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		<title>Shopify and the Problem of Shareholder “Approval” at Multi-Class Companies</title>
		<link>https://igopp.org/en/shopify-and-the-problem-of-shareholder-approval-at-multi-class-companies/</link>
		<comments>https://igopp.org/en/shopify-and-the-problem-of-shareholder-approval-at-multi-class-companies/#respond</comments>
		<pubDate>Wed, 07 Aug 2024 14:32:54 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Dual-class shares]]></category>
		<category><![CDATA[Proxy Advisors]]></category>
		<category><![CDATA[Say on Pay]]></category>

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		<description><![CDATA[Media reporting can make proxy season seem more dramatic than it is. While breathless coverage of board strife, impossibly high executive pay figures and shareholder activism at well-known companies is the norm, the overwhelming majority of director election and executive compensation proposals pass with majorities of 90% and upwards. The handful of proposals that fail [&#8230;]]]></description>
		<content><![CDATA[Media reporting can make proxy season seem more dramatic than it is. While breathless coverage of board strife, impossibly high executive pay figures and shareholder activism at well-known companies is the norm, the overwhelming majority of director election and executive compensation proposals pass with majorities of 90% and upwards.

The handful of proposals that fail understandably draw headlines – yet many proposals opposed by a majority of shareholders fly under the radar. That’s because (with some notable exceptions [1]) most reporting fails to acknowledge how multi-class share structures, which give certain shares typically held by founders and insiders more voting power than those held by institutional and retail investors, obscure investor sentiment.

Proxy voting is highly technical in and of itself, and its ultimate influence on how companies are run is even more complicated. So why does the impact of multi-class share structures matter? Because giving insiders and founders disproportionate voting power often serves to effectively silence ordinary shareholders, threatens the agency and objectivity of the board and removes a key safeguard against excessive pay, related party transactions, and other potential misuses of investor capital.

In this post, we look at how inequitable voting rights influenced 2024 AGM results at Shopify, and at the broader impact of multi-class share structures on the board and its role.

Case Study: Shopify Inc.

Two years ago, Shopify controversially [2] implemented a “founder share” that gave CEO Tobi Lutke 40% voting rights indefinitely, even if his actual economic stake in the company goes down as low as ~2%. A majority of the company’s shares were voted against this arrangement – but because not all of the company’s shares had the same voting power, the founder share was nonetheless granted to Lutke.

At the 2024 AGM, Shopify’s now-cemented triple-class share structure again swung the vote on several proposals. Yet, as in 2022, most media coverage of the general meeting painted an incomplete picture of the results. A Financial Post headline on the day of the meeting read [3] “Shopify shareholders approve executive pay plan they were urged to reject” while thelogic.co reported [4] “Shopify shareholders approve executive pay plan, rejecting proxy push.” Shopify’s subsequent filings announced that all agenda items had been approved.

Like two years ago, the word “approve” is doing a lot of lifting.

According to S&#38;P Capital IQ, institutional investors currently hold 815,336,783 shares in Shopify, or 63.3% of the economic exposure to the company’s share price performance. This translates into roughly 40% voting power, equivalent to that of the founder-CEO who only holds 6.2% of company’s total outstanding equity.

If the multi-class structure were collapsed and all shares voted on a one-to-one basis, the results indicate that well under half of shareholders supported the pay proposals, with support ranging from 34% for the option plan to 45% for the advisory say on pay. Meanwhile, we calculate that the re-election of director Gail Goodman would only have received 57% support.



[...]

Impact on Transparency

It’s notable that we had to perform the above calculations to untangle vote results ourselves. Even proponents of multi-class share structures, like the Institute for Governance of Private and Public Organizations (“IGOPP”) in Canada (see “Policy Paper No. 11: The Case for Dual-Class of Shares [5]”, 2019), call for companies to disclose a breakdown of their voting results so that shareholders can more easily isolate the effect of the superior voting shares. The failure to provide such disclosure indicates that companies see value in opacity, and that directors who effectively owe their seat to the grace of the CEO are not in a position to extract even modest concessions.

