Shareholders of the world unite!
Quebec group pushes for expanded rights for individual investors

After about ten minutes with Yves Michaud you start to think he was brought up in a sawmill, he has so many chips on his shoulder. Michaud, a former journalist, never ducks a fight. Recently he has taken on banks, big business, the Quebec National Assembly and has even contributed to bringing down a premier.

But Michaud is less known for another cause he represents: the rights of individual investors. Many of his initiatives have put this iconoclast far in advance of the bulk of Canada's financial community, from which he has garnered surprising respect, both in Quebec, the rest of Canada and even abroad.

Through the Association des Investisseurs et Épargants du Québec, an organization he founded in the mid-1990s, Michaud has been a thorn in the side of lax corporate boards, auditors and greedy CEOs, all, he says, on behalf of the little guy.

"We are exclusively devoted to protecting the interests of savers and investors," said Michaud, of his 1,200 paid-up member organization. "The individual investor is completely defenseless in dealing with the big players in today's financial markets."

Long before the Enron and Arthur Anderson debacles, Michaud's group was one of the first to decry the potentially corrosive influence that big auditing firm's consulting revenues were having on their judgments of client's financial statements.

In fact during 1999, and 2000 the APIEQ achieved a considerable victory, by getting Canada's banks to disclose the amount of audit and consulting fees they were paying to their public accountants.

With we know today, in retrospect Michaud's proposals seem rather modest. In fact in light of the Arthur Anderson debacle there is growing support in the U.S. Congress to force the audit firms to completely split off their consulting practices.

The APIEQ has also been ahead of the curve on other key issues; notably the separation of the CEO and chairman functions, and the expansive use of stock options for executive compensation, issues that are getting increasing attention in the financial community.

According to a spokesman for the Commission des Valeurs Mobilières du Québec who has seen Michaud in action over the years, the APEIQ is fulfilling an important niche. "The securities commissions do a good job, and investor confidence in the markets continues to be high, But they definitely have their place," said the spokesperson. "Someone has to speak up for individual investors."

It's ironic that an organization such as the APEIQ should spring up in Quebec, where share ownership tends to lag the rest of the country. Much of the organization's "little guy against the big institution" rhetoric, smacks of a leftist bent, especially its proposal to limit executive compensation to 20 times the average salary of company workers.

Under the APEIQ plan "if the average salary in a company were $50,000, the CEO gets $1 million," said Michaud. "That not too bad."

But there's more than just anti-capitalism going on here. According to Michaud the markets are controlled by big mutual and pension funds, with individual investors forming only a fragment fragment.

"We have very much a Marxist system here," said Michaud. "Who owns the means of production? It's not the large private fortunes anymore. It's the people, through their retirement savings. But they are not doing anything to protect their rights."

A close look at the numbers shows that Michaud has a bit of a point. Participation in the Canadian stock market has grown steadily during the last five years, reaching 49 per cent in 2001, according to the Toronto Stock Exchange. This ranges from a high of 57 per cent in BC, to a low of 35 per cent in Quebec. Five-year growth was between 10 and 14 per cent depending on the province.

But more detailed numbers provided by the Commission de Valeurs Mobilières du Québec, show what's really going on. According to the CVMQ, in 1999, 31 per cent of Quebecers owned shares in public companies. But only about half of those were direct shareholders, the rest had their holdings in various types of funds.

As a result, the financial system is set up to service the needs of professional highly trained, financial managers, and fraught with pitfalls for the individual investor. For example financial statements are almost incomprehensible, even to many accountants. Companies can focus earnings announcements on their net income, pretax, or EBITDA basis, and how is the ordinary investor to know which number to trust?

On the other hand, this is not a big problem to institutional investors who can hire their own full-time accountants to decipher what companies are really saying in their corporate financial statements.

But Michaud's shareholder rights bandwagon has hit a big snag in recent months.

"We used to have to just buy one share in a company to be able to attend annual meetings and make shareholder motions," said Michaud. "But last year they changed the Canada Business Corporations Act to slow us down. Now a shareholder has to own $2,000 worth of stock in a company, for at least six months, before he can take part."

In fact, a big part of the $25 in annual fees APIEQ changes members is allocated to purchase shares of specific companies, so the group has a right to make proposals. Although Michaud would not provide a complete list said Nortel, Tompson Corp. and Manufacturer's Life are targets for future corporate governance motions.

In recent months, Michaud, now 72, moved to assure the long-term continuity of the APEIQ by steeping back and relinquishing the president title to Jocelyne Pellerin, with the intention of moving quietly into the background while retaining his position as a board member, and title as "founding president." But we left three messages for Pellerin, and it was Michaud who called back. "I'll talk to you," he said. "But make it fast. I'm very busy you know."

You can contact the APEIQ at 286-1155, or visit their Web-site at



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