5 Former Goldcorp CEO's legal battle for shareholder votes.

Rob McEwen's legal efforts to force Goldcorp Inc. to hold a shareholder vote as part of its $8.6 billion takeover of Glamis Gold Inc. came to a screeching halt Nov. 5.

The former Goldcorp CEO conceded defeat when the Ontario Court of Appeal refused to overturn a decision that allowed the company to issue 67 per cent of outstanding shares without shareholder approval. The deal moved ahead the same weekend resulting in the second largest deal ever for the gold mining industry.

"This is going to have far-reaching implications for the capital market," says McEwen, chairman and CEO, U.S. Gold.

"It sets a precedent that many clever corporate lawyers will use to circumvent shareholder votes, which addresses all companies listed on the Toronto Stock Exchange. Rather than improving the situation for shareholders and protecting their interests, this will erode their interests."

McEwen who led Goldcorp from 1989 to June 2006, says much of the problems surrounding this issue are due to Ontario law. A company taken over by another has a vote whereas the pursuing company may only obtain a vote if they can demonstrate the purchase would effect a "fundamental change" to the company.

Although he says such laws to be insufficient McEwen refuses to lay the entire blame on current legislation. He says companies with less than 50 shareholders trading on the Toronto Stock Exchange must have a vote.

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"This is ridiculous, because there isn't a public company in the world with less than 50 shareholders."

The New York Stock Exchange requires a vote when more than 20 per cent of its stock is being issued. The London Stock Exchange requires a vote when issuing five per cent or over. The TSX has no such restrictions, and this could potentially threaten global confidence McEwen says.

"Canada is behind the world standards on protecting their shareholders from these instances of mass dilution," he says. "We are out of step with the rest of the world."

According to representatives from the TSX, the idea of mandating shareholder votes for acquisitions resulting in 25 per cent pretransaction dilution had been considered prior to Jan. 1,2005. However, public commentary dictated the rule remain as it had been for over a decade, with the rationale that a company's board would be relied upon to act in the best interests of its shareholders.

Glamis shareholders certainly saw no fault with the proposed move as they voted 98.6 "yes" to support it.

"Goldcorp shareholders get no information, no vote, no right of dissent," McEwen says.

"You look at this and go, 'There's something wrong with this. You're putting the two companies together, why aren't the two sets of share-holders getting a vote?'"

As the largest individual shareholder (1.5 per cent) McEwen says there are a number of logistical risks associated with the move, which is said to increase potential reserves. He fails to see the benefits of the deal, since information has not been released to Goldcorp shareholders.

"Why are they working so hard to ensure that shareholders don't get a vote? What's wrong with just giving the information they used to analyze the deal to the shareholders and show them how good a deal this is?"

Goldcorp officials did not respond for an interview before publication date.

Throughout his court battle, McEwen lashed out at Ontario regulatory bodies such as the Ontario Securities Commission, bemoaning their silence in the face of what he says is the very sort of situation they are in place to prevent.

"They should all be up there, saying that this is something that needs a vote," he says.

"They're not walking their talk. From my perspective, that doesn't bode well for the capital market."

BY NICK STEWART

Northern Ontario Business 

QUICK FACTS: Goldcorp Inc. Earnings ended Sept.30, 2006 were $342 million (M) (US). Operating cash flows $536 (M) Recent acquisition will double reserves/resources, increase production by 50 per cent over four years

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