Canada: the promised land for shareholder activists

Oct 16, 2013
<p>Hired guns give predictions for activism in 2014</p>

Got dreams of being an activist? Or nightmares about being the target of one?

Orestes Pasparakis

Three of Canada’s toughest proxy fighters gave an advanced course in shareholder activism in a broad-ranging, 90-minute video webinar today. Curiously, the combat training was pitched to activists as much as to corporations, with a Jane’s Defence list of activist weapons along with how to resist them.  

The webinar featured Walied Soliman and Orestes Pasparakis from law firm Norton Rose Fulbright and Kingsdale Shareholder Services CEO Wes Hall, who have worked on one side or the other of Canada’s biggest activist showdowns of recent years, working for both shareholders and corporations.

The message to Canadian IROs was knife-sharp: get ready for more confrontations. As uttered to Hall by a US activist, ‘Canada is the promised land.’

‘We believe Canada is the most shareholder activist-friendly jurisdiction in the western world,’ Soliman followed up. 

The webinar ran down evolving hot topics including empty voting (‘pernicious’), shareholders acting jointly or in concert (more disclosures and issuers becoming more vigilant), and activist requisitions (when a board can say no and for how long).

The three experts also tackled the touchy topic of regulating proxy advisory firms like ISS and Glass Lewis, which Canada’s securities administrators have announced they will reign in with a policy-based approach in 2014.

Institutions’ voting policies give ‘a lot of power to these entities who people feel are not accountable, and who people feel may not understand all of the issues 100 percent of the time,’ Soliman said. ‘The problem with ISS and Glass Lewis is there’s nuance in their report, but that nuance is lost with their recommendation.’

This lawyer’s opinion is that in the case of contested votes, proxy advisors should issue reports but not recommendations. ‘Let someone read about 

the issues and make their own call,’ he said.

The webinar wrapped up with a list of predictions and recommendations for 2014:

Wes Hall, Kingsdale
- If you don’t have an advance notice bylaw, get one.
- Take a good, hard look at the composition of your board, including how long directors have served and their experience, especially if your stock is down, because shareholders will be targeting individual board members in search of board renewal.
- Also take a hard look at pay practices. A lot more companies will fail say-on-pay votes as ISS, armed with five-year data, recommends more often against companies.
- Above all, be prepared for continued angst among your shareholders. ‘You’re going to continue to see shareholders agitating with companies. The companies that actually manage those things effectively will find they can watch from the sidelines as others go through mayhem.’

Orestes Pasparakis, Norton Rose Fulbright
- Watch for more Canadian activism with more support from mainstream investors like pension funds.
- There will be new entrants to the space. ‘We’re also going to see them getting beat up. It takes money, it takes commitment and it takes a real fight.’

Walied Soliman, Norton Rose Fulbright
- Canada will emerge as a ‘just say no’ jurisdiction for boards with shareholder-approved poison pills – a positive development.
- The 10 percent early warning threshold will be reduced to 5 percent.
- There will be more US based activism with Canadian large caps as targets.
- There will be more activists on the debt side of companies’ capital structure.

Norton Rose’s video webinar will be available for replay in the ‘knowledge’ section of its website: http://www.nortonrosefulbright.com/ca/en/knowledge/.  

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