 Good afternoon. I'm an expert in resident lecture. I'm Kim Brooks, the dean here at the Shields School of Law. It's a great pleasure to welcome you to this year's lecture. The visiting expert program was established in 2011 by Jim Listen, who has joined us today. So many thanks for your generosity. The purpose of the program is to bring leading experts in the fields of law and business to our school. Jim Listen is a graduate of the class of 1975. He served as counsel to law firms in both Canada and the UK. He has extensive experience as an advisor to business in Canada and internationally, and was the chair of Cadillac Care and the Corporation. Jim has advised the Federal Department of Finance on reform and restructuring in the financial services sector. He's a committed alumnus, keen to make a difference to his alma mater and his house. He's also a friend of this year's visitor, Mr. Peter Day. Peter Day is the chair of Paradigm Capital and a graduate of our class of 1966. He was formerly a partner at Ellsberg-Hausen and Hartford. He specializes in corporate governance and mergers and acquisitions. His career, which you will undoubtedly hear more about, has included Stints as chair of Morgan Stanley, of the Toronto Stock Exchange Committee on Corporate Governance in Canada, and many other chairs. I'm going to highlight a few of them, but as I was putting together my notes, I thought how many times can I say the word chair in one paragraph. He's chaired the Ontario Securities Commission and served as Canada's representative to the OEC Task Force that developed the OECD Principles of Corporate Governance. He advises all manner of corporate boards and institutional actors in Canada and abroad. For those of you with a penchant for good theatre, you can find him as a director of the Soul Pepper Theatre Company in Toronto. I've come to note Peter a little as a result in his induction into our Bertha Wilson Honor Society, a society that recognizes extraordinary alumni. In my brief time with him, I have come to adore him. You will no doubt find him to be smart, focused, painfully charming and thoughtful. He's not one to shy away from controversy. Like Jim Listen, he's incredibly loyal and committed to the Weldon tradition. Please enjoy. I can assure you the feeling is very mutual. Thank you very much. It's a real honor for me to be here today as the James Listen professor in residence. I'm sorry it's so short because like I'm here today and then we're doing a seminar tomorrow. So I think it's more like a Jim Listen drive-thru. But there's a bit of irony here. I graduated in 66. Jim, as Kim said, graduated in 74. I guess I was chairman of the Articling Committee at Oster Hoskin when we were recruiting and we recruited Jim. And Jim joined Oster as a lawyer and went on to have a very successful career. But now he's kind of turned the tables on me, which I welcome. And I flatter myself by saying I was one of a number of mentors to Jim. But we must have done something right. Congratulations Jim and thank you for the support for the law school. So I'm very happy to return to the law school. When I reflect on some of the experiences I've had, many of them relate to my educational experience here and the network of friends that I developed. And there are some people in the audience that Professor Ed Harris, who is one of the most influential figures in my legal education, one of my classmates, Noella Brennan, is here. And there may be others that I'm sorry if I haven't recognized you, but it gives me a very warm feeling to be back amongst my Dell friends. I asked Kim, I said, what should I talk about? And she said, well why don't you talk about the happy experiences you've had in your career. And if you feel like it, talk about some of the unhappy experiences and maybe we'll learn something. So I thought, okay, I can talk about the experiences, whether we learn something, I'm not sure about. I came to Dell in 1963. I came as then there was a fellowship offered called the Sir James Stone Fellowship. And I came in 1963 and there were four of us that had the fellowship. And our responsibility was to maintain an A average and I think with a bit of pushing from some of my professors, I made it through. So Sir James, as you may be aware, like my mentor, Pertie Crawford, started from very humble beginnings. Sir James from New Brunswick and then he went on with and went to Dell Housing Law School, had a Dell degree and he became one of Canada's foremost financiers, industrialists. He controlled companies like Algoma Steel, Canada Steamships and obviously he recognized the law school with the fellowship. I maintained my average and then with the help of the Dean Horace Reed, I got a fellowship to go to Harvard. Dean Reed referred to Harvard as kind of the farm team and I was very honored to go there. So I'm going to start by my series of stories by telling you one that has had an impact on me to this day. And Noella will remember it. It happened in first year law. This was in late 1963 and one of our classmates was from Newfoundland and he was repeating his year and he stood up at the end of one of the classes and he said, my notes are missing. All of my notes for the forthcoming December exams are missing. And the class was concerned, very sympathetic, and how can we help you? And so we came up with this process. We said, we're going to divide our class into groups of three. A and B will go to C's residence and investigate. A and C will go to B's residence and investigate. And C and B will go to A's residence and investigate. Did you ever hear this? OK. So we had to unleash the bodies immediately so that nobody