Paul Desmarais Jr. and André Desmarais of Power Corporation speak to media at their annual meeting of shareholders in Toronto on May 14, 2019.Christopher Katsarov
Minority shareholders at Power Corp. have continued to rebuff Paul Desmarais Jr. and André Desmarais, with about half the company’s non-family shareholders voting against them in Friday’s election for the company’s board of directors.
Holders of 46 per cent of the company’s “subordinate” Toronto Stock Exchange listed shares withheld their votes from Paul Jr., while 42 per cent of the holders withheld their votes from André.
If the 48 million subordinate shares held by the Desmarais family trust are removed from that vote count, slightly more than half of the non-family shareholders withheld their votes from Paul Jr. and nearly 49 per cent withheld their votes from André.
A Desmarais family trust owns about 15 per cent of Power Corp., but its ownership of a special class of shares, with 10 votes apiece, gives it just more than half the voting power at the company.
Overall, the company said the two brothers had 18.47 per cent and 17.00 per cent of votes, respectively, withheld from them in the shareholder vote. It’s a significant increase from 2019, when the two had 13.4 per cent and 12.8 per cent of votes, respectively, withheld from them.
After 23 years running the company built by their father, Paul Desmarais Sr., Paul Jr. and André officially stepped down as co-CEOs of Power Corp. in February. The move was part of a deal where Power Corp. acquired the shares of subsidiary Power Financial Corp. that it didn’t already own.
The two remained as chairman and deputy chairman, respectively, on the Power Corp. board, and stood for re-election Friday.
Corporate elections are normally uncontroversial. Shareholders do not vote “yes” or “no” on directors, and the elections are usually uncontested, with the only choice to vote for a full slate of the company’s nominees, or “withhold” a vote in protest.
Power Corp., however, has historically faced a host of concerns from the proxy advisory services that publish reports guiding institutional shareholders in casting their proxy ballots.
Institutional Shareholder Services, one of those advisory services, recommended this spring that stockholders withhold votes from the Desmarais brothers in the board election. ISS said it’s because they sit on the board’s Governance and Nominating committee, which, among other duties, recommends candidates to join the board. In its 2020 proxy voting guidelines, ISS said “best-practice corporate governance standards recommend that the board should have … a nominating committee and a compensation committee composed entirely of independent directors.”
ISS also recommended withholding votes from Paul Jr. because he violates its policy of a non-CEO director sitting on the boards of more than five public companies. Paul Jr. sits on six, including Power; Power has investments in the other five.
Earlier this year, ISS recommended that shareholders of Power Financial reject the February privatization bid, saying the economic benefits of the deal were outweighed by the problems posed by the Desmarais family’s control of the company. However, Power Financial shareholders approved the deal, with 91 per cent voting in favour.