Shortly before Christmas, Darren Entwistle told institutional investors in Telus Corp. T-T that his 26-year stint as chief executive officer at Western Canada’s dominant telecom had at least another year to run.
For major Telus investors, the question of who would succeed the famously intense 63-year-old had become a key one. Mr. Entwistle, who stepped down as CEO in 2014 only to return 15 months later, assured the company’s largest shareholders he was preparing a successor while taking steps to fix poor stock-market performance.
In his conversations, sources told The Globe and Mail, Mr. Entwistle targeted 2027 for a CEO transition.
But as he was plotting his future, Telus directors were crafting a different plan. Starting last fall, board chair John Manley was having conversations with retired Canadian Imperial Bank of Commerce chief executive Victor Dodig about his willingness to step into the CEO role.
And a source said Mr. Dodig told friends in December he was lining up a new role that would keep him very busy.
In mid-January, Mr. Manley met with Mr. Entwistle and told him that Mr. Dodig would be his successor, subject to board approval. Mr. Entwistle was surprised by the news, sources told The Globe.
On Thursday, in one of the more dramatic leadership changes in corporate Canada, Telus announced the transition plan, revealing Mr. Entwistle will retire on June 30.
The news caught Bay Street off guard, since there were no public signs that Mr. Entwistle was about to announce his exit. It also showed that despite years of succession planning under Mr. Entwistle’s leadership, Telus’s board never was able to line up a suitable successor to take over the top job at the company, before turning to Mr. Dodig.
The timeline of the board’s actions is based in part on conversations with three sources close to the company. The Globe is not naming the sources since they aren’t authorized to speak publicly.
Over a decade at the helm of CIBC, Mr. Dodig delivered the largest takeover in the bank’s history and rebuilt the balance sheet and culture, moving the bank from worst to first on customer satisfaction. He joined the Telus board four years ago. At age 60, friends expected the self-professed policy wonk to jump into politics.
“I got to him before Mark Carney,” Mr. Manley, a former chair of CIBC and former deputy prime minister, said in an interview.
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The Telus board’s decision to recruit an outside board member as the next CEO represents a reset at a company shaped entirely by Mr. Entwistle’s vision of adding digital health, agricultural and consumer businesses to what started as a government-owned phone company.
It echoes Bank of Nova Scotia’s out-of-the-box decision to recruit board member Scott Thomson as its new CEO in 2022, over internal candidates, after he stepped down as boss of equipment supplier Finning International Inc.
The moves at Telus could signal a change of strategy for the Vancouver-based telecom, analysts said Thursday.
“Under Darren’s leadership, we were operating under the assumption that the dividend is sacred and will be defended. The board with a new CEO might have other prerogatives on capital allocation,” said Bank of Nova Scotia analyst Maher Yaghi in a note to investors.
“We think a dividend cut and asset sales or business exits (Health, Agriculture) are more likely under new leadership,” said Bank of Montreal analyst Tim Casey in a note to investors.
Mr. Entwistle’s planned departure follows a period in which the company has lost what was a premium stock market valuation over investor and credit agency concerns with its dividend growth strategy and heavy debt load. Telus and its peers have also seen their profits dip as demand for lucrative cellphone services declined in step with lower immigration.
Telus names ex-CIBC chief Victor Dodig as CEO, replacing Darren Entwistle
The price of Telus shares has fallen almost 30 per cent over the past five years, and it slid 1.9 per cent on Thursday after the company reported financial results that were in line with analysts’ expectations along with the succession news.
Mr. Manley told The Globe there was no concern from the board related to Mr. Entwistle’s recent performance, calling him an “outstanding CEO” with a strong legacy. However, two sources told The Globe that the board had been growing increasingly concerned with the company’s performance and Mr. Entwistle’s leadership.
While Mr. Entwistle and the board had discussed “a variety of timelines” related to his retirement, they had “moved a number of times over the years.” So last summer, Mr. Manley created a board committee to conduct a CEO search.