Read more [6]

[1] https://www.theglobeandmail.com/business/commentary/article-rbi-dentalcorp-nuvei-agm-shareholder-votes/
[2] https://www.glasslewis.com/shopify-shareholders-approve-controversial-founder-share-with-the-help-of-the-existing-multiple-voting-shares/
[3] https://financialpost.com/news/retail-marketing/shopify-shareholders-approve-executive-pay-plan
[4] https://thelogic.co/briefing/shopify-shareholders-approve-executive-pay-plan-rejecting-proxy-push/?synckey=1948957d-bee6-4d85-9c95-dee765098202%3Fwpa_error_token%3Dtrue
[5] https://igopp.org/en/the-case-for-dual-class-of-shares-2/
[6] https://igopp.org/wp-content/uploads/2024/08/GLASSL2.pdf]]></content>
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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>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Activime]]></category>
		<category><![CDATA[Activism]]></category>
		<category><![CDATA[Chief Executive Officer]]></category>
		<category><![CDATA[Proxy Advisors]]></category>
		<category><![CDATA[Succession]]></category>

		<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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		<title>Couche-Tard’s end of special voting rights will be closely watched by critics, defenders of dual-class share structures</title>
		<link>https://igopp.org/en/couche-tards-end-of-special-voting-rights-will-be-closely-watched-by-critics-defenders-of-dual-class-share-structures/</link>
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		<pubDate>Sun, 05 Dec 2021 19:53:34 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
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		<category><![CDATA[Dual-class shares]]></category>
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		<description><![CDATA[n will set this week on the special voting rights held by the four founders of Alimentation Couche-Tard Inc., leaving the Canadian convenience store giant more exposed to investor pressure than ever before. Its fate will be closely watched by both critics and defenders of dual class share structures. Laval, Que.-based Couche-Tard is one of [&#8230;]]]></description>
		<content><![CDATA[n will set this week on the special voting rights held by the four founders of Alimentation Couche-Tard Inc., leaving the Canadian convenience store giant more exposed to investor pressure than ever before. Its fate will be closely watched by both critics and defenders of dual class share structures.
Laval, Que.-based Couche-Tard is one of Canada’s biggest companies, with a current market capitalization of $50.6-billion. It’s controlled by executive chairman Alain Bouchard and three other founders through a special class of stock that gives them 10 votes for every share they own. A so-called sunset clause – put in place in 1995 when the founders were in their 30s and 40s – says those super-voting rights will end when the youngest of them turns 65 or dies.
That clause will be triggered on Dec. 8, when the youngest founder, Jacques D’Amours, celebrates his birthday. The company’s two classes of shares will subsequently become one class, with uniform voting power. All of the company’s Class B shares will be delisted from the TSX at the close of trading on Dec. 7, and only Class A shares will trade at open the next day under the same ticker, ATD, Couche-Tard said Friday evening in an update on the process.
Mr. Bouchard, who grew up living in a trailer with five siblings and climbed from poverty to become one of Canada’s richest men through his corner store empire, has said that while this is an important moment in Couche-Tard’s history, the end of the company’s dual class share structure is largely a “non-event” for its operations. In his view, Couche’s continued strong performance will help keep any activist investors at bay, while its sheer size will limit the number of companies that could raise the amount of money needed to mount a hostile takeover attempt.
“We have been planning for this for some time,” Mr. Bouchard said in the update. He added that the founders will remain as directors and stay closely involved in the organization. “My commitment and leadership of the business will not change, and I am more confident than ever before that our size, our winning culture and strategy, and the structures that we have put in place … will serve the business well.”
There is more at stake, however, than the emotions of the founders, all of whom are now billionaires as a result of the company’s share price appreciation over the years. At a time when dual class share structures have once again come under scrutiny – a result of the family battle at Rogers Communications Inc. – what happens to Couche-Tard in the months and years ahead could have broader repercussions for the Canadian corporate landscape, observers say.
The number of companies adopting dual class share structures in both Canada and the United States is rising, even as governance experts continue to warn about the drawbacks of such systems. Critics say dual class shares can entrench a company’s leadership when it performs poorly, by limiting the power of shareholders to vote in new directors.
More companies with dual class systems listed on the TSX in the first nine months of 2021 than in the prior two years combined, according to data from the TMX Group.
In Canada, companies that unwind their dual class share structures are “really rare,” said Catherine McCall, executive director of the Canadian Coalition for Good Governance (CCGG). She said what happens at Couche-Tard will be a petri dish experiment that will show how things can unfold for other companies. Her organization represents 54 major institutional investors in Canada, which collectively manage $5-trillion in assets.
The results at Couche-Tard could fuel arguments on both sides of the dual class share debate, Ms. McCall said. “If there are issues with control, then the people that are very much in favour of dual class shares are going to say ‘we told you so.’ And especially in Quebec, that’s an issue.”
All four founders have been selling some of their stakes in the company this year as the sunset date approaches.
[...]
Together, the four founders own 22 per cent of the company’s equity, and they will continue to have 66 per cent of its voting rights while the multiple-voting system still exists. After their special rights expire, that stake, in combination with the support of friendly shareholders such as the Caisse de dépôt et placement du Québec, will still give them “almost a blockage type of group if there’s something we don’t like,” Mr. Bouchard has said.
While that might be true, Couche-Tard will lose the immunity it had against unsolicited bids when the dual class system is dissolved, said François Dauphin, chief executive of Montreal’s Institute for Governance of Private and Public Organizations.
More generally, the company will be more vulnerable to external pressure than it has ever been, he added. For example, institutional investors or proxy advisory firms could press Couche-Tard to change elements of its governance and it will have to respond. Already, the company has signalled it will move to taking analyst questions in real time on its quarterly calls instead of compiling their queries in advance.
“Some people will be happy about this,” Mr. Dauphin said of the move to a single class of shares. “We will see in a few years. If we lose a company like Couche-Tard due to a hostile takeover or reverse takeover by another company somewhere, we might be disappointed.”
In 2016, the founders proposed extending their voting rights, but the company cancelled a shareholder vote on the proposal at the last minute after concluding that it did not have the two-thirds support needed from subordinate shareholders. Behind the scenes, investors expressed uneasiness about the founders’ children inheriting control of Couche-Tard.
Mr. Bouchard took the rejection personally. But time, and the company’s growth since then, appear to have healed what was once a raw wound.
Read more [1]

