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		<title>‘There’s no war without cost’: Gildan’s proxy fight racked up US$77-million in expenses</title>
		<link>https://igopp.org/en/theres-no-war-without-cost-gildans-proxy-fight-racked-up-us77-million-in-expenses/</link>
		<comments>https://igopp.org/en/theres-no-war-without-cost-gildans-proxy-fight-racked-up-us77-million-in-expenses/#respond</comments>
		<pubDate>Thu, 01 Aug 2024 18:14:39 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/theres-no-war-without-cost-gildans-proxy-fight-racked-up-us77-million-in-expenses/</guid>
		<description><![CDATA[The nasty proxy fight that plunged Gildan Activewear Inc. into turmoil for nearly half a year and ended with the return of chief executive Glenn Chamandy cost the company US$76.8-million, delivering a US$33-million windfall for lawyers and other advisers in exchange for their expertise. The CEO calls it an “abusive” waste of money. The Canadian [&#8230;]]]></description>
		<content><![CDATA[The nasty proxy fight that plunged Gildan Activewear Inc. into turmoil for nearly half a year and ended with the return of chief executive Glenn Chamandy cost the company US$76.8-million, delivering a US$33-million windfall for lawyers and other advisers in exchange for their expertise. The CEO calls it an “abusive” waste of money.

The Canadian maker of T-shirts and fleece on Thursday published a financial accounting of the battle that climaxed this past spring between Gildan’s former board of directors and rebel shareholders led by U.S. investment firm Browning West. It lays bare the millions that were spent on lawyers, strategic advisers and consultants of all kinds as well as severance for departed executives in what the company believes is one of the most costly proxy fights in history.

“It was an abusive amount of money being spent,” Mr. Chamandy said in an interview with The Globe and Mail following the company’s second-quarter earnings report, his first since he was reinstated as CEO in late May. “For a small company like Gildan, it just doesn’t make a lot of sense.”

At Gildan, a board’s defeat offers lessons in shareholder management

Mr. Chamandy said the cost is a direct result of a former board that used aggressive tactics, launching three lawsuits against Browning West and agreeing to generous payouts for executives who are now no longer with the company. The board could have avoided the entire saga by communicating its thoughts on his leadership to investors instead of surprising them with a dismissal they opposed, he said.

[...]

As part of the legal and advisory fees, the new board is reimbursing Browning West for the costs it racked up in waging its dissident campaign, which total US$9.4-million. Mr. Chamandy said the move is justified because it largely amounts to the firm defending itself against attacks by the former board, which he said sought to entrench itself and therefore spent more than twice what Browning West spent on such fees.

That’s one view. Another is that the original board believed it was acting in good faith and in the best interest of the corporation when they removed the CEO, said Catherine McCall, CEO of the Canadian Coalition for Good Governance. The board would then naturally move to bolster that position.

“I wouldn’t think that you should fold if you firmly believe in the rightness of what you’re doing just because somebody comes along and challenges that,” Ms. McCall said.

Ex-CEO Glenn Chamandy finds his record scrutinized as Gildan’s shareholders mull leadership change

To put Gildan’s US$76.8-million proxy contest bill in perspective, Walt Disney Co. won a high-profile proxy battle earlier this year with activist investor Nelson Peltz that could cost the two sides US$70-million by the time the dust settles, The Wall Street Journal reported in February. Disney is several times the size of Gildan as measured by revenue and market capitalization. A separate shareholder battle by Mr. Peltz at Proctor &#38; Gamble Co. in 2017 cost an estimated US$60-million, the priciest ever at the time, the newspaper said.

Gildan’s expenses for the fight and its related leadership changes ate up US$57.2-million during the company’s second quarter alone. That’s equal to almost all of Gildan’s US$58.4-million in net earnings for the period.

“It’s a bit mind-blowing, but there’s no war without cost,” said François Dauphin, CEO of the Montreal-based Institute for Governance of Private and Public Organizations, adding the sum should have been expected given the intensity and length of the proxy fight.

“It was a confrontation of two visions for the future of the company,” Mr. Dauphin said. “And the jury is still out. We will see in a few years whether that cost was prohibitive or whether it was a good investment.”

Browning West has said a combination of operational improvements at Gildan, share buybacks and an improved executive compensation scheme could nearly double the company’s stock price to US$60 by the end of next year and propel it to US$100 within five years.

Read more [1]

[1] https://igopp.org/wp-content/uploads/2024/08/THERES1.pdf]]></content>
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		</item>
		<item>
		<title>At Gildan, a board’s defeat offers lessons in shareholder management</title>
		<link>https://igopp.org/en/at-gildan-a-boards-defeat-offers-lessons-in-shareholder-management/</link>
		<comments>https://igopp.org/en/at-gildan-a-boards-defeat-offers-lessons-in-shareholder-management/#respond</comments>
		<pubDate>Fri, 24 May 2024 20:53:17 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
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		<guid isPermaLink="false">https://igopp.org/at-gildan-a-boards-defeat-offers-lessons-in-shareholder-management/</guid>
		<description><![CDATA[Glenn Chamandy, co-founder of Gildan Activewear Inc. GIL-T, left his job as chief executive officer last year in a cloud of mystery after relations with his board soured. Now he returns triumphant – and under more pressure than ever before to deliver returns for the investors who won his job back. The raucous five-month battle that engulfed [&#8230;]]]></description>
		<content><![CDATA[Glenn Chamandy, co-founder of Gildan Activewear Inc. GIL-T, left his job as chief executive officer last year in a cloud of mystery after relations with his board soured. Now he returns triumphant – and under more pressure than ever before to deliver returns for the investors who won his job back.

