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William Ackman of Pershing Square Capital Management, seen here Sept. 27, 2010, is locked in battle with the management of CP Rail as he tries to replace the company's chief executive. (Shannon Stapleton / Reuters/Shannon Stapleton / Reuters)
William Ackman of Pershing Square Capital Management, seen here Sept. 27, 2010, is locked in battle with the management of CP Rail as he tries to replace the company's chief executive. (Shannon Stapleton / Reuters/Shannon Stapleton / Reuters)


War of words: The e-mails that touched off a battle at CP Add to ...

War is also not inevitable.

I think the failures so far have been largely ones of communication. As a result, I think it is useful to review why we are where we are. When we first met, I explained to you the importance of resolving things quickly and getting on the same page as quickly as possible. We were delighted with the way our first meeting ended. After pulling me off the plane, you explained to me that “Fred agrees with the logic of your presentation” and clearly implied that he was prepared to step down. You explained that his principal motive for allowing Hunter to replace him was to get back at Canadian National because he hates them so much. You then said, “Welcome to Canadian Pacific!” and shook my hand in a warm embrace. You told me that you had a board call set for the following day and that you would get back to me no later than Friday morning, but probably earlier on Thursday.

We viewed the meeting positively, largely because often the biggest barrier to replacing a failed CEO is the CEO himself. With Fred apparently on board with the plan and with your welcome, I believed we were well on our way.

Things began to go awry when you did not call me on Thursday or Friday. When we finally spoke on Saturday as a result of my reaching out to you, things apparently had changed meaningfully since our Wednesday meeting. On the call, you asked me to arrange a meeting with Hunter that Kathryn McQuade would attend. When I explained that I thought it was inappropriate for a CEO candidate to meet with the CFO of the company rather than the full board who should be doing the job of hiring the CEO, you told me that the board did not have a lot of railroad industry expertise and that Kathryn could help the board evaluate Hunter’s plan for turning around CP. I then explained that even if the board were willing to meet with Hunter we did not believe he could do so in light of constraints in his non-compete arrangement. You then asked me to have our counsel speak with yours about the non-compete agreement.

In light of the necessary delay in meeting Hunter, I then suggested that the best approach would be to get Paul Hilal and myself on the board right away so we could assist the board in the management decision. You expressed surprise that we were interested in board seats. When I reminded you that we had requested “a couple of board seats” at our Wednesday meeting, you said that you had no recollection of that request. When I reminded you that at the meeting, I had given the JC Penney analogy where two of our representatives were invited to join the board without being required to sign a standstill, and we then worked with the board in private to recruit a new CEO, you seemed to remember that, but not a specific request for board seats. I then reiterated the request for board seats. You explained that you would have to talk the board about that.

Two weeks or so passed without a communication from you. I called to find out when we would have an opportunity to meet with the board. You then explained that while you were recommending that the board meet with us to consider our candidacy, you would not be able to hear whether the board would be willing to do so until after Thanksgiving because of travel schedules. On the Friday after Thanksgiving, you called and said that nominating committee would be willing to meet and that the lawyers should talk to schedule such a meeting.

Your side proposed December 11th, Sunday night, in Calgary and we flew there for the meeting. While I very much enjoyed meeting the directors and thought I could work well with them on the board, I took it quite negatively that the committee was unwilling to meet with my proposed director, trusted partner and good friend Paul Hilal particularly in light of the fact that he left his newly born baby girl and beautiful wife to travel a fair distance on a Sunday night. I also felt that you were perhaps attempting to run out the clock on us. I didn’t completely understand the Canadian proxy rules at the time, and had been erroneously told that we had to file proxy materials shortly. When I learned that we could file materials up to nearly the day of the meeting, it took some of the time pressure off.

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