[1] https://igopp.org/wp-content/uploads/2021/12/Couche-Tard’s-end-of-special-voting-rights_The-Globe-and-Mail_December-2021.pdf]]></content>
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		<title>Corporate Purpose, ESG, stakeholders: what’s the deal?</title>
		<link>https://igopp.org/en/corporate-purpose-esg-stakeholders-whats-the-deal/</link>
		<comments>https://igopp.org/en/corporate-purpose-esg-stakeholders-whats-the-deal/#respond</comments>
		<pubDate>Tue, 17 Nov 2020 15:15:16 +0000</pubDate>
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		<description><![CDATA[Since the publication in 1932 of Berle and Means’ The Modern Corporation and Private Property, “capitalist” societies have been engaged in a forlorn quest for an appropriate definition of the role, justification and “raison d’être” of large corporations. Except for the legal fiction of shareholders as owners, corporations of the 1950’s, 60’s and 70’s, were [&#8230;]]]></description>
		<content><![CDATA[Since the publication in 1932 of Berle and Means’ The Modern Corporation and Private Property, “capitalist” societies have been engaged in a forlorn quest for an appropriate definition of the role, justification and “raison d’être” of large corporations.

Except for the legal fiction of shareholders as owners, corporations of the 1950’s, 60’s and 70’s, were not really “owned” by anyone but controlled by management. In this context, the manager had to be a man (or a woman) of many constituencies, a nimble balancer of conflicting interests, an impartial purveyor of amenities to one and all, a human synthesizer of the rights and interests of all parties which might directly or indirectly be affected by the actions of the corporation. Whether managers actually internalized these norms of conduct is a moot point. That concept of the corporation gave rise to formidable, dominant companies, such as IBM, Johnson and Johnson, GM, GE.

However for the last 40 years or so, with the rise of “financial capitalism” and the clever linking of executive compensation to share price, “creating shareholder value” became the driver of management, the rallying cry of the executive corps. That worked well for the managerial class. No matter that all large corporations proudly brandish statements about their Vision, Mission, Values and Ethics, recriminations and discontent simmered and eventually crystallized around a bundle of expectations now assembled under the ESG banner. [Environment, Social and Governance]

Institutional funds, pension funds, asset managers of various stripes and index funds particularly have joined, indeed led the bandwagon, relentlessly pushing corporations to include ESG issues in their management. Most corporations have given in to the pressure with various degrees of enthusiasm.

The proxy advisory firms (ISS in particular), their noses firmly in the wind, have sniffed the trend and now intend to include ESG factors in their assessment of corporate governance.

That’s the context which led some 181 CEOs of large (mainly American) corporations, under the aegis of the Business Roundtable, to sign a solemn undertaking, a year ago or so. They committed to adopt and impose on themselves a “Purpose” of care for, and nurturing of, their stakeholders. Henceforth, corporate decisions will factor in the interests of various parties, including the civic society and Mother Earth.

Professor Colin Mayer, one of the promoters of the ‘corporate purpose”, puts it this way: “the purpose of business is to solve the problems of people and planet profitably, and not profit from causing problems”. Hum, all leaders of large corporations will subscribe to this broad and vague agenda.

