Edward Rogers “takes no joy” in B.C. court decision, keeping Natale around after CEO offered millions in severance
News | 11/05/2021 5:31 pm EDT
Formerly ousted and now-reinstated Rogers Communications Inc. (RCI) chairman plans to keep CEO and president Joe Natale in his position, after a Supreme Court of British Columbia judge ruled that Edward Rogers’ reconvening of the board was legitimate.
Edward Rogers made the statement late Friday night after RCI also issued a statement officially recognizing him as the chair of its board of directors. The company put out the statement as per a court order that included directives for RCI to complete and file with the BC Registrar of Companies a notice of change of directors.
“I take no joy in the decision or the events of past weeks,” Edward Rogers said in his personal statement. “Much has been written about Rogers CEO Joe Natale and his future. Mr. Natale remains CEO and a director of Rogers Communications and has the board’s support. Our focus must be on the business, a return to stability, and closing our transformational merger with Shaw Communications Inc.”
Earlier in the day, Justice Shelley Colleen Fitzpatrick delivered her decision in the Supreme Court of British Columbia — where the company is incorporated — that it was within Edward Rogers’ power to fire five of RCI’s directors through a written resolution without convening a meeting of the shareholders.
“We are very disappointed with the court’s ruling, which represents a black eye for good governance and shareholder rights and sets a dangerous new precedent for Canada’s capital markets by allowing the independent directors of a public company to be removed with the stroke of a pen,” Martha Rogers wrote in her own statement posted on Twitter.
Fitzpatrick also awarded Edward Rogers costs and denied RCI lawyer Stephen Schachter’s request to stay the ruling pending an appeal. Fitzpatrick denied the request based on the fact that Edward Rogers told the court that no changes to management will be made.
“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,” Edward Rogers said in his statement.
The family drama began in the summer when Edward Rogers expressed concern that Natale was not the right man to handle the merger with Shaw and discussed those concerns with his mother, sister and several other directors.
“Edward was of the view that Tony Staffieri, RCI’s chief financial officer (CFO), was his preferred choice to replace Natale as CEO/president. He indicates that all of the individuals he spoke to supported the notion of replacing Natale and, also, that Staffieri was a suitable candidate to move on as CFO and into the CEO role,” according to the court documents.
On Sept. 15, 2021, Edward Rogers apparently spoke to both MacDonald and Melinda Rogers, the latter of which was “firmly opposed” to a review of the CEO.
“Word of these swirling issues got back to Natale. Natale’s response was to indicate that he wanted to terminate Staffieri as CFO. By September 19, 2021, when Edward did not agree to that suggestion, Natale insisted that one of them – either him or Staffieri – would have to go.”
According to the documents, Natale was all set to leave, with a severance package of approximately $200 million. Only one member of the board, David Peterson, opposed his removal.
Both Loretta and Martha Rogers spoke in support of the proposal to replace Natale. Then before a board meeting on Sept. 26 things “took an unexpected turn” with the majority of the board reversing their decision, according to the court documents.
By Sept. 29 Stafferi was terminated as CFO and by Ot. 19 Edward Rogers was eventually demoted as chair.
Edward Rogers then initiated proceedings to remake the board of directors and reinstall himself as chair, using his position as chair of the Rogers Control Trust. That resulted in two separate boards claiming authority over the company.
Edward Rogers sought to remove chair John MacDonald, John Clappison, Peterson, Bonnie Brooks, and Ellis Jacob from the board of directors through a written resolution. They were replaced by Michael Cooper, Jack Cockwell, Jan Innes, Ivan Fecan, and John Kerr.
Part of the group opposing Edward Rogers’ takeover is his mother, and widow of founder Ted Rogers, Loretta Rogers, and Edward Rogers’ sisters, Melinda Rogers-Hixon and Martha Rogers.
During this past Monday’s court proceedings, Edward Rogers’ lawyer Ken McEwan argued that B.C.’s Business Corporations Act — as a matter of legislative policy — gives shareholders the power to pass an ordinary resolution through a consent resolution. For an ordinary resolution to qualify as a consent resolution, only 66.7 per cent of all the eligible votes are required. McEwan said Edward Rogers surpassed the two-thirds threshold required for the consent resolution because he represents 97.5 per cent of voting shareholders as chair of the control trust.
RCI lawyer Stephen Schachter argued that Article 3.4 of the company’s incorporation rules stipulates that “the shareholders may by ordinary resolution remove any director from office and the vacancy created by such removal may be filled at the same meeting,” and therefore should be interpreted to mean that the removal and replacement must take place at the same meeting. He also argued before the court that the Class B shareholders, who do not have voting power in the dual-class share structure, have a right to be at any meeting.
“Edward filed this petition to decide only one narrow legal issue: namely, whether the consent resolution dated Oct. 22, 2021 that he initiated to remove five of RCI’s board members and replace them with another five directors is valid and effective (the consent resolution),” Fitzpartick noted in her decision.
Fitpatrick ultimately determined that there is no reason why a “meeting” could not include “either an actual meeting or a ‘deemed’ meeting”.
“In that respect, the Act provides for a ‘legal fiction’ in that the effect of the consent resolution is as if an actual meeting had taken place to both remove and replace directors, just as contemplated by Article 3.4,” she wrote.
Fitzpatrick also noted that there was a lot of evidence filed by both parties at the hearing as relevant “surrounding circumstances,” such as what were the wishes of Ted Rogers when in 2007 he established the Rogers Control Trust for the benefit of the Rogers family as the means to control RCI, or what good corporate governance is.
In her view, the evidence did not aid in determining the issue at hand, which was interpreting the articles.
Later this month, the CRTC will hold its hearings on RCI’s merger with Shaw Communications Inc., although the Public Interest Advocacy Centre asked the CRTC earlier this week to delay the hearing until it becomes clear who has authority over Rogers.
On Wednesday, RCI’s regulatory team responded to the request by arguing that it can present the company’s position to the commission and public regardless of who is in charge and suggested that both boards claiming authority over the company could “agree to choose to be bound by a commission decision regarding potential decisions from this hearing,” though the letter did not explain what mechanism the two boards could use to reach such an agreement.
— Reporting by Jenna Cocullo at firstname.lastname@example.org.