On Feb. 7, Bill Ackman did what the board of Canadian Pacific Railway refused to do: he interviewed Hunter Harrison for the position of CEO.
Packed into a Toronto hotel ballroom, a crowd of more than 350 shareholders and others watched as Ackman introduced Harrison, the retired executive credited with turning around both Illinois Central Railroad and Canadian National. Ackman called the town hall “CP Rising,” and asked investors to use a May proxy vote to push for a management change. “Ask yourself who is most likely to lead the company to its maximum potential,” he said.
Ackman’s $1.4 billion investment in CP through his Pershing Square Capital Management fund, and his determination to shake up CP’s boardroom with a proxy fight, exemplify a strain of investor activism that’s becoming increasingly common in Canada. Last November, AIMco tried to catalyze change at grain-handler Viterra by publicly bashing the company’s performance. Merchant bank Jaguar Financial knocked on RIM’s door in late 2011 and called for the sale of the company, whole or in pieces. And West Face Capital convinced Maple Leaf Foods to replace some of its directors in February.
This growing activism is partly a result of the recession, which left many companies beat up and undervalued, yet reluctant to act. Investors, meanwhile, grew impatient not seeing returns fl ow back into their port folios, prompting them to put pressure on companies large and small.
This most recent strain of activism bears little resemblance to the greenmailing and hostile takeover tactics favoured by ’80s corporate raiders. Ackman’s speech was delivered simply and unemotionally, encouraging agreement rather than forcing it. During question period, when a longtime CP customer and shareholder blasted Ackman for leading “a terrible forum because it’s been so one-sided,” Ackman casually replied that it was “good to hear different points of view.”
And nobody sweetened the medicine more than Harrison himself—the gathered investors laughed easily at his wisecracks delivered in a disarming Tennessee drawl. The would-be CEO, who has invested $5 million of his own in CP, made a bold off er: if he couldn’t deliver results, “you can hang me in Times Square—and you don’t have to pay me.”
Some in the financial industry think such activism has led boards to meet more often with key investors, and try to better anticipate conflict. CP’s current executives have been forced to outline their vision for the railroad more clearly as a result of activist influence. In May, shareholders will decide if they’ll heed current CEO Fred Green’s plea to “continue working safely,” or submit to Ackman’s persistence and Harrison’s charms. Either way, investors will know more about the company’s plans—and it’s hard to see that as anything but good.