The raucous five-month battle that engulfed the T-shirt maker came to a sudden conclusion late Thursday, when Gildan’s entire board of directors and CEO Vince Tyra quit [1], admitting defeat at the hands of activist investor Browning West. The Los Angeles-based firm, which owns about 5 per cent of Gildan’s shares, has now taken control of the company and will reinstate Mr. Chamandy as CEO, with United Rentals Inc. CEO Michael Kneeland becoming chairman.

Mr. Tyra’s bio has already been scrubbed from the Gildan [2] website.

The feud was a rare case of activists pushing for the status quo. And though it’s often hazardous to predict whether the fallout from such cases will have a lasting impact on the Canadian corporate landscape, observers say it does provide a cautionary tale for other boards overseeing strong-willed executives who directors think might be past their best-before date.

Gildan’s legacy board, the directors who dismissed [3] Mr. Chamandy last December, weren’t fast or blunt enough in explaining publicly why they showed him the door, according to one insider who spoke openly on condition they not be named.

Other experts say those directors underestimated the strength of Mr. Chamandy’s backing from Browning West and other institutional investors – and their resolve.

“It does show that sometimes the personality, the charisma, and the history of a long-time CEO and founder with investors is not something you can break easily,” said François Dauphin, president of the Institute of Governance for Public and Private Organizations. “Once you start pushing against that, it’s really hard to get yourself out.”

Former Gildan chairman Don Berg and the other directors who dismissed Mr. Chamandy initially said that they didn’t see eye to eye with the CEO on the timing of a leadership handover and they worked until the very last moment to try to hammer out a compromise with him. It wasn’t until after Mr. Chamandy was gone that they took a harsher tone, saying he’d become increasingly detached from his job and unable to articulate a credible long-term growth strategy for the company.

Even if the board’s process to address CEO succession was appropriate – engaging advisers and considering Mr. Chamandy’s proposals, for example – the announcement of his termination still took investors by surprise. And if there’s one warning for other companies from this saga, it’s to communicate with shareholders more closely when working through leadership issues, said Catherine McCall, executive director of the Canadian Coalition for Good Governance.

“I don’t think the lesson is that shareholders should micromanage the board because I think the situation, the circumstances, don’t encourage that takeaway,” Ms. McCall said. “[But] they should have maybe been talking to shareholders more. ... If anything, this is going to prompt or encourage more shareholder engagement.”

Read more [4]

[1] https://www.theglobeandmail.com/business/article-gildan-board-resigns-clearing-the-way-for-glenn-chamandy-to-retake/
[2] https://www.theglobeandmail.com/topics/gildan-activewear-inc/
[3] https://www.theglobeandmail.com/business/article-gildan-activewear-replaces-ceo-in-sudden-shakeup/
[4] https://igopp.org/wp-content/uploads/2024/05/At-Gildan-a-board’s-defeat-offers-lessons-in-shareholder-management_Globe-and-Mail_May-2024.pdf]]></content>
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		<title>Browning West seeks court order to prevent Gildan sale before vote on new directors</title>
		<link>https://igopp.org/en/browning-west-seeks-court-order-to-prevent-gildan-sale-before-vote-on-new-directors/</link>
		<comments>https://igopp.org/en/browning-west-seeks-court-order-to-prevent-gildan-sale-before-vote-on-new-directors/#respond</comments>
		<pubDate>Mon, 08 Apr 2024 03:25:58 +0000</pubDate>
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		<description><![CDATA[U.S. investment firm Browning West is seeking a court order preventing the board of Gildan Activewear Inc. from signing any binding deal to sell the clothing maker until shareholders vote on new directors. The request was made last week as an amendment to an existing suit in the Quebec Superior Court’s commercial division, filed by [&#8230;]]]></description>
		<content><![CDATA[U.S. investment firm Browning West is seeking a court order preventing the board of Gildan Activewear Inc. from signing any binding deal to sell the clothing maker until shareholders vote on new directors.
The request was made last week as an amendment to an existing suit in the Quebec Superior Court’s commercial division, filed by Browning West, which has a roughly 5-per-cent stake in Gildan [1].
“We do not believe the current board has a mandate to be making any decisions about the future of the company,” Browning West founders Usman Nabi and Peter Lee said in an e-mailed statement.
Gildan dismissed Browning’s gambit to hamstring existing directors as “ridiculous.”
It’s the latest in a series of legal volleys between Montreal-based Gildan and Browning West in what has become one of the most acrimonious corporate power struggles in recent years in Canada. As the clock ticks down on an April 10 deadline [2] for initial offers for the apparel manufacturer, the clash has taken on another level of urgency.
The saga, now in its fourth month, started when the board fired co-founder and long-time chief executive Glenn Chamandy last December. The board concluded he had run out of ideas to increase sales and profits, and hired former Fruit of the Loom executive Vince Tyra to replace him. Dissident shareholders unhappy about that decision are trying to push current directors out and demanding the reinstatement of Mr. Chamandy back at the helm.
[...]
Gildan punched back Sunday.
“This latest tactic is ridiculous and without precedent or merit,” Gildan spokesman Simon Beauchemin said by e-mail. “It appears designed solely as an attempt to generate headlines and obstruct a potential sale of the company.”
At least one court decision has confirmed boards can do what they believe is in the best interest of the company for the entirety of their term. In a 2011 case concerning Bennett Environmental, then in the midst of a proxy battle, Justice Ruth Mesbur, an Ontario Superior Court judge, said: “A board need not curtail its activities in the face of a fight for control.”
In an interview with The Globe and Mail on March 27, Gildan chairman Donald Berg said the board chose to launch a sales process because the takeover approach it received was a “serious offer.” Shareholders will ultimately have the last say in any case, he said.
It’s not in the best interest of shareholders and other stakeholders to seek to tie the hands of the board of directors and prevent its work, said François Dauphin, chief executive of Montreal’s Institute for Governance of Private and Public Organizations, who’s been following the Gildan drama. Regardless of the recriminations some shareholders might have against the current board, directors must consider and analyze any offer received, which might mean having to incur costs, he said.
Said Mr. Dauphin: “Browning West put forth its plan and vision for Gildan. Vince Tyra’s plan is expected soon. Shareholders will have the choice between those two visions and a proposed purchase offer, if there is one. It would be reasonable to let shareholders decide on these choices. Everything else is just noise.”
Read more [3]

