27 April 2012

CP Rail Proxy Fight Attack! Counterattack!
Reassure Customers When the Dust Settles

Toronto Ontario - It's come to a daily war of words.
 
As the proxy fight between Pershing Square Capital Management and Canadian Pacific Railway, one of the country's oldest companies, counts down to the critical vote on 17 May 2012, the two sides are firing off attacks and counterattacks.
 
Pershing Square's Bill Ackman has set his sights on replacing CP's current CEO Fred Green with retired CN executive Hunter Harrison. But CP's board of directors is sticking with Green.
 
Accusations fly. Retractions are demanded. Warnings that sales will fall or safety will be compromised are fired. And the attacks become personal.
 
Some say the battle is like an election, with a firm date for shareholders to cast votes on whether they support the current management and board, or whether they want to go with change, as put forward by the dissident shareholder.
 
"Your big objective is always to frame the ballot question," said David Scott, senior vice-president at Fleishman-Hillard Canada, who has done communications work from both sides of proxy contests, where small shareholders who might not turn out to vote are encouraged to assign their votes to the company's management or a rival side. "You want people to vote for you. But as it escalates, it becomes increasingly emotional."
 
The shareholders pushing for change are on the attack, and then the company and its management feel the need to respond, he said.
 
But if there is a response to every attack, the real danger is that investors turn off.
 
"They stop listening," Scott said. Every shareholder is undoubtedly inundated with letters and calls seeking their votes for CP's annual meeting in Calgary, at which the board of directors will be elected.
 
"If it's a war of words, there is a danger of losing where the focus will be."
 
Dan Tisch, president and CEO of Argyle Communications, said instant communications means information can be spread quickly.
 
"You're going to see more airing of the laundry, be it dirty or clean," he said. "Some of this is good. A debate that happens in public is transparent. But much like in politics, complex issues get simplified," Tisch said, noting the news cycle has never been shorter, while the legacy of information on the Internet has never been longer. "When shareholder revolts happen, you are much more likely to see these dynamics."
 
In this particular proxy fight, both sides are matching each other pound for pound, Tisch said, noting it has become personal, with Pershing Square targeting Green, while CP is focused on Bill Ackman and his nominee, Harrison.
 
"It's like a high-stakes game of poker," Tisch said, adding both are using a mix of the rational and emotional.
 
In a letter to shareholders, Ackman noted his hedge fund has a US$1.8 billion stake in CP, which represents one-sixth of its assets. "We are all in," he wrote.
 
But could the barrage of attacks and accusations hurt CP in the long-term?
 
Debi Andrus, an assistant professor of marketing at University of Calgary's Haskayne School of Business, said the stock value is different from the brand value.
 
"The CP Rail brand is iconic with a rich history, tied to the history of country," she said. "It is transportation, critical to our success. We can't get our goods without it, but it is not a consumer brand."
 
When the vote is done, Andrus said CP will have to focus on its relationship with customers.
 
The Teamsters Canada Rail Conference, which represents 5,000 workers at CP, said its members have given a 95 percent strike mandate. They could be on the picket line as early as 22 May 2012.
 
CP spokesman Ed Greenberg said the union has an offer from the company, with more talks planned for May. "We remain optimistic that a negotiated settlement will be reached," he said.
 
"There will be a need to assure the existing customer base that it will still deliver quality service, and it will be safe," Andrus said. "They won't have to do a re-branding."
 
Vanessa Lu.