Business circumstances, at least for the oligopolistic leviathans, are changing; the greatest threat to these corporations’ survival often comes from the social and political environment, not mainly or solely from the economic and competitive environment. Large companies with slack resources can cope with the piling up of new demands and expectations in matters of environment, social responsibility, diversity and so on. But three points need to be emphasized here:

1. In this quest for a stakeholder oriented corporation and the multiplication of new ESG mandates, what’s the role of the entrepreneurial spirit, the drive to create and build a business in a world of sharp competition and evolving technologies? The vibrancy of an economy rests on entrepreneurial activity. Let’s be careful, lest we collectively stifle the entrepreneurial drive.

2. As the demands and legal requirements imposed on business corporations largely single out stock-market listed corporations, the current drought of new businesses listing on a stock exchange may worsen as entrepreneurs weigh the costs and benefits of “going public” and private sources of funding mushroom.

3. In Canada, two rulings by the Supreme Court clarified the meaning of acting in “the interest of the corporation” as stipulated in the Canadian Business Corporation Act. Boards of directors in their decisions must give equal consideration to stakeholders and shareholders; boards should not favor any particular group in its decision-making. Basically, we have in Canada a stakeholder model of governance. The U.S. jurisprudence is not that clear on this issue; several legal scholars still argue that maximizing shareholder wealth should be the prime objective of boards of directors. For instance, Professor Bainbridge writes “The law of corporate purpose remains that directors have an obligation to put shareholder interests ahead of those of other stakeholders and maximize profits for those shareholders”.

That is the context for the BRT’s “Purpose” initiative: an unclear American legal framework combined with investor and societal/political pressures on management to adopt a sort of stakeholder model.

But In Canada, this whole agitation about “Corporate Purpose” is moot as stakeholder governance is the law! Canadian boards of directors should be governed accordingly although there is yet little empirical evidence as to how that legal fact has impacted governance in Canada.

When all is said and done, managing for the long term, factoring in the multiple interests of the broader society, desirable goals indeed, will only happen when the games of some financial types are checked and executive compensation is re-arranged to support these objectives. Otherwise, all this agitation is perfunctory, pro-forma, “sound and fury signifying nothing”.

&#160;

Opinions expressed in this article are strictly those of the authors.
]]></content>
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		<title>Couche-Tard founders to lose special voting rights</title>
		<link>https://igopp.org/en/couche-tard-founders-to-lose-special-voting-rights/</link>
		<comments>https://igopp.org/en/couche-tard-founders-to-lose-special-voting-rights/#respond</comments>
		<pubDate>Wed, 16 Sep 2020 13:55:28 +0000</pubDate>
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		<description><![CDATA[Alimentation Couche-Tard Inc. will let the sun set on the special voting rights held by its four founders. Executive chairman Alain Bouchard says that he and the three other men who built the Canadian convenience-store empire will let their 25-year-old special stock rights, which give them control over the company, expire next year as scheduled [&#8230;]]]></description>
		<content><![CDATA[Alimentation Couche-Tard Inc. will let the sun set on the special voting rights held by its four founders.
Executive chairman Alain Bouchard says that he and the three other men who built the Canadian convenience-store empire will let their 25-year-old special stock rights, which give them control over the company, expire next year as scheduled without asking shareholders for an extension.
“It’s over,” Mr. Bouchard said in an interview Wednesday following the company’s annual shareholders meeting. “We won’t do anything on this front. I feel better today about this with the evolution of the company in the last years.”
In theory, the decision will leave Laval, Que.-based Couche-Tard exposed to a takeover attempt as soon as next year when the voting rights end. In practice, Couche-Tard’s $48.5-billion stock market capitalization makes it a massive morsel to swallow for any potential acquirer.
The founders together hold about 23 per cent of Couche-Tard’s equity, Mr. Bouchard said. After their rights expire, that stake, along with the support of friendly shareholders, will still give them “almost a blockage type of group if there’s something we don’t like,” he said.
While that might be true, Couche-Tard is “not totally immune” from outside pressure, said François Dauphin, chief executive of Montreal’s Institute for Governance of Private and Public Organizations. Even if its size limits the number of companies that could raise the amount of money that would be needed to acquire the company, it’s still a possibility, he said.
The fate of the special stock rights has been a big unknown looming over Alimentation Couche-Tard for years. The rights give the four men a separate class of 10-for-one multiple voting shares that have allowed them to exercise majority control of the company despite owning less than a quarter of the equity.
A so-called sunset clause – put in place in 1995 when the founders were in their 30s and 40s – stipulates that their voting rights end when the youngest of them turns 65 or dies. That will happen in December, 2021, when the youngest founder, Jacques D’Amours, celebrates his birthday.
In 2016, the founders proposed extending the voting rights, but the company cancelled a shareholder vote on the proposal at the last minute after concluding that it did not have the two-thirds support needed from Class B subordinate shareholders. Behind the scenes, investors expressed uneasiness about the founders' children inheriting control of Couche-Tard. Two proxy advisory firms, Institutional Shareholder Services and Glass Lewis &#38; Co., issued recommendations to vote against the plan.
Mr. Bouchard took the rejection personally. But time – and the company’s growth since then – appears to have healed what was once a raw wound for the billionaire chairman.
“I’m in a better place” on this issue today, Mr. Bouchard said. He said the concern at the time was an unwanted bid for Couche-Tard or the involvement of investor activists. Since then, the company’s market value has ballooned along with its profits.
Read more [1]

