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For activist investors, it's all about who has the power

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Meanwhile, shareholders say they are also continuing to protest against the use of dual-class shares in Canada, which typically give one shareholder voting power far beyond the actual number of shares held.

The CCGG said earlier this year that it would target dual-class shares for reform in abusive cases, and the Toronto Stock Exchange is in the process of adopting a new labelling system to identifying subordinate voting shares with special endings on ticker symbols. Some companies with dual-class shares, including Four Seasons Hotels Inc., faced shareholder resolutions this year calling on them to eliminate the special voting shares.

The Report on Business review found that 23.4 per cent of companies in the S&P/TSX index have some form of uneven voting shares, representing almost a quarter of Canada's largest companies.

Brian Barsness, vice-president of fund manager Meritas Financial Inc., said more investors have spoken out on their objection to dual-class shares in the past year than ever before as governance issues have become more prominently discussed.

"It doesn't make sense that you are an investor in a company, and yet a minority investor has more say in how the company is being run. Magna is a key one that got our attention," he said. Meritas voted against directors at Magna International Inc. this year to protest against their dual-class shares.

Mr. Barsness said investors cannot easily avoid all dual-class share companies when they make up one-quarter of the shares in the benchmark index. But he said that if investors such as Meritas feel the power is being abused at a particular company, they will fight back or sell.

Indeed, many large shareholders say they feel they have little choice but to invest in dual-class-share companies because there are so many of them in Canada, but will push for reforms in cases where they believe the power is abused.

Mr. Beatty said dual-class shares are difficult to fight because the holder controls the voting process, leaving investors with "moral suasion" as their only tool for reform.

As a result, he said the CCGG looks at the quality of a company's safeguards to protect minority-investor rights to decide which dual-class shares merit protest.

Ultimately, however, Fairvest's Mr. Mackenzie notes that if lobbying doesn't work, investors unhappy with a dual-class share structure may have no choice but to sell.

"There's nothing else you can do. Either you go along for the ride or you get off," he said.

With files from reporter Elizabeth Church

Of 218 companies in the S&P/TSX index as at June 15 this year, how many have dual-class shares?

23% or 51 companies have dual-class or unequal voting shares

77% or 167 companies have only one class of shares, with equal votes

How many companies allow votes for each director. And how many only for the board as a slate?

46% or 101 companies allow individual voting

54% or 117 companies have only slate voting

Are directors required to own shares to align their interests with those of shareholders?

60% or 130 companies have a mandatory director share ownership requirement

40% or 88 companies do not

Do directors own shares in the company equal to a minimum of three times their base cash retainers?

38% or 82 companies report all directors own shares to this threshold

14% or 30 companies report that four or more directors do not

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