Mr. Entwistle had previously named two executive vice-presidents as strong internal candidates to head up Telus: Zainul Mawji, head of consumer solutions, and Navin Arora, who leads multiple technology divisions.
But after looking internally, the board sought outside candidates, considering “dozens” of names proffered by executive search firm Egon Zehnder.
Mr. Manley and the Telus succession committee, working with Egon, first approached Mr. Dodig with the Telus job before he formally stepped down from CIBC on Nov. 1. After initially turning down the overture, Mr. Dodig decided to apply.
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After interviewing Mr. Dodig and reaching a consensus with his ad hoc board, Mr. Manley approached each member of the board individually to “test drive” the idea, he said.
The details were only finalized in the days leading up to the board meeting on Wednesday.
“It has been a tremendous privilege to be a member of the Telus team,” Mr. Entwistle said in a release Thursday. “To be part of this extraordinary team, and to support them, has been the greatest honour of my career,” he said.
Ultimately, Mr. Dodig won the Telus job with what one long-time friend called an action plan with three main points: improve financial performance, enhance the telecom’s culture, and develop talent and leadership.
Mr. Manley said that while it considered several strong leaders from within the company, the board’s responsibility “was not to pick the best internal candidate, but to pick the best candidate,” he said. “We chose Victor because he was the best available.”
Mr. Manley has a deep relationship with Mr. Dodig. The former federal finance minister and deputy prime minister was on the CIBC board in 2014 when the bank named Mr. Dodig as CEO. Mr. Manley became the bank’s chair the following year.
Mr. Dodig was not in the room when the board took its vote, Mr. Manley said, adding he “ran a pristine process” to make sure the decision was objective.
On May 1, Mr. Dodig will join Telus’s executive team on a full-time basis, and he will become CEO on July 1. He is expected to split his time between Vancouver and Toronto.
Mr. Entwistle outside his Toronto office in September, 2022. Having joined the company in 2000, he is the telecom industry's longest-serving executive.JENNIFER ROBERTS/for The Washington Post
Mr. Entwistle, who will be accorded the title CEO emeritus in recognition of his leadership at Telus, will serve as adviser to Mr. Dodig until next April, but will step down as CEO and a Telus board member on June 30.
Mr. Manley said his long experience on boards shows keeping the former CEO around “is not a good governance practice.”
Case in point: When he previously left the company in 2014, Mr. Entwistle handed the reins as CEO to Joe Natale but remained on the Telus board as executive chair. The next year, the board removed Mr. Natale, who went on to run rival Rogers Communications Inc., and reinstalled Mr. Entwistle.
The Telus board wanted to be decisive in dealing with succession, and in defusing any potential activist investor campaigns. Mr. Manley was on the board of Canadian Pacific Railway Ltd. in 2011 when hedge fund manager Bill Ackman led a successful campaign to replace the company’s leadership, an experience Mr. Manley said left “deep wounds.” He said Telus has seen “no sign of activism.”
Mr. Dodig is taking on the business in the middle of major transformation amid a challenging time for the industry as a whole, as population growth has slowed and wireless prices have been forced down by greater competition from rivals such as Quebecor Inc.
After winding down its years-long fibre buildout, the company is now actively working toward possible spinouts of several of the divisions that Mr. Entwistle backed and hoped to monetize during his tenure. That includes the company’s health division, Telus Health, which Mr. Entwistle championed in particular.
Under his leadership, the company spun out Telus International, now branded as Telus Digital, in 2021. However, the company bought that business back last year after its share price dropped by 90 per cent in the wake of industry-wide pressure on customer-service businesses.
Last spring, executives said they would slow the pace of growth of the dividend. In the fall, after analysts said Telus’s plan was not sustainable, the company initially dug in its heels before changing course a week later by saying it would pause dividend increases.
“I am excited to build on Darren’s legacy and by the opportunity to lead Telus in its exciting next chapter,” Mr. Dodig said in a statement.