Topic: Shareholder Activism

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Best Practices for Board Oversight and Disclosure of Environmental and Social Issues

In a recent post, we discussed investors’ growing interest in environmental and social (E&S) governance. As a recent report published by the Canadian Coalition for Good Governance (CCGG) demonstrates, public company boards are no less attentive to growing shareholder interest in E&S issues. The Directors’ E&S Guidebook (Guidebook), which is the product of consultations with industry leaders in the management of E&S factors, provides practical insights and recommendations for effective board oversight and disclosure of E&S matters.

Companies have good cause to respond to investor interest in E&S matters. For some, past incidents … Continue Reading

Activist Shareholders Trading on the Blockchain: Is the Prized Secrecy Compromised?

By Hugo Margoc (Toronto) on May 14, 2018 Posted in Corporate Governance, Securities, Shareholder Activism

Background: Registered Shareholders and Beneficial Shareholders

While a registered shareholder holds its shares directly with a company and can be contacted through its transfer agent, a beneficial shareholder does not have the shares registered in its name. Instead, a securities depository is the registered shareholder. There are two types of beneficial shareholders, a Non-Objecting Beneficial Owner (NOBO) and an Objecting Beneficial Owner (OBO). A NOBO has authorized a financial intermediary to disclose its identity and share position. An OBO has taken affirmative steps to object to such disclosure. Therefore, while a NOBO can be contacted directly, … Continue Reading

Canadian Securities Administrators are seeking comments on soliciting dealer arrangements

By Trevor Zeyl on April 19, 2018 Posted in Compliance, Corporate Governance, M&A, Proxy Battles, Shareholder Activism

The Canadian Securities Administrators (the “CSA”) have issued CSA Staff Notice 61-303 and Request for Comment – Soliciting Dealer Arrangements (the “Notice”) on the use of soliciting dealer arrangements. “Soliciting dealer arrangements” generally refer to agreements entered into between issuers and investment dealers under which the issuer agrees to pay to the dealers a fee for each security successfully solicited to tender to a bid in the case of a take-over bid, or to vote in favour of a matter requiring securityholder approval. In many cases, the payment of any fee is contingent on “success” and/or … Continue Reading

Preparing for activism in 2018: the activist investing annual review

By Joe Bricker on February 20, 2018 Posted in Shareholder Activism

Activist Insight recently published the fifth annual edition of The Activist Investing Annual Review (the Review). The Review analyzes global activist investing trends over the past few years, with an emphasis on 2017, forecasts developments expected in 2018, and breaks out key statistics by jurisdiction.

The 2018 Forecast

The Review identifies four big trends expected to make their mark on 2018 activism:

Return to large-cap targets. With more institutional investors recognizing the benefits of an activist approach, such investors have become more and more willing to support activist campaigns. This support allows activists to challenge larger and larger

Ignoring board gender diversity is no longer an option

By Michael Viner (Toronto) on January 10, 2018 Posted in Corporate Governance, Shareholder Activism

Discussions around board gender diversity are picking up steam in the lead up to the 2018 proxy season. Some of the leading proxy advisory firms, namely the Institutional Shareholder Services (ISS) and Glass Lewis & Co. LLC (Glass Lewis), appear to have caught wind of the discussions – both firms added a voting policy in respect of board gender diversity to their 2018 proxy voting guidelines for Canada.

The discussions around board gender diversity are not new. In late 2014 (and as reported on this blog), the Canadian Securities Administrators (CSA) published ‘comply or … Continue Reading

Glass Lewis’ 2018 Canada Policy Guidelines on Proxy Advice

By Victoria Riley (Toronto) on January 4, 2018 Posted in Corporate Governance, Proxy Access, Proxy Battles, Shareholder Activism

Glass, Lewis & Co., LLC (Glass Lewis), a leading governance and proxy voting firm, has recently released its 2018 Policy Guidelines for Proxy Advice in Canada. The following are three of its key changes from the 2017 Policy Guidelines:

Board Gender Diversity

In the new year, Glass Lewis will not make voting recommendations solely on the basis of board diversity. However, starting in 2019, Glass Lewis claims that it will generally recommend voting against the nominating committee chair of a board that has no female members, or has not adopted a formal written gender diversity policy. This … Continue Reading

SEC provides guidance on shareholder proposals and expands boards’ responsibilities

By Lauren Day on December 21, 2017 Posted in Shareholder Activism

On November 1, 2017, the staff of the US Securities and Exchange Commission’s Division of Corporation Finance (Staff) provided important guidance to companies and shareholders on how Staff will evaluate arguments to exclude shareholder proposals from proxy materials. Among other considerations, the Staff Legal Bulletin No. 14I (CF) (the Bulletin) deals primarily with the “ordinary business” and “economic relevance” exclusions found in Rule 14a-8 of the Securities Exchange Act of 1934 (the Rule). The Bulletin reflects Staff’s continuing effort to address issues arising under the Rule, and among other things, transfers to boards of directors the … Continue Reading

Shareholder activism leads to higher rate of CEO turnover – win or lose

By Matthew Lau (Toronto) on December 5, 2017 Posted in Proxy Battles, Shareholder Activism

Shareholder activism is now a global phenomenon. Activists commonly seek to shake up the board of a target company in hopes of instilling change and increasing shareholder value. The impact on target companies can be both disruptive and enduring – often resulting in turnover among top management and in particular chief executive officers (CEOs). A recent study by Lazard found that since 2013, the average annual turnover rate of CEOs at target companies was 23 percent, compared to 12 percent at non-target companies.