[1] https://www.theglobeandmail.com/topics/gildan-activewear-inc/
[2] https://www.theglobeandmail.com/business/article-gildan-sets-april-10-deadline-for-initial-takeover-offers/
[3] https://igopp.org/wp-content/uploads/2024/04/Browning-West-seeks-court-order-to-prevent-Gildan-sale-before-vote-on-new-directors-The-Globe-and-Mail_April-2024.pdf]]></content>
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		<title>Gildan says allegations by key shareholder Browning West violated U.S. securities law</title>
		<link>https://igopp.org/en/gildan-says-allegations-by-key-shareholder-browning-west-violated-u-s-securities-law/</link>
		<comments>https://igopp.org/en/gildan-says-allegations-by-key-shareholder-browning-west-violated-u-s-securities-law/#respond</comments>
		<pubDate>Fri, 15 Mar 2024 02:13:24 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/gildan-says-allegations-by-key-shareholder-browning-west-violated-u-s-securities-law/</guid>
		<description><![CDATA[Gildan Activewear is accusing one of its largest shareholders of violating American securities law and has asked the regulator to investigate allegations that the investor has been spreading falsehoods about the Montreal-based clothing maker’s new chief executive, Vince Tyra. In a letter sent to the U.S. Securities and Exchange Commission late Thursday, Gildan alleged that U.S. [&#8230;]]]></description>
		<content><![CDATA[Gildan Activewear is accusing one of its largest shareholders of violating American securities law and has asked the regulator to investigate allegations that the investor has been spreading falsehoods about the Montreal-based clothing maker’s new chief executive, Vince Tyra.
In a letter sent to the U.S. Securities and Exchange Commission late Thursday, Gildan alleged that U.S. investment fund Browning West made “false and highly prejudicial personal attacks against Mr. Tyra and the board” as part of its campaign to take control of Gildan’s board of directors and remove Mr. Tyra as CEO. Browning West wants Glenn Chamandy reinstalled as chief executive.
The move is an escalation of an increasingly vicious battle between Gildan and Browning West, which this week saw each side issue public statements condemning the other.




Specifically, Gildan has accused Browning West of mischaracterizing the nature of a relationship Mr. Tyra had with a female executive at Gildan, which occurred 20 years ago and at a different company.




On Wednesday, Browning West issued a statement raising questions about whether Gildan’s board had properly considered whether “Mr. Tyra’s seemingly inappropriate relationship with a subordinate” would create “undue conflicts and risk for Gildan shareholders and employees.”
Gildan alleged in its letter to the regulator that Browning West has violated a section of the securities act that bans individuals from making untrue or misleading statements in connection with the purchase or sale of a security.
Gildan pointed to a recent story published in the New York Post – which recounted information contained in a report from management-analysis company Paragon Intel – that alleged Mr. Tyra had an affair with the female subordinate. Browning West said it had no involvement in the Paragon Intel report.
However, Mr. Tyra and the female executive – Patti Lambert Simetz, who is Gildan’s vice-president, distributor sales – told The Globe and Mail that the Post story was a mischaracterization of the relationship.
Both Mr. Tyra and Ms. Simetz said they dated briefly in 2002 during a period when they were both single. The three-month relationship was not an office secret and there were no rules about interoffice romances. After splitting, the pair remained friends, although as their careers took them in different directions, they did not stay in regular touch.
On Wednesday, Gildan accused Browning West of planting the Post article.
[...]
François Dauphin, chief executive of Montreal’s Institute for Governance of Private and Public Organizations, said this week marked the beginning of an acrimonious phase of a proxy fight.
“Digging into the past of targeted individuals is a tactic frequently used by shareholder activists, whose objective is to keep the debate present in the media and in the public eye, and in this case to discredit the current CEO and those who named him,” he said.
However, Mr. Dauphin noted that investors seemed unfazed by the Tyra relationship narrative, with Gildan’s stock up about 2 per cent on both the New York and Toronto stock exchanges since the Post article went online Tuesday night.
The fight will come to a head in May when shareholders will be asked to vote on the future of the company.
Read more [1]

