In a recent twist on activist investing, People for the Ethical Treatment of Animals (PETA) purchased shares in SeaWorld in an effort to address conduct it considers animal cruelty. According to PETA, it bought “the smallest number of shares necessary” to give it “the right to attend and speak at annual meetings and to submit shareholder resolutions asking for policy changes”.
SeaWorld is not the only corporation PETA has claimed ownership in. PETA is using this same strategy with companies such as General Electric, Schering-Plough and 3M, and with fast food restaurants like McDonald’s and Wendy’s. Although in many cases its shareholder proposals are being ultimately withdrawn, PETA is successful in forcing corporations to discuss their treatment of animals with PETA directly.
Activist investing is a relatively inexpensive tool for policy activists looking to push their social agendas onto a corporate vehicle. PETA only had to spend $2,273.70 to acquire 80 shares in SeaWorld to gain the right to bring forward shareholder proposals to all of SeaWorld’s shareholders at the company’s general meeting.
Canadian corporations are not sheltered from this kind of policy activism. Under the Canadian Business Corporations Act, policy activists only have to own $2,000 in stock to bring forward a shareholder proposal. For a nominal investment, shareholders are given a very powerful tool to demand a debate on policy issues.
The rights of a shareholder with a $2,000 equity interest are tempered by statute. The proposal need not be sent to shareholders if, among other things:
- its primary purpose is to enforce a personal claim;
- it does not significantly relate in any way to the business or affairs of the corporation; or
- the right to bring a proposal is being abused to secure publicity.
However, sophisticated policy activists will attempt to work around such restrictions. In those circumstances, companies require an equally sophisticated response. The Norton Rose Fulbright Special Situations Team has been engaged in three similar situations over the past few years, each involving corporations with a market capitalization in excess of over $1 billion.