could tamper with the evidence. And indeed that process started at about, I would say, late morning. And by 2 p.m. the notes had been discovered in one of our classmates' studies. And he disappeared from law school that day and never to be seen again. So we had not taken constitutional law at that point in time. So we didn't have a good sense of process, fairness. But it was an amazing process when I reflect back on it. And I think we were naive. We sort of thought, and I guess the learning from this is that the result does not necessarily justify the process. I think if you had to look at that process in the sort of clear light of day, you would say, you know, I'm not sure I'm willing to have strangers unauthorized coming in and looking through my notes. Anyway, it worked. And our classmate Frank went on to graduate and become a very successful lawyer. In my third year at law, I had the opportunity to go to Toronto and attend a conference. And one of the panelists was Pertie Crawford. And we were obviously drawn to each other because of our Dell connection. And he invited me to apply for an articling position at Osler, which I did after I went on to Harvard. When I was there, I came back in the fall, applied to six firms, and I had a series of offers. And I didn't know much about Toronto law firms. How am I going to choose? But Pertie solved it for me. He said, I'm going to give you credit for your LLM. And you're going to get $100 more a month. That was big stuff. And so my decision was made for me. And I accepted the position at Osler. And one of the people I had to write to to say I was not going to the firm was Arthur Petillo, who is also a distinguished graduate of this school. And he wrote back and he said, somebody sold you a pup. And I showed that to Pertie. He was not amused. I always wondered why Pertie joined Osler-Hoskin. And I have with me a copy of Pertie's biography. It's just published by Gordon Pitts. It's a wonderful read. And it talks about his humble beginnings and his willingness to take on the Toronto establishment and enter a firm like Osler-Hoskin, which was the paradigm of an establishment upper Canadian law firm. And he went in and to the credit of the partners at Osler and obviously to Pertie, he succeeded in transforming that firm to be the powerhouse that it is today, shedding its establishment roots and really becoming a very successful commercial enterprise. But I'll tell you what the environment was like when I articles, just to give you a sense what an upper Canadian establishment firm was like. The senior partner was a man named Harold Charles Featherston Mockridge QC. He wore chalk stripe suits and with a vest. He always had a cigarette dangling. But he was a brilliant corporate lawyer, educated at Princeton and returning to Canada, a very imposing figure. And he sat on the boards of some of Canada's major corporations, Montreal Trust, Bank of Montreal. And I was in his office about noon hour one day. And he looked over and he said, Peter, time for lunch. And okay, we'll go to my club. And so I walked with him and we went over to the Venerable Toronto Club. And we went in and he directed me to the lounge and we sat down. And he ordered a double martini and not being used to drinking at noon. I said, okay, I'll order a beer. And sort of worked my way through the process. And finally, he's finished his martini and I'm finished my beer. And I'm thinking, okay, it's time for lunch. And he looks over at me and he said, Peter, you can't fly on one wing. And so I had to have another beer. And it was just a very different era. I happen to now be a member of the Toronto Club and if somebody orders a glass of wine at lunch, it's an event. In 1970, the conglomerate form of business became very popular. But it raised issues of securities regulation. So the government set up a committee and Purdy had been working. He had developed a profile in securities regulation. He'd worked on what was then known as the Kimber Committee and the Kimber Committee was a very high powered committee. Purdy was part of the staff and it laid the groundwork for what is now our system of securities regulation. Purdy, because of this, was asked, you know, how do we staff this study on conglomerates? And he nominated me as research director in David Johnson, our Governor General as the General Counsel. And we went on to publish something called the Merger Report. It was an important experience for me. It sort of helped my profile in securities regulation. And of course I became best friends with David Johnson, who is, as you well know, a wonderful Canadian. After that I went back to Osler, eventually became a partner, and I worked as one of Purdy's sort of fleet of juniors. He was so committed to growth and he was excellent at drawing in work. People wanted to seek his advice. He was known as a wise and a shrewd advisor. But soon as he got the client in the door and comfortable with the firm and with his juniors, he passed it on to the juniors. So it was a great opportunity for me to assume responsibility. In 1983, the government was looking for a chair for the Securities Commission. And again, Purdy was consulted and he proposed me as chair of the Securities Commission. And it looked like a great opportunity and I had to obviously resign my partnership. And the compensation, I took a serious hit to my compensation, but I did get a QC in a parking spot. So anyway, it was a great opportunity to sit with some very experienced financiers and learn something. But soon as I got there, I made a decision I regretted and you're going to sort of, my talk is entitled Hits and Misses and well, I'll