Dale Jackson

Personal Finance Columnist, Payback Time

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Forget Ted Lasso. The latest Canadian corporate family drama has become the new binge-worthy media event.

It’s a story about Edward Rogers, son of late Rogers Communication Inc. (RCI) empire founder Ted Rogers, who seeks to take control of the company’s board of directors. 

In a shocking twist, family matriarch Loretta Rogers withdraws her support for the attempted coup, saying she was misled by her ambitious son.   

As the saga moves to the courtroom, the real-life situation is becoming too real for the millions of average Canadians (including myself) who hold RCI shares in their retirement portfolios, and count on the telecommunications giant’s success to help see them to their golden years.

Sixty-five per cent of Rogers stock is owned by clients through their investment advisers, according to Bloomberg data. Some the company’s biggest institutional stock holders are mutual fund companies and pension funds. Most Canadians save for retirement through mutual funds and company pensions. The bottom line: if you invest for retirement, you probably own RCI’s Class B shares directly or indirectly.

Rogers has become a staple in Canadian retirement portfolios primarily because it is part of a telecom oligopoly, which includes Telus Corp. and BCE Inc. (which owns BNN Bloomberg via Bell Media). 

The telcos, like Canada’s big bank oligopoly, must comply with strict government regulations that include foreign ownership restrictions, but ultimately protect profits.

That profit protection normally gives shareholders the luxury of a relatively stable stock price and relatively generous dividend payouts.

Rogers Communications is also a favourite for investment advisers and Canadian equity fund managers simply because there are few alternatives for retirement investors who rely on steady profit growth and reliable income streams. Dividends from the oligopolies have become a substitute for fixed income for more than a decade as yields on government bonds and guaranteed investment certificates languish well below inflation.

But dividend income is not the same as fixed income, and this is where the Rogers drama gets real for retail investors. Dividend payouts are at the discretion of the company and the underlying share price fluctuates at the whim of the market.

Shares in RCI, which have been floundering lately, lost nearly ten per cent of their value as this month’s drama unfolded. Most long-term investors can brush that off, but the future of the stock is in question as principals focus their attention on a battle to control the company.

With uncertainty surrounding the company’s planned $20-billion purchase of Shaw Communications Inc. and mounting legal costs, RCI’s dividend yield - currently about 3.5 per cent annually - could also come under pressure.

It’s another step up the risk ladder for the growing number of Canadian workplace pension plans shifting to market-driven defined contribution pensions from guaranteed-payout defined benefit pensions.

Much of the disconnect between company elites and regular shareholders at RCI can undoubtedly be attributed to the dual-class share structure the Rogers family enjoys. 

Rogers Communications issues different classes of common shares that typically give disproportionate voting rights. The Rogers family trust almost 98 per cent of the Class A voting shares and 9.89 per cent of common Class B shares, which pay dividends but do not have voting rights. Family members also take up a disproportionate share of board seats.

The dual-class share structure is a throwback to the old days in Canadian history when financial power was more consolidated, and nepotism was seen as a strength and not the value-destroying ritual it really is.

For Canadians investing for retirement, rich folks playing power games with the livelihoods of everyone else is just another risk to consider.