[1] https://igopp.org/wp-content/uploads/2020/09/Couche-Tard-founders-to-lose-special-voting-rights_The-Globe-and-Mail_September-2020.pdf]]></content>
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		<title>Finding Friends is Hard: Long-Term Investors’ Relationship with Proxy Advisors, Activists and Private Equity Funds</title>
		<link>https://igopp.org/en/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/</link>
		<comments>https://igopp.org/en/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/#respond</comments>
		<pubDate>Wed, 31 Jul 2019 15:56:14 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Activism]]></category>
		<category><![CDATA[Hedge funds]]></category>
		<category><![CDATA[Proxy Advisors]]></category>

		<guid isPermaLink="false">https://igopp.org/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/</guid>
		<description><![CDATA[Institutional investors are howling for US public companies to focus more on the long-term.[1]  This is unsurprising. Long-term focused companies produce significantly better results over time, reporting far greater revenue growth with less volatility, far higher levels of economic profit, and greater total return to shareholders.[2] So if you are holding stock for a long time, a [&#8230;]]]></description>
		<content><![CDATA[Institutional investors are howling for US public companies to focus more on the long-term.[1] [1]  This is unsurprising. Long-term focused companies produce significantly better results over time, reporting far greater revenue growth with less volatility, far higher levels of economic profit, and greater total return to shareholders.[2] [2] So if you are holding stock for a long time, a long-term focus for your portfolio companies is critical.

[ ... ]

So who is picking up the tab?

There seem to be a variety of possible answers.

If the bulk of the value transferred comes from the payment of a takeover premium (as Professors Coffee and Palia and Professor Allaire think likely)[19] [3], then the argument could be made that the additional value comes from the third party buyer of the shares – a gift from heaven.  However, this may not be something long-term holders should thank activists for.  The pie has not actually gotten bigger, and no new value has been created.  A sale just represents a cashing in of chips held.  For a long-term holder, there is no need to capture the inherent control premium in any particular time period, and there is no reason to think that the time period selected by an activist (with median holding periods of 266 days)[20] [4] will be particularly advantageous for long-term holders.

[ ... ]

[19] [5] Id. at 59 (“All told, this evidence suggests that changes in the expected takeover premium, more than operating improvements, account for most of the stock price gain.”); Yvan Allaire &#38; Francois Dauphin, The Game of ‘Activist’ Hedge Funds: Cui Bono? 26, International Journal of Disclosure and Governance (Dec. 31, 2015) (“Our study, similar to several others, show that the best way, bar none, for these activists to make money for their funds is to get the company sold off or substantial assets spun off.”).

Read more [6]

