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BRENDAN WOOD SHAREHOLDER CONFIDENCE POLL Confirms Canadian Pacific Shareholders Wish to Oust Board Members and CEO

May 14th, 2012 by TopGun Press

14th May, 2012 – Citing longstanding intransigence and a lack of response to their concerns, institutional shareholders were unmoved by 1st quarter earnings announced by CP. The defence mounted by CP’s Cleghorn and Green failed to alter the feelings of institutional shareholders in the Brendan Wood poll.

Results effective as at May 11th, 2012, institutional investors representing over 50% of the vote:

Supporting Pershing.....................79% - 75% - 73% - 72%
Supporting a Change But Not Harrison....14% - 19% - 18% - 14%
Supporting CP Board.....................07% - 06% - 09% - 14%
 % institutional shareholders polled

“According to investors, Canadian Pacific’s Board and Management have failed to treat their shareholders as owners,” commented Brendan Wood. “In fairness to CP’s existing management, the old school of management appointed director slates has been around for a long long time. Directors invisible to the shareholders and perceiving themselves to be part of, if not accountable to management is nothing new. A great many companies throughout the world operate in this kind of culture which has been the norm. However, the rules are changing. As CP and others have learned of late, directors who aggressively campaign for their jobs can and often will win over a slate. Investors are rapidly beginning to see the boardroom as their investment tool to affect strategy and create a culture of performance,” said Stewart Borden, Brendan Wood Partner for Canada.

The latest results underpin the reasons for the shareholder dissent that Pershing Square tapped into. Investors report high levels of discontent with CP’s performance relative to the Global Transportation Sector which is one of thirty global sectors in the Brendan Wood Shareholder Confidence Index. The rankings for CP are collectively poor when compared to the 51 Transportation companies on the index. The CP Board is being held to account for the world ranking of CP’s most senior management, namely last in the sector. However poor the ratings, the disapproval of shareholders has been inflated by the perceived absence of a fulsome response from existing management, which according to investors has, by turns, been unaware, denied or disputed the existence of the problem. Most investors in the poll cite the efforts of CP as being ‘too little too late’. These results indicate that the existing management group had an opportunity to win back shareholder confidence. Unawareness and denial were the undoing of that opportunity according to the investors polled. Again, in fairness, shareholders are only recently holding boards to account on a wide scale and CP is a prolific case due to the timing of its performance shortfall relative to shareholder expectations. The data assigns much responsibility for the intended vote to the response of CP management. “Anything perceived to be approaching arrogance and denial can become confidence killers,” said Sal Scamardo Managing Director, Brendan Wood New York.

In the world index investor dispositions and moods reflect a number of significant trends. “Setting CP shareholders aside, investors worldwide do not regard titles, privileges and academic, government even business pedigree as a substitute for performance. Even the most dispassionate investors are aroused by a seemingly terse board attitude which signals ‘if you don’t like it, you can sell’. The traditional fiefdoms of what investors see as somewhat freeloading, if not parasitic board membership are under quiet siege throughout the world. Likewise political appointees who know little about driving a business but claim schooling in governance as a rite of passage are highly vulnerable to the level of scrutiny at work in today’s markets. Escalating director fees, free stock and the absence of shared risk with common investors are becoming omens. Investors are looking for boards who drive success – proper governance is not considered a board achievement, it is a fundamental right,” said Mr Wood.

CP Global Shareholder Confidence Rank – Transportation Index (Out of 51 Companies) as of 11-May-2012

42nd – Corporate Strategy
51st – CEO (last in sector)
42nd – CFO
45th – Board
29th – Short Term Growth Potential
21st – Long Term Growth Potential
18th – Disclosure / Reporting
44th – Balance Sheet
24th – Commitment to Own Stock
46th – Senior Management

As to CP’s reaction to earlier polls, Stewart Borden, Managing Partner, Brendan Wood Canada commented “CP has twice attacked its own shareholder ratings, without inquiring into the substance or even communicating with our firm. CP was welcome to visit and discuss the data, we even gave the directors and officers a report at no cost in order to alert them to the seriousness of shareholders’ concerns.”

Stewart Borden, Partner, Brendan Wood International

Henry S. Brenzel, Panel Manager, Brendan Wood International

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