Fred Green and John Cleghorn - Date/Photographer unknown.

26 March 2012

In Praise of Proxy Circulars

Toronto Ontario - I admit it. I'm a bit of a nerd, at least when it comes to proxy circulars. When you get your hands on a good one it's hard to find better reading.
 
Sunday morning, hunched over my bowl of cereal and my mug of coffee, I started flipping through CP Rail's, in advance of its 27 Mar 2012 investor meeting in Toronto. It's the warm up act for the 17 May 2012 showdown with Bill Ackman's Pershing Square Capital Management over who will run the company, the current CEO, Fred Green, or Pershing's man, the former boss of arch-competitor CN Rail, Hunter Harrison.
 
Among the juicy tidbits in what has become a rather unpleasant proxy war launched by Ackman & Co, CP's 134-page circular includes almost 50 pages on compensation policies and details. For this, the company paid compensation consultancy Towers Watson $228,353. Tucked in there on page 110 is the payout CP's top five executives would get in the event of a change of control at the company, in other words, how much they'd get if Pershing prevails and shows them the door. That number for CP's quintet is just north of $36 million ($36,345,602). The biggest chunk of that, almost half, would go to Fred Green, the CEO ($17,691,802).
 
If you add that $36 million to the $40 million in pension and other benefits that Hunter Harrison has been stripped of by CN for cavorting with the enemy, CP Rail could theoretically be on the hook for at least $76 million in payments if Harrison gets the job and his new employer has to make him whole on what he's lost. Bill Ackman has said Pershing would cover the $40 million so Harrison won't be out of pocket, but he conceded to us in an interview broadcast 6 Feb 2012 that in the event of victory by Pershing, he assumed it would be CP's obligation to pick up.
 
Among the other noteworthy items, on page 16, CP says that it understood Ackman to say that Harrison would not be the only Canadian National alumnus to jump aboard, citing a "specific senior executive employed by CN". Given that the former CN CEO had a so-called non-solicit clause in his contract with CNR, meaning he can't pry people away from CN for three years after leaving his post there, the circular says Ackman suggested CP "should hire the CN Executive prior to hiring Mr. Harrison". Just who might that CN executive be?
 
Nothing like a good proxy circular to go with your Sunday morning brekkie.
 
Howard Green.