After many tortuous months of drama, the books are finally closed on Rogers Communications Inc.’s RCI-B-T takeover of Shaw Communications Inc. SJR-B-T. You may think you’ve heard more than enough about the deal, yet the many millions of final severance payments to Shaw executives are largely a mystery.
The issue? Shaw hasn’t filed any disclosure about what its executives made in the year that ended Aug. 31 of last year – more than 200 days ago. That data informs exactly what the severances for the individual executives will be.
The absence of information suggests a bit of a weakness in Canadian disclosure regulations, which indulged Shaw’s understandable lack of interest in talking about a compensation culture best compared to hogs at a trough.
But we can look back to the shareholder circular Shaw filed in April, 2021, that offers details on termination payments.
Most notable is Shaw chief executive officer and founding-family scion Bradley Shaw, who will receive nearly $400-million for his Shaw shares.
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Mr. Shaw is also slated to get a $20-million, two-year consulting deal from Rogers to, in part, “serve as an institutional knowledge base.” And that’s on top of a severance payment that Shaw estimated, at the time, at $18.73-million. To cushion the blow of his voluntary unemployment, of course.
That estimate was made on the assumption the deal closed on April 14 – of 2021, not 2023. Mr. Shaw’s package can change, since it’s based on two years’ worth of salary, bonus targets and stock awards, and that figure was current at the time.
What is it now? We do not know, because Shaw has failed to file its most recent annual executive compensation disclosure.
Typically, companies disclose compensation in the proxy circular for a coming annual meeting of shareholders. Shaw didn’t want to hold a meeting, as it assumed the Rogers takeover was close to done. But it was also close to running afoul of Alberta law that requires an annual meeting no more than 15 months after the previous one, which would have been April 12.
So in February, Shaw received an extension from the Toronto Stock Exchange and an order from the Alberta Court of King’s Bench that permitted it to hold its 2023 annual general meeting by no later than May 31.
The national securities instrument that governs proxy disclosure, however, includes language that suggests regulators typically want to see timely executive compensation disclosure even in the absence of a proxy circular.
It says that a company must make its annual executive compensation disclosure not later than 140 days after the end of its most recently completed financial year. The instrument says the deadline applies to a company “that is not required to send to its security holders an information circular.”
The Rogers acquisition may have allowed this not to apply to Shaw. It’s common for a company to not file an annual report or a proxy when it gets acquired shortly after the close of its fiscal year, before the normal deadlines for the documents. In Shaw’s case, however, we’re 215 days past the end of the last fiscal year.
Asked about the failure to disclose – prior to Friday’s news that the deal will close – Shaw spokesperson Chethan Lakshman pointed to the TSX extension and court order, and said the company planned to hold an annual meeting near the end of May, 2023, if the Rogers-Shaw merger wasn’t complete.
Without the salary, bonus and stock award information, it’s impossible to be sure exactly how much Mr. Shaw will receive. Nor is it possible to be sure how much severance other Shaw executives get – although the 2021 circular does say six executives, other than Mr. Shaw, will get $40-million in pension enhancements, on top of $22-million in retention bonuses, and $46-million in cash and stock for their Shaw holdings, which largely consisted of shares given them as compensation.
If you’re a lawyer, you can argue there was no need for Shaw to disclose any of this – the only number that matters to Shaw shareholders is the $40.50 a share that Rogers was offering for Shaw, and whether the deal closed or not. Everything else is irrelevant.
And under Canadian securities law, compensation arrangements with executives are rarely considered material, meaning companies can postpone disclosure or – in this case – avoid it completely. That’s different from the United States, where new deals, contract amendments and fresh severance agreements must be disclosed by companies.
I’d argue there’s an investor and public policy interest in finding out what Shaw paid its executives last year and how it influences the severance. They shouldn’t get the benefit of the doubt, as Shaw had long been one of Corporate Canada’s outsized compensators. The company’s legacy pension plan estimates its obligation to Mr. Shaw at nearly $135-million as of Aug. 31, 2021 (again, the most recent disclosure). That plan, at one time, topped $500-million in obligations to just 15 people. (Another fact that argues against a severance package for Mr. Shaw, I’d say.)
Knowing the final bill for Shaw compensation related to this merger also helps us judge the performance of the boards of both Shaw and Rogers, particularly the directors who serve on their compensation committees.
At the very least, it could be yet another reminder of how much of our cellphone bills flow directly into executives’ pockets.