Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50875
Shareholder activism in Canada is no fad, and in-house counsel are doing their homework on how to adapt to the trend. By Robert Todd sophisticated institutional shareholders — such as the Ontario Teachers' Pension Plan, Canada Pension Plan Investment Board, and British Columbia Investment Management Corp. — mobilized to attack Magna International Inc.'s dual-class share capital transaction. Other examples of this growing trend include actions by Carl Icahn, who has made several acquisitions of positions in the market and has shown a willingness to make hostile takeover bids of companies where change could add value; and West Face Capital, which launched a hostile proxy contest to replace the direc- tors of Maple Leaf Foods Inc. And those represent just the tip of the iceberg in terms of the mass of activity that has seen emboldened shareholders exercise their rights more aggressively. Canada's mining sector has been particularly susceptible to activist shareholder actions. "This is a very important issue, and I I think it's here to stay," says Emmanuel Pressman, co-chairman of Osler Hoskin & Harcourt LLP's mergers and acquisitions f Canadian in-house counsel did not feel overwhelmed enough in their role protecting their com- panies' interests, a new threat reached their radar screens over the course of the past year: share- holder activism. A long list of high-profile and specialty group. "There are lots of illustra- tions of it in the market, and there are more to come." Alison Love, Enbridge Inc.'s vice-pres- ident, corporate secretary, and chief com- pliance officer, says investors are clearly becoming more aware of the opportunities they have to exercise their rights and bring issues to management's attention. At the same time, groups promoting shareholder rights now have the capacity to get more involved. With that said, in-house counsel have a big role to play in helping their com- panies effectively manage the new world of shareholder activism. "Companies don't want to have to put many shareholder proposals to votes at the annual meeting," explains Love. "They would like to resolve as many as possible. In addition, companies want to be seen to be working well with shareholders, and want to try to accom- modate the best interests of shareholders. So you obviously want to put your best foot forward with all your shareholders." Love emphasizes the importance of adequate handling of shareholder activ- ism by noting what she calls the "social license" that companies are increasingly operating under. Accordingly, the big- gest risk they face is with regard to their reputation, she says. She points to BP's Deepwater Horizon oil spill in the Gulf of Mexico last year as an example. "There was a huge and immediate decrease in the value of its shares, probably greater than the cost of that cleanup," says Love. "So the negative reputational impact is huge, and can be totally destructive." Some companies deal with such repu- tational threats better than others. Take Maple Leaf Foods' effective handling of the 2008 listeriosis outbreak in one of its plants in Toronto. "The CEO [Michael McCain] stood up right from the get-go and said, 'We're taking responsibility for this. We're going to make sure it never happens again, and we're going to com- pensate the people whose lives have been affected,'" explains Love. Her company has itself felt the impact of the rise in shareholder activism in Canada, and the potential reputational damage that comes along with it. She uses Enbridge's Northern Gateway Pipeline project — which will see a twin pipeline system run from near Edmonton to a marine terminal in Kitimat, B.C. — as an example. The project has not only engaged shareholders, but general stake- holders as well. "In that, in-house coun- sel are very involved in a lot of negotia- tions with First Nations and other groups in British Columbia, as well as some investor groups who are similarly inter- ested in the issues that have been brought forward by those First Nations groups and INHOUSE AUGUST 2011 • 25 HERE TO S T AY