[1] https://www.lexblog.com/2019/07/31/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/#_ftn1
[2] https://www.lexblog.com/2019/07/31/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/#_ftn2
[3] https://www.lexblog.com/2019/07/31/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/#_ftn19
[4] https://www.lexblog.com/2019/07/31/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/#_ftn20
[5] https://www.lexblog.com/2019/07/31/finding-friends-is-hard-long-term-investors-relationship-with-proxy-advisors-activists-and-long-term-private-equity-funds/#_ftnref19
[6] https://igopp.org/wp-content/uploads/2019/08/Finding-Friends-is-Hard_-Long-Term-Investors’-Relationship-with-Proxy-Advisors-Activists-and-Long-Term-Private-Equity-Funds-_-LexBlog_July-2019.pdf]]></content>
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		<title>CPPIB backs investor group in bid to end Bombardier’s dual-class share structure</title>
		<link>https://igopp.org/en/cppib-backs-investor-group-in-bid-to-end-bombardiers-dual-class-share-structure/</link>
		<comments>https://igopp.org/en/cppib-backs-investor-group-in-bid-to-end-bombardiers-dual-class-share-structure/#respond</comments>
		<pubDate>Thu, 02 May 2019 21:05:58 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Dual-class shares]]></category>
		<category><![CDATA[Institutional investors]]></category>
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		<guid isPermaLink="false">https://igopp.org/cppib-backs-investor-group-in-bid-to-end-bombardiers-dual-class-share-structure/</guid>
		<description><![CDATA[CPPIB is backing a proposal to end Bombardier Inc.’s dual class share structure and remove the control of the founding family, forcing the company onto the defensive as it hosts investors for its annual meeting Thursday. Canada Pension Plan Investment Board, which oversees assets worth about $368-billion and is one of Bombardier’s 25 biggest shareholders, [&#8230;]]]></description>
		<content><![CDATA[CPPIB is backing a proposal to end Bombardier Inc.’s dual class share structure and remove the control of the founding family, forcing the company onto the defensive as it hosts investors for its annual meeting Thursday.
Canada Pension Plan Investment Board, which oversees assets worth about $368-billion and is one of Bombardier’s 25 biggest shareholders, says on its website it will vote in favour of a proposal by investor rights group Médac to end the two-class system. It gave no reasons for its decision, but its proxy-voting guidelines state that it supports the collapse of existing dual-class share structures on terms that are in the long-term best interests of the company.
“One argument for dual-class share structures is that those with the superior voting rights can ensure stability, continuity in ownership and facilitate a long-term perspective. We disagree with this argument,” CPPIB says in the guidelines, adding such systems are contrary to good governance. “They can entrench management against shareholder pressure for change and undermine the basic principle linking voting to equity ownership on the basis of one-share-one-vote.”
[ ... ]

Relatives and descendants of inventor Joseph-Armand Bombardier control the company with 50.9 per cent of the voting rights through a special class of stock carrying 10 votes a share. Family members also have four of the company’s 14 board seats, despite owning just 12.2 per cent of the equity. The system has been in place since 1980.
Bombardier operates under the Canada Business Corporations Act, which states that changing or unwinding multivoting share systems requires the adoption of special resolutions and the approval of those holding those supervoting shares. In the case of Bombardier, that’s the company’s founding family.
The company has said it has no intention to change its share-capital arrangement, arguing the system brings significant benefits, such as the ability to keep its headquarters in Canada. Concern over the setup is dispelled in part by the oversight of independent directors on senior management and strong governance principles and practices, Bombardier said in a March 22 filing.
“This issue will be discussed at the annual meeting of shareholders along with other shareholder proposals,” Bombardier spokesman Simon Letendre said on Wednesday.
Yvan Allaire, executive chairman of the Institute for Governance of Private and Public Organizations, told The Globe he believes a large number of subordinate voting shares will be cast in favour of the Médac proposal.
“Most large funds are in principle opposed to this type of shareholding,” Mr. Allaire said via e-mail, adding this is the first time Bombardier investors will have an opportunity to vote on the issue. A similar proposal put forward to the shareholders of any dual-class company would elicit a large number of “for” votes from investors holding subordinate voting shares but would still be roundly defeated, he said.

“In the end, the corporation must change hands,” Médac said in its proposal outlined in Bombardier’s proxy circular. “Indeed, it is in everyone’s interest.”

Médac knows its proposal is destined to fail because of the family’s opposition. Still, obtaining the support of more than half of investors who are not tied to the family would send a “very significant” message, the group said in an e-mail to The Globe.

The debate over the dual-class share system comes as analysts are questioning whether Bombardier chief executive Alain Bellemare will reset his 2020 financial goals for the company when it reports first-quarter earnings on Thursday morning. Management slashed revenue and earnings estimates last week for 2019 as it grapples with delivery issues on several big rail contracts.
Read more [1]

[1] https://igopp.org/wp-content/uploads/2019/05/CPPIB-backs-investor-group-in-bid-to-end-Bombardier’s-dual-class-share-structure-The-Globe-and-Mail_May-2019.pdf]]></content>
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		<title>As vote challenging Bombardier’s share structure faces defeat, Médac calls for legislative reform</title>
		<link>https://igopp.org/en/as-vote-challenging-bombardiers-share-structure-faces-defeat-medac-calls-for-legislative-reform/</link>
		<comments>https://igopp.org/en/as-vote-challenging-bombardiers-share-structure-faces-defeat-medac-calls-for-legislative-reform/#respond</comments>
		<pubDate>Sun, 21 Apr 2019 18:58:48 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Dual-class shares]]></category>
		<category><![CDATA[Proxy Advisors]]></category>
		<category><![CDATA[Shareholders]]></category>

