Activist investor Bill Ackman says he’s surprised that Canadian Pacific Railway Ltd. has nominated him for a seat on the board of directors because he hasn’t held any conversations with the company for months.
The chief executive officer of Pershing Square Capital Management LP learned about the nomination on Thursday after CP said in its proxy circular that it recommended he be one of 16 CP directors.
The proxy battle is headed for a showdown at CP’s annual meeting in Calgary on May 17, when shareholders will be asked to choose from competing slates of directors.
Mr. Ackman said in an interview that the fact CP is offering its biggest shareholder only one seat when he is soliciting votes for six new directors is “further evidence” of the board’s indifference to investor demands. “It is clear the board does not understand the degree of change that is necessary,” he said.
CP maintains it has cleared the way for him jump aboard. A CP spokesman said Thursday key terms and conditions originally attached to having Mr. Ackman join the board are no longer a factor, although he declined to elaborate.
Mr. Ackman had been invited in December to join CP’s board. But talks broke off after he resisted some of the terms and began campaigning publicly to replace chief executive officer Fred Green with Hunter Harrison, the retired former CEO of Canadian National Railway Co.
When CP offered Mr. Ackman a seat in December, the position was conditional on him signing a standstill agreement that would have effectively prohibited him from launching a proxy battle to replace several of the directors. The agreement also would have restricted his ability to buy a significantly larger stake or to take any actions, notably the proxy contest, that opposed CP’s board.
Pershing Square began buying the railway’s shares last September. The hedge fund publicly disclosed in October that it had invested in CP. The New York-based firm now holds a 14.2-per-cent stake in CP, making it the largest investor in the Calgary-based company.
After initial meetings last fall, “an invitation was extended to Mr. William A. Ackman, chief executive officer of Pershing Square, to join the board so that a constructive board-level dialogue based on all the relevant facts and information could take place,” CP chairman John Cleghorn wrote in a letter Thursday to the railway’s shareholders. “The invitation to Mr. Ackman remains open and, in that regard, Canadian Pacific has included him as one of the nominee directors that we recommend to Canadian Pacific shareholders.”
Pershing Square is proposing to elect a minority slate of alternative directors at CP: Mr. Ackman and his Pershing Square colleague Paul Hilal; corporate restructuring specialist Gary Colter; former Onex Corp. executive Anthony Melman; Just Energy Group Inc. executive chairwoman Rebecca MacDonald; and businessman Paul Haggis, a former head of Alberta Treasury Branches.
Pershing Square is urging shareholders to vote with a blue proxy to back its campaign for management change, while CP wants investors to cast white ballots to support the railway’s current board, which includes Mr. Green.
Mr. Green had $5.3-million in compensation last year, including a salary of nearly $986,000 but no bonus, according to CP’s management proxy circular. His total pay packet fell 20 per cent from $6.6-million collected in 2010, when he had a salary of $926,250. Mr. Green’s remuneration climbed 57 per cent in 2010 from $4.2-million in 2009.
The freight carrier posted a $570-million profit last year, compared with $651-million in 2010 and $550-million in 2009.
Mr. Ackman argues that CP’s management needs a shakeup to turn around the underperforming railway.