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	<title>IGOPPmlamnini &#8211; IGOPP</title>
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	<link>https://igopp.org/en</link>
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		<title>Anne Marie Croteau  will become the first female dean of JMSB</title>
		<link>https://igopp.org/en/anne-marie-croteau-sera-la-premiere-femme-doyenne-de-lecole-de-gestion-john-molson/</link>
		<comments>https://igopp.org/en/anne-marie-croteau-sera-la-premiere-femme-doyenne-de-lecole-de-gestion-john-molson/#respond</comments>
		<pubDate>Fri, 26 May 2017 15:09:07 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[Press Releases]]></category>
		<category><![CDATA[Diversity]]></category>
		<category><![CDATA[Governance of universities]]></category>

		<guid isPermaLink="false">https://igopp.org/anne-marie-croteau-sera-la-premiere-femme-doyenne-de-lecole-de-gestion-john-molson/</guid>
		<description><![CDATA[Anne-Marie Croteau, IGOPP Board member, starts as dean of the John Molson School of Business (JMSB) on June 1, 2017, and will become the first female dean of JMSB, one of North America’s largest and leading business schools. A professor in the Department of Supply Chain and Business Technology Management, she is a highly respected academic leader [&#8230;]]]></description>
		<content><![CDATA[Anne-Marie Croteau, IGOPP Board member, starts as dean of the John Molson School of Business (JMSB) on June 1, 2017, and will become the first female dean of JMSB, one of North America’s largest and leading business schools.

A professor in the Department of Supply Chain and Business Technology Management, she is a highly respected academic leader with 25 years of teaching and research experience, including 10 years as an administrator.

Croteau is a certified chartered director and serves on the board of directors for leading organizations, including the Société de l’assurance automobile du Québec (SAAQ) and Hydro-Québec.

Most recently, she was associate dean of Professional Graduate Programs and External Relations at JMSB.

Photo: Concordia University
]]></content>
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		<slash:comments>0</slash:comments>
		</item>
		<item>
		<title>IGOPP&#8217;s Executive Chair of the Board will be named a Knight of the Order of Montreal</title>
		<link>https://igopp.org/en/le-president-executif-du-conseil-de-ligopp-nomme-chevalier-de-lordre-de-montreal/</link>
		<comments>https://igopp.org/en/le-president-executif-du-conseil-de-ligopp-nomme-chevalier-de-lordre-de-montreal/#respond</comments>
		<pubDate>Fri, 05 May 2017 14:55:08 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[Press Releases]]></category>
		<category><![CDATA[Chairman of the Board]]></category>
		<category><![CDATA[Homages]]></category>

		<guid isPermaLink="false">https://igopp.org/le-president-executif-du-conseil-de-ligopp-nomme-chevalier-de-lordre-de-montreal/</guid>
		<description><![CDATA[By virtue of his long-standing commitment and exceptional contribution to the evolution of the governance of our public and private organizations, on May 17, 2017, professor Yvan Allaire, executive chair of the board of the Institute on Governance (IGOPP), will be named a Knight of the Order of Montreal, the city&#8217;s highest distinction. On May [&#8230;]]]></description>
		<content><![CDATA[By virtue of his long-standing commitment and exceptional contribution to the evolution of the governance of our public and private organizations, on May 17, 2017, professor Yvan Allaire, executive chair of the board of the Institute on Governance (IGOPP), will be named a Knight of the Order of Montreal, the city's highest distinction.

On May 4, 2017, the executive committee of the City of Montreal, on the recommendation of the mayor of Montreal, Denis Coderre, announced the appointment of 17 well-known Montrealers, including professor Allaire, who will receive the medal of the Order of Montreal next May 17.

The Order of Montreal, an important legacy of the 375th anniversary of Montreal, is aimed at recognizing exceptional women and men who have made a remarkable contribution to the development and reputation of Montreal.




Yvan Allaire is one of the most influential business figures in Québec and Canada. A renowned international leader in the field of business strategy and governance, he has led a brilliant academic career and played an exceptional role in the business world.








Professor emeritus of strategy at the Université du Québec à Montréal (UQAM) since 2001, Allaire has been the Executive Chair of the Board of the Institute for governance (IGOPP) since 2005. His contribution as Chair of the task force on the governance of government corporations, in 2003, led to the enactment of Québec’s Act Respecting the Governance of State-Owned Enterprises in 2006. He has published over a hundred works and articles covering every aspect of corporate governance, the most recent of which were co-authored with Mihaela Firsirotu.

