At these companies, anger lurks beneath successful shareholder votes

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Three Canadian companies wrapped their annual general meetings last week with overwhelming shareholder approval for their directors or their pay practices. Drill down in the numbers at Restaurant Brands International Inc. QSR-T, Dentalcorp Holdings Ltd. and Nuvei Corp. NVEI-T, however, and some deep dissatisfaction can be found.

That’s because in all three cases, the companies had controlling shareholders whose votes for management and the board were in the bag. Indeed, in some cases, the votes came from management itself.

But excluding some of these guaranteed votes, we can see the remaining shareholders of the company provided serious pushback to the companies’ leadership and its policies.

And we can ask whether current disclosure requirements – which allow for limited information on voting results – are adequate.

First, let’s take Restaurant Brands, or RBI, known best as the owner of Tim Hortons.

The company’s advisory vote on executive compensation, or say on pay, should have been contentious: In 2022, the company lured former Domino’s Pizza leader Patrick Doyle to the company with a stock-based package it valued at US$116.66-million (not a typo). Then, it ushered out CEO José Cil with a consulting contract that allowed him to keep tens of millions of dollars in stock awards.

When the company tallied the vote results May 23, only 25 per cent of the 388 million votes cast were against the company’s pay practices, with nearly 75 per cent in favour. It’s not a great number – the Canadian average of support is above 90 per cent, according to Kingsdale Advisors – but it’s not a disaster, either.

But what about the shares owned by 3G Capital Inc., the investment fund that has nearly 29 per cent of the votes at RBI, and has two employees serving as RBI board members? Set aside 3G’s nearly 157 million votes, and the support drops below 60 per cent.

RBI spokeswoman Jane Almeida said in an e-mailed response to questions that “it shouldn’t be a surprise” that 3G would vote in line with the company’s recommendations, as “anyone investing in RBI would have a clear view on our management and board philosophy.”

The pay package for Mr. Doyle “is entirely beneficial to all shareholders,” she said, because of performance hurdles attached to it.

“The bottom line is that the compensation vote clearly passed with a solid majority,” she said. “To re-cut the results by including or excluding various voters arbitrarily would be unfair, just as it would be in any other voting context.”

At least 3G has just one vote per share, like ordinary stockholders at RBI. Not so at Dentalcorp, where CEO Graham Rosenberg and his institutional investing partners own a class of stock that gets 10 votes per share. One of those partners also owns more than 73 million common shares. All told, they have 44 per cent economic ownership of the company, but 61 per cent of the votes.

When Dentalcorp released its board-vote results Thursday, every director had at least 93 per cent support. Except that, aside from those controlling votes, Mr. Rosenberg got just 80.3 per cent support, and director Jeffrey Rosenthal got 78.3 per cent.

That’s owing to negative recommendations from proxy adviser Glass Lewis & Co., which urged shareholders to vote against Mr. Rosenberg because of the multiple-class voting structure, and Mr. Rosenthal, head of the director-nominations committee, for a lack of gender diversity on the board.

But at least the voting rights at Dentalcorp aren’t as skewed as they are at Nuvei.

The numbers from Friday’s AGM of the payments processing company look smashing: No director got less than 95.88 per cent of the vote.

Except CEO Philip Fayer and his institutional partners, including Caisse de dépôt et placement du Québec, have 76 million multiple-voting shares, with 10 votes apiece. By contrast, there are just about 62 million common shares. They own 55 per cent of the company, but have 92.4 per cent of the votes.

Excluding them, director David Lewin failed to get a majority of votes from common shareholders. Director Daniela Mielke likely failed, as well. Two other directors had about a quarter of votes withheld. And the renewal of the company’s incentive-compensation plan failed to get approval from the common shareholders.

Why no precise numbers from me? The company’s report of results Friday revealed percentages for each director and proposal, but not the number of votes cast. That makes it difficult to evaluate the results of the minority vote.

Mr. Lewin and Ms. Mielke, members of the board’s compensation committee, earned “withhold” recommendations from both Glass Lewis and Institutional Shareholder Services for the company’s pay practices. (Mr. Fayer’s reported compensation fell to US$16-million in 2022 from US$112-million in 2021.)

Neither Dentalcorp nor Nuvei responded to a request for a comment.

It shouldn’t take several hours and three Excel spreadsheets to figure this out, but here we are. And it raises the question of whether the disclosure rules for voting results are adequate.

Under the National Instrument for Continuous Disclosure, companies are allowed to report voting results from a shareholders’ meeting using either “the number or percentage of votes cast.” There is no requirement to report separate results from multiple classes of shares. There is no requirement to report separate results from non-controlling shareholders.

Periodically, shareholders try to make a change, and a company with two classes of shares faces a proposal that requests improved voting-result disclosure. The proposal typically gets rejected, exactly because there are two classes of shares.

Canadian securities regulators have already recognized the perilous status of minority and subordinate-class shareholders by creating extensive protections for them in takeover battles. This matter seems easier: Rewrite the disclosure rules so companies can’t hide their views in annual proxy elections.