Management wins Eagle proxy battle

The trend of activist investors winning the hearts and minds of shareholders came to a halt Tuesday when a management nominated fourperson board was installed at Calgary-based Eagle Energy Inc.

But the last word on the matter may not have been heard as the dissidents — led by Daniel Gundersen, an industry executive, and Kingsway Financial Services Inc. — are understood not satisfied with the process and plan to review the proxies that were cast.

The two based their message on the need for change, on the need to cut costs and the need for a better plan compared with what Eagle released in March. In that plan, Eagle announced a four-year secured-term loan (that replaced a bank facility), the suspension of its dividend and a new growth strategy and substantial capital expenditure.

But the dissidents’ message didn’t resonate enough with shareholders. In an interview after the meeting, Richard Clark, Eagle’s chief executive, said he was “happy to thank our shareholders for their time and effort to focus on the issues raised by both sides. And we appreciate their faith in our continuing effort.”

The dissidents faced challenges given that two proxy advisory firms, ISS and Glass Lewis, largely supported Eagle. The two firms spoke of the additional uncertainty that would result if the dissidents won and implemented their plan. Eagle highlighted those recommendations to its largely retail shareholder base.

It would seem that Eagle’s low share price — down more than 90 per cent since its IPO — was not the deciding factor in the minds of many shareholders.

Eagle has bucked the trend that saw, activist investors win in two other proxy battles: at Granite REIT, all three dissident directors nominated were elected while at Liquor Stores NA, the six dissident nominees were also elected.

BATES ON OSC PANEL

In terms of background, Larry Bates — who spent three decades in the institutional fixed-income world both here and in London — is one of the more unusual choices for the OSC’s recently appointed investor advisory panel.

But it terms of interests, Bates is a wise appointment to the body whose role is to “enable investor concerns and voices to be represented in (the OSC’s) rule and policy-making process.” Its mandate is to solicit and represent the views of investors on the Commission’s policy and rule making initiatives. The panel was formed in 2010.

Bates created the T-Rex score, a measure that allows investors to determine their total return after all fees have been paid. Bates also developed a website wealthgame.ca. that, he says, “is proving to be an eye-opener for some investors. To determine whether an investor is getting fair value for the services received, you have to understand the price you are paying. The T-Rex tool helps people understand the costs.” He is also working on a book that will be published in early 2018.

And Bates, who will be part of a nine-person group, is joining the panel at a fork-in-the-road moment given that the industry and some provincial securities commissions seem to be going in different directions on key matters including: the role that embedded commissions play in the retail investment world; the need, or otherwise, to implement a best interest standard for advisers; and the desirability, or not, of a national securities commission.

Bates, who hasn’t yet attended a meeting, said Tuesday, “it will be interesting times and hopefully I can make a positive contribution. The next 12 months will be important for the industry and the average investor.”