Skip to main content

When the music stopped, there were no seats for Trian Fund Management.

The activist firm run by investor Nelson Peltz was circling U.S. chemical company E.I. du Pont de Nemours & Co. (DuPont), angling for four seats on the company's board. But DuPont chief executive officer Ellen Kullman prevailed after a shareholder vote on Wednesday.

An increasingly professional and calculating group of activists is now being met by more responsive management teams with more sophisticated defences. And these boardroom challenges almost always start out with an intention to fly under the radar, lawyers and communication firms say.

Story continues below advertisement

Executive teams in Canada also appear to be swatting away more dissidents. Last year, 58 per cent of proxy contests were won by management teams, according to law firm Fasken Martineau DuMoulin LLP's new 2015 Canadian Proxy Contest Study, which tracked 15 fights last year. The last time company wins outpaced the dissidents was 2011. These figures are based on formal proxy contests from last year, where an activist has prepared and mailed a dissident proxy circular to its target.

"After the [Canadian Pacific Railway] and Agrium fights a couple of years ago, boards started realizing that they could all be potential targets. We've certainly seen boards and management teams taking a more active preparatory role," said Aaron Atkinson, a partner at Fasken Martineau, who worked on the report.

"I think everyone would rather save the money, and the aggravation, and try to come to some agreement without the public contest," Mr. Atkinson said. "It's probably fair to say that the success rate of dissidents, at least in the prior years, was understated if you were to also lump in the private approaches, because if you have a very motivated dissident, it may be hard to get them to take their ball and go home."

Some activists launch loud, public battles to pressure shareholders and management teams, with the hopes of avoiding a formal proxy campaign.

"It's been our experience that companies and activists are more prone to settle than ever before," said Riyaz Lalani, chief executive officer of Bayfield Strategy Inc., a financial communication firm. "The cost and distraction of fighting a proxy contest, and the willingness of shareholders to support activists, have contributed to that trend."

A recent example is the oil patch tussle where West Face Capital Inc., the largest shareholder of Gran Tierra Energy Inc., wanted more representation on the board of directors. Before long, Gran Tierra agreed to reconstitute its board.

In many cases, the two sides can compromise more discreetly.

Story continues below advertisement

"The most effective activism is behind-the-scenes activism," said Wes Hall, CEO of Kingsdale Shareholder Services Inc., which advises on proxy fights and other transactions. A dispute in the public eye is often a last resort for groups that couldn't get a deal done behind the scenes. Mr. Hall said that even in the case of DuPont, Ms. Kullman tried to negotiate a deal with her adversaries long before the dispute went to a shareholder vote.

And dissidents don't have to take control of a company to consider the move a success. "There's a lot of concessions that are going on – and that's a win. I may not get everything I'm looking for, but I get something," Mr. Hall said. Kingsdale also tracks proxy fights in the country, and tallied 31 disputes last year.

Companies are more aggressive in their response to activists than they used to be, said Bradley Freelan, another partner at Fasken Martineau who worked on the report.

"I think earlier on, as a board member, you were very worried about your reputation, and the way you responded was somewhat cautious," he said. "I think you see management teams [today] really coming back and trying to hit the dissident hard and expose flaws in their plans as quickly as you possibly can."

And sometimes making noise pays off. In cases such as Agrium and DuPont, where executive teams explained their strategy clearly and financial results were solid, shareholders demonstrated they were willing to vote with management.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies