Shareholder Gets Not-So-Special Treatment From Maple Leaf Foods Inc.

Most shareholders provide feedback to their equity portfolio companies only by way of the proxy ballot. Some of shareholders also engage companies in dialogue on specific issues, and every year some file shareholder proposals. In Canada, these activities are all commonplace.

More rare by far are shareholder requests that a company call a special meeting¹. Such requests are accompanied by the resolutions that the shareholder wishes to put to a vote at the special meeting. Here we review the circumstances of one such recent request.

In August 2010, West Face Capital Inc. (West Face) acquired 10% of the voting shares of Maple Leaf Foods Inc. (Maple Leaf). With this purchase, West Face became Maple Leaf’s second largest shareholder. A McCain family-controlled private corporation is the largest, with 31.6% of voting shares. Three members of the McCain family are Maple Leaf executives and directors.

Thomas Dea, a partner of West Face, said of his organization’s purchase: “We believe the shares of Maple Leaf Foods have significant potential value and we hope to work with the Company to enhance value for all shareholders.”

Four months later, West Face announced that it had requested a special meeting of Maple Leaf shareholders. The request included the following proposals to be voted by company shareholders at the special meeting:

1. Reduce the size of the board to nine directors
2. Require that two-thirds of the directors be independent of management
3. Require that only independent directors sit on the committees of the board
4. Retain an independent search firm to identify suitable candidates for election to the board at the 2011 annual shareholders meeting and,
5. Require the company to provide shareholders with a say on executive pay.

The results of Maple Leaf shareholders’ votes on each of these proposals would be advisory to the company’s board which means that even if the proposals received majority support, the company would not be required to implement them.

Maple Leaf rejected the West Face request for a special meeting. The company indicated that the West Face proposals will be considered at the company’s annual meeting in late April 2011, at which time shareholders will also be asked to vote on management’s director nominees. Maple Leaf said that it did not believe the cost of holding a special meeting was warranted because the company’s board had ‘recently’ established a committee to lead its ‘renewal process’.

Responding to the Maple Leaf decision, West Face spokesperson John Lute said: “Once again, the board is showing its disrespect for shareholders other than McCain Capital by delaying the special meeting so that advisory resolutions on the constitution of the board cannot be considered before the board asks for a vote on its own election.”

Maple Leaf’s annual meeting of shareholders is scheduled for April 28, 2011.


¹ Under the corporate statutes of most Canadian jurisdictions, shareholder(s) of 5% or more of the voting shares outstanding may request that the company’s directors call a special meeting of all shareholders.
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