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The Canada Pension Plan Investment Board has backed activist investor Bill Ackman's entire slate of nominees for Canadian Pacific Railway Ltd.'s board and withheld votes from incumbent directors at the railway.

Mr. Ackman, chief executive officer at hedge fund Pershing Square Capital Management LP, is proposing to have his seven nominees elected at next Thursday's annual meeting of Calgary-based CP, while the railway is hoping that shareholders will back its team of 15 directors.

"We have assessed the cases put forward by CP and Pershing Square and have concluded that change is necessary at CP. This view is supported by both operational and financial measures of performance which have significantly underperformed peers over a prolonged period of time, resulting in shareholder returns that have lagged the company's closest peers," CPPIB said in a release on Friday.

CP's first-quarter profit quadrupled to $142-million, but CPPIB failed to be swayed.

"Although CP appears to have made some recent progress towards improving its operations, we believe that Pershing's proposals for change provide the greatest likelihood for long-term sustainable improvement. We believe that our vote for only the dissident nominees is the best way to ensure that these directors are elected and that constructive change occurs" CPPIB said.

Pershing Square is proposing to elect a minority slate of alternative directors at CP: Mr. Ackman and his Pershing Square colleague Paul Hilal, former Norfolk Southern Corp. chief operating officer Stephen Tobias, 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.

"We are grateful for the support of CPPIB, one of Canada's largest and most respected pension investors. Their support, along with the strong support we've received from others in recent weeks, makes it clear that our fellow shareholders are ready for change and believe in our goal of returning Canadian Pacific to its historic position as a leader in the industry," Mr. Ackman said in a statement.

Pershing Square owns 24.16 million CP shares, or a 14.2-per-cent stake in the railway.

CPPIB, which controlled more than 1.36 million CP shares on the March 22 record date for voting eligibility, is the latest shareholder to rally behind Pershing Square. The New York-based hedge fund wants to install Hunter Harrison, the former chief at Canadian National Railway Co., as the replacement for CP CEO Fred Green.

Calgary-based CP said it recommends that "shareholders cast their votes in favour continued value creation under the oversight of the best 16 individuals up for election and not to vote for the risk and disruption associated with giving Pershing Square seven seats on the board."

Meanwhile, British Columbia Investment Management Corp. said it will choose four nominees from the Pershing Square slate and nine incumbent CP directors, but withhold votes from six other railway board members, including Mr. Green and CP chairman John Cleghorn.

B.C. Investment Management said it supports Mr. Ackman, Mr. Haggis, Mr. Tobias and Ms. MacDonald from the Pershing Square slate.

"We applaud the efforts of Pershing Square Capital Management but don't believe that a wholesale change of the board is required at this time," Bryan Thomson, vice-president of equity investments at B.C. Investment Management, said in a statement. "We expect that the new board will undertake a complete evaluation of management and make the required changes."

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