Edward Rogers`s Challenges at Rogers Communications

Edward Rogers`s Challenges at Rogers Communications
Case Code: BECG178
Case Length: 14 Pages
Period: 2021-2022
Pub Date: 2022
Teaching Note: Available
Price: Rs.400
Organization: Rogers Communications Inc.
Industry: Technology & Communications
Countries: Americas
Themes: Corporate Governance, Governance Practices,Family Business,M&A
Edward Rogers`s Challenges at Rogers Communications
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case discusses the challenges faced by Edward Rogers (Edward), Chairman and Independent Director at Rogers Communications Inc. (Rogers), a Canadian communications and media company, in running the company. Though it was a publicly-traded company, it was a family-owned business. The company had a Rogers Control Trust (RCT) set up by Edward’s father and Canadian entrepreneur Ted Rogers. The RCT gave huge amount of control to Edward wherein he controlled 97.5% of the voting rights due to the company’s dual-class share structures. While the RCT aimed to benefit successive generations of the Rogers family, Edward faced allegations of using RCT to his advantage. In October 2021, Edward informed the Rogers board that he planned to replace the then CEO of Rogers, Joseph Natale (Natale), with the then Chief Financial Officer (CFO), Tony Staffieri (Staffieri). The board comprising Edward’s mother, Loretta Rogers (Loretta), and his two sisters, Martha Rogers (Martha) and Melinda Rogers-Hixon (Melinda), and other independent directors initially agreed with him but later changed their decision when they found that they had been misled by Edward and Natale was effectively overseeing Rogers’s C$26 billion proposed acquisition of Canadian telecommunications company Shaw Communications Inc. (Shaw) announced in March 2021. Subsequently, the board ousted Edward as the Chairman of Rogers and replaced him with John MacDonald (MacDonald), a member of Rogers’s board and Lead Director and Chair of the Corporate Governance Committee.

The board’s decision did not go down well with Edward. Consequently, in October 2021, he filed a case against his company in the Supreme Court of British Columbia since Rogers was incorporated in British Columbia. He stated that Natale had failed to turn Rogers around. Based on the RTC, the court gave its ruling in favor of Edward. Soon after, using his control over the voting rights, he replaced the five independent directors with five others chosen by him. Natale chose to exit the company paving the way for Staffieri to take over as interim CEO and then CEO of Rogers in November 2021.

Experts criticized the corporate governance practices at Rogers as it was essential for the Chairman of the board to conduct a shareholders’ meeting or give prior notice to the shareholders before firing any independent director. But Edward’s huge control over the board and the dual-class share structures at Rogers allowed him to do so. Though Edward won the family feud, he faced the Herculean task of completing Rogers’s acquisition of Shaw since the deal was facing a scrutiny from regulators. The acquisition had to be approved by the Canadian Radio-television Commission (CRTC), the Competition Bureau – the competition regulator in Canada, and the Ministry of Innovation, Science and Economic Development Canada (ISED). The Competition Bureau stated that consumers in Canada were already paying the highest prices in the world for telecom and internet services as the market was an oligopoly dominated by the Big Three – Rogers, Telus Corporation (Telus), and Bell Canada (Bell). If Rogers acquired Shaw, it would create an industry behemoth, further increasing prices for consumers. In June 2022, the Competition Bureau blocked the acquisition citing concerns over increasing prices and reduced choices for the consumers.

To add to Edward’s woes, on July 8, 2022, a network outage at Rogers led to a disruption which left millions of Canadians without internet or phone service for 19 hours. The outage had a huge impact on businesses, banks, passport offices, and 911 emergency services in Canada. The outage led to Rogers facing immense scrutiny from the federal government and the CRTC, and the company being asked to explain the causes of the ‘unacceptable shutdown’.

After the outage, Staffieri issued an apology. He added that the company would credit five days of free service to its consumers. The outage was hugely criticized by François-Philippe Champagne (Champagne), Minister of ISED, since the service disruption had a huge impact on 911 services and payments systems, and left more than 12 million people without landline, cell phone, or internet connections.

Champagne suggested that Rogers, Telus, and Bell should work collaboratively to enable customers to switch to each other’s network in case of any network outage in future. Some experts opined that to improve network resiliency against future network outages, Canada should address the oligopoly of Rogers, Telus, and Bell in the country’s telecommunications industry.

In light of these challenges, what should Edward do to improve the company’s corporate governance practices? What steps should he and Staffieri take to convince the regulators and complete the proposed acquisition of Shaw by Rogers?

Issues

The case is structured to achieve the following teaching objectives:

  • Know the challenges faced by business owners in owning and managing an enterprise at the same time?.
  • Understand the importance of good governance and control in bringing transparency to the operations of family owned businesses
  • Know the challenges associated with dual-class share structures
  • Understand the scrutiny faced by business owners from regulators while acquiring and integrating a company in an oligopoly

Contents

Keywords

Rogers Communications; Edward Rogers; Rogers Control Trust; Supreme Court of British Columbia; Management Reshuffle; Independent directors; Boardroom Tussle; Corporate Governance Practices; Dual-class share structures; Shaw Communications; Competition Bureau; Canadian Radio-television Commission; Ministry of Innovation, Science and Economic Development Canada; Market dominance; Service disruption

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