Edward Rogers has won a striking victory at the Supreme Court of British Columbia, one that paves the way for him to potentially make sweeping management changes at the giant telecommunications company founded by his late father Ted Rogers in 1960.
Justice Shelley Fitzpatrick ruled Friday that Mr. Rogers acted legally when he removed five directors from the Rogers Communications Inc. (RCI) board of directors, and replaced them with five others. She didn’t read her reasons in the courtroom. The company had opposed the move, and argued at the court that Mr. Rogers was legally bound to hold a shareholders meeting before making changes to the board.
Justice Shelley Fitzpatrick ruled against the request for a stay of her order.
"Certainty is important here," she said, agreeing with Kenneth McEwan, a lawyer representing Mr. Rogers, that the spectacle of two boards of directors claiming to represent the company created confusion that needed to be cleared up.
In a statement, Mr. Rogers said he took “no joy” in the events that have transpired over the past several weeks.
“The judgment confirms I acted appropriately, in accordance with RCI’s Articles and applicable corporate law, with a clear preference for expediency to ensure that Rogers Communications is effectively governed,” he said. “The company requires an effective board that shares a strategic vision for the business, is open, deliberate, consistent in its decision making, independent of management, and that always acts in the best interests of the corporation.”
Mr. Rogers added that “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.”
In a statement Sunday evening, Rogers Communications said it will not seek an appeal of Justice Fitzpatrick’s decision.
In overhauling the board, Mr. Rogers acted in his capacity as chair of the Rogers Control Trust, the body that controls the Rogers family's 97.5 per cent voting control of the company.
“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,” said Loretta, Martha and Melinda Rogers in a statement after the decision was released.
“We plan to remain steadfast in our advocacy for good governance and responsible stewardship at Rogers on behalf of our employees, customers and all shareholders. We also plan to do everything we can to help the company successfully conclude the transformative Shaw transaction for the benefit of all stakeholders,” the statement said.
Richard LeBlanc, professor of governance, law and ethics at York University, said he wasn't surprised by the B.C. Court's ruling, but still thinks that there could be "more shoes to drop" for Rogers.
"I think it's a poor day for corporate governance when one person has this much authority leading a major public company, a telecommunications company at that," he said.
"Some of the takeaways are that Rogers needs to clean up its articles (of corporation), British Columbia needs to tend to its (Corporation) Act and ... we now have one valid board and Rogers should be getting behind and rallying behind Edward Rogers to contemplate the CEO search. Family members need to put down their swords and support the board," Leblanc stated prior to the release of Mr. Rogers’ statement.
Since the controversy burst into public view, Mr. Rogers has made no secret of his desire to remove Natale from the position and replace him with Tony Staffieri, the company's former chief financial officer. Staffieri left the company on Sept. 29, with the company announcing his departure in a tersely worded press release that belied the dispute raging at the board of directors.
It subsequently came to light that Mr. Rogers’ mother as well as sisters Martha and Melinda Rogers vigorously opposed his plan to oust Natale.
Rogers’ board removed Mr. Rogers as its chair on Oct. 21. Mr. Rogers responded with the overhaul of the board that was at dispute at the British Columbia Supreme Court.
In an affidavit supporting his petition to the court, Mr. Rogers included internal company documents that detailed his plan to not only replace Natale with Staffieri as CEO, but also to replace the chief operating officers of Rogers’ wireless and cable units.
The affidavit also contained several tables and charts that Mr. Rogers said supported his view that the company has underperformed its two main competitors – BCE Inc. (whose Bell Media division owns BNN Bloomberg) and Telus Corp. - during Natale's tenure as CEO.
When each side in the dispute argued their cases before Justice Fitzpatrick on Nov. 1, much of the debate centred around Article 3.4 of the company's articles of incorporation. That article references both a "resolution" and a "meeting" as ways Rogers directors can be removed and replaced, and it was Justice Fitzpatrick's task to determine if Mr. Rogers acted legally when he made the changes by way of a written resolution alone.