Executive chairman Alain Bouchard, writing on behalf of his fellow founders, says the four ‘would like to continue playing a key strategic role in growing Couche-Tard.’Ryan Remiorz/The Canadian Press
It's believed a very young Mick Jagger said he couldn't imagine being up on stage singing Satisfaction at the old age of 45. He had little idea what the next two decades – and more – would hold.
Perhaps similarly, the golden age of retirement must have seemed so far away for the founders of Alimentation Couche-Tard in 1995, when they were in their 30s and 40s. That year, they went to shareholders and promised to end their special voting rights at the company once they all turned 65.
Like the Stones, Couche-Tard has kept on rocking, with a stock up 650 times from its 1986 public offering. (That's 650 times, mind you, not 650 per cent.) It's made the four founders worth a combined $7.8-billion. And with the youngest of the four, Jacques D'Amours, currently 58, things have begun to look different than they did two decades before. (The other three founders will all be older than 65 by year-end.)
So: The founders have come back to the shareholders with a plan to extend their voting control a little longer, at least until the last of the four steps down from the board, whenever that may be. Executive chairman Alain Bouchard, writing on behalf of his fellow founders, says the four "would like to continue playing a key strategic role in growing Couche-Tard. … [Our] strong involvement has been beneficial to all."
With the dazzling returns Couche-Tard has provided, the founders may well get their wish when shareholders vote on the proposal at the company's annual meeting Tuesday. But it is not certain they will – nor should it be.
The founders of Couche-Tard are not the only ones who have struggled this year with the loss of control. Prem Watsa, the founder of Fairfax Financial Holdings Ltd., has seen his voting stake in that company slip from more than 80 per cent to the low 40s after years of Fairfax issuing shares for acquisitions.
Having had enough, he went to Fairfax shareholders with a plan to increase the number of votes on the shares he holds from 10 per share to 50, although the power of his voting shares could rise no higher than the current 41.8-per-cent control. Mr. Watsa's proposal was scaled down after negotiations with a committee of independent board members, but it still took two postponements of the shareholder's meeting to get it passed.
Couche-Tard's founders' proposal, too, is the product of negotiations with the company's independent directors. According to the proxy materials the company has sent to shareholders, the founders had initially suggested their multiple-voting shares retain their power – 10 votes, versus one for the widely held B shares – as long as they or their families held at least 50 per cent of the company's voting rights. (Currently, the founders have about 60 per cent of the votes but only 22 per cent of all outstanding equity in the company.)
That original proposal was modified three times before it reached shareholders. The next suggestion was that the dual-class voting structure end when the last of the founders died. Then, it changed so at least one founder needed to be "actively involved" in the business for the special voting rights to continue. Finally, a formal definition for the formal proposal: "Actively involved" meant at least one founder needed to be on the board of directors.
In addition, the negotiations upped the number of directors the class B shareholders may elect to three (of 11) from the founders' initial proposal of two. Currently, class B shareholders are outvoted by the founders in all the votes for board seats.
Peter Chapman, executive director of Canada's Shareholder Association for Research and Education (SHARE), says this back-and-forth "lays bare the conundrum of dual-class shares." While some long-term investors are warming to the benefits of dual-class share structures, "others would prefer finding ways to incent long-term thinking by management without paying the price of assigning unequal rights to equity holders."
SHARE, like proxy advisers Institutional Shareholder Services and Glass Lewis & Co., have come down on the latter side: Despite acknowledging the adjustments Couche-Tard made to make the proposal more palatable, they've all recommended "no" votes on the change, much as they recommended "no" votes at Fairfax.
The glow of the long-term shareholder return at Couche-Tard may trump those recommendations, but expect the vote to be close, as the proposal on Tuesday's ballot needs two-thirds support from ordinary shareholders to pass. Last year, a stockholder proposal to change Couche-Tard's director election methods garnered the support of 68 per cent of the subordinate shareholders, despite being opposed by the founders. Clearly, Couche-Tard investors can appreciate the gains of the stock, but they may require a little more satisfaction from the company's governance structure.
David Milstead