[1] https://igopp.org/wp-content/uploads/2024/03/Gildan-says-allegations-by-key-shareholder-Browning-West-violated-U.S.-securities-law-The-Globe-and-Mail_March-2024.pdf]]></content>
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		<title>Gildan to hold shareholder meetings in late spring for board of directors vote</title>
		<link>https://igopp.org/en/gildan-to-hold-shareholder-meetings-in-late-spring-for-board-of-directors-vote/</link>
		<comments>https://igopp.org/en/gildan-to-hold-shareholder-meetings-in-late-spring-for-board-of-directors-vote/#respond</comments>
		<pubDate>Mon, 29 Jan 2024 14:56:02 +0000</pubDate>
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		<guid isPermaLink="false">https://igopp.org/?p=16421/</guid>
		<description><![CDATA[Canadian clothing maker Gildan Activewear Inc., GIL-T locked in a fight with dissident investors over its decision to sack its chief executive officer in December, is convening its shareholders in late spring to vote on whether they want a new board. The company says the timeline for the meeting on May 28 will give investors “a reasonable [&#8230;]]]></description>
		<content><![CDATA[Canadian clothing maker Gildan Activewear Inc., GIL-T [1] locked in a fight with dissident investors over its decision to sack its chief executive officer in December, is convening its shareholders in late spring to vote on whether they want a new board.
The company says the timeline for the meeting on May 28 will give investors “a reasonable period” to evaluate the dissidents’ plan for the company while providing more opportunity to judge the competence of the new CEO brought in by the board, Vince Tyra. U.S. investment fund Browning West, which is leading the dissidents, called it an “attempt to buy time for a seemingly unqualified chief executive officer with a record of value destruction.”
Montreal-based Gildan is under pressure from Browning West and other shareholders to hold a meeting as soon as possible to consider bringing in a new board that would back the return of former CEO [2] Glenn Chamandy. Gildan says Mr. Chamandy sought to entrench himself as CEO and that giving him his job back would jeopardize the company’s future because he’s no longer up to the task.


Browning wants a majority of Gildan’s current 11-director board out. Earlier this month, it made a formal request to the company for a special meeting so investors can vote on the investment fund’s own slate of candidates, which is supported by five institutional shareholders.
Gildan responded Monday and says it has called two shareholders meetings for May 28, one a special meeting and the other an annual meeting. But the clothing maker says it will seek a court ruling on whether the Browning West requisition is legal. If a judge rules in Gildan’s favour, the company would hold just an annual meeting that day and drop the special meeting. Browning could still try to get its directors elected at the AGM.
“Over the last few weeks, the company has heard from numerous shareholders, both those who have indicated preliminary support for Browning West and those who have not,” Gildan said in a news release. “The board and shareholders are aligned in the view that a speedy resolution of this unnecessary proxy contest is in the best interests of the company and its shareholder owners.”
The timing of the May meeting isn’t sitting well with at least two shareholders, who could mount a legal challenge to it.
Browning West blasted the board for setting a date that will come nearly five months after it submitted its special meeting requisition. “It appears the board has learned nothing from its recent string of ill-conceived decisions and publicity stunts, which seem to have only succeeded in alienating shareholders,” the firm’s founders said in a statement.
Toronto-based Turtle Creek Asset Management echoed that view. “The board’s tactics are just another slap in the face of Gildan’s long-term shareholders,” the firm said in an e-mailed statement.
Gildan has held its last eight annual general meetings at the end of April or in the first week of May, meaning this year’s May 28 AGM would come later than normal.
“We do have a sense of urgency here on the activist side,” said François Dauphin, chief executive of Montreal’s Institute for Governance of Private and Public Organizations. “Every hour, every week that goes by makes the possibility of getting Mr. Chamandy back at the helm that much harder.”
Gildan said it “remains ready and willing” to engage with Browning West and other shareholders to find a resolution to the dispute. It said while it has offered the investment fund an opportunity to meet with the new CEO, it has not been offered access in turn to Browning’s director nominees.
The decision to hold the shareholders meeting in May takes into account statements by investors expressing support for a spring meeting and a desire to limit disruption to the business, Gildan said. Combining a special meeting with an AGM on the same day avoids having two meetings within a month or two of each other that would address similar issues, Gildan said.
On the question of whether the Browning West meeting requisition is legitimate, Gildan wants a court to decide. The company said it would file an application for declaratory judgment to the Quebec Court on Monday seeking a ruling that the Browning West requisition is null and void.
Read more [3]

