The Who’s who of the controversy:

Ted Rogers, or Edward Rogers Sr., who passed away in 2008, founded the company in 1960.

Loretta Rogers is the widow of Ted Rogers, and mother to Edward (Jr.), Melinda, and Martha. As per Rogers.com, she is a corporate director and is a member of the Advisory Committee of the Rogers Control Trust.

Edward Rogers is the son of Ted Rogers and, prior to the commotion, is the chairman of the board of directors at Rogers. Additionally, he is the Chairman of the Finance Committee, the Nominating Committee, and the Executive Committee. He is also Chairman of the Rogers Bank and the Toronto Blue Jays. Edward also serves on the Board of Directors of Maple Leaf Sports & Entertainment and CableLabs.

Melinda Rogers-Hixon, Ted and Loretta’s daughter and Edward’s sister is a company director, the deputy chair of the Board of RCI (since Jan 2018), and vice-chair of the Rogers Control Trust.

Martha Rogers, sister to Edward and Melinda, is a company director, chair of Rogers’ Environmental, Social, Governance (ESG) Committee, and is a member of the Advisory Committee of the Rogers Control Trust. She previously served as a director of Rogers Wireless Communications Inc. and Rogers Media Inc. Martha has been quite vocal about her views on “#EdRogersSaga” on Twitter.

In addition to the core telecom business, the Rogers family owns the Toronto Blue Jays baseball team, franchising agreement with the NHL (National Hockey League), and an ownership stake in Maple Leaf Sports, the parent company of the Toronto Maple Leafs hockey team, and the Toronto Raptors basketball team.

Joe Natale joined RCI as President and CEO in April 2017. Prior to joining RCI, Mr. Natale served at Telus Corporation from 2003 to 2015 where he held several senior positions including President and CEO. In late September 2021, Edward and other Rogers’ directors and executives planned to remove Mr. Natale from the position of CEO citing poor performance compared to peers such as BCE (owns Bell), and Telus.

Anthony Staffieri was the CFO at RCI until he resigned in late September 2021 with no official reason. Staffieri is Edward’s choice of the replacement CEO.

John MacDonald in a swing of events has become the chair of the board of directors at Rogers backed by Loretta, Melinda, and Martha Rogers. He has previously served on many committees and is also the chair of the Corporate Governance Committee.

The drama coming out of one of Canada's larget telco companies has evolved at a fast pace. Below we try to summarize the developments best we can!

Timeline: What happened when

Edward Rogers, son of late founder Ted Rogers, has been at odds with his mother and two sisters regarding company leadership after he attempted to remove Chief Executive Officer John Natale from his position in late September. Edward planned on promoting former Chief Financial Officer Tony Staffieri to the position of CEO. Initially (September), Edward had the backing of Rogers family members and several Rogers senior executives to unseat Natale as CEO.

September 24, 2021^[i]: Edward Rogers convinced a majority of the Rogers board of directors that Natale should be let go and replaced by the then Chief Financial Officer Tony Staffieri. A point to note is that there was no “vote” yet.

September 26, 2021^[i]: Some board members changed their minds and wanted Natale to stay the Chief Executive. Loretta Rogers, Edward’s mother, was one of the directors that changed their mind and said that Edward misled her, putting words in her mouth. Upon closer look at Natale’s performance and actions, Loretta became convinced he should stay at the top position^[ii].

September 29, 2021: While this might or might not have affected the current drama, Chief Financial Officer, Tony Staffieri, left Rogers on Sep. 29^[iii]. In a surprising twist of events, Staffieri accidentally revealed Edward’s plot to remove CEO and senior executives to CEO Natale by pocket-dialing him while discussing this with someone^[iv].

October 19, 2021^[v]: Edward unsuccessfully attempts to replace chief executive John Natale

October 21, 2021^[vi]: Loretta, Melinda, and Martha Rogers joined by other directors, sided with Natale and removed Edward as chairman limiting his authority

October 24, 2021^[vi]: Edward Rogers retaliated, this time by using his position as chair of the Rogers Controls Trust, and constituted a new board that recognized him as chairman again. Independent directors John Clappison, David Peterson, Bonnie Brooks, Ellis Jacob, and John MacDonald were replaced by Michael Cooper, Jack Cockwell, Jan Innes, Ivan Fecan, and John Kerr. RCI petitioned the legality of this move.

To assert control, Edward Rogers, the board chairman of Rogers, tried to replace five board members with five new members. His mother and sisters tried to prevent the move by voting to oust Edward as the chair and voted to replace John Macdonald as the chair and retain the former board members^[vii].

