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Fairfax Financial Holdings Ltd. chairman and chief executive officer Prem Watsa speaks during the company's annual meeting in Toronto April 11, 2013.© Aaron Harris / Reuters/Reuters

Shareholders of Fairfax Financial Holdings Ltd. have approved a proposal to lock in the voting control of founder Prem Watsa's shares.

The insurance and investment company said Monday that its move to modify the terms of the company's dual-class share structure passed its shareholder vote by a narrow margin after twice being delayed to rally more support. The company needed two-thirds of subordinate shareholders to consent to the changes and received support of 69.7 per cent.

The change means that Mr. Watsa will be able to freeze the 41.8-per-cent voting control held through his multiple-voting shares as the company issues more equity over time. Fairfax's share structure has included the multiple-voting shares for about 30 years and Mr. Watsa and his family are the sole holders of these shares. In exchange for this new power, Mr. Watsa made the promise to never to sell the shares, to stay on as CEO for a decade and take an annual salary of $600,000 during that period.

In Mr. Watsa's view, shareholders were deciding how they want the company to grow in the future, because he was unwilling to dilute his position of control any further. Mr. Watsa said his current holdings make it easier to guide the philosophies and approaches to Fairfax's investments: "If we continue to issue [subordinate] shares, that 42 per cent drops. We went to the shareholders and we said, listen, we can be in a position of not issuing shares, which is fine we'll just grow internally. Or, if you trust us, give us the ability to issue shares, like we've done in the past." Issuing equity would make the company more likely to pursue acquisitions.

Mr. Watsa said most large institutional shareholders supported the move, especially once the company explained its reasoning. But some funds that are broadly against multiple voting shares did not support the move.

The changes were proposed in mid-June, but the vote was postponed in July to give smaller shareholders more time to consider the changes and vote their shares. Then in August, the company delayed the vote again, saying it needed more support from institutional shareholders. Modifications were made to the suggested amendment along the way to gain more support.

The move came amid frothy equity market conditions earlier this year, which saw most new initial public offerings come to market with dual-class share structures. Investors didn't appear to apply much of a discount to newly listed companies, such as Shopify Inc., that award multiple votes to a small group of shareholders. At the same time, several successful launches of special-purpose acquisition companies were launched, a structure that also puts plenty of trust and power in management teams' hands.

Mr. Watsa said it is a coincidence that the changes were proposed around the same time. The move was brought on by an equity issuance of one million shares earlier this year, which Mr. Watsa said was the edge of his comfort zone in terms of warding off takeover attempts that could change the culture of the company, move its headquarters or sell its investments. Including his subordinate voting shares, Mr. Watsa controls about 43 per cent of the company.

One of the modifications to the original proposal was to add a shareholder ratification procedure within five years of Mr. Watsa leaving the role of CEO and chairman. That would give minority shareholders the ability to reassess the voting power attributed to the multiple-voting shares. Without shareholder support, it could limit some power that the Watsa family maintains in the future.

Mr. Watsa clarified that he has not been grooming his children to be executives of Fairfax. His son was appointed to the company's board within the past year. "Fairfax is a big company, it's not easy to run … you can't expect my son or my daughters to have the experience to do that," he said. "They'll be on the board, they'll help guard the culture of the company with the board of directors."

Mr. Watsa says he would support other companies trying to make similar moves if he had confidence in the management team and the company's long-term track record. "We like buying a company where there's a controlling shareholder," he said. "With corporate governance today, we are a bit concerned about buying companies where there isn't a strong shareholder behind the company."