Allaire was the co-founder and, from 1975 to 1990, Chair of the Board of the SECOR Group, a major Canadian strategic consulting group which became KPMG-Secor in 2012. He was also Executive Vice-President of Bombardier from 1996 to 2001 and has served on many Boards of Directors, including those of the Council of Universities, the École de technologie supérieure, the Social Sciences and Humanities Research Council, Bombardier, CGI Group, the Caisse de dépôt et placement du Québec, the Aga Khan Foundation and the Montréal Council on Foreign Relations.

In 1976, his visionary approach was instrumental in establishing the joint doctoral program in administration in the four Montréal universities, and, in 1979, the executive MBA program that sealed the reputation of UQAM’s management science school, the École des sciences de la gestion (ESG).

From 2010 to 2014, Yvan Allaire was, first, a member and, then, the Chair of the World Economic Forum’s Global Agenda Council on the Role of Business, a task force made up of some of the most eminent thinkers and senior leaders of the business world, academia and the media.

Allaire has been a Fellow of the Royal Society of Canada since 1991, and in 2001, he received the Award of Distinction from Concordia University’s John Molson School of Business for his extraordinary contribution to the business world and the community. The Academy of Economic Sciences of Bucharest awarded him a doctorate honoris causa in 1995. In 2001, he was chosen as one of 12 “High Performers” by Commerce magazine and, in 2008, the Financial Post Magazine named him one of Canada six Business Gurus.

Yvan Allaire holds a B.Sc. Com. (summa cum laude) and an MBA from the Université de Sherbrooke and a PhD from the MIT Sloan School of Management.




]]></content>
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		<item>
		<title>Quebec takes aim at foreign takeovers with new watchdog group</title>
		<link>https://igopp.org/en/quebec-takes-aim-at-foreign-takeovers-with-new-watchdog-group/</link>
		<comments>https://igopp.org/en/quebec-takes-aim-at-foreign-takeovers-with-new-watchdog-group/#respond</comments>
		<pubDate>Tue, 21 Feb 2017 17:13:17 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Dual-class shares]]></category>
		<category><![CDATA[Head offices]]></category>
		<category><![CDATA[Hostile takeovers]]></category>
		<category><![CDATA[Regulation]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=7264</guid>
		<description><![CDATA[In the wake of several high-profile takeovers of Quebec companies, such as Rona Inc. and Cirque du Soleil, the provincial government is implementing new measures aimed at promoting the growth of local businesses while maintaining corporate head offices in the province. Premier Philippe Couillard’s government said Tuesday it would set up a watchdog group to [&#8230;]]]></description>
		<content><![CDATA[In the wake of several high-profile takeovers of Quebec companies, such as Rona Inc. and Cirque du Soleil, the provincial government is implementing new measures aimed at promoting the growth of local businesses while maintaining corporate head offices in the province.
Premier Philippe Couillard’s government said Tuesday it would set up a watchdog group to monitor the risks of Quebec-based companies being subject to a sale or hostile takeover offer as well as advise the government on the capital needs of local companies as they grow. It also said Investment Quebec, the government’s investment arm, would step up efforts to educate business owners about the merits of dual-class share structures as a way to fend off unwanted suitors.
[ ... ]
Sixteen of the 69 largest Quebec corporations have no protection against a hostile takeover bid, Montreal’s Institute for Governance of Private and Public Organizations said in a 2016 report. They include grocer Metro Inc., T-shirt maker Gildan Activewear Inc. and retailer Dollarama Inc. A proposal by some observers that the government should push financial institutions to create a fund to purchase blocking stock positions before any hostile bid has materialized is not particularly appealing, the institute said. Read more [1]