Edward Rogers, still a board member, then tries to replace the five members again, now within his capacity as chair of the family trust that controls the RCI voting shares citing distrust and loss of confidence in the board of directors at Rogers Communications.

Board members were taken aback by the decision, and along with Loretta and daughters, questioned the legitimacy and legality of Edward's latest move after being expelled from his position of board chairman.

The legality issue stems from the fact that the election of directors is conducted during the annual general meeting of shareholders with ample notice and in accordance with the industry norms, and while RCI has a dual-class share structure, such a move has no precedent examples.

October 26, 2021^[viii]: Edward Rogers filed a court petition to claim the legitimacy of its reconstituted board challenged by former board members and members of the family trust (mother and sisters).

November 1, 2021^[viii]: The Supreme Court of British Columbia begins hearing on this dispute between two groups of directors which have revolted shareholder confidence and have sent RCI’s share prices to the lowest level since February 2021.

What this might mean for shareholders

Stakes in this family feud are high for shareholders as the battle comes at a time when RCI is amid buying Shaw Communications for $26 billion. The transaction awaits regulatory approval as it would make Rogers the largest telecommunications company in the country, but the instability of the board puts the transaction at risk.

The why of the feud

Canada is unique in this governance aspect as it has many cases of families controlling voting shares of major public corporations. Such examples are seen with Magna, George Weston, Husky Energy, and Thomson Reuters. Such dual-class structures mean that while there are shares trading on secondary markets, the family trust, and in this case, the Rogers family trust owns 97.5% of voting class A shares, leaving an average retail investor out of a say in a matter of governance interruption, such as this case.

Rogers Communications operates in a dual-class structure wherein ten members of the family and close friends (to Ted Rogers), including Ted Rogers’ four children, several long-time family friends, and Loretta’s nephew sit on the Advisory Committee of the Rogers Control Trust, which owns 97.5% of Class A voting shares in RCI.

Since Ted’s death in 2008, Edward has been the chair of Rogers Control Trust making him the controlling shareholder. As per Ted’s trust and governance structure, to make a change, two-thirds of trustees must vote to remove Edward, and, at the same time, two-thirds must agree to a successor. The ten trustees are Loretta Rogers, and her four children: Edward, Melinda, Martha, and Lisa, her nephew David Robinson, and Phil Lind, John Tory, Toby hull, and Alan Horn. Two-thirds of voters would mean seven votes required for a change.

When appointed in April 2017, CEO Natale was entrusted with the chief goal of reducing churn in Rogers’ wireless business. The churn rate is the proportion of wireless customers that quit the company to get their cellular service somewhere else. Edward Rogers has been disappointed with the performance of Natale, a telecom executive regarded as a star for several years by many industry participants and watchers. As per Edward, RCI has continued to lag its two main competitors, Bell and Telus, has missed its budgets in the last two years, and the share price has stagnated.  

Exhibit: RCI compared to peers BCE Inc. (owns Bell) and Telus Inc.

Exhibit: RCI’s Wireless segment performance

Exhibit: Competitors’ industry metrics. Source: Refinitiv Eikon

Amidst the boardroom drama, RCI posted third-quarter 2021 results wherein the company reported solid operational improvements led by Wireless recovery. Wireless postpaid net subscriber additions of 175,000 was the highest in 13 years for Rogers, while the Q3 wireless postpaid churn of 0.95%, was the best third-quarter churn ever for Rogers. BCE and Telus are to post their quarterly results this week.

Happy Investing!

Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in securities mentioned.

[i] https://www.bnnbloomberg.ca/edward-rogers-case-to-turf-natale-doesn-t-tell-the-whole-story-1.1673292

[ii] https://www.theglobeandmail.com/business/article-rogers-ceo-joe-natale-was-set-to-retire-before-board-reversed-course/

[iii] https://financialpost.com/pmn/business-pmn/canadas-rogers-cfo-steps-down-after-over-10-years-in-role

[iv] https://www.theglobeandmail.com/business/article-rogers-ceo-joe-natale-learned-of-edward-rogerss-plan-to-oust-him/

[v] https://www.bloomberg.com/news/articles/2021-10-30/rogers-chairman-says-board-never-voted-to-oust-ceo-natale

[vi] https://www.theglobeandmail.com/business/article-struggle-for-control-of-rogers-continues-as-sunday-board-meeting/

[vii] https://www.theglobeandmail.com/business/article-rogers-board-votes-to-remove-edward-rogers-as-chair-sources-say/

[viii] https://www.reuters.com/business/media-telecom/edward-rogers-files-petition-canadian-court-validate-new-board-rogers-2021-10-26/