Power Corporation's Governance Woes: A Vote of No Confidence

The voting results for Power Corporation’s directors André Desmarais and Paul Desmarais Jr. in 2023 and 2024 reveal a troubling pattern: institutional shareholders are increasingly withholding support for the Desmarais family’s leadership. While the brothers retained their board roles due to the family’s outsized voting power, the rise in opposition—from 13.1% to 18.65% for André and 14.36% for Paul Jr.—signals a governance crisis that could undermine investor confidence and stock performance.

The Numbers Tell a Story of Fraying Trust

The data is unequivocal. In 2024, 36.38% of subordinate voting shareholders opposed Paul Jr.—a stark increase from the 44.84% opposition he faced in 2023. Meanwhile, André’s “Against” votes rose from 32.94% to 37.26% among non-family shareholders. These figures exclude the Desmarais family’s 15% stake in subordinate shares, which carries 10 votes per share, ensuring their control despite minority opposition.

The disconnect between voting power and shareholder sentiment is stark. While the family’s preferred shares (99.99% “For” votes) guarantee their influence, subordinate shareholders—representing public investors—now voice dissent at levels exceeding 40%. This chasm suggests a loss of faith in the Desmarais leadership’s strategic direction and governance practices.

Governance Red Flags: ISS, Independence, and Overreach

Institutional Shareholder Services (ISS), the influential proxy advisory firm, has repeatedly recommended shareholders withhold votes from both brothers. ISS cited breaches of independence standards, as Paul Jr. sits on the Governance and Nominating Committee—a role requiring impartiality—and holds six public board seats, exceeding ISS’s five-max guideline.

The family’s refusal to cede control compounds these issues. After stepping down as co-CEOs in 2023, the Desmarais brothers retained key roles: Paul Jr. as chairman and André as deputy chairman. Their continued dominance, despite ISS’s warnings, raises concerns about a lack of accountability.

Why This Matters for Investors

The voting trends are not just about governance—they’re a barometer of strategic risk. Minority shareholders, including large institutional investors, are sending a clear message: Power Corporation’s leadership structure is unsustainable.

Consider the implications:
1. Activist Threats: Rising opposition could attract activist investors seeking governance reforms or a breakup of the Desmarais-controlled conglomerate.
2. ESG Downgrades: The dual-class share structure and lack of independent governance may deter ESG-focused funds, a growing segment of the investment landscape.
3. Market Discount: If investor skepticism grows, Power Corporation’s shares could trade at a valuation discount to peers, as seen in companies with concentrated ownership (e.g., Berkshire Hathaway under Warren Buffett).

A Call for Caution: Governance Risks Are Material

Investors must weigh the structural risks embedded in Power Corporation’s governance. The Desmarais family’s 50%+ voting power insulates them from accountability, but markets rarely reward unchecked control indefinitely.

Final Recommendation: Proceed with Caution

Before committing capital to Power Corporation, investors should:
- Demand Governance Reforms: Look for signs of board independence or voting structure changes.
- Monitor ISS Guidance: ISS’s recommendations carry weight with institutional investors; further negative votes could trigger a liquidity drain.
- Assess Strategic Clarity: Evaluate whether the company’s post-Desmarais strategy addresses shareholder concerns.

The declining “For” vote percentages are not just data points—they’re a warning. Until Power Corporation addresses governance opacity and minority shareholder concerns, its stock remains exposed to reputational and financial risks. For now, investors would be wise to treat this conglomerate with the caution it deserves.

Power Corporation’s governance challenges are a litmus test for long-term value creation. The question is no longer whether the Desmarais era is ending—it’s whether the company can adapt before investors lose patience.