let you judge this. There was a company called Norsen, Northern and Central Natural Gas and the chairman of the board was Conrad Black. And Conrad was clearly in the crosshairs of the Attorney General. Norsen was making an issuer bid. That's where a company goes out. It's got excess cash, wants to consolidate so it makes an offer to its shareholders to sell their shares back to the company, reducing the capital, hopefully improving its multiples. The disclosure requirement when you make an issuer bid is to disclose all material facts and at the time, Norsen was thinking secretly of making a bid for another company and this was not disclosed. So the Attorney General got on this and they concluded, they did an investigation, they concluded that they didn't have enough evidence or they didn't have a provision of the criminal law which would enable them to go against Black. They were going against Black and the CEO, a guy named Ed Battle, you'll remember Jim. So they sent it over to the Securities Commission and they said, okay, you guys, you go after them. So then I thought, this is going to be a controversial process and I should provide some leadership and so I'm going to participate in the process to decide whether or not to proceed against Black and company. The problem was that my law firm was the advisor to Norsen and so I thought, can I do this or can I not? And it was one of those, it's like should I write this thank you note? It's one of those cases where if you have to ask yourself the question, you know the answer. Anyway, I went ahead, asked the question, got legal advice that said this is an administrative process, not a judicial process, so you can participate. So we concluded that we didn't have enough evidence to proceed against Black and we informed the Attorney General, well the Attorney General's staff was outraged and they took the whole file, gave it to the media. The media then figured out my connection to Norsen and there was an editorial calling for my resignation in one of the national newspapers. And I, oh shit, my career is over. Happily at that time there was an issue about the four pillars of the Canadian financial system, the banks, the securities firms, the insurance companies, the trust companies. And happily for me, the Bank of Nova Scotia acquired a small securities firm in Quebec and it just opened up the whole Pandora's box about ownership of other arms of the financial sector by the banks. The banks wanted to own everything. And so all of a sudden my participation in the Norsen process was relegated or was displaced by a discussion of the four pillars and I survived. But it was, you know, I mean the learning from that is when you have to ask a question about your participation in a process involving principles or ethics, you know the answer. The consolidation of the four pillars has sort of affected me personally now. I chair a boutique investment bank Paradigm Capital. It's a firm of about 70 people. We have offices in Toronto and Calgary and we do sales, trading, research and investment banking. And every day we do battle with the chartered banks. The chartered banks have balance sheets that they can use to get investment banking business. It's something we don't are not able to do. And therefore, you know, it's sort of the last lap is on me with the consolidation of the pillars. The securities firms now are in effect banks. So after my near-death experience at the OSC, I returned to my law firm and people thought that I knew something about securities law and so I was engaged by a very controversial firm called Gordon Capital and Gordon Capital was advising the Canadian Tire Dealers Association. Gordon Capital was controversial because the way you did financings in those days was a company that wanted to go to the capital markets would engage an underwriter and the underwriter would do a draft prospectus and they would take the principles of the company around the markets for a couple of weeks and then they'd come back and say, okay, we think we can sell you know, $50 million of common shares at such and such a price. So it was kind of an arduous process. Gordon Capital looked at this and they said, you know what? We know markets. Why don't we, when we see the underwriters out there sort of testing the market, what can we do? We will just go in and scoop it. We'll just go to the issuer and they'll say we can buy your issue right now for X dollars and probably with a slight haircut from what they might get if they'd gone through the regular process. And you can imagine from the issuer's point of view it made sense, certainty and it done. You can imagine from the sort of conventional player's point of view this was not a happy development and obviously the way the world has evolved all of the mainline players are now doing bought deals. Anyway, Gordon engaged me and they were advising the Canadian Tire Dealers Association. Canadian Tire was controlled by the Billis family and there was one class of shares, common shares. The Billises wanted to raise some money and they didn't want to give up control so the way they did it was they did a share reorganization so if you own one common share you got back one common share and five class A non-voting shares. And then what the Billises would do is sell their non-voting shares to raise some money. To get that through the underwriters and advisors said we've got to have a coattail on the class A shares and the way the coattail worked was that any third party making a bid for more than 49% of the common shares in those circumstances the A's would convert to common thus forcing the bidder to bid for all of the