Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50892
FEATURE The board sought and received an en- dorsement from RiskMetrics Group/ISS Governance Services –– an advisory ser- vice that tracks proxy battles and makes recommendations on voting. This also helped the board to depict the dissident group as inexperienced and opportunis- tic. "If you look at the last five, six proxy battles, and you can look at the front page of every one of those informa- tion circulars and they all have the same graph — stock going down, high to low, left to right — and you can do that with any company if you pick the right time frame," says Georgeson's Canadian vice president Chris Makuch. "What happened with Zarlink was a couple of things: one is there was a belief in this management team, there is belief in this board of di- rectors in taking this company where it needs to be and where it should be." Makuch says that belief didn't come by accident. It came through proactive com- munication with shareholders. And with recent events on the stock markets, the massive amount of news coverage, and the interest level that has been peaked by shareholders of almost every size, com- panies would be remiss not to reach out to all shareholders. "If you walk down the street imagine how many people know what the market did [yesterday]." That phenomenon has taken place during the past year with the greater attention being paid to the stock market, Makuch says. "[Zarlink] had good relationships with their shareholders, this wasn't all of the sudden 'oh geez, we're in trouble, I better start getting in touch with my sharehold- ers' and they're saying 'geez, this is the to the financial institutions . . . primarily on compensation issues, say for pay variations, more disclosure, and that sort of thing, pay for performance." – BRAD ALLEN, LAUREL HILL ADVISORY GROUP first time I've heard from you, why are you calling me today, oh I see, you need something.'" The next key Makuch says is to have a story to tell, a plan in place. Another re- sult of the intense scrutiny of stock prices and the markets is that simply going to a shareholder without a detailed plan can be dangerous. Companies need to show a business plan and communicate that to shareholders right away. Long before the collapse of worldwide stock markets in September, financial analysts from magazines, newspapers, ra- dio shows, and TV talk shows alike, were advocating a move into cash. As one often quoted, but never identified, analyst says, "there are two positions to be in right now, cash and fetal." In October during the Ca- nadian federal election, Prime Minister Stephen Harper was roundly criticized for suggesting that with the fall of the stock market comes bargains. Despite the statement being almost a modern day "let them eat cake," few questioned the verac- ity. So what the financial markets are left with is a situation of falling stock prices, dissatisfied investors, and $3.5 trillion in money market funds in the U.S. alone. Media personality and equities ana- lyst Lou Schizas, who has experience with both Bay Street in Canada and Wall Street in the U.S., says the merger and acquisition market in 2008 was $2.5 tril- lion, and despite being down 30 per cent from the previous year, it is still a signifi- cant amount. He agrees there is a lot of dissatisfaction in the shareholder com- munity and it isn't only financial advisers that could find themselves at odds with investors. "There [are] going to be a lot of unsatisfied shareholders," he says. "Just at the corporate level absolutely, every board had better get ready for a proxy fight, no two ways about it, people are disgusted." Brad Allen, senior vice president of the proxy solicitation firm Laurel Hill Advi- sory Group notes that while M&A activity is that there are an inordinate number of shareholder proposals that have been sent "What we are learning from the banks RainMaker Group Tel: Fax: www.rainmakergroup.ca 18 DECEMBER 2008 C ANADIAN Lawyer INHOUSE Untitled-1 1 6/23/08 10:13:37 AM