[1] http://www.theglobeandmail.com/report-on-business/quebec-takes-aim-at-foreign-takeovers-with-new-watchdog-group/article34104487/?utm_medium=email&#38;utm_content=oyfyBiSHsVomjLjQ1_lkMg]]></content>
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		<slash:comments>0</slash:comments>
		</item>
		<item>
		<title>Davos: Seven years later</title>
		<link>https://igopp.org/en/davos-seven-years-later/</link>
		<comments>https://igopp.org/en/davos-seven-years-later/#respond</comments>
		<pubDate>Thu, 09 Feb 2017 21:10:36 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Publications ]]></category>
		<category><![CDATA[Corpgov.net]]></category>
		<category><![CDATA[Ethics]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Regulation]]></category>
		<category><![CDATA[Value-creating governance]]></category>
		<category><![CDATA[World Economic Forum]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=7211</guid>
		<description><![CDATA[There is a Chinese proverb that says He who knows he has enough is rich; but the modern Western version of the saying seems to be: One never has enough; I deserve more; or There is always someone who has more. Over the last years, we have built a system of incentives and motives so [&#8230;]]]></description>
		<content><![CDATA[There is a Chinese proverb that says He who knows he has enough is rich; but the modern Western version of the saying seems to be: One never has enough; I deserve more; or There is always someone who has more.

Over the last years, we have built a system of incentives and motives so powerful that it overwhelmed values. Ethics is the resistance of values under pressure. But there is a breaking point. Enough pressure will grind values down. Heroes and saints do what they think is right whatever the costs and consequences for them. Most mortals, mes semblables, mes frères, dirait Baudelaire, are suspended in webs of motives and meanings they themselves have spun. We must understand how we have come to spin this web and learn to spin a new one.

There is something special about this panel. I am surrounded by representatives of very successful organizations: a banking cooperative (Grameen Bank), a professional partnership (Deloitte), a faith-based transformational organization (Sojourners), a large family-owned company (Bettersman); a publicly listed corporation with a stable network of shareholders (Takeda Pharmaceuticals); a publicly listed corporation with a controlling shareholder (Thomson-Reuters).

As I am sure my fellow panelists will testify, in all these organizations, values of trust and loyalty as well as a long-term perspective are alive and well. But what, or who is missing at this table? Precisely, the most prevalent type of corporations in several countries; that is:

 	Stock exchange listed corporations ‘owned’ by a large number of ever-changing, transient funds, many with short-term performance goals as well as a bunch of share-flippers (the average holding period of shares of companies listed on the NYSE or NADAQ is now some 7 months);
 	Governed by directors who are thoroughly ‘independent’ but often lack legitimacy and credibility;
 	Managed by a mobile executive class motivated by stock options and other compensation schemes to work exclusively for these short-term shareholders;
 	Surrounded by speculators, hedge funds and various financial operators free to play all sorts of lucrative games with the company’s shares and debt.

Read more [1]

[1] http://www.corpgov.net/2017/02/yvan-allaire-world-economic-forum-davos-2010/]]></content>
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		<item>
		<title>The Canadian Say on &#8221;Say on Pay&#8221;</title>
		<link>https://igopp.org/en/the-canadian-say-on-say-on-pay/</link>
		<comments>https://igopp.org/en/the-canadian-say-on-say-on-pay/#respond</comments>
		<pubDate>Mon, 06 Feb 2017 16:00:01 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Say on Pay]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=7234</guid>
		<description><![CDATA[As the New Year rolls along, so does commentary on executive compensation. According to the Canadian Centre for Policy Alternatives, by 11:47 am on the first working day of 2017 (January 3rd) Canada’s 100 highest paid CEOs on the TSX index had earned the equivalent of the average annual Canadian wage. Shareholder votes on the [&#8230;]]]></description>
		<content><![CDATA[As the New Year rolls along, so does commentary on executive compensation. According to the Canadian Centre for Policy Alternatives, by 11:47 am on the first working day of 2017 (January 3rd) Canada’s 100 highest paid CEOs on the TSX index had earned the equivalent of the average annual Canadian wage.

Shareholder votes on the executive compensation disclosed in management proxy circulars (“say on pay”) are not mandated in Canada. However, according to the Institute for Governance of Private and Public Organizations, 80% of the largest Canadian companies have adopted the practice voluntarily or as a result of pressure from investors.

Say on pay initiatives have been well under way in many jurisdictions for a number of years and the reviews are in.

