Edward Rogers’ attempt to reshuffle the boardroom at Rogers Communications Inc. without shareholder approval is valid, a B.C. Supreme Court judge ruled Friday.
The battle over leadership at the Canadian telecommunications giant spilled out of the boardroom and into the public eye when media reports broke last month of an attempted executive reshuffling by Edward Rogers.
The 52-year-old son of founder Ted Rogers wanted president and CEO Joe Natale gone, but his desires got him turfed as chair of the corporate board in late October.
However, as chair of Rogers Control Trust, the controlling shareholder of the company, Edward Rogers fought back and said he would remove five board members and substitute them with his own appointees.
His new five-member board elected him chair on Oct. 24, but the company disputed that move, which led to a court date in B.C., the province in which Rogers is incorporated.
Both sides presented arguments to Justice Shelley Fitzpatrick on Monday over the legality of the move, and why their respective board of directors should be recognized as the legitimate one.
Ken McEwan, a lawyer for Edward Rogers, told the court his client had the authority to make that move under “ordinary resolution” of the board of shareholders, as he has the power as chair to vote on behalf of the trust, which controls 97.5 per cent of the shares in Rogers.
However, Stephen Schachter, the lawyer for Edward Rogers’ mother and two sisters who are board members, told the court that “ordinary resolution” stipulates removal or election of directors which must occur at a meeting where shareholders have a right to participate.
In her reasons for judgement posted Friday, Fitzpatrick said that stipulation was based on Ted Rogers’ 2006 “memorandum of wishes,” which the judge said is subjective and contradicts existing company articles. Ted Rogers died in 2008.
In Fitzpatrick’s view, Edward’s actions were valid under those existing articles and B.C.’s Business Corporations Act.
“I take no joy in the decision or the events of past weeks,” Edward Rogers said in a written statement Friday reacting to the decision.
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“The judgment confirms I acted appropriately, in accordance with (Rogers Communications Inc.’s) articles and applicable corporate law,” he said.
Edward Rogers claimed in an affidavit that he had the authority to fire and appoint board members because he is chair of the control trust, sparking the feud with his mother Loretta Rogers and sisters Melinda Rogers-Hixon and Martha Rogers.
In his affidavit, Edward said he had support from his family to remove Natale as CEO after he lost confidence in him to lead the company through the acquisition of Shaw Communications, a $26-billion purchase and the largest deal in the company’s history.
In a statement, Martha Rogers called Fitzpatrick’s ruling “a black eye for good governance and shareholder rights and sets a dangerous precedent” to allow “independent directors of a public company to be removed at the stroke of a pen.”
She also suggested her side of the family plan to appeal the ruling, which she said could plunge the company into “a prolonged period of uncertainty, at perhaps the worst possible time.”
Edward Rogers said in his statement that the company’s focus must be on the business, a return to stability and closing negotiations on a merger with Shaw Communications.
“Our family has disagreements like every other family. I am hopeful we will resolve those differences privately, as any family would. I know every member of our family wants the brightest future for Rogers Communications.”
After initially voting to remove Natale on Sept. 24 and hiring CFO Tony Staffieri as his replacement, Loretta and other board remembers reversed course two days later and OK’d the firing of Staffieri.
He resigned on Sept. 29 without a reason given by the company. Edward was removed as chair on Oct. 21.
Loretta said in an affidavit filed last Friday the decision to remove her son as board chairman was difficult for her and other family members after trying to work with him for weeks.
The family matriarch said she disagrees with her son’s portrayal of the facts in his affidavit and was misled about the reasons he wanted to fire Natale, who learned “by accident” that he was soon to be on the way out.
She also claimed the move was “entirely inconsistent with the steps to be taken by the board when appointing a CEO” as her husband declared in a memorandum to the board dated June 23, 2006.
Loretta said she opposes her son’s “personal view that he is entitled to exploit his entrusted position as control trust chair to circumvent Ted’s wishes, the interests of the Rogers family members and the governance structure that has allowed Rogers to become a successful public company despite family control.”
Experts, analysts and shareholders have called for calm and a quick resolution in order for the company to get back to business. However, the losing side has the option to appeal the decision to the B.C. Court of Appeal.
“As a shareholder, we would like to have it resolved and know who the CEO is and carry on,” said one top-20 shareholder who refused to share their name in a Reuters report Friday.
“One or the other (CEO) is likely to deliver on the momentum that the operations have right now and the Shaw deal. It’s more just having the uncertainty taken away of who is going to be minding it.”
Rogers’ stock is up 0.8 per cent so far this year, compared with gains in rivals Bell (18.1 per cent) and Telus (14.7 per cent) in the same period.
Bell and Telus, alongside the Public Interest Advocacy Centre and the National Pensioners Federation, have asked the CRTC to delay the Rogers/Shaw hearings set to begin Nov. 22 as a result of the feud.
The CRTC still has the hearings scheduled for Nov. 22.
–With files from The Canadian Press and Reuters
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