Ackman touts role of activist investors in boosting performance

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Activist investor Bill Ackman says his Pershing Square Capital Management LLP has been a force for good in the capital markets because companies have improved their performance in the face of his firm's activism.

Mr. Ackman spoke in Toronto at the Ontario Securities Commission's annual Dialogue Day conference, arguing in favour of an array of corporate-governance reforms, including giving shareholders a choice of directors to vote for in board elections.

He condemned the existing practice in which investors must elect a group of directors who nominate themselves for re-election and run unopposed, giving shareholders no choice but to vote for them or withhold their votes.

"That's a terrible, terrible system that needs to be fixed," he said.

U.S. law professor Roberta Karmel from the Brooklyn Law School, who also spoke at the conference on Thursday, said activist investors behave as though they are playing a game with companies without realizing their impact.

"It seems like a video game my grandsons play, and we are talking about the real economy here," she said.

Ms. Karmel said some activists improve companies with their actions, but "that doesn't make them heroes of the whole situation."

"This has done damage to the real economy in the U.S.," she said.

Mr. Ackman, however, said Pershing Square has done 30 activist deals over the past 11 years, and only in two cases is the share price now lower. In many, the price is up by hundreds of per cent because business has improved, he said.

"It's silly to say activists are running around destroying the country," he said.

Mr. Ackman said activists only win support for their campaigns if they can attract large institutional investors who are long-term shareholders who care about the future of companies for decades to come. Activists with short-term plans to strip cash from a company and pay out big dividends won't win their support, he said.

"There is good and bad activism," he argued.

He added that it is easier to be an activist in Canada than in the U.S. because shareholders have better rights, including the right to requisition shareholder meetings. Canada also has less powerful poison-pill takeover defences.

Mergers and acquisitions lawyer Sharon Geraghty from Torys LLP said since Pershing's successful proxy battle at Canadian Pacific Railway Ltd., boards are more fearful of activists and more willing to give them board seats to prevent a public battle. Ms. Geraghty said it remains to be seen, however, if the new shareholder representatives improve boards.

She said activists have their own interests at heart, while directors have to act in the long-term best interests of a company considering many stakeholders, not just shareholders.

"I'm always a little leery in saying shareholder activists should decide how a company is run," she said.

Also Thursday, U.S. Securities and Exchange Commission chair Mary Jo White told the OSC conference one of her top priorities is boosting enforcement cases. She said the SEC launched 755 cases in the fiscal year ended Sept. 30, and ordered people or companies to pay more than $4-billion (U.S.) in disgorgement and fines, both of which are new record highs for the commission.

She said the SEC is more often seeking settlements that include admissions of wrongdoing in serious cases, not allowing people to settle on a no contest basis without admitting guilt.

Ms. White lauded the SEC's new whistle-blower program, which pays for tips and promises informants a share of money recovered when cases are concluded. The regulator recently paid $30-million to a single whistle-blower in a successful case.

The Ontario Securities Commission has been pondering whether to introduce a similar program. Ms. White told reporters after her remarks the policy "has yielded very significant information on very significant securities frauds, so I think it's highly successful."