CP offers foe a spot on board

Canadian Pacific Railway Ltd. nominated activist-investor William Ackman for election to its board of directors on Thursday, the latest twist in a drawn-out proxy battle with his Pershing Square Capital Management.

The railway is locked in a proxy contest with the Ackman-controlled hedge fund, which wants to replace CP chief executive Fred Green with former Canadian National Railway CEO Hunter Harrison.

The company had offered Ackman a board seat last year, but the activist-investor turned it down and nominated himself along with a fivemember slate for election to the CP board.

On Thursday, CP said it was ready to offer Ackman himself a voice on the board but insisted that Pershing Square’s other nominees have no evident rail experience and add no other complementary industry experience.

It’s rare for companies to nominate a proxy foe like Ackman to the board, said Brad Allen, a senior vicepresident at proxy solicitation firm Laurel Hill Advisory Group, which is not involved in the conflict.

“They know he’s going to get support,” he said. “They’ve made it easy for shareholders to elect him to the CP board and obviously not elect anyone else, trying to capture the vote of institutional shareholders that like Ackman but don’t know if they really like everybody else.”

CP’S annual shareholder meeting will be held on May 17, in Calgary. Shares of CP closed 37 cents lower at $78.16 on Thursday.

Pershing, which owns 14.2 per cent of CP, blames Green for the railroad’s sluggish performance.

CP defends its chief executive, saying he has built strong customer relationships that should help improve the railroad’s operating ratio over the next three years.

CP aims to lower its ratio to 70 to 72 per cent by 2014 from more than 80 per cent – a number that makes it the weakest of North America’s Class 1 railroads.

The company on Thursday outlined further improvement targets, saying that its multi-year plan should bring operating ratios down to between 68.5 and 70.5 per cent by 2016.