This article is part of Report on Business Magazine's annual top 1000 rankings. See the full website here.
Dear Bill Ackman,
Wow! That was impressive. For years we’ve been laughing behind John Cleghorn’s back at the National Club about what a putrid company Canadian Pacific Railway is. You came in and sent the big man and his pals on the board fleeing faster than we could say, “War of 1812.”
Clearly you are a man of action. That’s good, because we Canadians are not men of action. We’d like to be more like you, but it’s not easy. Our business community is rather different from America’s, as I’m sure you’ve surmised. It’s a small, polite group of people for a small, polite country. We invite each other to our kids’ weddings. No one wants to be the attack dog.
So we sure appreciate you coming along and cleaning up CP Rail for us. We like to think that we did our part, too. Did you notice how we voted for your plan? How we piled on Cleghorn and Fred Green at the last moment after you did the heavy lifting for months?
We see the potential to do much more together, Bill. In fact, we think there’s room for what we call a “constructive long-term business relationship.” It would work like this: You do the hard work, and we will meekly stand foursquare behind you. Since you’re going to be up here a lot more often anyway, perhaps you’d consider the following, er, candidates for corporate reform?
EnCana Corp. (oil and gas production, No. 143 in the Top 1000): This was once Canada’s premier oil and gas company. Then the brain trust came up with the idea of spinning off the oil assets to concentrate on natural gas—the fuel of the future. You know how that bet turned out. Now the company is shutting down gas wells and exploring for oil and other liquid fuels. No matter. EnCana’s brutal year in 2011 barely dented the bank accounts of CEO Randy Eresman (he got paid $9.2 million) or the directors, each of whom got at least $340,000 in stock and cash. David O’Brien, the chairman, was there when the company was formed a decade ago. Good guy, but it’s time for some new blood. (Pssst: Back in the day, he used to run CP Rail.)
Rona Inc. (retailing, No. 961): Two words for you: identity crisis. Rona is a wholesaler of hardware supplies. And it runs a chain of small hardware stores. And it has a chain of big-box stores. We strongly suspect that Rona management doesn’t know what the heck their company is supposed to be. But we know what it is: a poor cousin to Home Depot and Lowe’s. Its share price is down 56% over the past five years. Canada is still in a housing boom, but you’d never know it from looking at Rona’s financial statements. “Bad weather” is an excuse you’ll hear quite a lot. (Imagine that: bad weather in Canada!)
AGF Management Ltd. (financial services, No. 149): The CEO is Blake Goldring, and his family controls this mutual fund company. The first thing you need to know about Goldring is that he’s one of the nicest guys you’ll ever meet, and everyone loves him. The second is that his business is broken. In 2000, the stock was trading near $11.50. Since then, AGF has made a series of acquisitions, hired star fund managers, got deeply into the lending business, got out of it and shuffled executives—including hiring Blake’s sister, Judy Goldring, as chief operating officer in 2009. After all of that, the share price is still about $11.50. AGF doesn’t need a nice guy. It needs a hard-ass.
Shaw Communications Inc. (broadcasting, No. 58) and Cogeco Cable Inc. (No. 934): The good news is that these two companies have actually outperformed the Canadian stock market over the past five years, and so they should. Cable TV is an almost recession-proof business: Most Canadians would rather eat Purina than give up their cable subscriptions. (You’d feel that way too if the only other suburban entertainment option was to visit a Rona store.) The bad news is that both companies still underperform. The Shaw family runs a good operation, but they take to heart the credo “pay yourself first” (Jim Shaw’s $5.9-million-a-year corporate pension, granted at age 53, is but one example). At Cogeco, the controlling shareholder just blew a big wad of dough on a loopy adventure in Portugal, which resulted in a $225.9-million writedown last year. What’s needed here is a bit of adult supervision.
Loblaw Cos. Ltd. (retailing, No. 39): You can’t always find produce on the shelves at Loblaws, but you can find Loblaw in the portfolios of a lot of disappointed investors. The supermarket chain has shredded shareholders’ wealth like green-leaf lettuce—stock down 37% over the past decade, and that’s including dividends. The company has been “fixing” its supply chain and IT systems for, oh, about 35 years. Now a new man, a former Wal-Mart executive named Vicente Trius, is in charge. Maybe he’s the right choice, but to really keep him on his toes it sure would be nice to have a few more independent directors who aren’t members of the Canadian Establishment.
We think you’re just the man for the job, Bill.
With sincere thanks,
The Canadian Money Management Industry
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