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Bill Ackman, foreground, CEO of Pershing Square Capital Management, and Hunter Harrison, former CEO of Canadian National Railway, leave the stage after a town hall meeting Feb. 6, 2012, in Toronto.

Fred Lum/The Globe and Mail/Fred Lum/The Globe and Mail

Here's a brainteaser for you: because Canadian Pacific Railway Ltd. has underperformed its rivals for so long, did shareholders really need an activist to show them the light?

Now that so many influential shareholders have lined up behind activist Bill Ackman, forcing CP chief executive officer Fred Green to step down and convincing a number of key directors that they had no chance of being re-elected, it's pretty clear that CP never really had much of a leg to stand on.

We've all seen the stats during this months-long proxy fight. When Mr. Ackman first bought in, CP's operating ratio, which measures operating costs as a percentage of revenue, was around 82 per cent. Canadian National Railway Co.'s was 63 per cent. (Lower is better.)

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As for CP's E3 plan – Execution Excellence for Efficiency – that involved running longer trains, renegotiating fuel contracts with freight customers and reducing "dwell time" for freight left at terminals, there hadn't been much progress since it was enacted way back in 2008.

With so much staring shareholders right in the face, why didn't anyone act sooner? Why'd they need an outsider to come in and do the hard work? Had Mr. Ackman never emerged, were they just going to wait out the long slog and hope the company recovered?

I can't put words in their mouths, but I'd argue that yes, they would wait -- very quietly, too -- because shareholders are too often complacent. For all their talk about shareholder rights, they don't really use them.

Now, don't get me I wrong, I understand why backing a guy like Mr. Ackman can be effective. Some times you need an outsider with guts – and maybe more importantly, some times you need someone who is media savvy and can coordinate all the right leaks and smile nicely for the cameras. But my point is that it doesn't take much to at least light a flame under management's saggy butts.

CP is one of Canada's biggest and most well-known companies. If someone, anyone, said something critical about it, the media would jump on it. And I'm not just talking about shareholders here. Analysts cover this name intently, but you rarely seen edgy comments. (While I'm at, the media could have done more to highlight the inefficiencies on our own, too.)

But really, shareholders need to gin up. I know it's tough to put their reputation at risk when calling out management, but if they won't, who will? There are only so many activists who can take runs at big name companies. At the very least, if venerable shareholders sell underperforming stocks, publicly explain why they exited.

As for Mr. Ackman, good for him. His courage – and ego, of course – have made him a cool $385-million since buying his 12 per cent CP stake at $54.46 per share. (That reward is in plain vanilla stock alone. He also bought 2.65 million call options.)

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I just hope he's around for the long haul.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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