Canada's big pension plans are backing Bill Ackman in his proxy battle against Canadian Pacific Railway with more than their votes: they have given Mr. Ackman money to run.
Canada Pension Plan Investment Board announced Friday that it would support Mr. Ackman's slate as he tries to take install a new board and management, over the resistance of CP. That comes after Ontario Teachers' Pension Plan said the same thing a few days ago.
Both pension plans are invested with Mr. Ackman's Pershing Square Capital Management. Ontario Teachers has disclosed that it has more than $100-million with Pershing Square. CPPIB lists Pershing Square as one of its "partners" in public markets investments.
Exactly how much CPPIB has with Mr. Ackman's firm isn't publicly revealed, but CPPIB generally doesn't make small investments. When you're running a pension plan with almost $153-billion in assets, it's not worth your time to dole out a few million here and there to external managers. So rest assured it's a significant chunk of money.
So is there a connection between those investments in Pershing Square and the way that the pension plans vote their direct stakes in CP? There shouldn't be, as the pension plans usually hold direct stock investments and fund investments in different silos. And both have well-disclosed proxy voting guidelines.
At Teachers, there is no tie between investments in external funds such as Pershing Square and how shares are voted, said Deborah Allan, a spokeswoman for the fund." There is no connection whatsoever" she said.
Linda Sims, a CPPIB spokeswoman, declined to comment.
CPPIB's proxy voting guidelines say that the pension plan starts its voting process with a recommendation from Institutional Shareholder Services, which takes into account CPPIB's guidelines for voting. ISS's view, however, isn't final. "If we disagree with the recommendation, our vote is changed."
In this case, ISS recommended that shareholders support Mr. Ackman's slate and withhold votes for some of the existing directors, including chairman John Cleghorn. CPPIB went even further, and withheld its votes for all of the existing directors of CP.
CPPIB said in a statement on its web site that voting for "for only the dissident nominees is the best way to ensure that these directors are elected and that constructive change occurs."