How the Rogers Family Drama Could Impact Canadians
Canada’s real-life version of Succession—or is it Game of Thrones?— is unfolding right before the public’s eyes, with the Rogers family in a tense battle over who really controls Rogers Communications Inc. On one side is Edward Rogers, son of the late Ted Rogers, the patriarch who founded the media giant in 1960 and passed away in 2008. On the other is Loretta Rogers, Ed’s mother whose own parents gave Ted the money to start his company, and sisters Melinda and Martha. (Oldest sister Lisa is in the mix, too, but it’s unclear which side she’s on.)
It’s a complicated drama, with various board members, including Toronto Mayor John Tory, also taking sides, but it essentially boils down to Ed wanting to replace current Rogers CEO Joe Natale with the company’s now former CFO, Tony Staffieri. Ed’s mother and sisters want to keep Natale in place—and ensure that Ed doesn’t assume all decision-making power.
Rogers is a household name; one of the largest Canadian corporations. Millions of people have a wireless plan or a cable package with the company; they obsessively follow at least one of its sports teams, whether it’s the Toronto Maple Leafs or the Toronto Blue Jays (Rogers has a 37.5 per cent stake in the former and it owns the latter outright); or they may have either worked for the organization or know someone who has. Many people also own Rogers shares, whether in their mutual funds or the stock itself. So, while the family infighting may be enthralling to watch unfold, many Canadians feel rightly concerned that this situation may negatively impact them. Here’s what you need to know.
What exactly is going on?
This family feud hit the public’s radar in late September when the company announced in a brief statement that Staffieri had left Rogers. On October 8, The Globe and Mail reported that Natale and Staffieri have been at odds for years, and that the CEO wanted to replace his CFO. Unbeknownst to Natale—until he got wind of the plan via a butt-dial—Ed wanted to make Staffieri CEO, which would require approval from the board of directors. When he tried to make that play, the board—which includes Loretta, Melinda and Martha—shut him down.
What makes this conflict particularly complicated is that there are two Rogers boards: the board of directors, which every public company has, and the Rogers Control Trust, which is basically a family-controlled board that sits above the board of directors. The trust holds 97.5 per cent of all voting shares, which means it can decide who sits on the corporate board—the group that ultimately decides who runs the business. Ed is the chair of the Rogers Control Trust, while sister Melinda is vice chair. The Rogers sisters want Ed removed from his trust position, but they need seven of 10 trust members to oust him and, so far, the non-family members who sit on that board, all old friends of Ted’s, seem to want him to stay.
In late October, Ed was voted out by the board of directors as chair (but remained chair of the family trust). As a result, he removed five directors who voted against him, replaced them with people of his choosing, and announced he is back as chair of the board—a move Ed maintains is within his rights as head of the family trust. His family says that’s illegitimate and he is not chair.
The duelling press releases began with Rogers, the company, saying no one can replace the directors and Ed saying he can. Youngest sister Martha started firing off tweets saying she would tell the world about “what’s actually happening,” and alluded to Ed being involved in a Trump scandal. (Ed faced public scrutiny in May after his wife, Suzanne Rogers, posted a picture of his family with Donald Trump on her social media accounts.)
In a strange twist, it appears that Natale was going to retire in September—it’s unclear if it was his idea or not—from Rogers, with Staffieri set to take over after he left. For reasons still unknown, the board decided, while Ed was away, to keep Natale around.
Now, the family is going in front of the B.C. Supreme Court—Rogers is incorporated in B.C.—to determine who’s really in control.
What’s Toronto Mayor John Tory’s involvement?
Tory was CEO of Rogers Media in the ’90s and later CEO of Rogers Cable. He has a close relationship with the Rogers family and was friends with Ted, who reportedly told him “to help look after his family and try to keep them in a position where they could have a good business going and keep thousands of people employed in the city of Toronto.”
Tory remains an advisory member of the family trust and potentially holds a deciding vote in Ed’s future at Rogers. He says his involvement with the family does not interfere with his work as mayor, and helps mediate in his spare time, although Martha Rogers suggests otherwise.
