Couche-Tard’s Alain Bouchard could learn from Prem Watsa

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Convenience store king Alain Bouchard might still be nursing his wounds – but that shouldn't stop him from getting back in the ring.

The executive chairman of Alimentation Couche-Tard Inc. never thought his investors would reject a proposal to extend his control of the company past 2021. When they did, it left him stunned and mostly silent. Until this month, when he warned that the company could meet an undesirable fate.

It's a situation that should feel familiar to investors in Fairfax Financial Holdings Ltd., which last year led a months-long back-and-forth campaign to secure voting control for founder and chief executive officer Prem Watsa. After twice delaying a vote on the issue, Mr. Watsa eventually won support from subordinate shareholders to lock in his 41.8-per-cent voting control. But the victory came with several concessions.

"[I think Mr. Watsa] understands this type of situation better than me. He was more patient than I am," Mr. Bouchard said in an interview.

Couche-Tard's founders, together with a special committee of directors, developed and began pitching a proposal to key institutional shareholders early last summer. The idea was to cancel the sunset clause that would strip the company's multiple-voting shares of their status when the last of the four founders turns 65 in 2021, among other moves to secure voting rights. But less than four months later, the board concluded the plan didn't have the required support and cancelled a scheduled vote at the company's annual general meeting in September.

Mutual fund giant Fidelity Investments, a big Couche-Tard shareholder, expressed unease over the proposal, with worries about the power the founders' children will have when they inherit their parents' controlling stake in the retailer, one source said. It's a sentiment that Mr. Watsa also had to overcome with some shareholders in his campaign.

Fairfax learned the hard way just how difficult it is to circumvent the rigid corporate governance guidelines that shape the voting rules of many funds and investment managers. There are funds that track and move with the market and are guided by the directions of proxy advisory firms. Other larger institutional pension managers have their own strict principles that guide their votes. The situation was made worse for the Toronto-based insurance and investment firm when proxy advisory firm Institutional Shareholder Services recommended shareholders vote against the plan.

Convincing investors to change their minds can be a major challenge or impossible – even for the most beloved and established of leaders with a proven ability to generate returns for shareholders.

Both Mr. Watsa and Mr. Bouchard have gained their shareholders' respect over the years and have both publicly expressed the sentiment that decades of returns show they are worthy of secured power. With both leaders now in their sixties, they've met some questions about what the future holds for leadership of their companies.

But Couche-Tard's Mr. Bouchard faces a hurdle not shared by Mr. Watsa: negative sentiment that has wafted over from Bombardier. The other Quebec Inc. pillar has also come under fire for its dual-class share structure at a time when it is seeking a government investment, casting a shadow over family ownership structures over all.

Still, Mr. Bouchard could pursue an approach similar to Mr. Watsa's and restart talks with investors. Fairfax voiced its concerns about Mr. Watsa's diluted stake and the threat of takeover attempts about a year and a half before the final vote on the issue was held, giving subordinate shareholders time to adjust and think about the issue. The company also changed its approach over that time.

Mr. Bouchard revealed that one group of investors told him before the scheduled vote last year that if the founders put a clear time limit on their control – 15 years after 2021 – the proposal would pass. He ignored the offer at the time, saying it came too late in the process.

But if Fairfax is any indication, just a few modifications to an initial proposal can turn the tide – Mr. Watsa came out ahead by a few percentage points in the final vote.

For now, though, Mr. Bouchard isn't sold on reigniting his fight. It might be him, rather than the shareholders, who needs more time to think.

"Will we go back to our shareholders? Maybe," he said. "But I don't have the feeling we could win the vote right now. So I'm not about to be told no a second time."