[1] https://www.theglobeandmail.com/investing/markets/stocks/GIL-T/
[2] https://www.theglobeandmail.com/business/article-gildan-ceo-shareholders-stock/
[3] https://igopp.org/wp-content/uploads/2024/01/Gildan-to-hold-shareholder-meetings-in-late-spring-for-board-of-directors-vote-The-Globe-and-Mail_January-2024.pdf]]></content>
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		<title>How obeying an activist investor can destroy value</title>
		<link>https://igopp.org/en/how-obeying-an-activist-investor-can-destroy-value/</link>
		<comments>https://igopp.org/en/how-obeying-an-activist-investor-can-destroy-value/#respond</comments>
		<pubDate>Thu, 04 Aug 2022 22:36:41 +0000</pubDate>
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		<description><![CDATA[[&#8230;] If you ever needed a reminder about how M&#38;A can be value destructive, look no further than Just Eat Takeaway’s $7.3bn acquisition of US rival Grubhub. The Netherlands-based company on Wednesday said it had to write down by €3bn the value of Grubhub, effectively admitting its consolidation strategy has failed. There are two lessons [&#8230;]]]></description>
		<content><![CDATA[[...]

If you ever needed a reminder about how M&#38;A can be value destructive, look no further than Just Eat Takeaway’s $7.3bn acquisition of US rival Grubhub.

The Netherlands-based company on Wednesday said it had to write down by €3bn the value of Grubhub, effectively admitting its consolidation strategy has failed.

There are two lessons from this.

The first is that bigger isn’t always better. JET and Grubhub believed that by creating economies of scale they could reap huge rewards. But dealmaking is tough and most mergers fail, as this study shows.

Several rigorous academic papers have also determined that combining companies has historically led to value destruction rather than creation. This paper in the National Bureau of Economic Research shows that US takeovers have led to losses worth more than $200bn for shareholders over the past two decades.

The second lesson is that the short-term strategies of activist investors are often detrimental to the broader interests of the company and long-term shareholders. In fact, this paper [1] by Yvan Allaire at the Institute for Governance of Private and Public Organizations in Montreal shows how activists underperform passive funds.

Read more [2]

[1] http://www.shareholderforum.com/access/Library/20150401_Allaire.pdf
[2] https://igopp.org/wp-content/uploads/2024/04/Financial-Times_How-obeying-an-activist-investor-can-destroy-value_August-2022.pdf]]></content>
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		<title>Audet family was right to reject Rogers&#8217; attempted takeover of Cogeco</title>
		<link>https://igopp.org/en/audet-family-was-right-to-reject-rogers-attempted-takeover-of-cogeco/</link>
		<comments>https://igopp.org/en/audet-family-was-right-to-reject-rogers-attempted-takeover-of-cogeco/#respond</comments>
		<pubDate>Fri, 11 Sep 2020 14:35:55 +0000</pubDate>
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				<category><![CDATA[News Articles]]></category>
		<category><![CDATA[Actions multivotantes]]></category>
		<category><![CDATA[Activime]]></category>
		<category><![CDATA[Activism]]></category>
		<category><![CDATA[Dual-class shares]]></category>
		<category><![CDATA[Hostile takeovers]]></category>
		<category><![CDATA[Offres d’achat hostiles]]></category>
		<category><![CDATA[Offres d’achat hostiles]]></category>

		<guid isPermaLink="false">https://igopp.org/audet-family-was-right-to-reject-rogers-attempted-takeover-of-cogeco/</guid>
		<description><![CDATA[In a surprising move, Rogers and Altice USA made an offer to buy Cogeco and Cogeco Communications and split their assets between them. If Cogeco were a typical Canadian corporation with a one-share, one-vote capital structure, the would-be buyers could disregard any reticence or opposition by the board of directors and transmit their offer directly [&#8230;]]]></description>
		<content><![CDATA[In a surprising move, Rogers and Altice USA made an offer to buy Cogeco and Cogeco Communications and split their assets between them. If Cogeco were a typical Canadian corporation with a one-share, one-vote capital structure, the would-be buyers could disregard any reticence or opposition by the board of directors and transmit their offer directly to shareholders. Given that Rogers already holds a stake of 41 per cent in the subordinate shares of Cogeco and 33 per cent for Cogeco Communications, the outcome is fairly predictable. If shareholders representing two-thirds or more of the shares vote for their offer, the deal is done (leaving aside any possible wobbling by the CRTC or the Competition Bureau).

But because of multiple voting shares, the Audet family, which has effective control of these entities, can and did bluntly reject the attempted takeover. And for good reason. Under the family’s leadership, Cogeco shareholders enjoyed a compound return of 9.8 per cent over the last five years and 11.8 per cent over the last ten. Shareholders of Cogeco Communications were rewarded with a compound return of 10.8 per cent over five years and 13.2 per cent over ten years.

Rogers/Altice offered a “generous” premium of some 30 per cent over the average share price of August 2020. But, compared to the share price of Cogeco entities at the beginning of 2020, the bid price represented a measly 2.3 per cent premium for Cogeco and just 18.6 per cent for Cogeco Communications.

