West Face Capital Inc. bought roughly 10 per cent of the Canadian food giant in August and has been seeking to shake things up, expressing concern about the company’s market performance. West Face is calling into question Crawford’s independence due to his close ties with Maple Leaf’s largest shareholder, the McCain family and its McCain Capital Corp. holding company, in which Crawford is also a board member.
Maple Leaf says there is no breach of securities laws and regulations that relate to Crawford’s dual role.
In a prospectus filed with regulators on Dec. 7, the company says, “Crawford is not, and has never been, an employee, officer or shareholder of MCC and that he does not receive any compensation from MCC other than customary directors’ fees and expense reimbursement in connection with his role as a director of MCC.”
The prospectus also deals with Crawford’s ties to Osler Hoskin & Harcourt LLP, Maple Leaf’s main external counsel, saying Crawford is no longer a partner at the law firm and is not paid a salary or bonuses by Oslers. It also notes Maple Leaf believes Crawford receives no financial benefit from the work Oslers does for Maple Leaf. Crawford has been counsel at Oslers since 2000.
An independent board member’s ties with certain stakeholders in the company, as is the case with Crawford’s connection with the McCain family or Oslers, might not in and of themselves prove lack of independence, however. It’s the actions of an independent board member that ultimately determine independence, says Lew Johnson, professor of finance at the Queen’s University School of Business in Kingston, Ont.
“The first step is to make sure that any actions he takes are consistent with the well-being of all shareholders,” Johnson tells InHouse. “The important aspect of this is that a board member has to make sure that they can’t be accused of cronyism, of protecting the inner circle, in this case the family . . . to the detriment of other shareholders in the company.”
He adds Oslers’ ties with Crawford are not that unusual either.
“It’s not unknown for lawyers to be key players on boards, and it’s not unknown for the key counsel, not the in-house counsel, but the key counsel on the string for the company to have one of its members on the board. If that member is independent, then he or she has to make sure he or she takes the appropriate actions,” says Johnson.
The Ontario Securities Commission and, possibly, the courts, have the ultimate say in this case. Quoting an unnamed source, The Globe and Mail reported last week that a letter by West Face to the commission and the OSC inquiry to Maple Leaf that followed led to the company filing an updated prospectus with the securities regulator that disclosed Crawford’s association with MCC and Oslers.
Thomas Dea, a partner at West Face, says the hedge fund had been rebuffed several times when it tried to offer its input so it decided to start a formal process within the company to address its areas of concern as a shareholder.
“We have concluded that the board needs to hear a strong message from shareholders that the independence and governance practices of Maple Leaf do not satisfy their expectations or today’s standards of good corporate governance,” says Dea. “The deficiencies of Maple Leaf in critical areas such as board independence and corporate governance are well known to its shareholders and the investment community at large.”
That formal process included calling a special meeting of shareholders by West Face to give shareholders the opportunity to vote on five, non-binding, advisory resolutions. But the company’s management says the move is unnecessary.
James Hankinson, chairman of the Maple Leaf corporate governance committee, says the action is “a costly, and unnecessary process, knowing full well the board was already commissioning such a review including soliciting their input, is unproductive and contrary to the best interest of Maple Leaf Foods and its shareholders.”
The conflict for Maple Leaf’s leadership comes after the Ontario Teachers’ Pension Plan decided to sell its 25-per-cent stake in the company to a group of investment banks. In the process, it withdrew its two members in the board of directors.
Canadian Lawyer named Crawford as one of Canada’s top 25 most influential lawyers in 2010. Among other things, he was commissioned by the federal government to oversee a proposal for the establishment of a single securities regulator in Canada. His career is one that has been recognized many times throughout the years: he became an officer of the Order of Canada in 1996, was inducted into the Nova Scotia Business Hall of Fame in 1997, and in 2000 was inducted into the Canadian Business Hall of Fame and named Ivey Business Leader of the Year.