It should not come as a surprise that successful activists who secure board seats may have greater … Continue Reading

ISS releases 2018 Americas Proxy Voting Guidelines Updates

By Joe Bricker on November 22, 2017 Posted in Compliance, Corporate Governance, Shareholder Activism

On November 16, 2017, Institutional Shareholder Services (ISS) released its 2018 Americas Proxy Voting Guidelines Updates (the Updates). These updates implement changes in a number of areas, with the most significant being a gender diversity policy and new criteria for determining when a director is “overboarded”. Except where indicated below, the changes are effective for meetings held on or after February 1, 2018.

Gender Diversity

The Updates implement ISS’s proposal, in its 2018 Benchmark Policy Consultation, to implement a gender diversity policy. For S&P/TSX Composite Index companies, ISS will generally recommend a withhold vote for … Continue Reading

Activists knocking on the door

By Trevor Zeyl on October 19, 2017 Posted in Shareholder Activism

The Canadian Real Estate sector may be in for a shake-up. Reuters recently reported (here) that activists may be eyeing real estate investment trusts (REITs), and their approximate combined C$67 billion in market capitalization, as ripe targets for activist campaigns in light of: attractive prices, vulnerability in the market based on uncertainty surrounding the effects of interest rate shifts, and potential opportunities to unlock unrealized value.

In particular, with the Canadian REIT index down approximately 7% since August 2016, activists may ramp up efforts to target REITs for activist campaigns. Recent interest rate hikes may have … Continue Reading

Trends and predictions in Canadian proxy contests

By Joe Bricker on October 2, 2017 Posted in Corporate Governance, Shareholder Activism

Kingsdale Advisors (Kingsdale) recently released its annual Proxy Season Review for 2017. The report examines trends observed in 2017 and provides analysis on what the future may hold for Canadian proxy contests. The report also outlines strategic recommendations for Canadian companies.

Looking back – trends from 2017

Shareholder activism: alive and well. Kingsdale reports that despite a drop-off in the number of public campaigns so far in 2017 (21) as compared to 2015 (55) and 2016 (33), the number of public campaigns to-date demonstrates the continued prevalence of activism in Canada with respect to public companies. The

Defamation lawsuits as a defence to shareholder activism

By Michael Viner (Toronto) on September 18, 2017 Posted in Litigation, Proxy Battles, Shareholder Activism

Activist investors engaged in proxy fights typically mount aggressive public relations campaigns in order to undermine shareholder confidence in a target company’s performance and leadership, whether through social media, online forums or by using the more traditional PR channels. In response, target companies have turned to a number of defensive measures, many of which have been previously discussed on this blog. As part of their proxy defence playbooks, target companies may threaten or actively pursue legal action, such as by filing complaints with securities regulators or by suing for defamation.

Naturally, the decision to commence legal action must take into … Continue Reading

Investors heating up the conversation on climate change

By Lucy Liu (Toronto) on August 21, 2017 Posted in Corporate Governance, Shareholder Activism

Shareholders are placing increased value on non-financial factors when making investment decisions. Some of these factors are environmental and social issues. In particular, shareholder proposals on climate change have recently gained some traction.

In 2016, a record breaking number of climate change resolutions were filed. This shift in focus is attributed to the 2015 Paris Accord, where 195 nations committed to take measures to mitigate global warming. The accord’s objective was to garner a global response to climate change, and it succeeded in enlisting a pledge from these nations to limit temperature increases to well below 2 degrees Celsius.

Interestingly, … Continue Reading

Trends and strategies for companies involved in M&A transactions

By Sam Zadeh (Toronto) on July 19, 2017 Posted in M&A, Proxy Battles, Shareholder Activism

In a report entitled “M&A Activism: A Special Report”[1] (the Report), the editor-in-chief of Activist Insight describes the types of companies most at risk of being targeted by shareholder demands, providing steps that can be taken to increase the resilience of M&A transactions.

The Report identifies a number of trends and findings, as summarized below:

Deal Prevention: M&A demands from shareholders have increased in recent years in both Canada and the United States, most commonly by activists seeking to prevent deals, to pursue appraisal rights, and to make their own takeover bids. Notably, 45% of Canadian shareholder activism

Fasten your seatbelts: preparing for the globalization of hedge fund activists

By Matthew Lau (Toronto) on July 10, 2017 Posted in Proxy Battles, Shareholder Activism

Activist hedge funds have grown up and gone global, reinforcing the need for companies of all shapes and sizes to plan ahead for the possibility of an attack. A recent article by Martin Lipton in the Harvard Law School Forum of Corporate Governance and Financial Regulation reviews recent developments in the activist landscape and reconfirms the importance of preparing for an attack.

