the ice — Babcock will face more scrutiny from media and fans than any CEO. That kind of scrutiny also has a price tag.

“Sometimes we have execu-tives who get paid a risk-pre-mium for going to a war-torn

place,” says Chen. “Perhaps Mike Babcock is getting a risk-premium.”

Babcock, 52, started his hock-ey career at McGill Univer-sity’s hockey team, the McGill Redmen, and rose to captain of the team. Karl Moore, a profes-sor in the Desautels faculty of management at McGill, has heard Babcock speak and be-lieves him to be the leader that the Leafs so urgently need.

“He’s got the royal jelly,” Moore said. “He has charisma by hockey standards. We know he’s smart and that helps.

“As a business person I don’t mind paying him the money because if he has success it will more than earn the money back.”

Boland in New York suggest-ed that the Leafs give Babcock the autonomy to implement a scouting and player develop-ment philosophy.

“It looks good on paper,” Boland said. “When you pay a coach like that you assume you buy some stability.” That, too, is no sure thing.

“It’s a wedding day in an industry where there’s a 50 per cent divorce rate,” Boland said.

“And obviously it’s a very ex-pensive wedding.”

Babcock’s salary a roll of dice

Dave Reginek/nHLi via getty images New Maple Leafs coach Mike babcock will be worth his reported us$50 million salary over eight years if he can somehow lead the

struggling team to the stanley Cup, business experts say.

equipment put in many vehicles

dEE-aNN durbINThe associated Press

DETROIT — A recall of airbags made by Japanese auto-parts supplier Takata Corp. now has the dubious distinction of be-ing the largest in U.S. history.The number of vehicles in the U.S. being recalled because of the defective airbags is dou-bling to 34 million, safety regu-lators said Tuesday.

Here are some facts about the recall:

Q: What is wrong with Takata airbags?A: The driver and passenger-side airbags can inflate with too much force, blowing apart a metal canister and sending shards flying at drivers and passengers. The defect has caused at least six deaths and more than 100 injuries world-wide. Takata, automakers and the government are still try-ing to pinpoint the cause of the problem, but are prioritiz-ing repairs in humid climates, because Takata believes long-time exposure to high humid-ity can be a factor.

Q: Which automakers are in-volved and how many cars are affected?A: Honda has the most ve-

hicles equipped with Takata airbags. Dozens of models made by BMW, Chrysler, Ford, General Motors, Mazda, Mit-subishi, Nissan, Saab, Subaru and Toyota dating to the 2001 model year are also affected.

Q: How do I find out if my car is affected and, if so, what should I do?A: If your car’s air bag is be-ing recalled, you should re-ceive a recall notice from the automaker. Automakers also have recall home pages with information for customers. Or, you can go to the govern-ment’s Takata page — http://www.safercar.gov/rs/takata/index.html — and key in your vehicle identification number, which normally is printed on the registration and stamped on the dashboard. It could take a few weeks or longer for the latest recalled vehicles to appear on the websites. You can also call your dealer. Deal-ers will replace the airbags for free as parts are available.

Q: Will there be enough parts to get my car fixed?A: At current production rates, it would take about 2½ years for Takata to make the 33.8 million inflators needed to fix all the cars involved in the recall. Takata said Wednes-day it has made 3.8 million so far. The company says it’s making 500,000 inflators per month with plans to produce up to 1 million per month by

September. Honda, Takata’s largest customer, has lined up other companies to make re-placement inflators. Takata is working with other suppliers as well. That could speed the process a little.

Q: If parts aren’t available, am I in any danger if I drive my car?A: That’s a tough question. Takata uses ammonium ni-trate to create a small explo-sion that inflates the airbags. But in the airbags being re-called the chemical can ex-plode with too much force, blowing apart the metal infla-tor canister. Takata says its tests show that it takes many years of persistently high hu-midity to cause the problem in a small number of infla-tors. But the U.S. government pushed for the nationwide recall as it continues to inves-tigate the exact cause of the malfunctions. Honda is offer-ing loaner cars to drivers un-til their cars can be repaired.

Q: How does this recall com-pare with other big recalls?A: The largest auto recall

until now was in 1980, when Ford Motor Co. had to mail warning stickers to 21 mil-lion customers because their transmissions could slip into reverse. Last year, General Motors recalled more than 30 million vehicles in North America, but that was done in 84 separate recalls for various problems.

Q: Will Takata as a business survive this?A: Takata also makes seat belts, steering wheels and other parts, and it supplies ev-ery major automaker in every region of the world. Takata reported a net loss of US$244 million for the fiscal year ended in March, but forecast a profit of $166 million in the current fiscal year despite the recalls.

But Kelley Blue Book senior analyst Karl Brauer says Taka-ta may not be able to handle the huge cost of the expanded recall and may need help from automakers or the Japanese government.

“Everyone has to keep them alive so they can fix the mess they made,” he said.

Takata’s recall of faulty airbags

ranks as largest in automotive history

YOSHikaZU TSUnO/aFP/getty images Takata expects to make a profit this year may not be able to

handle the huge cost of the expanded recall and might need help from automakers or the Japanese government, says one analyst.

KEN sWEET aNd ErIC TuCKEr

The associated Press

WASHINGTON — Four of the world’s biggest banks agreed Wednesday to pay more than US$5 billion in penalties and plead guilty to rigging the cur-rency markets — a rare instance in which federal prosecutors have wrung an admission of criminal wrongdoing from a major financial institution.

Traders at JPMorgan Chase, Citigroup, Barclays and the Royal Bank of Scotland were accused of working together to manipulate rates on the for-eign exchange market, where hundreds of billions of dollars and euros change hands.

The penalties are a victory for the U.S. government and reflect a broader effort by the U.S. Jus-tice Department, long criticized as reluctant to prosecute big banks, to tackle financial mis-conduct.

In the past 18 months, pros-ecutors have brought criminal cases against banks accused of tax evasion and sanctions violations, and have reached multibillion-dollar settlements with several for their roles in the 2008 financial meltdown.

Still, the punishment an-

nounced Wednesday may have limited practical consequences.

The four banks will be able to continue to do business in the currency markets. No ex-ecutives were charged, though that part of the investigation continues. And the fines, while large, are a fraction of what the institutions have made through currency trading over the past decade.

Prosecutors said trad-ers shared customer orders through chat rooms and used that information to profit at their clients’ expenses.

The banks will pay a com-bined $US2.5 billion in crimi-nal penalties for manipulation of currency rates between 2007 and 2013. The Federal Reserve is slapping them with an ad-ditional US$1.6 billion in fines. Britain’s Barclays is paying an additional US$1.3 billion to British and U.S. regulators.

The number of traders who took part in the currency fix-ing was small. JPMorgan said it has fired one trader. Citi said it dismissed nine employees. Barclays has fired eight em-ployees tied to The Cartel, ac-cording to regulators.

The banks have agreed to help prosecutors investigate individuals who took part in the rigging.

Four banks plead guilty to rigging currency markets

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