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CCCA_V6No3_ProxyFights-FIN_CCCA_V6No3_ProxyFights 9/18/12 12:52 PM Page 19 When Cover shareholders flex their muscles By Pablo Fuchs orporate counsel with Canada’s publicly traded companies can be forgiven if they’re feeling somewhat beleaguered.The nature of their jobs has changed dramatically over the past decade Cas they’ve become more active participants in their corporations’daily business activities.And now, in-house lawyers and their firms face unprecedented challenges from activist shareholders. Once rare in Canada, headline-grabbing shareholder activism and proxy fights are increasingly front-page news. Consider Bill Ackman’s much publicized — and successful — campaign against Calgary-based Canadian Pacific Railway Ltd.’s (CP’s) board of directors and management through his U.S. hedge fund firm Pershing Square Capital Management LP. CEO Fred Green, chairman John Cleghorn and four other CP directors resigned from their posts just before the annual gen- eral meeting in May, then shareholders voted overwhelmingly to support Ackman’s seven nomi- nees for the board. In June,Vancouver-based biotechnology firm QLT Inc. saw a slate of seven directors nominated by a dissident shareholder elected to its board. Meanwhile, BlackBerry maker Research in Motion Ltd., grain handlerViterra Inc., and recently, telecommunications firm Telus Corp., have faced significant public investor agitation. The sheer volume of activity signals that corporate counsel have to be ready to deal with a proxy fight before it even presents itself. Says Walied Soliman, a partner with Norton Rose in Toronto: “I have one single piece of advice,and that is:Be prepared.Don’t be the general counsel who picks up the phone after the activist shareholder action has started because the shareholders will have been preparing for months.” A recent report released byToronto-based Kingsdale Shareholder Services Inc.shows there were more than 40 proxy fights in 2009 compared with about five in 2003.That number has since sta- bilized in the 20-25 range in 2010 and 2011. The financial crisis, which decimated markets and the value of shareholders’ holdings, is partly to blame for the dramatic increase in shareholder activism, says Kingsdale’s CEO, Wesley Hall: “Since 2007-08, the drop in the markets has been dramatic and a lot of people have been hurt financially as a result.There were those who saw that as a huge opportunity and they went out and started to shake things up. Once folks who were looking on saw that they were successful, they AUTOMNE 2012 CCCA Canadian Corporate Counsel Association 19