Edward Rogers won the war but that victory may still cost his company dearly

The decision by Rogers Communications Inc. to not appeal a court decision last week handed company chair Edward Rogers a decisive victory in his battle for control of the telecom company that bears his family name.

Long-simmering tensions at the family-run company spilled out into the open last month, giving ordinary Canadians an unprecedented glimpse into the behind-the-scenes details at play with the powerful family.

While the ruling handed the keys of the castle to Edward Rogers for the foreseeable future, the costs associated with his win may makefor a pyrrhic victory making iteven harder for him to fix the mismanagement and stock underperformancethat he says has plagued the company for years.

The legal costs of the fight alone are not insignificant.

A handful of law firms have been conscripted for one side or the other over the past few weeks as the drama culminated in last week's ruling in a B.C. court, after a battle that laid bare the $30-billion company's unique ownership structure.

With that many legal eagles involved,veteran corporate lawyer Phil Anisman says the costs can add up quickly. On the day the verdict was read, there were nine lawyers in court, and dozens more listening into a conference call of the proceedings.

It is reasonable to assume that those in the room would chargeup to $1,000 an hour for their time, saidAnisman, and that's just for one day of the almost two-month-long fight.

"Itwouldn't cover everything that went back to all their discussions, negotiations [and]legal advice before they decided to go to court," Anisman said in an interview.

Those legal costs may be in the rearview mirror, but a number of other major expenses still lie ahead.

Severance costs

The power strugglebegan last month when Edward Rogers, as chair of the board, attempted to dismiss the company's CEO Joe Nataleand replace him with CFOTony Staffieri.After Natale alerted the board, other family members,including Edward's sisters and mother, voted to block the move and to remove him as chair.

Edward instead unilaterally fired five members of the board, replacing them with successors of his choosing and reinstating himself as chair.

He was able to overthrow the board because of the company's dual-class sharestructure. More than 97 per centof Rogers shares with voting rights attached to themare held in a family trusta trust that'schaired by Edward.

In court filings, Edward suggests that Natale had agreed to go, and it was only in the process of negotiating the terms of his exit that things blew up. But even if the splithad been amicable, Natale was poised to leave the company with an exit package thatone estimate pegged at as much as $200 million.

Natale has earned a salary of just over $1 million every year since becoming CEO of Rogers in April 2017, along with an annual bonus of $1.5 million. Additionally, he's earned stock-based awards to bring his total compensation to at least $11 million every year.

Under the terms of the severance package that Edward Rogers submitted as evidence, if Natalehad left the company as planned on Oct.1,he was set to receive two years' worth of salary and bonuses, an acceleration of his stock options for the years 2019 through 2021, retirement treatment for all stock options he'dbeen awarded before that, and he would continue to accrue pension timeuntil 2024.

He wouldalso get a $4 million cash payout as part of Rogers Communications' planned $28-billion takeover of Shaw, and $20 million in consulting fees for the two years that followed the deal's closing.

Amid the recent family power struggle, Natalereportedly threatened to leave the company if Edward won control. In comments made after the court ruling, Edward Rogers did his best to extend an olive branch, saying that "Mr. Nataleremains CEO and a director of Rogers Communicationsand has the board's support."

Not everyone thinks that tenuous peace can last.

Richard Leblanc, a governance professor at York University in Toronto, says it's all but certain that Nataleand perhaps other members of the management teamwill be out the door at some point.

"Edward Rogers Isee as an activist investor. And the playbook is to replace the directorsand then replace the CEO," he said in an interview. "In the coming weeks, I think there will be a management shakeup."

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Richard Leblanc, a professor of governance, law and ethics at York University in Toronto, says the saga of the fight for control at Rogers shows why corporate governance issues don't get the attention they deserve, and why the rules need an overhaul.

If Natale'sgolden handshake is indeed worth $200 million, that's more than the companywill pay out in dividendsto its non-voting shareholders next quarter.

And that'sassuming the price tag hasn't gone up since things turned nasty.

It's no sure thing that Natalewould accept those same terms now, saidDimitry Anastakis, a professor of business history at the Rotman School of Management at the University of Toronto.

"Maybe he says, 'I'vegot to drive a harder bargain,'" he said. "There will certainly be a smouldering discussion when they have the next board meeting."

PRdisaster

While it'spossible to tally up some of the cold, hard dollars that Rogers has spent on the conflictso far, Anastakissaid the ugly saga may have harmed the company in more nebulous ways, too.

A public fight between billionaires for control of a highly valuablecompany didn't sit well with members of the public who have a low opinion of the telecom sector as it is, he said."This is not a beloved firm and, in terms of their customer relations, people mostly hate the telcos."

Anastakisdescribed the entire saga as a "pattern of poor judgment."

"All of this is really unnecessary," he said.

Edward Rogers's exploitation ofa loophole in the company's structure to allow him to do what he did left a bad taste in some people's mouths, saidAnastakis.

"That makes it even worse;it's like a filibuster," he said."It's minority rule.It's a rule of one."

Because of the company'sdual-share, family-driven structure, Anastakis doubts there is enoughdesire or abilityto scuttle the Shaw deal. But hesaid the feudmay raise uncomfortable questions about how much longer that structure can last for a company poised to control so much of Canada's IT infrastructure.

Numerous shareholders and governance experts "have been screaming about this for years, and I think this is really going to come to a head," he said."This screams for some sort of regulatory response."

Janet White, a portfolio manager withiA Private Wealth, says the fightcould hurt the company over the long term by shining a light on its poor governance.

"Shareholders vote with their money," she said.

White counts a number of Rogers employees as clients,andshe said even they don't like what they've seen this past month. "Most of them are shareholders in the company, and so their own personal wealth is tied up. [So]that could also cause people to rethink whether they want to be employees of Rogers."

As to whether the saga could cause Rogers tolose customers,Anastakis said thatwhile Canadianslove to gripe about their cellphone, cable and internetbills, history shows that few will do anything about it.

"Ed's got his customers over a barrelbut he's got them almost exactly where he wants them."