Rogers has two classes of shares, Class A and Class B. The Rogers family trust owns about 97.5% of Class A shares, which include voting rights, and 9.89% of Class B shares, which pay dividends but do not offer voting rights. Retail investors are most likely to own Class B shares. Rogers family members fill the bulk of the company’s board seats.
From a shareholder’s perspective, a takeaway from the chaotic Rogers power tussle is how a dual-class share structure puts voting rights into the hands of the chosen few, giving them disproportionate power with little accountability. If you owned Class B (non-voting) shares in Rogers Communications Inc., you had no say in the matter. As an investor, it’s important to understand what type of shares you’re buying and what your rights are.
Preferred vs. common shares
Being a shareholder means you own a piece of a publicly traded company. Individual investors typically buy and sell shares—also called stocks or equities—on a stock exchange with the help of an investment advisor, an online brokerage or a robo-advisor. You can also purchase shares privately and during initial public offerings (IPOs).
Canadian public companies have two main types of shares:
- Common shares: These shares typically include voting rights, but dividends are not guaranteed. If a company’s common shares do pay a dividend, it may be slashed or stopped at any time depending on the profitability of the business. The majority of shares are common shares.
- Preferred shares: These shares typically don’t grant voting rights to shareholders, but they offer a guaranteed return in the form of dividends. Investors enjoy greater tax efficiency with dividend income than investment income from, say, bonds. Preferred shares are treated preferentially with respect to the return of capital, including upon liquidation or bankruptcy.
What rights do shareholders have?
As a shareholder in a company, you have more rights than you might think, including the following:
- Right to vote: Common shareholders usually have the right to vote on major corporate matters, such as mergers, acquisitions, and the election or removal of a company’s board of directors. Preferred shareholders do not have the right to vote.
- Right to attend shareholder meetings: Owning common shares allows you the right to receive notice of meetings of shareholders, as well as attend and vote at those meetings. (Common shareholders who can’t attend a meeting in person can vote by proxy.) Preferred shares don’t include these rights.
- Right to access company information: Federal, provincial and territorial corporate regulations, and provincial and territorial securities laws, allow all shareholders to access basic information including shareholder lists, the articles and bylaws, and minutes of shareholder meetings.
- Right to a share of company profits (dividends): By definition, holders of preferred shares have a right to receive fixed, regular dividends determined at issuance. Holders of common shares typically aren’t entitled to dividends, but companies can pay them out if they wish (usually less than what preferred shareholders receive). Depending on their profitability, companies can also cut, stop or raise payouts to common shareholders.
- Right to sell shares: Shareholders have the right to transfer ownership of their shares by selling them, usually through a broker or investment advisor.
- Right to compensation if a company fails: If a company becomes insolvent or bankrupt, its remaining assets are distributed to stakeholders in this order: creditors (that is, bondholders), preferred shareholders, common shareholders. In other words, common shareholders have the least claim on a company’s assets.
- Oppression remedy: This is a legal mechanism that allows shareholders to sue a company. “It is a remedy under federal, provincial and territorial corporate statutes wherein a shareholder may apply to the court for relief if the corporation or its affiliates, or the directors, have engaged in conduct that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of the complainant,” says Robert Staley, partner and securities litigator at Bennett Jones in Toronto. The oppression remedy protects the reasonable expectations of shareholders and other complainants.
What is shareholder activism? How does it fit into shareholder rights?
Shareholder activism seeks to modify a corporation’s behaviour by threatening the tenure of some or all directors, or by bringing issues to a vote of shareholders.
“Shareholder activism is typically seen in public companies, where shareholders or groups of shareholders exercise, or threaten to exercise, their voting rights to remove and replace directors or influence the decisions of the board of directors,” says Staley.
Shareholder activism is often seen where a corporation’s performance is lagging or there are disagreements between the corporation and shareholders about strategic issues. During the pandemic, for example, shareholders have targeted boards and management teams at numerous companies over their perceived poor leadership during the global crisis. Recently, after shares in Peloton Interactive sank below their IPO price, activist investor Blackwells Capital LLC sent a letter to the company calling for the dismissal of its CEO and asking that the company be sold.