This year Canwest Global Communications Corp. proposed a change to the terms of the coattail provisions applicable to their existing subordinate voting shares. In similar circumstances Fairvest had not recommended a vote against a proposed resolution, if the proposed coattail provisions improved the position of holders of subordinate voting shares or, at least, did not prejudice them in any manner. But it was less than clear that CanWest’s proposed new coattail provisions satisfy even this standard. CanWest’s existing coattail permits direct descendants of Israel Asper to own Multiple Voting Shares but the amended coattail broadens potential ownership of Multiple Voting Shares to include spouses of direct descendants, a group referred to as the “Asper Family”. These amendments will have the effect of allowing an unrelated third party to acquire an interest in the Multiple Voting Shares. The proposed changes may confer an uncompensated benefit on the majority holders, and the amended coattail broadens the potential number of parties that could assume control over the Multiple Voting Shares without minority approval.

Shareholders of Four Seasons Hotels Inc. were asked to ratify and confirm the continued application of the voting rights adjustment mechanism, which was adopted by the company in 1996. The Variable Voting Shares carry a variable number of votes such that the class will continue to represent 67% of the outstanding votes, regardless of how many Limited Voting Shares are issued from treasury. Fairvest considers this mechanism to be in direct conflict with the obligations of a fiduciary investor and suggests that the complicated capital reorganization makes the company a riskier long term investment and questions the company’s statement that the adoption of variable voting rights is consistent with the enhancement of shareholder value, especially since such adoption makes it more likely that control of the corporation will be secured by Isadore Sharp’s immediate relatives, who, unlike Isadore, are unproven hotel management entrepreneurs.

Shareholders at Onex Corporation were asked to approve a two-for-one stock split with a twist. The resolution did not propose to make a corresponding two-for-one adjustment to the minimum number of shares to be held by Mr. G. Schwartz and his spouse and children to avoid the “Event of Change” that would cause a termination of the dual class capital structure. The company argued that when the dual-class capital structure was put in place in 1993 the ownership of 2,500,000 Subordinate Voting Shares represented an investment of approximately $29,000,000 and after giving effect to the 1999 stock split the minimum holding of five million shares represents an investment of approximately $275,000,000 almost ten times the originally contemplated level. However, not increasing the minimum holding requirement and increasing Mr. Schwartz’s holdings through the stock split would allow him to sell a large percentage of his current holdings and still remain firmly in control of the company. This resolution is inconsistent with the purpose of the minimum holding requirement and moves Onex’s capital structure further away from the concept of proportional representation by shareholders.

One of the hot issues of the season appears to be dual-class capital structures. Of the 62 companies currently on the TSE 300 with dual-class capital structures three put forth egregious resolutions testing the limits of subordinate shareholders and the ‘one vote for one share’ ideology. Moving into the new millennium, many companies seemed compelled to mark the occasion. 13 companies put forth benign resolutions proposing name changes. The most popular and contentious issues making up the 2000 proxy season remained, as in past seasons, stock option plans, shareholder rights plans and shareholder proposals. Fairvest and shareholders must remain ever vigilant on these issues given the sheer volume of these resolutions and their tendency toward negative corporate governance implications.