shares and so that was fine. The Billises were not getting along. There were three siblings and so it became apparent to the Canadian Tire Dealers that the company was going to go into play. So they and the way Canadian Tire works is there's the corporation that provides all of the equipment and then the dealers own their outlets and so the dealers are very dependent upon the corporation for financing equipment and that sort of thing so they as a defensive measure said we can't let control of this company fall into strange hands. So they talked to us I was actively involved in advising and you the dealers own 17% why don't we make a bid for 49% sorry if I may have misspoke on the coattail the coattail was if somebody bids for a majority of shares then the coattail is triggered. So we said make a bid for 49% and the coattail won't be triggered. So we thought this would work we read the law up and down we read the terms of the shares and we were satisfied that nothing would be triggered. So we announced the bid and the securities commission my successor Stanley Beck called me and said this is abusive this is abusive of the capital markets this is abusive of the class A shareholders we're going to cease trade done. So I said look read the terms of the shares read your policies you can't do this he said I have a public interest power when I see something that I think is offensive I can shut it down and I'm shutting it down. So you can imagine very large transaction and from the bill's point of view they were going to realize a huge premium because we had structured it so that with what they would be paid for the common shares the 49% we reverse engineered so that what they got there plus what they would realize when they dumped their A's and remaining commons into the market they wanted overall. We went to court we went to the divisional court and said you know you can't regulate capital markets this way people can enter into transactions where it's black and white clear and you have a discretion to go in and upset it anyway the court deferred to the experts and said we're not going to interfere we're not going to we're not going to interfere with the exercise of discretion by the securities commission. I've been asked by my wife who is a retired corporate lawyer and is happily here today what would you have done if you'd been chair of the securities commission always ask zingers and I thought you know I think I probably would have and this is a different era now I think I would have said look I would have had the opportunity to anticipate every transaction and capture it in your coattail so you should have drafted it to pick this sort of situation up and you didn't so you're going to have to live and die by the terms of your shares I probably would have come out on that side now that would have been back that would be today maybe back in the 80s it might have been different what do I learn from that I work with some people who take on very difficult cases or get involved in very difficult transactions and the learning is always do the right thing when you're involved in a transaction and you've structured it and you've looked at all along you're satisfied that it works just sit back and say you know are we doing the right thing here and you may not change anything in terms of your process so you're probably wondering about my hits and misses at this point in time my average is kind of poultry so I want to talk about something that was one of the most innovative things that I ever got involved in it was the introduction of the poison pill into Canadian M&A environment and this was in 1988 INCO was one of Oster's largest clients and Morgan Stanley the global investment bank went to INCO and said hey we've got this really interesting shareholder value creation strategy you should pay a special dividend of $10 per share it involves some leverage but the company nickel prices were high at the time there was a lot of cash pay a special dividend our only concern is that you will be in a weakened financial state and there will be a very high volume of trading in your security so we need to ensure your defenses are in order and we're proposing that you be the first Canadian company to adopt a poison pill the poison pill was developed on Wall Street by Marty Lipton of Wachtel Lipton and he is sort of the defense bar in Wall Street and the way the poison pill works is it's in effect a warrant indenture and the warrant indenture is executed by a trustee on behalf of all shareholders and in the event a third party acquires more than a threshold usually 20% there's what's called a flipping event and all shareholders other than this third party can buy common shares from the company for a fraction of a penny the effect being to dilute the acquirer out of existence so any bidder has to address if there's a poison pill in place in the target you have to address it so the OSC there's a lot of controversy about poison pills the concern being that target boards of directors would use them to entrench themselves and in effect just say no to anybody so the securities commission said you have to have a shareholder a vote you need to get shareholder approval and we said that's okay but we're going to take it to the shareholders as a package you won't get your ten dollars unless you vote for the shareholder rights plan the securities commission must have been asleep anyway they allowed us to go ahead and of course we got overwhelming support and then the securities commission came up with a policy saying basically you can't bribe shareholders with their own money but I can tell you in my experience it was one of