The family drama surrounding Rogers Communications Inc. could have ripple effects for the company and its shareholders if it’s not resolved soon.
The warning from experts comes as the Canadian telecommunications giant continues to make headlines over a feud involving ousted company chair Edward Rogers, his family and executives.
Rogers, which provides communications services to millions of Canadians, could be defined by this tussle if it continues into the future, experts tell Global News.
Here’s what’s happening.
Edward Rogers vs. Joe Natale
Rogers started making headlines last week after media reports emerged Edward Rogers, son of late company founder Ted Rogers, wanted to remove CEO Joe Natale and reshuffle corporate leadership.
Multiple reports said the plan was blocked by other board members, including Edward Rogers’ sisters and mother, and his attempt led to him being replaced as corporate chairman.
However, Edward Rogers wasn’t going to go away quietly. As chair of the Rogers Control Trust, the controlling shareholder of the company, he holds 97.5 per cent of the voting power and said he would replace five corporate board directors with his own appointees.
The company said it was invalid, but Edward Rogers held a meeting on Sunday in British Columbia with his five board members and subsequently said he was elected chair of a new corporate board. He plans to take his case to the British Columbia Supreme Court to confirm it.
Richard Leblanc, professor of governance, law and ethics at York University, told Global News that Rogers is at a crossroads.
“It’s distracting. It’s diminishing the brand, the reputation of the company and of the individuals,” he said.
“Shareholders are paying attention, customers are paying attention, individuals are paying attention. … What people might remember in the next 10 or 15 years is not the incredible success of the founder, Mr. Ted Rogers, but the dispute that is occurring.”
What impact could this have on the company?
After Sunday’s meeting in British Columbia, the company finds itself with two corporate boards of directors, and each one is calling the other illegitimate.
Edward Rogers’ mother, his siblings and several other board members said the B.C. meeting was unauthorized, and that the five members Edward sought to remove, remain on the board.
This power struggle is no doubt having ripple effects throughout the company, said Richard Powers, national academic director of the directors’ education program at the Rotman School of Management.
“People are choosing sides in the management team. … This is such a distraction to management when their focus really should be Shaw and continuing to run the daily operations of the business,” he said.
“The longer it goes on, the more difficult it becomes.”
Rogers is in the midst of purchasing smaller rival Shaw Communications for $26 billion, but several analysts told Reuters that the family drama is unlikely to damage the takeover bid.
Yet other analysts said it could raise regulatory and financial risk around the deal.
“Collateral damage now seems inevitable, and in our view will only grow the longer a definitive resolution takes,” said RBC Dominion Securities Inc. analyst Drew McReynolds and associate Riley Gray, in a Monday note to investors.
Brad Shaw, Shaw’s executive chairman and CEO, has reaffirmed his commitment to the takeover, but his company’s stock has fallen in recent days as the battle continues.
What could this mean for shareholders?
According to McReynolds and Gray, not only could the feud lead to an underperforming executive leadership team, but it could also affect investor confidence around governance and management.
Another factor to watch is the share price of Rogers, Leblanc said. Rogers’ stock closed at $60.02 on Friday, and was trading lower on Monday after the battle intensified over the weekend.
“The number one job of the board is to hire and fire the CEO, so it’s incumbent on the board to always look at performance, and always look at the job that they’re doing,” he said.
“So shareholders should pay attention to this because the impact of what happens can affect the share price, and many Canadians are not only shareholders of Rogers, they’re also customers of Rogers.”
Recently, Rogers reported a profit of $490 million, down from $512 million in the same quarter last year, as its revenue held steady for the quarter ending Sept. 30.
The cable TV and wireless company said the profit amounted to 97 cents per basic share, down from $1.01 per basic share a year ago.
What happens now?
With Edward Rogers planning to go to the B.C. Supreme Court to affirm his new corporate board, both Powers and Leblanc feel the feud could play out in the legal setting next.
But both experts suggest a settlement should be reached to end the saga sooner rather than later.
“The warring parties need to be brought into a room and a compromise needs to be reached,” Leblanc said.
“Settle means some agreement, and it could be instead of replacing five directors, replacing two directors, reinstating Mr. Rogers as chair of the company board, and also an agreement of when the current CEO will step down. In my mind, that’s the type of a compromise that could occur to have a stand-down.”
Right now, all parties involved seem dug in.
“I see Ed has appointed himself the Chairman. LOL,” Edward’s sister, Martha Rogers, tweeted on Sunday.
“This should be taken as seriously as if he appointed himself the King of England.”
— with files from The Canadian Press and Reuters