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William 'Bill' Ackman by Anthony jenkins (Anthony Jenkins/The Globe and Mail/Anthony Jenkins/The Globe and Mail)
William 'Bill' Ackman by Anthony jenkins (Anthony Jenkins/The Globe and Mail/Anthony Jenkins/The Globe and Mail)

the lunch

Bill Ackman: 'A stake in the ground' Add to ...

In Bill Ackman’s world everything is negotiable, even the prix fixe menu at the Red Eye Grill in midtown Manhattan.

Scanning the daily specials, the billionaire hedge fund operator begins bargaining. He wants miso matzo ball soup instead of salad. He’ll take the yellow-fin tuna burger, but lose the bun. And instead of hand-cut fries, sautéed spinach.

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“I can do salad on this menu sir, but I don’t think I can do spinach,” the waiter winces.

Feigning outrage, Mr. Ackman points to me, gasping, “You’re giving her sautéed spinach, I want sautéed spinach.”

The waiter nods, retreating to the kitchen. You hope he’s got the message. Powerful business leaders and regulators have learned to regret not yielding to the shareholder activist and his New York hedge fund Pershing Square Capital Management.

“I negotiate, that’s what I do,” the 46-year-old says with an impish grin that seems out of place underneath a shock of thick white hair. “If I believe that I am right, I will take it to the end of the earth until I am proven right.”

Mr. Ackman’s legendary persistence is expected to deliver a boardroom coup that until recently would have been unthinkable in Canada. After four months of 24/7 campaigning for management and boardroom changes at Canadian Pacific Railway Ltd., Mr. Ackman is expected to win a proxy battle on May 17 that will likely see some of Canada’s most influential corporate directors replaced by a slate of seven low-profile consultants, entrepreneurs and retired businessmen.

The anticipated upset is in part a testament to Mr. Ackman’s ferocious crusading, which a friend once likened to stepping inside a wind tunnel, and his no-holds-barred campaign tactics. His expected victory also highlights the growing clout of activist funds which are deploying billions of dollars and ties with other investors to shake up underperforming companies.

For Mr. Ackman, the anticipated win will be powerful leverage the next time he makes a major investment in an underperforming company and asks for board or other changes. Pershing has targeted 23 companies in nine years and only three, including CP, have led to proxy battles.

A successful vote next week, he says, means “we are not going to have to run another proxy contest” because directors will not want to risk a similar humiliation.

“In every significant boardroom they are talking about the Canadian Pacific proxy contest and … what is the right thing to do for a board. Directors are sitting up more straight and reading board materials more carefully and questioning the CEO more intently. That is a very, very good thing.”

Few directors will want to endure the kind of public thrashing Mr. Ackman has given CP’s directors.

He threatened CP’s chairman John Cleghorn with “nuclear” war in an e-mail, publicly questioned the accuracy of the company’s financial reports and savaged the record of its chief executive officer Fred Green. The activist makes no apologies for his harsh crusade, which has elicited furious denials and demands for retractions from some of CP’s establishment directors.

“I am always prepared to do the right thing regardless of what other people think. That’s my whole thing, my whole mantra. In order to do this you have to have a thick skin,” he says.

Since he started his first hedge fund at the age of 26 in 1993, Mr. Ackman quickly established himself as a brash investor who liked to place contrarian bets. One of his bets was so controversial that it was responsible in part for the winding down of his first fund, Gotham Partners, a split with his founding partner and an investigation by the U.S. Securities and Exchange Commission.

The investment was a multimillion-dollar bet in 2002 against MBIA Inc., a major bond insurer which backed shaky subprime mortgage investments. Mr. Ackman saw a company that was dangerously undercapitalized for what he believed was a looming financial crisis. His bet was prophetic, but it would take seven years and a financial crisis to prove him right. In the meantime, the SEC launched an investigation into whether his fund was improperly acting in concert with other investors to drag down MBIA’s stock price.

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