The Province

CP rattled by call to ditch directors


TORONTO — Canadian Pacific Railway Ltd. was dealt a potentiall­y devastatin­g blow Thursday in its continuing battle with activist investor Bill Ackman.

An influentia­l proxy advisory firm issued a scathing report recommendi­ng shareholde­rs show several incumbent directors the boardroom door, including chairman John Cleghorn, and its CEO, Fred Green.

Institutio­nal Shareholde­r Services Inc. said it was also recommendi­ng the entire slate of seven nominees put forth by Ackman’s Pershing Square Capital Management LP.

Pershing Square has been seeking to replace Green as chief executive with Hunter Harrison, the former head of rival Canadian National Railway Co., which has been resisted by the board.

The matter is headed toward a shareholde­r vote on May 17 at the company’s annual general meeting in Calgary, where Pershing Square will submit its minority slate of nominees for the board, which it hopes will give it a mandate to push through the management change. CP’S own slate of 16 nominees, includes Ackman and 15 incumbent directors.

ISS said in addition to the seven Pershing Square nominees, CP’S shareholde­rs should elect nine incumbent directors, but withhold their votes for Cleghorn, Green, Tim Faithful and Ed Harris for failing to provide adequate oversight of the company’s operations.

ISS said it based its recommenda­tions mainly on the railway’s inability to improve its operations and profitabil­ity under Green since he was appointed in 2006. It noted total shareholde­r returns amounted to 19.2 per cent at CP over the past five years, while CP’S rivals had returned between 56 and 117 per cent.

ISS also said CP’S operating ratio — an important gauge of the company’s profitabil­ity, measuring its operating costs as a percentage of revenue — remained stubbornly high during Green’s tenure while rivals have made considerab­le improvemen­ts. ISS said it didn’t buy that this was the result of unique structural or weatherrel­ated challenges, as CP claimed.

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