June 07, 2013
The face of shareholder activism has changed significantly over the last several years; a recent Lexpert article featuring partner Sharon Geraghty discusses the various strategies and trends emerging from both activists and companies. Below is an excerpt of the article.
“CP was a coming-of-age for shareholder activism in Canada–a watershed,” says Sharon Geraghty, a partner with Torys LLP in Toronto. “I think Ontario Teachers and the CCP Investment Board supporting Bill Ackman were really important signals that you can’t be complacent about long-term shareholders anymore. You can no longer assume they’re supporting management.”
You also can’t assume that unhappy shareholders will allow the fight for change to play out behind closed doors. Shareholder activists are increasingly using the media to get their message out, which was visible in CP and, more recently, Agrium’s showdown with Jana Partners LLC.
“I know issuers who have been under these kinds of assaults complain that dissidents don’t have any disclosure rules to worry about so they can use the press in a way that’s very, very different to respond to,” says Geraghty. “I think that’s another tool we’re going to continue to see shareholder activists use.
She says institutional shareholders like CPP and Teachers—and Ackman’s Pershing Square Capital Management LP—have fiduciary obligations of their own and are answerable to their own stakeholders. Some are also wrestling with issues such as pension deficits.
So when they reach out to complain that the company is underperforming, the board can no longer just designate one person to listen, slap them on the back and send them on their way flattered at having had a hearing.
“You cannot appeal to institutional investors anymore on anything other than a concrete value basis,” says Geraghty, who advises on mergers and acquisitions and governance. “CP made that very clear because with CP everyone saw pressure could bring success, even with a large iconic issuer. I believe that has given shareholder activists the confidence that if they have good points, big institutions will vote with them. That is a very big change.”