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CCCA_V6No3_ProxyFights-FIN_CCCA_V6No3_ProxyFights 9/19/12 10:42 AM Page 21 fact we’re in a bear market is not the driver,” Cover Pasparakis notes.“Really, it’s all about the rela- tive performance of the management team.This will always occur in a competitive landscape.” So, when stock markets and the economy bounce back, don’t expect shareholder activism to fall off. Hall adds: “It’s not just because a com- pany is operating badly. In many cases, these are opportunistic moves. There are cases in which companies are doing well, but they were still subject to shareholder activism. Take Magna [International’s 2010 proxy fight] as an example. It was a very well performing stock but it still had to deal with shareholder activism.” The Magna situation was based on share- holder disagreement with founder Frank Stronach’s compensation — another reason why shareholders are willing to take on these firms. Says Allen: “A major red flag for investors is that there is no correlation between a com- pany’s performance, relative to its peers, and rising executive pay.” As a result, he adds: “Pandora’s box has been opened. From now on, boards of large companies have to take notice of what happened in situations such as CP’s in a relatively short time of about eight months. It went from 99 per cent broad support of the board to Pershing now having a majority.” Proxy fight playbook It’s not uncommon for corporate counsel to go into a proxy fight not knowing what to expect. Says Allen: “The most regularly asked question I get from corporate counsel when a proxy situation occurs is, ‘What’s going to happen next.’ They’re completely unfamiliar or unprepared with what’s going on or what the next step is going to be.” Hall recommends having a playbook ready that sets out what steps to take. “You have to have a playbook developed in terms of how to MARNIE BURKHART, JAZHART STUDIOS deal with these issues, who are the experts that Vice-president and you need to have on stand-by in the event something happens, and how and when you need to put the team together to deal with a Alison Love Q.C. particular issue,” he says.“The issue may even Enbridge sees you’re very prepared in terms of how go away just because of the fact the other side corporate secretary Calgary you’re going to deal with that situation.” AUTOMNE 2012 CCCA Canadian Corporate Counsel Association 21