Bill Ackman

Institutional Shareholders Services, ISS,  has published a report today backing the Bill Ackman led proxy war at Canadian Pacific Railway Limited (NYSE:CP). The battle has been going on for months now and Ackman’s Pershing Square Capital Management attempt to change the board has gained much infamy in the investing community.

Pershing Square owns 14.2% of Canadian Pacific and is using that, along with Ackman’s powerful persona, to lead a drive to oust the current CEO and many of the company’s board members. Ackman has prepared a list of seven alternative directors for the company. ISS now advocates for Ackman’s entire list to be voted in at the firm’s shareholders meeting on May 17th.

That date will see shareholders vote on the alternative board nominations deciding the fate of the proxy war. Today’s recommendation will certainly help Ackman’s chances though it inevitably comes down to the decisions made by shareholders later on this month. Shareholders will be allowed to fill in a blue proxy form if they wish to see the board members nominated by Ackman elected or a white proxy if they wish to see the attempts fail.

The evaluation by the proxy advisory service points to Canadian Pacific’s lower performance compared with competing North American rail companies. It concludes that the firm has been mismanaged by current executives. Because of the relative underperformance Ackman’s picks, according to ISS, offer the best alternative for the company’s shareholders.

The company’s major competitors include Union Pacific Corporation, (NYSE:UNP), Providence and Worcester Railroad Company (NASDAQ:PWX) and Canadian National Railway (NYSE:CNI). These, among others, are the companies whose performance undermines the achievements of the board at Canadian Pacific.

ISS report includes extremely strong statements about the performance at the company and sides regimentally on the side  of Ackman’s choices. The statement says that the “dissidents have demonstrated a compelling case” and refers to a “bewildering lack of accountability for results” at the railroad firm.

Canadian Pacific responded to the statement today by pointing to independent analysis it had done on its own performance. It also attacks the report by ISS as merely using analysis to support its conclusions rather than the other way around. CP wishes to enforce the idea that Ackman’s success would lead to a massive tumult in the firm’s own plans to generate value.