Last week’s decision by Rogers Communications Inc. not to appeal the court’s decision gave company chairman Edward Rogers a decisive victory in his battle for control of the telecommunications company bearing his family’s namesake.
Long-running tensions at the family-run company spilled out into the open last month, giving ordinary Canadians an unprecedented glimpse into the behind-the-scenes details of playing with the mighty family.
While the ruling handed Edward Rogers the keys to the castle for the foreseeable future, the costs associated with his victory could make for a Pyrrhic victory – making it even more difficult for him to fix mismanagement and stock underperformance, he said. That the company has suffered for years.
The legal cost of the fight alone is not insignificant.
A handful of law firms have been hired for one side or the other over the past few weeks as the drama culminated in last week’s ruling in a B.C. court, after a fight that laid bare the unique ownership structure of the $30 billion company. Gave.
There are many legal eagles involved, says veteran corporate attorney Phil Enisman, adding that costs can add up quickly. On the day the verdict was delivered, nine lawyers were on the court, and dozens more were listening to a conference call of the proceedings.
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It’s fair to assume that roommates will charge up to $1,000 an hour for their time, and that’s for just one day of a nearly two-month-long fight.
“It wouldn’t cover everything that went back to all their discussions, negotiations [and] Legal advice before you decide to go to court,” Anisman said in an interview.
Those legal costs may be in the rearview mirror, but there are many other major expenses still ahead.
The power struggle began last month when Edward Rogers, as chairman of the board, attempted to sack the company’s CEO Joe Natale and replace him with CFO Tony Staffieri. After Natale alerted the board, other family members, including Edward’s sisters and mother, voted to halt the move and remove her from the chair.
Instead Edward unilaterally fired the five members of the board, replaced them with his chosen successor, and reinstated himself as chair.
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He was able to overthrow the board because of the company’s dual-class share structure. More than 97 percent of Rogers’ shares with which voting rights are attached are held in a family trust—a trust chaired by Edwards.
In court filings, Edward suggested that Natale had agreed to leave, and it was only in the process of negotiating the terms of their exit that things flew away. But even though the split was amicable, Natale was prepared to leave the company with an exit package. One estimate was estimated at $200 million,
Natalie has earned a salary of just $1 million each year, plus an annual bonus of $1.5 million, since Rogers became CEO in April 2017. Additionally, he has earned stock-based awards to bring his total compensation to at least $11 million each year.
Under the terms of the severance package, presented as evidence by Edward Rogers, if Natale had left the company as planned on October 1, she was slated to receive two years’ salary and bonus, which would last for years. for the acceleration of their stock options. Retirement treatment for all stock options granted to him before that, from 2019 to 2021, and he will continue to earn pension time until 2024.
They will also receive a $4 million cash payment as part of Rogers Communications’ plan to acquire Shaw for $28 billion, and pay $20 million in consulting fees for the two years following the closing of the deal.
Amid the recent family power struggle, Natale reportedly threatened to leave the company if Edward took control. In comments made after the court’s decision, Edward Rogers did his best to expand the olive branch, saying that “Mr. Natale is the CEO and director of Rogers Communications and has the support of the board.”
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Not everyone thinks that tough peace can last.
Richard LeBlanc, a governance professor at York University in Toronto, says it is certain that Natale and perhaps other members of the management team will be out the door at some point.
“Edward Rogers is what I see as an active investor. And the playbook is to change directors and then change CEOs,” he said in an interview. “In the coming weeks, I think there will be a management shakeup.”
If Natale’s golden arm is actually worth $200 million, the company will pay out in dividends to its non-voting shareholders next quarter.
And that’s assuming the price tag hasn’t gone up since things got worse.
It is not certain that Natale will now accept the same terms, said Dmitry Anastakis, a professor of business history at the Rotman School of Management at the University of Toronto.
“Maybe he says, ‘I have to strike a hard bargain,'” he said. “There will definitely be a smoldering discussion when they have their next board meeting.”
While it’s possible to match some of the cold, hard dollars that Rogers has spent on the conflict so far, Anastakis said the ugly saga may have hurt the company in more obscure ways.
A public battle between billionaires for control of a highly valued company does not sit well with members of the public who have a low opinion of the telecom sector, he said. “It’s not a beloved firm and, in terms of its customer relationships, people mostly hate telecommuting.”
Anastakis described the entire saga as a “pattern of poor judgment”.
“It’s all really unnecessary,” he said.
Anastakis said that Edward Rogers exploited a flaw in the company’s structure, which left some people with a bad taste in their mouths.
“It makes it worse; it’s like a filibuster,” he said. “This is minority rule. This is the rule of the one.”
Because of the company’s dual-share, family-run structure, Anastakis doubts that there is enough will or ability to foil the Shaw deal. But he said the controversy could raise the uncomfortable question of how long that structure could last for a company set to control Canada’s IT infrastructure.
Many shareholders and governance experts “have been raving about this for years, and I think it’s really going to come to a head,” he said. “It screams for some sort of regulatory response.”
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Janet White, a portfolio manager at IA Private Wealth, says the fight could hurt the company in the long run, highlighting the company’s poor governance.
“Shareholders vote with their money,” she said.
White counts many of Rogers’s employees as customers, and he said that even he doesn’t like what he’s seen in the past month. “Most of them are shareholders in the company, and therefore have their own personal assets tied up. [So] It may also make people reconsider whether they want to be an employee of Rogers.”
About whether the saga could cause Rogers to lose customers, Anastakis said that while Canadians love to complain about their cellphone, cable and internet bills, history shows that some Will do too.
“Ed’s got his customers more than a barrel—but he’s got them almost exactly where he wants them.”