The number of proxy contests in Canada has remained consistent over the last few years, but 2017 was the first time since 2014 that dissidents won more contests than management, according to research from law firm Fasken.
In 2016, management won 86 percent of proxy contests, before dissidents won or partially won 62 percent of proxy contests in 2017. There were eight proxy contests in Canada in 2017, all board-related. There were also eight proxy contests in 2016 and nine in 2015. Fasken’s research measures activist contests that go all the way to a proxy contest, and therefore excludes activist situations that are settled earlier.
Dissidents were successful in 2017 at SGX Resources, Rapier Gold, Liquor Stores N.A. and Granite Real Estate Investment Trust, and were partially successful at Eco Oro Minerals Corp, the study finds.
Five of the eight proxy contests were led by institutional investors, which is a marked change from 2016 when founders and management led the majority of the dissident contests. Institutional investors were successful in all but one of the contests they led.
‘Many of the contests between 2014 and 2016 were led by management or founders who had a dispute with the incumbent board,’ Aaron Atkinson, partner at Fasken, tells Corporate Secretary. ‘Those contests tend to be quite binary and there’s not much room for a settlement, so management tends to fare better. Last year you had more institutional, non-retail or founder-based activists. They were able to stir the pot with some success.’
There have been significantly fewer proxy contests in recent years in Canada, compared with the 10-year peak of 27 in 2012, of which 23 were board-related and four were transaction-related.
‘The high-water mark was in 2012, with the Canadian Pacific proxy fight bringing activism to the fore,’ Atkinson says. ‘It was a Canadian icon being attacked by a large US fund, and showed that activism had arrived in Canada. As a result, law firms and other advisers started preparing clients to be potential targets.’
Atkinson attributes the falling number of proxy contests to Canadian boards building better defenses against activists, engaging their broader shareholder base more regularly and having a better sense of when to settle before a proxy contest. He adds that there’s a greater understanding from both dissidents and public companies of the cost of a full proxy contest.