		<guid isPermaLink="false">https://igopp.org/as-vote-challenging-bombardiers-share-structure-faces-defeat-medac-calls-for-legislative-reform/</guid>
		<description><![CDATA[Investor-rights group Médac acknowledges its bid to end Bombardier Inc.’s dual-class share system is destined to fail, but says it has no better option to trigger a discussion on what it sees as a critical issue. The Montreal-based organization is calling for changes to the laws governing Canadian companies that give extra voting rights to [&#8230;]]]></description>
		<content><![CDATA[Investor-rights group Médac acknowledges its bid to end Bombardier Inc.’s dual-class share system is destined to fail, but says it has no better option to trigger a discussion on what it sees as a critical issue.
The Montreal-based organization is calling for changes to the laws governing Canadian companies that give extra voting rights to certain shareholders. It has submitted a shareholder proposal that will be considered at the plane- and train-maker’s annual meeting on May 2.
“We think multivoting share structures like that should never be eternal,” Médac spokesman Willie Gagnon said in an interview. If companies choose to enact them, controlling shareholders should maintain an equity interest threshold in the company of at least 20 per cent, he said.
Relatives and descendants of inventor Joseph-Armand Bombardier control the company with 50.9 per cent of the voting rights through a special class of stock carrying 10 votes a share. Family members also have four of the company’s 14 board seats, despite owning just 12.2 per cent of the equity. The system has been in place since 1980.
[ ... ]
Médac says the time has come to dissolve Bombardier’s two-class structure because there is growing discrepancy between the family’s interests and those of Bombardier’s other shareholders and stakeholders. Proxy firms Institutional Shareholder Services and Glass Lewis are backing Médac’s proposal.
Mr. Gagnon said Médac’s proposal will be voted on by shareholders, but that he expects it to be defeated because of the family’s opposition. Still, obtaining the support of more than half of investors who are not tied to the family would send a “very significant” message, he said.
As of last year, there were 69 companies with multivoting share structures listed on the Toronto Stock Exchange, according to Montreal’s Institute for Governance of Private and Public Organizations. They include several well-known names such as Canadian Tire Corp. Ltd., Power Financial Corp. and Rogers Communications Inc.
Médac says it is taking a long-term view with its stand on Bombardier, saying its share price topped $26 in 2000, but has fallen to less than $3 today. Médac says the family continues to wield control over a company whose recent decisions, such as handing control of its C Series airliner program to Airbus SE, have proved unpopular among some stakeholders.



Quebeckers took to the streets in protest and institutional investors publicly rebuked Bombardier in 2017 over its decision to raise the pay of its top executives by nearly 50 per cent while the company received more than US$1-billion in Quebec taxpayer support. More recently, Bombardier chief executive Alain Bellemare was chided for failing to take time to publicly explain the reasons behind the company’s move to slash 5,000 jobs in November. “Bombardier restructures and leaves others to pick up the pieces,” one commentator said.



“The progressive dismantling of Bombardier over the last several years and its sizable debt level are among the factors leading us to conclude that the long-term development of the company is now compromised,” Mr. Gagnon said. “When we consider the value of the shares together with the company’s social acceptability level … that’s when we start to ask the kinds of questions we’re asking today.”
[ ... ]

Read more [1]

[1] https://igopp.org/wp-content/uploads/2019/04/As-vote-challenging-Bombardier’s-share-structure-faces-defeat-Médac-calls-for-legislative-reform-The-Globe-and-Mail_April-2019.pdf]]></content>
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		<title>Why Canadian CEO pay has soared over the past decade</title>
		<link>https://igopp.org/en/why-canadian-ceo-pay-has-soared-over-the-past-decade/</link>
		<comments>https://igopp.org/en/why-canadian-ceo-pay-has-soared-over-the-past-decade/#respond</comments>
		<pubDate>Thu, 21 Jun 2018 17:58:37 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Chief Executive Officer]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Proxy Advisors]]></category>
		<category><![CDATA[Say on Pay]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=9990/</guid>
		<description><![CDATA[When shareholders of Canada’s big banks opened their proxy voting forms in early 2008, they found a striking new proposal on the ballot. Submitted by a small ethical mutual fund company, the resolution called on banks to give investors an annual vote on how executive pay was designed. Bank boards initially opposed the motion as [&#8230;]]]></description>
		<content><![CDATA[When shareholders of Canada’s big banks opened their proxy voting forms in early 2008, they found a striking new proposal on the ballot. Submitted by a small ethical mutual fund company, the resolution called on banks to give investors an annual vote on how executive pay was designed.

Bank boards initially opposed the motion as an intrusion into boards’ powers to set executive level pay. But within a year, a wave of companies bowed to pressure and agreed to introduce the votes, ushering in a decade of change in executive compensation design in Canada.