Read more [1]

[1] http://www.lexology.com/library/detail.aspx?g=03280eef-8056-4a2b-8fa1-27c2ee6d4169&#38;utm_medium=email&#38;utm_content=Ly-3_D57eve3hWkapTbgiw]]></content>
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		<item>
		<title>The $100 million man</title>
		<link>https://igopp.org/en/the-100-million-man-2/</link>
		<comments>https://igopp.org/en/the-100-million-man-2/#respond</comments>
		<pubDate>Sat, 28 Jan 2017 21:28:09 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Chief Executive Officer]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Hedge funds]]></category>

		<guid isPermaLink="false">https://igopp.org/lhomme-de-100-millions-2/</guid>
		<description><![CDATA[In an unexpected turn of events, the Canadian Pacific Railway announced the early retirement of its CEO Hunter Harrison a few minutes before the conference call planned for the analysts on January 18. Harrison thus forfeited all benefits and perquisites he was entitled to receive from CP, including his pension, and has agreed to surrender [&#8230;]]]></description>
		<content><![CDATA[In an unexpected turn of events, the Canadian Pacific Railway announced the early retirement of its CEO Hunter Harrison a few minutes before the conference call planned for the analysts on January 18. Harrison thus forfeited all benefits and perquisites he was entitled to receive from CP, including his pension, and has agreed to surrender for cancellation almost all of his vested and unvested equity awards, this whole package valued at approximately C$118 million.

What makes Hunter Harrison so valuable that a U.S. hedge fund will make him whole on a C$118 million to persuade him to leave CP and come, at age 72, run another railway company (presumably CSX) targeted by the hedge fund? That’s the deal offered to Harrison by Mantle Ridge LP, a newly established hedge fund run by Paul Hilal, who, when at Pershing Square, was instrumental in the CP operation.

But why does Harrison fetch such a market value is a puzzling question? Of course, in the enchanted world of finance, there are no limits to what one will be paid as long as it is a fraction of what the payer will gain. Still, one would think that a hedge fund manager
looking for someone able to turn-around a poorly performing U.S. company would have an abundance of candidates to choose from.

After all, the operating tricks that Harrison has come up with to make railroads more efficient have been described in minute details in books he wrote. Dozens of seasoned railroad executives have worked with him and for him over the years. They must have learned quite a bit about Harrison’s recipe. Yet, again, a hedge fund is prepared to throw a fortune at him to get him on board.

The answer to the question appears to reside in the fact that the successful transformation of these railroads (CN and CP) was the result, yes, of operational improvements but more so of a fundamental cultural change. Harrison then appears as a formidable change agent, a transformational leader in the truest meaning of that tired expression.

PRECISION RAILROADING

Hunter Harrison claims to have invented a principle called “precision railroading”, which he implemented at three major railroads: Illinois Central, CN, and the CP, the latter with spectacular results, bringing the operating ratio (operating costs as a percentage of revenue, the lower the ratio the better) to 58.6% for fiscal year 2016, down from 81.3% in 2011, the last full year before Harrison’s took over.

Precision railroading, if it was easily learned from a book and replicated, would have been applied with success long ago at every North American railroad. Yet, Harrison still seems to bring something that can make a difference over and above the techniques he developed and implemented. That something seems to be his skill at changing the culture of the railroad, a most difficult skill to imitate.

CHANGING THE CULTURE

As a lifetime railroader himself, his decisions and actions display a deep understanding of the daily reality of the operators. He spends time meeting with the workers on the field, communicates profusely about the importance of asset optimization and the control of costs. At CP, he took many symbolic actions to instill in the whole organization the need to think and act like a railroader. For example, he relocated the corporate glasstowered headquarters to a railyard, a move that was meant to cut costs but mostly to keep the employees’ focus on freight operations, and remind them daily of what the business is all about.

No cost saving is too small. At the CP, he instilled a healthy competition between the different terminals with a scorecard method designed to stimulate continuous improvement.

Harrison used the employee magazine as his communication tool to impart his vision and strategic orientations and broadcast the results obtained since the leadership change (and always makes sure to give a positive connotation to the word “change”). The magazine is clearly targeting a readership of railroad people, containing lots of interviews with employees working on railroad specialties sharing their passion for what they do. The aim is to create and consolidate a winning culture through the sharing of accomplishments and operational achievements.

Managing a strategic turnaround is not an easy task. The softer, cultural, element of it is often neglected, overlooked, and difficult to implement. That is where Hunter Harrison excels and why a hedge fund manager is prepared to pay big bucks to get that talent
working for him.

But is money really the sole motivation for Harrison to start over at another railroad company at the age of 72. In fact, at this stage of his career, he has more to lose reputation-wise if he fails than anything he can really earn in monetary terms.

