Really? This Happens?!?!

Agrium’s board is taking a totally legal, yet very sketchy approach to securing votes in its proxy battle with Jana.

The Motley Fool

If my criteria for getting up in the morning was to learn one new thing every day, I could go back to bed now.  An article in this morning’s Globe and Mail totally floored me!

It’s perfectly legal (and seemingly normal) for Canadian corporations to go out and buy the votes they require to get past a contentious shareholder issue.  This issue was brought to light in the context of Agrium’s (TSX:AGU,NYSE:AGU) current proxy battle with hedge fund Jana Partners.

The story is, Jana wants to replace Agrium’s board.  Agrium’s board doesn’t want to be replaced.  Jana has the support of ISS, a respected proxy advisory firm, which is recommending that shareholders vote to replace the board.  Agrium’s board has decided to buy votes.

The payment is actually made from the company to retail brokers.  Agrium will pay $0.25 per share to brokers whose clients vote for the Agrium slate of directors.  Brokers can earn a minimum of $100 and a maximum of $1,500 for each of their clients who vote for the Agrium cast.  Jana has indicated they will not resort to such measures.

Sure, the company is not directly paying shareholders to vote for them, but I’m pretty sure my four-year old could recognize the ridiculousness of expecting a broker to offer a fair assessment of this situation to their retail clients given the available bounty.  In fact, when asked, she did indeed say “that sounds ridiculous”!

Even if you knew nothing else about the spat between Agrium and Jana, this spins the Agrium board in a negative light as far as I’m concerned.

The article fingered several other Canadian firms for taking similar measures.  Telus (TSX:T) and EnerCare (TSX:ECI) paid $0.10 and $0.05 respectively to get voters onside with critical decisions and TMX Group (TSE:X) spent $0.15 per share when it was looking to merge with the London Stock Exchange.  Agrium’s offer however blows these out of the water.

Don’t get me wrong, we Fools love it when corporations pay-off shareholders, but far prefer these payments come in the form of dividends.  And dividends have never been more important to investor returns given the current low-interest rate environment.  13 U.S. companies that promise to fill the income void created by low-interest rates are profiled in our special report “13 High Yielding Stocks to Buy Today”.  Click here now to access this FREE report that will have you rolling in dividend cheques before you know it.  You’re just one click away from dividend nirvana!

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Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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