On their face, those facts would justify a rejection of the Rogers/Altice offer and perhaps lead to further negotiations. That would prove a point often made in favor of multiple-voting shares: the controlling shareholders are in a great position to extract the best price from would-be buyers for the benefit of all shareholders.

That is not the denouement here, however, as the Audet family has made it clear their rejection of the “hostile” bid is not tactical but is firm and unconditional. Rogers should not be surprised by such a decision nor continue to pursue this acquisition: its own shareholder structure gives total control to the Rogers family (and now to a “control trust,”).

In an era of exotic funds and of “activist” hedge funds seeking to bully companies into taking actions of only short-term benefit, a dual class of shares becomes very attractive and beneficial for the whole industrial system of a country. It is the ultimate defense mechanism, particularly in Canada, where staggered boards do not exist and poison pills are of very short duration. Even in the U.S., however, from 2017 to 2019 some 16.5 per cent of companies going public did so with a dual class of shares, a share structure that is especially popular among tech companies.

Some will argue, as they always do, that all shareholders should have a voice in a takeover decision, as they would with a one-share, one-vote model, and that multiple voting shares represent a breach of shareholder “democracy.” That’s balderdash. The equivalent of “one person-one vote” democracy in the domain of shareholding would be “one shareholder-one vote,” irrespective of the number of shares held. In political democracies, citizens do not acquire more voting rights because they pay more taxes to the government.

Short-term “tourist” shareholders should no more get to vote than tourists who happen to be in a country on voting day should be able to claim voting rights. Like immigrants, newcomers to the shareholding of a company should have to wait a significant time before acquiring “citizenship” and the right to vote. Clearly, one share-one vote can’t be taken seriously.

We live in an age when all institutional investors call on corporations to pursue ESG (Environment, Social, Governance) objectives and in a country where the legal framework as interpreted by the Supreme Court calls on boards of directors to take into account the interests of all stakeholders, without giving preference to any particular group, not even shareholders. Many dual-class companies become family businesses, which have a longer life, are better integrated in their communities and are more likely to plan and manage with a long-term perspective and careful consideration of all stakeholders. The controlling shareholders of the Cogeco companies are exemplars of these benefits associated with family control. May these family-controlled companies, including Rogers, remain impervious to unwanted takeovers and other financial shenanigans.
]]></content>
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		<title>Some Thoughts for Boards of Directors in 2020: A Mid-Year Update</title>
		<link>https://igopp.org/en/some-thoughts-for-boards-of-directors-in-2020-a-mid-year-update/</link>
		<comments>https://igopp.org/en/some-thoughts-for-boards-of-directors-in-2020-a-mid-year-update/#respond</comments>
		<pubDate>Thu, 02 Jul 2020 18:29:48 +0000</pubDate>
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				<category><![CDATA[IGOPP in the Medias]]></category>
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		<category><![CDATA[Activism]]></category>
		<category><![CDATA[Harvard Law School Forum]]></category>
		<category><![CDATA[Hedge funds]]></category>
		<category><![CDATA[Stakeholders]]></category>

		<guid isPermaLink="false">https://igopp.org/some-thoughts-for-boards-of-directors-in-2020-a-mid-year-update/</guid>
		<description><![CDATA[The past six months have been marked by a profound upheaval that has accelerated the growing focus on both the purpose of the corporation and the role of the board in overseeing and leading the corporation in ways that promote sustainable business success. For a number of years, there has been a growing sense of [&#8230;]]]></description>
		<content><![CDATA[The past six months have been marked by a profound upheaval that has accelerated the growing focus on both the purpose of the corporation and the role of the board in overseeing and leading the corporation in ways that promote sustainable business success. For a number of years, there has been a growing sense of urgency around issues such as climate change, environmental degradation, globalization, workplace inequality and the need to keep pace with rapidly evolving technologies. Then, in recent months, the COVID-19 pandemic prompted a systemic shock, which has been accompanied by a long overdue awakening regarding endemic racial injustice. The convergence of these events has accelerated the focus on environmental, social and governance (ESG) issues and stakeholder capitalism as operational and strategic imperatives that are core to corporations’ abilities to compete and succeed. The well-being of employees and other stakeholders, and the ability to engage in more sustainable ways of doing business, are not a nice-to-have luxury or a branding exercise, but rather a basic building block of corporate value. There is an essential nexus between “value” and “values.”

Attention is being focused not just on stock price and quarterly financial results, but also on understanding what is needed to manage through challenging business conditions, strengthen the business and ensure it is well-positioned to execute on strategic goals as conditions normalize. It is clear that value is not necessarily equivalent to stock price, particularly as the limitations of the stock market as the “all-things-considered” arbiter of value have been illustrated by seemingly capricious volatility, precipitous plunges and exuberant upward trajectories that, in some respects, have defied reality. A more holistic conception of value that is anchored not only in financial results and stock price, but also in a more nuanced understanding of a corporation’s strengths and weaknesses that takes into account factors that are often difficult to quantify (such as corporate culture and employee well-being), goes hand-in-hand with stakeholder governance and the idea that a myopic focus on stock price and shareholder returns will ultimately limit, rather than enhance, the overall value of the corporation.

