Canadian Lawyer InHouse

ROUNDUP • A roundup of legal department news and trends Engage the activist Is your company ripe for attracting the attentions of a share- holder activist? If you think it is, you might want to think about what can be done to fend one off before trouble starts, said a panel of experts in Toronto recently. "You need to groom your relationships with shareholders," said Jonathan Lampe of Goodmans LLP speaking at a panel on cross-border M&As hosted by the firm. "I think there are a lot of companies out there if they spent some time looking at themselves, they would admit they are candidates in this environment." With the arrival of activist shareholder Bill Ackman in Canada, panel moderator and Ohio State University law professor Steven Davidoff kicked off the session with a discussion about the current cli- mate for activists and how to deal with them. "This topic is deeply in the minds of everyone in Canada and it's because of Bill Ackman's arrival in Canada," said Davidoff. At a Feb. 6 meeting of sharehold- ers in Toronto, Ackman was critical of Canadian Pacific Railway Ltd. for falling behind its peers. Ackman and his New York hedge fund, Pershing Square Capital Management LP, which holds a 14.2-per- cent stake in the company (CP's largest shareholder), was critical of the railway's current board and its management team. Aiming at management issues is a common target for shareholder activists. For the most part, activists in Canada have been driven by issues around long- term strategic direction or a change in senior management, according to the panel. In many cases activists are looking at underperforming companies. "Shareholder activism is in a fairly well-developed state in this country, and to some degree, it is being applied in the same way in the U.S. but even more so," said Goodmans partner Stephen Halperin. "It's actually easier, from a legal perspective, to be an activist in Canada than it is in the United States. One reason is the complete ineffectiveness of stag- gered boards." Unlike in the U.S., Halperin explained, Canadian law allows shareholders effec- tively to recall directors at will, at any time, and it only takes shareholders with five per cent of company stock to do that and call for their removal. A variety of factors can contribute to an activist being drawn to a company, such as a management change, or a board appearing to be out of sync with what's going on in its industry. While it might have been the policy 10 years ago not to engage activist shareholders, panellists advised it is in the best interest of a board to be proac- tive and engage shareholders regularly. "Try to meet, greet, and engage, and listen — hear them out and see whether there is a deal to be done or a dialogue that can build a relationship. Don't stiff- arm the activist and force them to go public," said Halperin. Copyright bill should address fair dealing Canada's universities are urging swift passage of bill C-11, the copyright modernization act, but critics say there is still work to be done in the area of fair dealing. "This bill is an important step forward in providing a balance between the interests of creators and users of copyright works," said Paul Davidson, president of the Association of Universities and Colleges of Canada in a statement released by the AUCC Feb. 16. "It's a good approach for Canada's universities, which are both creators and users of copyright works. The bill clarifies important questions and will help ensure students and learners have access to the content they need, including digital material." Bill C-11 will allow universities to use the Internet to deliver research and learning materials to faculty members and students. Canada's university libraries spend more than $300 million annually to buy and license new content for research and learning. In addition, more than $400 million is spent every year in university bookstores to buy new textbooks, course packs, and works in digital format. But the general counsel for Access Copyright, the non-profit cre- ators' collective, says there is still work and clarification that needs to be achieved with the bill as it stands. "We hope that the universities do support it but the bill is far from clear that that is how things will play themselves out," says Roanie Levy. "While we also agree that a modernization of our Copyright Act is long overdue and we do urge the government to move ahead with the modernization of the act and pass bill C-11, there is some clarification that needs to be brought to the bill in order to ensure that creators and publishers will continue to be paid for uses of the works in the same way they are paid today." The areas Levy says need clarification include fair dealing for educa- tion, which she says right now are "very open-ended." Steve Wills, manager of government relations and legal affairs for the Association of Universities and Colleges of Canada, says some question has arisen as to what fair dealing means in terms of what qualifies as an educational institution or what kind of organizations can engage in educational copying. INHOUSE APRIL 2012 • 7

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