The Memphis (Tennessee) native, whose career began over five decades ago as an 18- year-old carman-oiler, may be driven by the determination to prove that the theory he has developed is replicable, no matter where. And determined to push his legacy to a new level, turning him into him some kind of legend in the railroad industry.
]]></content>
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		<item>
		<title>Corporate Governance: The New Paradigm</title>
		<link>https://igopp.org/en/corporate-governance-the-new-paradigm/</link>
		<comments>https://igopp.org/en/corporate-governance-the-new-paradigm/#respond</comments>
		<pubDate>Wed, 11 Jan 2017 21:23:46 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Activism]]></category>
		<category><![CDATA[Board members' compensation]]></category>
		<category><![CDATA[Diversity]]></category>
		<category><![CDATA[Harvard Law School Forum]]></category>
		<category><![CDATA[Hedge funds]]></category>
		<category><![CDATA[Risk management]]></category>
		<category><![CDATA[Stakeholders]]></category>
		<category><![CDATA[Value-creating governance]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=7040</guid>
		<description><![CDATA[[ &#8230; ] a growing body of academic research has confirmed that short-term financial activists are a major contributor to systemic short-termism in managing businesses and investments. The notion that activist attacks increase, rather than undermine, long-term value creation has been resoundingly discredited. Economists Yvan Allaire and François Dauphin, for example, demonstrated in a series [&#8230;]]]></description>
		<content><![CDATA[[ ... ]

a growing body of academic research has confirmed that short-term financial activists are a major contributor to systemic short-termism in managing businesses and investments. The notion that activist attacks increase, rather than undermine, long-term value creation has been resoundingly discredited. Economists Yvan Allaire and François Dauphin, for example, demonstrated in a series of papers issued by the Institute for Governance of Private and Public Corporations that the “benefits” of activism cited by its proponents were, to the extent not temporary, marginal at best, largely the result of basic short-term financial maneuvers (such as asset sales, spin-offs, buybacks and cost cuts) and not of any superior long-term strategies and may simply constitute a wealth transfer from employees and creditors to shareholders rather than actual wealth creation.

Read more [1]

[1] https://corpgov.law.harvard.edu/2017/01/11/corporate-governance-the-new-paradigm/]]></content>
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		<item>
		<title>Pershing Square, Ackman and CP Rail: A Case of Successful «Activism»?</title>
		<link>https://igopp.org/en/cp-rail-a-case-of-successful-activism/</link>
		<comments>https://igopp.org/en/cp-rail-a-case-of-successful-activism/#respond</comments>
		<pubDate>Fri, 23 Dec 2016 20:46:04 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[Publications ]]></category>
		<category><![CDATA[Reports & Studies]]></category>
		<category><![CDATA[Activism]]></category>
		<category><![CDATA[Activisme]]></category>
		<category><![CDATA[American governance]]></category>
		<category><![CDATA[Hedge funds]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=7025</guid>
		<description><![CDATA[Pershing Square, an activist hedge fund owned and managed by William Ackman, began hostile maneuvers against the board of CP Rail in September 2011 and ended its association with CP in August 2016, having netted a profit of $2.6 billion for his fund. This Canadian saga, in many ways, an archetype of what hedge fund [&#8230;]]]></description>
		<content><![CDATA[Pershing Square, an activist hedge fund owned and managed by William Ackman, began hostile maneuvers against the board of CP Rail in September 2011 and ended its association with CP in August 2016, having netted a profit of $2.6 billion for his fund. This Canadian saga, in many ways, an archetype of what hedge fund activism is all about, illustrates the dynamics of these campaigns and the reasons why this particular intervention turned out to be a spectacular success… thus far.

Governance at CP Rail

In 2009, the Chairman of the board of CP Rail asserted that the company had put in place the best practices of corporate governance; that year, CP was awarded the Governance Gavel Award for Director Disclosure by the Canadian Coalition for Good Governance. Then, in 2011, CP ranked 4th out of some 250 Canadian companies in the Globe &#38; Mail Corporate Governance Ranking1. Yet, this stellar corporate governance was no insurance policy against shareholder discontent.

Indeed, during the summer of 2011, a group of 20 portfolio managers were gathered in a New York City bistro to discuss opportunities in the transportation sector. During pre-diner cocktail, one of the investors spoke critically about the governance of CP. “He was exasperated that the company’s board had not thrown out the chief executive, Fred Green” 2.