As directors work to maintain focus in these uncertain times, it is more important than ever to have a clear understanding of and conviction about the corporation’s purpose [1]. This is the anchor and compass that boards require to chart the path forward towards a new normal and is the bridge that reconciles value with values. As BlackRock CEO Larry Fink recently observed, “Companies and investors with a strong sense of purpose and a long-term approach will be better able to navigate this crisis and its aftermath.”

[...]

Stakeholder Governance

A strong and growing consensus of corporations, investors, academics and leading institutions—including the Business Roundtable, the British Academy and the World Economic Forum—have overwhelmingly embraced stakeholder governance. The consensus recognizes that directors should not be required to act as if any one stakeholder trumps all others, with potentially value-destructive consequences. Instead, they have latitude to make decisions that reasonably balance the interests of all constituencies and operate to promote sustainable, long-term business success of the corporation as a whole.

Stakeholder governance is fully consistent with well-established principles of corporate law and the existing fiduciary duty framework for directors. The directors of a corporation have a fiduciary duty to promote the success and value of the corporation, and the means and time horizon for achieving such goals are within the purview of the board’s business judgment. Furthermore, the exercise of balancing competing interests and risks to pursue the best interests of the corporation is the very core of business judgment, and the decisions of unconflicted directors, acting upon careful deliberation, will be fully protected by the business judgment rule. As we have previously discussed [2], there is no rule of law that mandates the ideology of share-price maximization, or case law requiring directors to manage the ongoing business of a corporation with the paramount goal of maximizing share price.

For an example of how stakeholder governance could influence board decision-making, Yvan Allaire and Stéphane Rousseau have outlined a framework [3] for corporate governance in a multi-stakeholder context that suggests that directors should (i) be explicit about how the decisions they make relate to the objective of maximizing the corporation’s long-term value, (ii) adopt a rigorous and explicit decision-making process that involves identifying stakeholders and their level of relevance for the decision, (iii) consider the reasonable expectations of all stakeholders, including shareholders and (iv) finally, render fact-based business judgment as to the course of action that would best serve the long-term interests of the corporation. This framework recognizes the competing tensions between stakeholders, but also accounts for the differing relevance of stakeholders for certain decisions and focuses on the long-term interests of the corporation as the overarching goal. Boards and board committees that follow a similar framework will be fully protected by the business judgment rule.

Read more [4]

[1] https://www.wlrk.com/webdocs/wlrknew/WLRKMemos/WLRK/WLRK.26961.20.pdf
[2] https://www.wlrk.com/webdocs/wlrknew/WLRKMemos/WLRK/WLRK.26567.19.pdf
[3] https://www.wlrk.com/docs/IGOPP_Rapport_PartiesPrenantes_EN_v3_WEB.pdf
[4] https://igopp.org/wp-content/uploads/2020/07/Harvard-Law-School_Some-Thoughts-for-Boards-of-Directors-in-2020_-A-Mid-Year-Update_July-2020.pdf]]></content>
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		<title>Regulations to rein in short-sellers must not overlook the good they do</title>
		<link>https://igopp.org/en/regulations-to-rein-in-short-sellers-must-not-overlook-the-good-they-do/</link>
		<comments>https://igopp.org/en/regulations-to-rein-in-short-sellers-must-not-overlook-the-good-they-do/#respond</comments>
		<pubDate>Wed, 29 Jan 2020 19:49:23 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
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		<description><![CDATA[A thick hide is a necessary qualification for the job of activist short-seller. When Spruce Point Capital Management released a negative report on Canadian Tire Corp. Ltd. in late 2019, it prompted Yvan Allaire, the executive chair of the Institute for Governance of Private and Public Organizations, to fire back in the Financial Post: “What [&#8230;]]]></description>
		<content><![CDATA[A thick hide is a necessary qualification for the job of activist short-seller. When Spruce Point Capital Management released a negative report on Canadian Tire Corp. Ltd. in late 2019, it prompted Yvan Allaire, the executive chair of the Institute for Governance of Private and Public Organizations, to fire back in the Financial Post: “What one never finds in these short-seller hatchet jobs is concern for anything other than a quick profit.” This was followed with several suggestions for reining in short-sellers.

Mr. Allaire is not the only one proposing restrictions – indeed, there appears to be an upswing in such calls from a number of sources recently. The danger here is that the urge to impose new regulations could go too far and choke off the good things that academic studies have found short-sellers provide to financial markets.

Only seven campaigns were launched in Canada by activist short-sellers in 2019, according to financial data firm Breakout Point. This was the lowest tally since financial analytics firm Activist Insight began keeping records in 2015: In most of those years, the number of new campaigns ranged from 19 to 22. It appears some short-sellers may have gone to the sidelines during 2019 to wait out the bullish tide flowing through the stock market.

[ ... ]

Even though Canada’s activist short sales plunged last year, the count was still higher than in other countries, excluding the United States. Indeed, Canadian firms have been disproportionately targeted for several years: From 2015 to late 2019 there were 76 campaigns, compared with 17 in Australia and 57 in the European Union.

