Corporate Governance: Has US-style activism arrived in Canada?
Tom Burke - May 17, 2012
In September of 2006, I attended what may be viewed as an historical annual meeting of MOSAID Technologies in Ottawa. It was a big day in the evolution of canadian corporate governance because it was one of the first times to my knowledge that a
In September of 2006, I attended what may be viewed as an historical annual meeting of MOSAID Technologies in Ottawa. It was a big day in the evolution of canadian corporate governance because it was one of the first times to my knowledge that a US hedge fund had swooped in on a canadian public company and wanted a new slate of directors and a clearer path - in their view - to value maximization for shareholders. The antagonist (or protagonist depending on where you stand) was Loeb Partners out of NYC and they were getting a bit restless with the overly comfy management and board entrenchment. It was quite an interesting dance to see how the US hedge funds were portrayed as the evil unknown, while the crowd in the room got a grandfatherly sermon from the chairman at the time. Looking back it was quite a patronizing mouthful to swallow from the entrenched ones. In the end, the money guys with swagger and the cozy collegial tenured corporate brain trust folks agreed to an uncomfy compromise. Loeb got their agenda more or less imposed over time, a very generous dividend policy was initiated, new management slowly moved in, and the company was sold at a healthy premium in 2011. The Loeb activism proved out to be an accelerant for value creation; and paternalistic powers and attitudes of corporate governance in this country were put on notice, albeit on a smaller stage than we are seeing today.
Fast forward to 2012, and in my world it almost seems like the Loeb baton has been handed to Bill Ackman of Pershing Square Capital in his attempt to remake CP Rail. The epic showdown with the board and managment of CP at the AGM (annual general meeting) on May 17th may be another piece of history for corporate governance in this country. It also shows us that there are natural forces at work in the markets that can remake corporate accountability and defend minority shareholder interests in Canada. I guess we have our neighbours to the South to thank for that.