Canadian law firm Fasken Martineau DuMoulin LLP has released its as always engaging review of proxy contests in Canada during 2017.
A proxy fight is an unfriendly contest for the control of in this case, a public listed company. Proxy fights usually occur when shareholders become unhappy with management’s behaviour (corporate governance) or where economic outcomes are disappointing and generally involve disputes over directorships and management positions.
The disaffected group, sometimes a corporate activist, will solicit the proxies of shareholders via a proxy solicitation. A proxy allows for an individual or institution to become the shareholders authorised representative.
Incumbent directors and management have a number of distinct advantages over the disaffected shareholder group. They have access to the corporate treasury and can use it in a largely unrestricted manner, they can hire very expensive proxy solicitation firms, can engage in disparaging public relations campaigns though their existing public relations and shareholder list channels and lastly they can rely on the corporations law requirements to easily disqualify entire actions or individual proxies. Boards can simply ignore the actions of disaffected groups who then must rely on the courts to seek remedy.
I have been involved in a number of proxy battles. I have initiated and managed two and actively participated in a third, all of which were resounding successes for the dissidents. A proxy fight should not be considered lightly, it can be very public, is time-consuming and expensive and outcomes can be uncertain.
The Fasken study concludes:
The number of proxy fights is about the same for the last three years, 2015-2017
75% of proxy contests targeted small capitalisation companies
Unlike 2016, when management dominated and largely lost, institutional investors dominated the proxy contests in Canada during 2017 and won
If you get the opportunity attend the Fasken lectures at their offices in Toronto during the 2018 PDAC. They were most informative in 2017. Contact them here.
Resources
Ethical boardroom Article
How do proxy fights work
Typical proxy solicitation firm
Harvard Law School Library – Proxy fights