Since the financial crisis, measures have been introduced to increase transparency, better align executive returns with those enjoyed by shareholders and curb the worst excesses in chief executive pay.

[ ... ]

SHIFTING PERFORMANCE GOALS

The shift into share units over the past decade also means that compensation rewards shorter-term performance, despite frequent discussion about the importance of focusing management on longer-term, sustainable growth. Stock options are typically exercisable over 10 years, creating a long time lag between granting and cashing out, while share units typically pay out in cash at the end of three years.

Whether an unintended consequence, or simply an unavoidable trade-off, the shift into share units has reduced the definition of “long-term” compensation.

Yvan Allaire, chair of the Institute for Governance of Private and Public Organizations who wrote a recent paper on pay trends, believes share units provide a medium-term incentive at best, and a muddled short-term incentive at worst.

With most CEOs getting share unit grants each year, a portion is also vesting each year, so executives never have a single discrete three-year performance cycle. Instead, the performance goals are constantly shifting as a new target comes to fruition each year.

His proposed solution is to offer one grant of units every three years, allowing the performance goals to play out before a new incentive is added.

[ ... ]

While many shareholders urge companies to tailor compensation programs to their own unique strategies and time horizons, boards complain it is risky to deviate from the pay models favoured by the proxy advisers.

“The incredible convergence in compensation systems across companies is absolutely mind-boggling,” said Mr. Allaire.

“You read them, and it’s almost the same text from one to the other. … We’ve converged on a process which has received the blessing of proxy advisers and large investors, and boards feel safe when they apply that particular process.”

Read more [1]

[1] https://www.theglobeandmail.com/business/careers/management/executive-compensation/article-canadian-ceo-pay-an-inside-look-at-soaring-compensation/]]></content>
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		<title>It&#8217;s hunting season, as activists and regulators open fire on Canada&#8217;s businesses</title>
		<link>https://igopp.org/en/activists-and-regulators-open-fire-on-canadas-businesses/</link>
		<comments>https://igopp.org/en/activists-and-regulators-open-fire-on-canadas-businesses/#respond</comments>
		<pubDate>Thu, 05 Apr 2018 18:33:55 +0000</pubDate>
		<dc:creator><![CDATA[IGOPP Site web]]></dc:creator>
				<category><![CDATA[IGOPP in the Medias]]></category>
		<category><![CDATA[IGOPP in the medias]]></category>
		<category><![CDATA[Activism]]></category>
		<category><![CDATA[Executive compensation]]></category>
		<category><![CDATA[Proxy Advisors]]></category>
		<category><![CDATA[Shareholders]]></category>
		<category><![CDATA[Stakeholders]]></category>

		<guid isPermaLink="false">https://igopp.org/?p=9681/</guid>
		<description><![CDATA[The corporate hunting season is officially underway, an annual ritual during which shareholder parties, armed with proxies and other weapons of democratic destruction, set out to bag executives and directors for failing to deliver. The list of potential corporate failings is all encompassing. Anything and everything is a target, from executive compensation to diversity policies [&#8230;]]]></description>
		<content><![CDATA[The corporate hunting season is officially underway, an annual ritual during which shareholder parties, armed with proxies and other weapons of democratic destruction, set out to bag executives and directors for failing to deliver. The list of potential corporate failings is all encompassing. Anything and everything is a target, from executive compensation to diversity policies to return on equity, from investment strategies to social responsibility and whether there are an adequate number of people of varying genders in key positions. The scene for these hunting expeditions is the corporate annual meeting.

[ ... ]

As annual general meeting season arrives, many forms of corporate shareholder activism, accompanied by increasing regulatory interventions, will be on display. Executive compensation, say on pay, gender composition of boards, majority-voting requirements, mandatory board engagement with shareholders, withholding votes for certain directors, mandated ratios of independent directors. Some of this comes from regulators, some from the proxy advisory firms whose role is increasing, apparently because institutional investors are too dumb or disinterested to undertake their own analyses and make their own decisions.

[ ... ]

Executive compensation has long been touted as a problem in need of reform, as Montreal management consultant Yvan Allaire notes elsewhere in FP Comment today [1]. Reform is one thing. But the objective of the CEO-to-worker comparisons is to spark a little Marxist unrest within the population, promote government action to further regulate and tax corporations and executives, and stimulate shareholder revolts at annual meetings.

Read more [2]

[1] https://igopp.org/en/executive-pay-time-for-change/
[2] http://business.financialpost.com/opinion/terence-corcoran-its-hunting-season-as-activists-and-regulators-open-fire-on-canadas-businesses]]></content>
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