The Fight Has Gone Global

One recent development is the expansion of hedge fund activism across the globe within the past two years. Mr. Lipton suggests that activism typically associated with the American marketplace is quickly gaining traction … Continue Reading

The drivers and consequences of settlement agreements in proxy fights

By Michael Viner (Toronto) on July 4, 2017 Posted in Proxy Battles, Shareholder Activism

Activist interventions are being increasingly resolved by way of settlement agreements, with 3% of activist interventions in 2000 having resulted in a settlement agreement versus 16% in 2011.[1] In light of this emerging trend, the Columbia Business School recently published a paper, Dancing with Activists, in which the authors sought to provide the first systematic analysis of the drivers, nature, and consequences of such settlements. The authors identified 4 main drivers of settlement agreements: (1) the activist’s stake; (2) market reaction to a SEC Schedule 13(d) filing; (3) settlements in past engagements; and (4) past firm performance.… Continue Reading

The CCGG’s stewardship principles

By Michael Viner (Toronto) on June 19, 2017 Posted in Corporate Governance, Shareholder Activism

Last month, the Canadian Coalition for Good Governance (CCGG) published its new Stewardship Principles paper designed to assist institutional investors fulfil their responsibilities to their beneficiaries or clients and enhance the value of their investments. The principles reflect what the CCGG believes are appropriate stewardship responsibilities for institutions investing in Canadian public equities and are directed to both asset owners and asset managers. While it is not the institutional investor’s role to manage the public companies in which it invests, in order to fulfil its role as fiduciary to its beneficiaries and clients, the CCGG believes an institutional … Continue Reading

Members of Special Situations team weigh in on Canadian activism in Ethical Boardroom Magazine

By Trevor Zeyl on May 16, 2017 Posted in Shareholder Activism

Members of Norton Rose Fulbright’s Canadian Special Situations team have weighed in on shareholder activism in Canada with an article in the Spring Edition of Ethical Boardroom Magazine. The article, written by Trevor Zeyl (assisted by Joe Bricker), offers insights on shareholder activism in Canada in the past year, and some predictions for 2017 and beyond. The Spring Edition of Ethical Boardroom can be viewed here (free subscription required): https://ethicalboardroom.com/ethical-boardroom-spring-2017/.

Stay connected with Special Situations Law and subscribe to the blog today.… Continue Reading

Re Hemostemix Inc: Alberta Securities Commission upholds decision of TSXV in contested private placement

By Trevor Zeyl on February 27, 2017 Posted in Securities, Shareholder Activism

Following recent amendments to Canada’s takeover bid rules, private placements in the face of hostile bids have become newly controversial. Private placements in the context of proxy contests have received less attention. Yet this is somewhat surprising, because they are another facet of the same underlying question: whether regulators should allow a financing that may significantly affect the voting power of hostile shareholders in an ongoing shareholder persuasion campaign.

The Alberta Securities Commission (ASC) has just released its reasons for upholding the TSXV’s allowance of a private placement in the context of a proxy contest, without requiring shareholder … Continue Reading

An age of shareholder empowerment

By Jenny Yoo on January 16, 2017 Posted in Corporate Governance, Shareholder Activism

In a corporate directors survey (the Survey) entitled “The swinging pendulum: Board governance in the age of shareholder empowerment”, PricewaterhouseCoopers LLP (PwC) presents current trends in investor influence and their impact on governance practices of boards and management teams.

Conducted amongst 884 company directors in the summer of 2016 with respondents representing over 24 industries, the Survey highlights the increasing influence of investors and board sentiment in this “new age of shareholder empowerment”.

Board composition

When recruiting new board members, investor recommendations appear to carry increasing weight. The Survey notes that there has been an … Continue Reading

Tactical defenses by targets: OSC and BCSC defer to target board decision to implement private placement in face of hostile bid

By Andrea Brewer and Kassy Corothers (Calgary) on November 14, 2016 Posted in Shareholder Activism

Further to our post on the Dolly Varden Silver Corp. (Dolly Varden) and Hecla Mining Co. (Hecla) decision, the Ontario and British Columbia Securities Commissions (the Commissions) recently released their reasons for their decision in July, 2016 (the Reasons) allowing Dolly Varden to proceed with a proposed private placement announced shortly after Hecla launched a hostile bid for Dolly Varden. Following the decision, Hecla promptly withdrew its bid.

The Dolly Varden bid has been closely watched because it is the first decision to consider the use of a private placement by a target since … Continue Reading

Placeholder board nominees: A new tactic in the activist tool-kit?

By Andrea Brewer on November 4, 2016 Posted in Shareholder Activism

In response to the threat of a shareholder ambush of director nominations at a shareholder meeting, many Canadian companies have adopted advance notice provisions (ANPs). ANPs require that shareholders inform a company by a certain deadline if they wish to nominate directors to the board. For annual shareholder meetings, this deadline is typically no less than 30 days in advance of the meeting. For special meetings, it is typically no less than 15 days after the announcement of the meeting. Norton Rose Fulbright’s Special Situations team has been at the forefront of this development, having been involved in … Continue Reading