Activist short-sellers on the ropes

Perhaps the most notable of recommendations to curtail-short sellers came in a November report released by law firm McMillan LLP. It claimed that the regulatory framework in Canada for short-sale trades was “out of step” with other countries and some tightening up was needed to make it more difficult to engage in abusive transactions, particularly naked short-selling (which can result in illegal situations where the number of short sales exceeds the actual number of tradable shares).

The regulator in charge of trading rules, the Investment Industry Regulatory Organization of Canada, however, has pointed out that its studies have found little evidence of abusive short-selling in Canada. Moreover, assessments of IIROC’s regulatory framework by the International Monetary Fund and World Bank concluded that it met international standards.

Several other sources have forwarded their own proposals. They include bringing back the uptick rule (short sales can only be made on an uptick in share price), giving companies civil remedies to combat “short and distort” campaigns, and having institutional investors cut back on lending securities to short-sellers. (Companies can currently sue short-sellers on a criminal basis but civil remedies would be preferable because of their lower burden of proof.)

Read more [1]

[1] https://igopp.org/wp-content/uploads/2020/02/Regulations-to-rein-in-short-sellers-must-not-overlook-the-good-they-do-The-Globe-and-Mail_Januray-2020.pdf]]></content>
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		<title>The Angels of Market Efficiency</title>
		<link>https://igopp.org/en/the-angels-of-market-efficiency/</link>
		<comments>https://igopp.org/en/the-angels-of-market-efficiency/#respond</comments>
		<pubDate>Fri, 10 Jan 2020 15:02:22 +0000</pubDate>
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				<category><![CDATA[News Articles]]></category>
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		<description><![CDATA[Mr. Ben Axler, Chief Investment Officer and founder of Spruce Point Capital responds (Financial Post, December 17th, 2019) to my article on short sellers of his kind (Financial Post, December 13th, 2019). He trots out the worn-out argument that short sellers only reveal the sordid truths hidden in the bosom of corporations. In short, “professional” [&#8230;]]]></description>
		<content><![CDATA[Mr. Ben Axler, Chief Investment Officer and founder of Spruce Point Capital responds [1] (Financial Post, December 17th, 2019) to my article [2] on short sellers of his kind (Financial Post, December 13th, 2019). He trots out the worn-out argument that short sellers only reveal the sordid truths hidden in the bosom of corporations.

In short, “professional” short sellers are sort of the guardian angels of market efficiency acting as a countervailing force to the fawning, relentlessly positive and often corrupted recommendations of sell-side analysts! Indeed, sell-side analysts tend to see glasses as half-full; for short sellers, glasses are always empty and… dirty.

The consequences of short-sellers’ actions may be dramatic. The near collapse of the financial system in 2008 owed a good deal to the savage, incendiary role of short selling (particularly of the “naked” sort). The book “On the Brink”, written by Hank Paulson, U.S. Treasury Secretary at the time of the financial crisis, makes clear the noxious role played by short sellers during that frightening period. That’s what angels of market efficiency do!

Mr. Asler invites me to share with him what I find wrong in their report on Canadian Tire. Much, too much for a short article but an overarching theme would be the relative ignorance of the Canadian retail market that pervades their report. Spruce Point Capital assumes the competitive and buying behavior of Canadians are identical to Americans. That assumption has proven costly in a number of instances (Think Target, Kmart, Sam’s Club, Best Buy, Sears). Similarly, Canadian retailers which crossed over to the US market were often taught a painful lesson about the differences between the two markets.

So, Spruce Point Capital’s report on Canadian Tire (CT) is insensitive to the particular nature of the Canadian retail and financial markets. It keeps comparing CT unfavourably to Amazon and Walmart as the be-all, end-all of retailing. That myopic American perspective may explain the case of Dollarama.

Barely a year ago in October 2018, Spruce Point Capital launched a virulent campaign against Dollarama producing a long negative report to buttress its claim that the stock price of Dollarama should or would drop from $46 to $28; the stock price actually leveled off briefly at $31 in December 2018 from which level it soared back to above $45.

I made two basic points in my earlier piece, which bear repeating.

1. Canada is a benign place to practice financial/casino capitalism as our regulators never adopted either of the two following measures put in place in the USA. As a consequence of the financial crisis, the SEC has clamped down on “naked” short selling, the practice of selling shares but delaying the delivery of the shares for as long as possible in the hope of buying back the shares at a much lower price without incurring the cost of borrowing shares from other holders. Also, in 2010, the SEC introduced a measure whereby if the price of a security falls by more than 10 per cent, transactions in the stock are stopped for the remainder of the day and all of the following day.

2. Large institutional investors with a significant position in a company have, or should have, the analytical wherewithal to assess public claims made by short sellers against this company. If they find those claims to be illfounded or even false, they should state so publicly instead of, as is the case now, letting the company fend off the attack by itself. And these large institutional funds should not lend their shares to short sellers of the Spruce Point Capital ilk.

Should Canada let American short sellers roam free and wreak havoc in our financial markets? To ask the question is to answer it.

&#160;

The author is solely responsible for the opinions expressed in this article.

[1] https://business.financialpost.com/opinion/counterpoint-short-sellers-like-us-create-real-value-for-public-markets-by-telling-canadian-investors-the-truth
[2] https://igopp.org/limiting-the-damage-of-short-sellers/]]></content>
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