Another shot was fired late Friday in the battle over control of Rogers Communications Inc., with former chairman Edward Rogers issuing a statement saying the company was wrong to declare a change of directors invalid.
“The previously announced change of directors of Rogers Communications Inc. took effect this morning (Friday) immediately upon execution of the shareholder resolution by the Control Trust Chair in accordance with section 180 of the Business Corporations Act (British Columbia) and the articles of RCI,” said Edward Rogers, who is still chairman of the Rogers Control trust.
“There is no legal basis for declaring the resolution invalid.”
The statement by Edward Rogers came only hours after the company declared that his attempt to replace five members of the company’s board of directors was invalid. Chairman John MacDonald said the declaration was made after seeking legal advice.
Edward Rogers, who was removed from the position Thursday but has retained his board seat, is seeking to assert control over the telecommunications giant in an escalating fight with the company.
The fight broke out after Edward Rogers unsuccessfully attempted to put former chief financial officer Tony Staffieri into the CEO role and replace other members of the leadership team, according to media reports.
Multiple reports say the plan to replace company CEO Joe Natale was blocked by other board members, including Edward Rogers’ sisters and mother, and his attempt at shaking up the firm led to him being replaced as chairman.
But Edward Rogers would not give up. In a news release late Thursday, he announced his plan to remove independent directors John Clappison, David Peterson, Bonnie Brooks, Ellis Jacob and MacDonald from the company’s board.
In their place, he named Michael Cooper, Jack Cockwell, Jan Innes, Ivan Fecan and John Kerr as the new directors.
Richard Leblanc, a professor of governance, law and ethics at York University, said successfully countering the move to replace the directors will be tough, if not impossible.
The difficulty lies in how the company was set up by the late Ted Rogers, who arranged it so that his family trust controls 97 per cent of the firm’s class A voting shares, Leblanc said.
His intention was to ensure his company stays in his family’s hands and to make it difficult to oust his relatives or dilute their control.
“That’s the brilliance of Ted Rogers and why he likened being chairman of the trust to being the president of the United States,” LeBlanc said.
“There’s a lot of authority.”
One of the few ways control could be wrested away from Edward Rogers is if he loses his role as chairman of the trust, which has a 10-person advisory board, Leblanc said.
To oust him, two-thirds of the board would need to support the move.
A removal seems unlikely because Edward Rogers appears to have support from at least two trust board members, who aligned themselves with him on Friday.
“I worked alongside Ted for most of my 53 years at RCI and am supportive of the changes that have been announced today,” said Phil Lind, a former vice-chairman at Rogers, who wrote a book about being Ted’s “Right Hand Man.”
“My primary focus going forward is to assist the members of the Rogers and Shaw teams to ensure a successful completion of the transaction.”
Alan Horn, who said he started working with Ted in 1979, also backs Edward Rogers.
“I look forward to working with Edward, the Rogers family, and the reconstituted board to help the company complete its game-changing transaction with Shaw,” he said in a statement.
If Edward Rogers, Horn and Lind support him as chairman, the seven remaining board members would have to support his removal to secure the two-thirds majority.
Leblanc said it wouldn’t surprise him if Edward Rogers garnered additional supporters, giving him enough votes to keep his role.
“Several directors that are on these types of boards have told me that their role as a director is to give counsel, but at the end of the day, the founder has the authority and you owe your board seat to founder, so its founder’s way or the highway,” said Leblanc.
This can be especially true at a company like Rogers, where an unconventional corporate governance structure, little turnover and a lack of independent committees and chairs offer fewer checks and balances, he said.
“They have directors on the board that are over-tenured, that have been there longer than nine years or significantly longer,” Leblanc said. “I think one director, who is a former politician, has been on the board 30 years.”
The company moved toward introducing some additional corporate governance controls on Thursday when it launched an executive oversight committee.
The company said earlier Friday it was concerned that the trust would seek to make such a fundamental change in such an unusual way.
In its evening statement, the company confirmed it had “received a written resolution from the Rogers Control Trust purporting to remove five of the independent directors of Rogers and replace them with nominees of the Rogers Control Trust.”
The company reviewed the resolution with external legal counsel, it said, “and has determined the resolution is invalid.”
“Accordingly,” reads the statement, “the Board of Directors of Rogers, including its independent directors, remain unchanged.”
It reiterated Natale’s commitment to driving business performance and completing its proposed merger with Shaw Communications Inc.
Rogers is awaiting regulatory approvals for a $26-billion deal for the Calgary-based company that it signed earlier this year.
While RBC Dominion Securities Inc. analyst Drew McReynolds called the recent board and family dynamics “an unnecessary distraction,” he said in a note that he assumes the Rogers-Shaw deal still has “unwavering support” from shareholders.
In an emailed statement, Shaw’s executive chairman and CEO Brad Shaw said he wanted to “reiterate our commitment to the takeover.”
“This is a Rogers family and board matter and out of respect for the Rogers family, it is not appropriate for Shaw Communications to comment on recent developments,” he said.
Leblanc doesn’t think the Shaw deal will become a casualty of the recent drama, but said he has never seen anything like the disagreement unfolding between the company and Edward Rogers. He likened it to a “soap opera,” but said a resolution is likely on its way.
“One way or the other, it sounds like we’re going to come to a bit of a showdown in the next day or two or even today, and hopefully one decision will be made and then everybody has to … rally around the final set of directors, whoever they may be.”
– Tara Deschamps, The Canadian Press