A proxy advisory services firm castigated Canadian Pacific for “an enduring failure of board leadership” in its endorsement of the seven director nominees proposed by an activist investor.
Institutional Shareholder Services rejected the CP management nominees, saying management has displayed “a bewildering lack of accountability for results.” Pershing Square Capital Management, led by William Ackman, is waging a proxy war with CP in at attempt to boost profitability at the Class I railroad with the poorest operating ratio in North America.
"Because the dissidents have demonstrated a compelling case that poor board oversight has allowed the company's performance to drift further and further below both its peers and its potential over at least half a decade, it seems clear that change on the board is needed,” according to the ISS report.
CP criticized the ISS report for “perfunctory analysis” in its “flawed recommendation.” The railroad cited an analysis by Oliver Wyman, a railroad consulting firm, that said the Pershing Square goal to drive operating ratio to 65 percent by 2015 was unrealistic. CP plans to pull down the operating ratio to 70 to 72 percent within three years through its multiyear plan.
“CP's Board is unanimous in its belief that Pershing Square's demand that it replace the company's CEO with Hunter Harrison would delay and damage CP's value-generating plan, and represents unwarranted risk to shareholder value at a critical time,” the railroad said.
Harrison helped rival Canadian National Railway become the most profitable North American railroad during his tenure as CEO. CP shareholders will cast their proxy vote at the annual shareholder meeting May 17.
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