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TheStreet Open House

Roger Martin's Silly Defense of RIM: Opinion (Update1)

(Adds RBC analyst Mike Abramsky's price target and subsequent bearishness on the stock.)

NEW YORK ( TheStreet) -- One of the most well-known directors on Research In Motion's (RIMM) board for the last five years (at least within Canada) is Roger Martin, the dean of the University of Toronto Business School.

His semi-celebrity status within Canada is due to the fact that Martin is often portrayed as some kind of "management guru" who makes grand speeches or writes long essays in business magazines ( like this cover story in Toronto Life ) describing how companies should run themselves. Prior to becoming the dean, Martin was a consultant for Monitor Group in Boston. He was co-head of that firm for two years.

In addition to his directorship with RIM, Martin also serves on the boards of Thomson Reuters and the Skoll Foundation (headed by eBay (EBAY) co-founder and Canadian, Jeff Skoll). Martin also still actively consults with Procter & Gamble (PG).

On Saturday, he gave a long and feisty interview with the Globe & Mail , in which he attacked critics of RIM for their complaints that he -- and his fellow directors -- should have acted much faster to prevent RIM from losing 70% of its market capitalization last year.

As one of those critics since May 2009 (and I don't recall any other serious critics until last summer when the company laid two egg quarterly earnings reports consecutively), I feel compelled to respond to Martin's statements which I find odd and disingenuous.

Let's review the key points raised by Martin in his interview, which Henry Blodget summarized in his headline: "Our Critics Are Idiots -- We Had No Choice But To Run The Company Into The Ground":

Martin: "I laugh at the vast majority of critics when they say 'Oh, you should have made this CEO transition, like, four years ago.' Yeah, right - like, to who?"

Jackson: Wait a moment. I think I've been the biggest RIM critic out there for the longest period of time. But I don't recall anyone saying that -- even now when it's obvious to everyone that the board completely failed in its responsibilities over the past five years.

No, Roger, it's not that you should have fired Jim and Mike four or five years ago when you came aboard (with new Chairman Barbara Stymiest at the same time in 2007). But you should have implemented a clear new strong outside governance framework to the board which had been (and sadly continued to be) lacking.

Keep in mind, the main reason that you and Stymiest came on to the board back then was that RIM had just settled an ugly stock option back-dating case brought against it by the Ontario Securities Commission and the SEC. There had been allegations that the co-founders had helped select dates for stock option grants over the past several years to optimize their payouts for RIM employees. The company settled (without admitting anything) and you came on to the board to show shareholders there was new governance in place.

Balsillie stepped down as chairman at the time as well. You or Stymiest could have stepped in as chairman then to assert control and ensure the co-founders were being adequately challenged in their assessments of the company's future potential. Instead, you made Jim and Mike co-Chairman, in addition to co-CEOs, on May 28, 2010.

Martin: "So we're supposed to hand it over to children, or morons from the outside who will destroy the company?" "Or should we try to build our way to having succession?"

Jackson: Yes, Roger, all the critics of RIM believe you should have appointed "children" or "morons" to take over from Jim and Mike in 2007. Come on. Procter & Gamble pays you for that kind of lazy thinking? This is the worst straw-man argument I think I've heard in some time.

Why will an outsider necessarily be a child or a moron? Sorry to lecture the professor, but a board of directors has two responsibilities in representing shareholders: (1) to hire the CEO and (2) to fire the CEO.

It's shocking that Martin could be so defensive and (worse) simplistic in his thinking of this point of CEO succession. If this is how RIM's board thought of potential outsider replacements for Jim and Mike, it's no wonder they picked Thorsten Heins. Of course, the more cynical RIM critics would likely respond to Martin's point above by saying any child or moron could not have done worse leading RIM over the last five years compared to Jim and Mike, considering where the company was then and where it is now. The descent of the company this past year has been truly staggering.

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