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The internal workings of Canadian telecom giant Rogers Communications have been the source of many headlines over the past week, after an attempt to shuffle the corporate leadership failed. Now, the various directors of the company are engaged in an ongoing dispute that could have long-term ramifications for the company’s shareholders and public reputation.

Not only that, but the infighting has the potential to negatively impact the company’s acquisition of rival telecom company Shaw Communications, which is currently in progress.

A Pocket Dial Alerted the CEO to Plans to Oust Him

The issue gained national attention when it was revealed that Rogers Chief Financial Officer, Tony Staffieri, met with the company’s former Chief Legal Officer David Miller about removing the company’s CEO Joe Natale, as well as other executives. During the discussion, Staffieri accidentally ‘pocket dialled’ Natale, who overheard a portion of the conversation. In response, he informed one of the company’s directors, triggering an emergency board meeting.

The majority of the Board, including the majority of the Rogers family, sided with Natale, prompting Staffieri to exit the company. The discussion to remove Natale was part of what is being described as an “attempted coup” by Edward Rogers, pitting him against his mother and sisters, who are also directors of the company. Edward Rogers was ousted from his position at the head of the Board last week.

Since then, the fight has escalated further, with Martha Rogers publicly condemning her brother’s actions, and calling for his resignation as Chair of the Rogers Control Trust, a family trust which owns 97% of the voting shares of the company.

Two Groups of Directors Fighting for Legitimacy

Over the weekend, Edward Rogers met with five newly chosen board members in British Columbia, where he claims he was re-elected to his position. The existing board members, including Edward’s mother and sisters, dispute the claim, saying that the meeting was illegitimate since the pre-existing board still retains authority over the business. Edward Rogers plans to bring his case to the British Columbia Supreme Court to decide the fate on which board has control of the company.

Highlighting the Discrepancies Created by the Corporate Share Structure

The dispute has brought scrutiny of the share structure employed by Rogers Communications, one which is used in corporations throughout Canada, which creates varying levels of authority for different classes of shares. The family trust owns 97% of the Class A shares, which allows the shareholder to vote on matters pertaining to the company. On the other hand, there are also Class B shares, which pay dividends to the shareholder but do not permit them to have a say in corporate policies or decisions.

These types of share structures have been derided for creating an “inferior class” of shareholders, and for encouraging a lack of accountability by allowing the ‘superior’ shareholders to control the reigns of an organization. Often, those who retain the voting rights associated with Class A shares are limited to a company’s founders, family members, and executives, keeping control of the company in the hands of a select few.

Issues Could Affect Acquisition of Rival Company

These issues have all come to a head as Rogers Communications awaits regulatory approval of its bid to purchase rival telecom company Shaw Communications for $26 billion. Some say that the public dispute could be putting the deal at risk. Last week, five of Rogers Communications’ independent directors sent a letter to Toronto Mayor John Tory indicating that the CEO of Shaw Communications, Brad Shaw, had requested that there be no further changes to Roger Communications management or board before the sale.

Since then, Mr. Shaw has indicated that his company is committed to the merger. Speaking with the Globe and Mail, Shaw said the following:

On behalf of my family, the Shaw Board of Directors, and our management team, I want to reiterate our continued commitment to work with Rogers Communications Inc. to close the transaction that was announced on March 15, 2021. Any recent reports or descriptions regarding comments made by me or Shaw Communications with respect to the composition of the Rogers Board of Directors or its management team are false. 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.

A professor of strategy at the Ivey Business School at Western University, says that this sort of public dispute at a company of this size is nearly unprecedented:

Normally, when you have a dual structure with the family owning the majority of the voting shares, you don’t see this kind of public family dispute in this type of situation. I’m very surprised that what’s going on within the family has spilled over into the public forum.

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At Milosevic & Associates, our team of Toronto litigation lawyers regularly represent clients in complex commercial litigation matters including shareholder disputes, partnership disputes, contract disputes and appeals. We are exceptionally experienced in advising directors, officers, and shareholders of corporations across a variety of industries. We help clients find a swift and effective resolution for these issues to mitigate potential damage to a company’s continued growth and success. Over the years, our team of exceptional litigators has seen it all and has successfully advocated for our client’s rights. Our impressive track record speaks for itself. Call us at 416-916-1387 or contact us online to schedule a consultation.