There have been 35 proxy contests launched in Canada since the start of July, 2022, according to data from Kingsdale Advisors
“This really is the age of shareholder activism,” Kai Li, a finance professor at the University of British Columbia’s Sauder School of Business and the Canada Research Chair in Corporate Governance. “Management teams in Canada should not be complacent, because investors are really chasing returns.”
Others, as in the recently resolved cases of Suncor and First Capital, are geared toward broader goals, such as replacing some or all of what activists often see as a complacent or ineffective leadership team. Canadian companies can also employ a poison pill defence, though it is rarely effective here as it heavily dilutes the value of a company’s existing shares and the pill itself can be struck down by the courts. The American version of a just-say-no defence, whereby a target company simply rejects a takeover offer outright, does not exist in Canada.
That difference makes it possible for an activist investor to replace an entire Canadian board in one fell swoop, whereas achieving the same result at some companies in the United States would take several years. Canadian proxy battles can also be resolved much more quickly than in the U.S. as investors here can requisition shareholder meetings to occur in between annual meetings. American activist investors have to wait for the next annual meeting.
“There is a very limited talent pool of corporate directors in Canada with lots of companies connected to one another through directors sitting on various boards,” Prof. Li said. “That makes it very difficult for any shareholder activist to find a truly independent and capable director as a replacement to the slate of directors recommended by management. You just have to recycle the same people, which defeats the purpose of having a clean slate.
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