the most interesting sort of involvements I had in my career shareholder rights plans are still prevalent in the Canadian capital markets our Canadian securities administrators have tried to come up with one of the things that offends me so much about our system of securities regulation is how securities regulators put themselves in the position of the shareholder when the shareholders have the resources and the rights to challenge corporate boards and the securities regulators run around and so now they've come up with a draft policy saying every bid must be open for four months and I'm saying corporations are complex boards of directors have a responsibility that go beyond shareholders they have to think about the communities in which they work and build the stakeholders and you guys sitting in a government office are not in a position to make that judgment and you don't have a liability for that judgment let the boards do their work anyway I'm probably losing the debate it's like I've been heavily involved in the whole say on pay thing which I could give another speech on it just drives me nuts that shareholders are getting involved in voting on the compensation but that's another day in the course of working on the INCO poison pill I got to know the guys at Morgan Stanley and the power of that franchise and that led to my next job opportunity I'll tell you very briefly one of the most memorable experiences I had was the junk bond market was very active in the this would have been in the late 90s and we were pitching a company to lead a junk bond offer those are high risky debt and so I thought this is a very competitive process I'd better bring up one of our heavy hitters from Wall Street and we'll see the CEO so the guy came up from Wall Street and he was a heavy hitter and we went to see the client and as soon as we got in there the client said I've just talked to one of your competitors and this is what they're prepared to do for me they're prepared to lend me money personally so that I can participate they're prepared to give me priority on all new issue financings my friend from New York looked at him and he said take it and walked out and it just so clear when you're out to win business based upon the merits of your business it's so obvious that you can't buy judgment from people you want to do business with from there I went on and tomorrow Kim and I are doing a seminar on corporate governance and I hope many of you will attend it's a whole different sort of aspect of my life so I'm not going to talk about it today I'm going to pass through I went on the board of CP ships Canadian Pacific back in about 1994 was doing a split up they had four lines of business one was container shipping and I went on that board and we got embroiled with the OSC and it was really about communication to disclose when management comes to you and says we've got to restate our financials first of all you you take a deep breath and what happened there was management knew in June that they had to restate but they didn't tell us that we're facing a restatement until August and so the OSC said that doesn't work for us we're going to investigate see what monkey business is going on so we went back at the OSC and said trust us we are just as concerned as you are we're going to do our own investigation we've got all the resources all the power and the independence to do it and we did that and the OSC bought our process they slapped our wrists but I think we ducked a bullet okay my final hit or miss but I regard this as a hit this I'm going to tell you about Goldcorp Goldcorp currently is by market capitalization the largest gold company in the world it's got a market cap of about 20 billion dollars even though it generates only about 2.6 million ounces of gold a year compared to say a company like Barrick which is generating more than twice that number of ounces in its current form it was the product of a merger between Goldcorp and Wheaton River and Goldcorp CEO when it merged was a guy named Rob McEwen and Wheaton River CEO was the guy named Ian Telfer they did the merger and the board said okay how are we going to accommodate these two egos and they said well McEwen you be chair of the board executive chair and Telfer you become CEO well McEwen is a guy that is a hands on guy and he said this doesn't work for me and he resigned immediately so then fast forward to 2006 the merger happened in 2004 2006 there's a tradition on Bay Street that every Thursday afternoon the brokers and bankers disappear to one of the watering holes on Bay Street usually by mark and they go and they swap lies and I went over there on a Thursday in June of 2006 and I ran into Telfer who I knew from previous dealings what are you doing and I said I'm at a security firm and he said what are the current issues of governance and we talked and I said do you have any issues of governance and he called and he gave me the name of the chair of the board so I phoned the chair of the board anyway the call turned out to be an interview to see whether they wanted me to join the board and I was invited to join the board very happy about that I still sit on that board at my first meeting in June of 2006 Telfer who had a larger-than-life reputation as somebody who creates said I'm thinking about doing a major deal and point made and then about a month later the board reconvened and he said we're going after Glamis Gold and we are going to have a negotiated deal and it's going to be all paper all shares and to do it we will have to issue the equivalent of about 60% of our issued and outstanding shares so that's a big big chunk of equity the issue