These board conflicts can end up very badly: David Baskin on tension within Rogers
The Rogers clan -- mother, son and daughters -- is taking its feud into the boardroom Wednesday, marking a potentially pivotal moment in the power struggle at Canada’s largest cable and wireless company.
The family that has controlled Rogers Communications Inc. since its founding six decades ago is rupturing, publicly. Chairman Edward Rogers tried to oust Chief Executive Officer Joe Natale last month but the plan was blocked by a majority of the board, including two of Edward Rogers’s sisters and his mother, Loretta Rogers.
Today’s meeting could raise the stakes. Besides signing off on the company’s third-quarter results, which will be released before the market opens on Thursday, the board is set to discuss how to move forward after the infighting. It’s possible that some directors will seek to put new limits on Edward Rogers’s authority within the company.
Amid the turmoil, shareholders have reason to be anxious. The stock has underperformed Canada’s two other major telecom companies since announcing a US$16 billion takeover of Shaw Communications Inc. in March.
The shares are lower now than when Natale started in April 2017. In fact, Rogers has lagged rivals BCE Inc. and Telus Corp. by a wide margin since founder Ted Rogers passed away in 2008.
Undeterred by the board’s rejection of his plan, Edward Rogers broke his silence on Monday night with a statement that was far from an olive branch.
“Industry stalwarts, controlling and minority shareholders, employees, analysts and market observers agree: there is room for improvement,” he said in an email to Bloomberg News.
“It is my responsibility to put the interests of RCI first. It’s disappointing the focus of others has strayed from what is best for the business,” he said, mentioning no names.
Since his father’s death, Edward Rogers has been the most prominent family member within the company. He’s not only head of the board but also chair of the Rogers Control Trust, the private entity that controls most of the voting shares in Rogers Communications.
He’s also a major player in the Canadian sports scene, as chairman of the Rogers-owned Toronto Blue Jays baseball team and a board member of the company that owns the city’s professional basketball, hockey and soccer clubs.
But there is concern within the board that he does not place enough trust in the company’s senior executives -- and that he bears some responsibility for the revolving door at the top, according to a person familiar with the board’s deliberations. Rogers has named three permanent CEOs since Ted Rogers and so far none has lasted five years in the job.
Even Bay Street analysts who are usually loath to discuss the family dynamics have begun to talk about what an odd situation Natale finds himself in.
“We think the optics of the chairman of the board moving against a sitting CEO (and one that he recruited in 2017) while on the verge of a generational transaction is a more meaningful and longer-term concern,” BMO Capital Markets analyst Tim Casey wrote in the aftermath of last month’s attempted coup.
Casey downgraded his target price on the shares to $68 from $72 because of “risk regarding the long-term management of the company.” The shares already trade at the lowest multiple of Canada’s big three telecommunications companies.
If the board wants to secure Natale’s position, it has a number of options to ensure the CEO can do the job without undue interference, according to a person familiar with the discussions, who declined to provide specifics.
There are also questions surrounding Edward’s role as chair of the Rogers Control Trust, which gives him certain levers of power over the public company. The five other family members on the trust’s advisory committee include his mother and his sisters Melinda Rogers-Hixon and Martha Rogers -- all of whom sit on the Rogers Communications board and helped block his attempt to dump Natale and replace him with longtime Chief Financial Officer Tony Staffieri.
The trust’s structure allows the 10-person advisory committee to change the trust’s chair, according to public filings of Rogers Communications. It’s a system that was designed by patriarch Ted Rogers, in the hope that it would help create a smooth transition to the next generation.