That investor admitted that the previous winter had been grueling for rail transportation, but blaming the weather to justify CP’s poor results was, according to him, just another lame excuse made by Fred Green to avoid taking responsibility. His views were shared by many other portfolio managers who turned belligerent about CP’s Board and wondered why no activist fund had yet spotted the opportunity offered by CP. A phone call was made to Paul Hilal, an associate at Pershing Square Capital Management (Pershing Square), an activist hedge fund. That phone call triggered the most highly mediatized proxy contests in Canada. Thou shalt never (henceforth?) underestimate the power of discontented shareholders. Read more [1]

[1] https://igopp.org/wp-content/uploads/2017/01/IGOPP-Allaire-and-Dauphin-CP-Case-November-28-2016-SSRN.pdf]]></content>
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		</item>
		<item>
		<title>A «Successful» Case of Activism at the Canadian Pacific Railway: Lessons in Corporate Governance</title>
		<link>https://igopp.org/en/successful-case-of-activism-at-the-canadian-pacific-railway/</link>
		<comments>https://igopp.org/en/successful-case-of-activism-at-the-canadian-pacific-railway/#respond</comments>
		<pubDate>Fri, 23 Dec 2016 20:16:07 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[News Articles]]></category>
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		<guid isPermaLink="false">https://igopp.org/successful-case-of-activism-at-the-canadian-pacific-railway-2/</guid>
		<description><![CDATA[Pershing Square Capital Management, an activist hedge fund owned and managed by William Ackman, began hostile maneuvers against the board of CP Rail in September 2011 and ended its association with CP in August 2016, having netted a profit of $2.6 billion for his fund. This Canadian saga, in many ways, an archetype of what [&#8230;]]]></description>
		<content><![CDATA[Pershing Square Capital Management, an activist hedge fund owned and managed by William Ackman, began hostile maneuvers against the board of CP Rail in September 2011 and ended its association with CP in August 2016, having netted a profit of $2.6 billion for his fund. This Canadian saga, in many ways, an archetype of what hedge fund activism is all about, illustrates the dynamics of these campaigns and the reasons why this particular intervention turned out to be a spectacular success… thus far.

In 2009, the Chairman of the board of the Canadian Pacific Railway (CP) asserted that the company had put in place the best practices of corporate governance; that year, CP was awarded the Governance Gavel Award for Director Disclosure by the Canadian Coalition for Good Governance. Then, in 2011, CP ranked 4th out of some 250 Canadian companies in the Globe &#38; Mail Corporate Governance Ranking.1 Yet, this stellar corporate governance was no insurance policy against shareholder discontent.

Pershing Square began purchasing shares of CP on September 23, 2011. They filed a 13D form on October 28th showing a stock holding of 12.2%; by December 12, 2011, their holding had reached 14.2% of CP voting shares, thus making Pershing Square the largest shareholder of the company.

Read more [1]

[1] https://igopp.org/wp-content/uploads/2017/01/2016-12-23-a-successful-case-of-activism-at-the-canadian-pacific-railway_lessons-of-governance.pdf]]></content>
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		<title>Corporate Governance: looking backward, looking forward</title>
		<link>https://igopp.org/en/corporate-governance-looking-backward-forward/</link>
		<comments>https://igopp.org/en/corporate-governance-looking-backward-forward/#respond</comments>
		<pubDate>Wed, 07 Dec 2016 16:34:27 +0000</pubDate>
		<dc:creator><![CDATA[mlamnini]]></dc:creator>
				<category><![CDATA[Publications ]]></category>
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		<category><![CDATA[American governance]]></category>
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		<category><![CDATA[Hostile takeovers]]></category>
		<category><![CDATA[Public governance]]></category>
		<category><![CDATA[Regulation]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=6909</guid>
		<description><![CDATA[Once upon a time, the governance of publicly listed corporations was a friendly, fraternal affair with few requirements and little risk. Then, during the 1980s, a group of funds (leveraged buyout funds) sprouted up claiming that this sort of governance deprived shareholders of the full economic value of the business they had invested in. Cozy [&#8230;]]]></description>
		<content><![CDATA[Once upon a time, the governance of publicly listed corporations was a friendly, fraternal affair with few requirements and little risk. Then, during the 1980s, a group of funds (leveraged buyout funds) sprouted up claiming that this sort of governance deprived
shareholders of the full economic value of the business they had invested in. Cozy boards and complacent management, these funds claimed, were not motivated to maximize value for shareholders.