facing there was no legal requirement for us to get a shareholder vote of our own shareholders to issue that much equity but there was a group on the board that said we need to have our shareholders approve this and I took the conservative view I said there's no legal requirement we have the responsibility to make these decisions we've got direct access to advisors we should stand up and be counted and so my view prevailed McEwen who you will recall resigned was our largest shareholder and a mischievous little guy he initiated a lawsuit to try and force a shareholder vote and he thought he's doing this because he wants to inject uncertainty into the deal and if you inject uncertainty then maybe we'll be in play and that'll increase the value of his holdings he sued and the legal process involved exchanging affidavits I was asked to take the avidavit for Gold corp the lawyer for McEwen is an infamous guy named Joe Groyer and Joe Groyer is infamous he's a very aggressive, talented litigator that focuses on Bay Street indeed he represented John Felderhoff who was one of the people associated with the biggest scam of all times in our capital markets Briex Gold and indeed Joe was so aggressive in the way he dealt with the Ontario Securities Commission which was his counterparty in that that his license was suspended for two months by the Law Society of Upper Canada now that suspension is under appeal anyway so I had to learn something about the Gold business quickly so I went to Vancouver spent a night with Telfer he educated me I flew back everybody was busy so they said the cross examination is going to be I had dinner on the Monday night the cross examination was 8 p.m. on Tuesday night and the cross examination went from 8 p.m. until 2.40 in the morning and Groyer pulled every trick in the book to try and sort of expose me he looked at old speeches and papers I've written trying to show that I was inconsistent in the way I regarded shareholders anyway we got to court and we prevailed happily I flatter myself more than I have already but my law firm Osler Hoskin was acting for Glamis which was the counterparty to Gold Corp they came up to me after me and said your career peaked tonight you used your experience as a lawyer, securities regular an investment banker and they all came together and you were able to confound Groyer so I I don't know how you think about it I thought of it as a hit it allowed me to develop some sympathy for litigation lawyers how quickly how fast litigation lawyers have to get up to speed on issues because they usually end up not that I knew that much about the precious metals business but you have to get up to speed quickly anyway it's a challenge for them at the time of the merger people were saying Gold Corp is going to be the third largest gold company in the world because of this merger today we're number one it's a good deal let me conclude by saying I have some very positive reflections upon my legal education here I felt it gave me the confidence and the tools to move outside my comfort zone which I did on a number of occasions and take on new challenges some I was good at and some I was not so good at but I am the education I got here it also gave me the ability to think critically and I think you will all agree that the ability to think critically is the foundation of a civil society and that's why the law is so basic to our quality of life as my wife said to me this morning you know the legal education enables you will read the newspaper differently after you have your legal education it also impressed upon me and I mean I'm still learning what it's like to be a professional and to have obligations that you know transcend just the selfish interests that you may be associated with it teaches you to deal with sensitive situations manage a sensitive information in a you know confidential way I had the benefit of having Purdy Crawford as my mentor and the book Fire in the Belly is the biography of Purdy it's written by Gordon Pitts and Kim tells me that the author is coming down to address the law school but I had that good fortune to be one of his juniors and one of the things he always impressed upon me was to be thinking about public policy and be involved in the debate about public policy and because he was actively involved I told you about his involvement in developing our system of securities regulation if you love language the law is the place to be and the ability to take complex concepts and capture them in understandable language I think is a fun exercise and it's an important exercise and finally through my career I always tried to make sure I was enjoying what I was doing and if I wasn't enjoying it then I would either try to change it or I would move on and I have to say in preparing for this lecture I've had a lot of fun and I've enjoyed it I hope you enjoyed it and I'm going to sign off by my children think I look like Peter Mansbridge so I'm going to say thanks for watching so I know that these comments have generated a range of different questions I'm conscious that some of the students here will have time to ask them difficult questions tonight others will get a chance to ask those questions tomorrow afternoon everyone is invited upstairs to the third floor to join us for a reception at faculty lounge where you can ask them questions and the students are heading off to class I've never given a speech longer than 20 minutes in my life honest maybe I like talking about myself but it was fun to do so thanks for the invitation and thanks Jen for your sponsor thank you please join me in welcoming you welcome you to be here thank you thank you