Chief executive Joe Natale in awkward spot as Rogers tries to calm the waters

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Joe Natale, chief executive of Rogers Communications Inc., met with equity investors in Montreal on Monday in what a company spokesperson called “business as usual” after the British Columbia Supreme Court ruled Friday that Edward Rogers had the power to replace five of the company’s independent directors with his own hand-picked slate.

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The corporate and family brawl over control that landed in the B.C. courtroom was kicked off after Edward — who chairs the family trust that controls the telco and was also reaffirmed as chair of the company’s board courtesy of Friday’s ruling — tried unsuccessfully to replace Natale.

But while Edward, the only son of company founder Ted Rogers, issued a conciliatory statement after the court ruling in his favour and said Natale has the support of the board, observers said the public airing of Edward’s loss of confidence in Natale’s performance is almost certain to shorten his tenure as CEO, a job he had been expected to hold for at least a few more years before events began unfolding in September.

“There will never be a relationship of trust and mutual respect between Edward and Natale, which is essential for this relationship to work effectively,” said Beverly Behan, president of New York-based Board Advisor LLC, which works with the boards of publicly traded companies in Canada and the United States.

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She questioned whether either side would be able to stick it out long enough for the company to obtain regulatory approvals for its $26 billion acquisition of rival Shaw Communications, including a crucial regulatory hearing next month before the Canadian Radio-television and Telecommunications Commission.

That question also appeared to be on the minds of members of Edward’s family who sit on the board, who all ultimately opposed his attempt to get rid of Natale and fought his board overhaul. In a statement Friday, his mother Loretta and two of his sisters warned of a “very real prospect of management upheaval and a prolonged period of uncertainty, perhaps at the worst possible time.”

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The company declined to comment on the speculation about Natale leaving, and a representative for Edward Rogers reiterated his statement from Friday, saying the focus “must be on the business, a return to stability, and closing our transformational merger with Shaw Communications.”

Adam Shine, a telecom analyst at National Bank of Canada, said in a note to clients that a “calming of the waters” would serve Rogers well as it seeks to obtain regulatory and financing approvals to complete the Shaw acquisition.

But Richard Leblanc, a professor of governance, law and ethics at York University, said he sees the saga continuing to play out like a unique activist investor campaign — from the inside — and he expects Natale won’t stay for long.

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“CEOs are not irreplaceable,” Leblanc said. “Part of the playbook (of activist campaigns) is to replace directors, and then replace to CEO to augment performance.”

Independent directors who were shown the door by Edward Rogers late last month had defended the CEO’s performance, and said they had initially approved a severance package for him in September only because it had been presented to them as something Natale wanted.

A dysfunctional board is like kryptonite to any external prospective CEO

A couple of days later, they voted instead to keep Natale, with an augmented compensation package he had negotiated to leave, and to terminate the employment of chief financial officer Tony Staffieri, who Edward Rogers had lined up to replace Natale.

Leblanc said that while Staffieri could ultimately be tapped to take over as chief executive, the family rift within the board of directors could make finding an outside candidate difficult.

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“A dysfunctional board is like kryptonite to any external prospective CEO,” he said, adding that Friday’s court ruling makes it clear to any candidate that they will really answer to only one person.

“If you as an external candidate coming in fall into bad grace with only one person, then your days will be numbered,” Leblanc said.

Edward Rogers said in an affidavit filed with the B.C. court that he had grown increasingly concerned with Natale’s performance over the past couple of years, and that Rogers was lagging rivals Bell and Telus on key metrics such as adding new customers and share price. Analysts said Rogers was hit harder by the pandemic than rivals because it relies more on roaming fees that were curtailed by travel restrictions.

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Rogers Communications is unique among Canadian corporations because the Rogers family controls 97.5 per cent of the telecom’s voting stock through a trust. The Rogers Control Trust is, by design, led by a single chair. That person — Edward for the past 13 years since his father passed away — answers only to a 10-member advisory committee made up of family members and long-time associates and advisors. He can be replaced only by a vote of at least seven of the 10. Several members of the trust’s advisory committee are also on the board of Rogers Communications, including former executives Alan Horn and Phil Lind, and Edward himself.

Claude Lamoureux, a corporate governance advocate and former chief executive of the Ontario Teachers’ Pension Plan Board, said there should be a special category of governance for such companies when it comes to the composition of their boards.

“All directors from corporations in a similar situation as Rogers should be listed as dependent,” he suggested.