Their solution was a dramatic one: this system must be changed by a "revolution" in governance made possible only by the full privatization of these companies. Having access to large pools of funds and the borrowing capacity of the targeted companies, these LBO “revolutionaries” carried out a wave of hostile takeovers of companies and their subsequent privatization. That period was unusual for the large number of transactions – nearly always hostile – to privatize public companies.

This "revolution", which was to some degree successful and did leave a lasting impact on corporate governance, eventually faded away as a result of two events at the end of the 1980s and beginning of the 1990s:

 	The financing of these LBO transactions relied heavily on another "innovation", namely junk bonds, whose principal protagonist was Michael Milken. However, at the end of the 1980s, a series of financial scandals implicated several major actors in the
financial world, including Milken himself who was charged and eventually served jail time. This criminal turn of events had the effect of immediately drying up the junk bonds market as a source of financing for LBOs.
 	Legislators in 30 or so U.S. states, prompted by an electorate that was shocked and outraged by the impact on their communities of these hostile "privatizations", adopted laws giving boards of directors increased authority and leverage to repel any
unwanted takeover bids.

However, stung by the arguments of LBO funds, boards of directors would henceforth set compensation of senior executives in a way that would motivate them to create economic value for shareholders. That meant, inter alia, generous helpings of stock options so that management would work hard to push up the stock price, pleasing shareholders and ipso facto enriching themselves.

This radical change in executive compensation was strongly supported, and even instigated, at the time by institutional investors. As executive compensation shot up, public companies, beginning in 1992, were obliged to disclose detailed information about the compensation of their five best-paid executives.

Thus, during the 1990s, hostile takeover bids quickly dried up and were replaced by transactions that had become "friendly"1. The aggressive, “hostile” LBO funds morphed into “gentle” Private Equity Funds (PEF).

Board governance reverted to the quiet, collegial nature of the old days, but failing inexcusably to factor in the increased risk of management misbehaviour brought about by a system of compensation now loaded with stock options. This risk went unforeseen until the tornado known as Enron, WorldCom, Global Crossing, et alia caught boards of directors by surprise in 2001.

The American political and regulatory system, sensing that accusations of laxity were forthcoming, adopted the Sarbanes-Oxley (SOX) Act in short order in July 2002. Thus, having interpreted the Enron/WorldCom scandals as being largely attributable to accounting flaws and management malpractices resulting from overly generous incentives, SOX imposed new safeguards, including the following:

 	Independence requirement for audit committee members;
 	Responsibility of audit committees for the quality of internal controls;
 	Explicit responsibility of the CEO and CFO to certify that the financial statements adequately represent the corporation's financial position;
 	Full disclosure of off-balance sheet transactions;
 	Creation of the Public Accounting Oversight Board;
 	Severe restrictions on other services that audit firms can provide to corporations for whom they assume audit responsibility;
 	More expeditious filing of insider trading reports;
 	The reimbursement of any variable compensation obtained according to financial statements that were subsequently restated;
 	The prohibition of loans to senior management and directors;
 	Longer prison terms for financial fraud.

Not only did the bankruptcies of Enron and WorldCom lead to unusually long prison sentences for the officers of these corporations but board members were required to pay out of their own pockets fines of $13 million and $18 million respectively. Although there was no equivalent jail time or monetary fines in other cases, the Enron/WorldCom sagas triggered a shock wave among the officers and board members of U.S. public corporations.

Having to comply with the SOX requirements, worried about the risks they now ran for any laxity in governance, submerged under an avalanche of measures, standards and principles of "good governance" put forth by committees of experts, security commissions and the stock exchanges, boards of directors engaged in a sweeping reform of the governance of public corporations. Boards would henceforth play their role fully and assert a new (or renewed) fiduciary authority over corporate management.

This phenomenon, which first appeared in the U.S., spread like wildfire to Canada and the United Kingdom, and then more slowly to other developed countries. Read more [1]

The opinions expressed in this article are the author's own.

[1] https://igopp.org/wp-content/uploads/2017/01/IGOPP_Rapport_CorporateGovernance_EN_v1.pdf]]></content>
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