Rogers decision: Edward Rogers can replace independent directors, B.C. Supreme Court judge rules

Edward Rogers won full control over Canada’s largest wireless carrier on Friday when a B.C. Supreme Court judge ruled that he can replace five of Rogers Communications Inc.’s independent directors without holding a shareholder meeting.

The ruling means Mr. Rogers is once again chair of the telecom and media giant’s board of directors, after weeks of intense conflict erupted when he attempted to unseat chief executive officer Joe Natale and other senior executives.

Mr. Rogers has been opposed in the family and boardroom drama by his mother, Loretta Rogers, his sisters Martha Rogers and Melinda Rogers-Hixon and five former independent directors.

Mr. Rogers was ousted as board chair last month in the power struggle, which is playing out in the middle of the telecom’s $26-billion takeover of Shaw Communications Inc. Mr. Rogers, who is the chair of the family trust that controls the wireless giant, then moved to replace the five independent directors who opposed him with his own candidates through what’s known as a written resolution.

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The trust owns 97.5 per cent of the company’s voting class A shares, and Mr. Rogers, as chair of the trust, has the power to exercise voting control over the appointment of directors.

Lawyers for Mr. Rogers argued that the Business Corporations Act in British Columbia, where the company is incorporated, is unique in allowing such a change to be made using this method.

Stephen Schachter, a lawyer for Rogers Communications, had argued that under the company’s articles of incorporation reconstituting the board requires a shareholder meeting, a process that would likely have taken months.

Justice Shelley Fitzpatrick granted Mr. Rogers’s application for approval of the change on Friday and awarded him legal costs.

“RCI argues strenuously that Edward is ‘thumbing his nose’ at the proper process and that he improperly seeks to exert rights ‘with the stroke of a pen,’” Justice Fitzpatrick wrote.

“However, as I see it, Edward has closely followed the strictures of the articles, as informed by the act where appropriate. This can only be described as respecting the process, not disregarding it.”

Mr. Rogers said in a statement that the ruling “resolves important governance issues” at the company and confirms that he acted in accordance with the articles of incorporation and applicable corporate law.

“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 said.

He added that he takes his responsibility of ensuring that the company is properly governed and effectively managed “very seriously.”

“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,” he added.

Mr. Schachter urged the judge to stay her ruling for several days so he could seek a stay from the B.C. Court of Appeal, on the grounds that Mr. Rogers’s new board could fire the company’s management or order them not to pursue an appeal.

But Ken McEwan, a lawyer for Mr. Rogers, assured the judge no such steps would be taken, which prompted her to deny the request for a stay.

Loretta Rogers, Martha Rogers and Melinda Rogers-Hixon said in a statement that they are disappointed, calling the ruling a “black eye for good governance and shareholder rights” that “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.

“We believe that today’s ruling also ushers in a particularly dangerous time for RCI. The company now faces a very real prospect of management upheaval and a prolonged period of uncertainty, at perhaps the worst possible time,” the statement said.

“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,” it added.

The decision casts doubt on the future of Mr. Natale and other senior executives. The Globe and Mail has reported that Mr. Natale and most of his 11-member executive team were prepared to leave if Mr. Rogers succeeds in reconstituting the board.

Mr. Rogers said Mr. Natale remains CEO and a company director, 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,” Mr. Rogers said.

He added that recent events have not changed the “tremendous confidence” he has in the company’s future, its management team and its 24,000 employees.

“As we proceed towards closing our merger with Shaw Communications, continue making investments in our future and executing well for our customers, I am certain that for Rogers Communications, the best days are still ahead of us,” Mr. Rogers said.

Over the past several days, talks have been under way aimed at reaching a compromise between the two sides, but no such agreement could be reached, according to a source close to the negotiations. The Globe is not identifying the person because they are not authorized to speak publicly about the matter.

Rogers is awaiting regulatory approval of the Shaw takeover, which the company expects will close in the first half of next year. Earlier this week, rival telecoms BCE Inc. and Telus Corp. and two advocacy groups urged Canada’s telecom regulator to delay a hearing into the acquisition until control of Rogers is resolved.

Rogers Communications responded in its own regulatory filing that it’s unnecessary for the Canadian Radio-television and Telecommunications Commission to postpone its Nov. 22 hearing because the Rogers family is aligned on the importance of the Shaw takeover.

Friday’s ruling means Mr. Rogers’s move to remove five independent directors – John Clappison, David Peterson, Bonnie Brooks, Ellis Jacob and John MacDonald – from the company’s board is valid.

They have been replaced by Michael Cooper, Jack Cockwell, Jan Innes, Ivan Fecan and John Kerr. Mr. Rogers was reappointed chair of the company’s board at a board meeting last month that, at the time, was deemed invalid by others Rogers family members.

Rogers Communications confirmed the reconstituted board in a statement.

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