Will this drama affect my investments?
There’s a good chance you own at least some Rogers stock in your portfolio. Maybe you’re one of the many thousands of Canadians who worked for the company and paid into its stock plan (Rogers currently employs 25,000 people), or you hold a Canadian mutual fund or exchange-traded fund, many of which include the stock.
Depending on how much of the company you hold, your portfolio could take a short-term hit, as its stock price has fallen by nearly six per cent in the last week. The longer the family continues to fight publicly, the more the stock could fall, but the price should rebound once this squabble is settled.
While some analysts have downgraded their 12-month stock price targets on the company—such as TD Securities’ Vince Valenti, who now expects Rogers’ stock to hit $69 over the next year instead of the previously projected $76—the revision has more to do with the potential for instability in the short-term than the fundamentals of the business itself.
Matthew Dolgin, a Morningstar analyst, said in a report that “this situation is an ordinary, if extreme, occurrence of board disagreement that was resolved as shareholders would hope—with each director taking the position that he or she feels is in the best interest of the company and letting the majority rule.”
Will this impact the Shaw merger?
In March, the company announced that it wanted to buy Shaw Communications Inc. for $26 billion. If the deal goes through, Rogers will have a true cross-Canada footprint, something it’s wanted for a long time. Many experts predict the union will not get derailed by the current conflict—there’s too much money at stake—but others aren’t so sure. Could the Shaw family (yes, another family that controls a major telecom) decide that Rogers won’t properly steward their business and back off? Maybe. Shaw’s stock price has fallen by about three per cent over the last week, which indicates that some investors are nervous about what’s to come.
Will the fighting impact my bills?
It’s unlikely the average Canadian will notice anything different about their cable, internet or wireless services or their bills as a result of this drama.
Where customers may feel concern is around what the Shaw merger means for service prices and innovation in the industry. Once the deal is finalized, it will further reduce telecom provider options for Canadians—giving Rogers an even greater share of the market—and could ultimately result in higher bills for customers.
What about my sports teams?
It’s too early to tell what this specific situation means for the Rogers sports empire, which, as part of its ownership stake in Maple Leafs Sport and Entertainment (MLSE), also includes the Raptors, the Argos and the Toronto FC. TSN’s Rick Westhead said on Twitter that a senior baseball executive told him that the infighting at Rogers “might impact the Blue Jays’ efforts to re-sign star players and attract others,” and that “other teams will try to use the appearance of instability within Blue Jays ownership to their advantage.”
More troubling for sports fans may be Ed’s general meddling into his teams: The Toronto Star recently reported that Ed didn’t want to resign Masai Ujiri, the beloved Raptors president, while MLSE’s other owners, Bell Canada and Larry Tanenbaum, did. The latter two won out.
What does this battle say about corporate Canada?
If anything, this saga shows just how little influence Canadians have on some of the country’s largest companies—and how a board of directors means little when you have a family controlling a business. Rogers has a dual-class share structure, where the majority of shareholder voting rights remain with the Rogers family, rather than with investors. In more typical share structures, investors get a vote equal to the number of shares they own. In dual-class shares, investors can make money off the stock, but don’t get a vote. Other family or entrepreneur-owned businesses—especially in the tech industry—have similar dual-class share structures, which makes it hard for average investors, or the pension funds and mutual funds that represent them, to voice their displeasure with the board.
Dual-class share structures are not uncommon in Canada—they’re also used by Canadian Tire and Shaw, for example. But many shareholder advocates would like the system abolished: Some experts say these structures are problematic and can lead to a lack of accountability.
Where does it all go from here?
The fight is now in court, where the two factions will argue over whether Ed should be chair of the board. Ed recently filed a petition with the B.C. Supreme Court to have his new board declared legitimate, and said his family previously supported his moves and questioned Natale’s leadership, too. Ed’s mother Loretta disputes the claim and argues Ed mislead her about the CEO’s performance.
As long as the business itself operates as usual, then it’s mostly the Rogers family who will be impacted by what’s unfolding.