Central to the fight over control of Vector was the size of management compensation and more particularly, frighteningly expensive change in control agreements with Vector management. These provisions had been triggered, the management proxy circular noted, as a result of a challenge for board seats mounted by the dissidents at Vector’s annual meeting in May. The tally payable to management was close to $30 million. Given the staggering size of the obligation relative to the underlying business of Vector, independent directors on the Vector board attempted to negotiate more reasonable severance terms with Vector Management. Asked by the board to surrender some of these benefits, management balked. In fact, Vector management promised not to detonate the severance package if shareholder supported the incumbent slate and kept them on. Perhaps feeling like they were held ransom with their own money, the dissidents promised to explore all means to defuse the severance payments if they won.

Supporting the dissidents was not an easy decision for some shareholders. Among the three key members of the dissident group were IMP Group and Northstar

Aerospace, both significant Vector shareholders who also operated in the same market as Vector. There were concerns about the motives of IMP and Northstar, and worries about a creeping takeover or merger on terms a bit too friendly to IMP and/or Northstar.

Despite these risks and looming severance costs, shareholder votes poured in overwhelmingly in favour of the dissidents. At the last minute, the incumbent board acted quickly. Management was terminated, the incumbent board resigned and the scheduled shareholder meeting never happened. The dissidents have taken over and have appointed Colin Watson as CEO.

Terminating management prior to the change in control saved shareholders some management severance costs that would have been payable under Vector’s numerous provisions. A big part of this upset stems from the strong distaste among shareholders for executive compensation arrangements that appear to prioritize management interests ahead of those of shareholders. Vector certainly had that appearance.