At the end of a breathless tirade about CanWest’s dubious investments and indictment of the “shareholder-value-destroying Asper clan,” Toronto Star business editor David Olive delivers this crushing blow:
It’s a rare day that readers of the Wall Street Journal and U.K. Financial Times don’t come across one or more reports of activist minority shareholders successfully pressuring better-run firms than CanWest for bigger returns – and smarter managers. Oh, to be protected by a dual-class voting structure and Canadian restrictions on foreign ownership of media firms.
--Toronto Star, today
Now, I’m no business wizard, but I seem to recall reading somewhere that the only shares of Torstar Corp. available to the public are non-voting shares, so that the Star can remain in the iron grip of a handful of families. Oh yes, here we go:
Former Star publisher John Honderich, a Torstar director who chairs a voting trust comprising five families that control the company, had arrived at the meeting with a litany of criticisms of the newspaper’s editorial direction. He informed the group that the families had met to discuss a variety of concerns at the Star, in particular what they perceived to be a drift away from the so-called Atkinson Principles, a commitment to social justice reporting that is formally enshrined at the paper. To make matters worse, he went on, it had been a poor year for awards at the Star, and circulation was ebbing.
These five families, some now in their third generation, hold 98 per cent of the company’s nearly 10 million class A voting shares. This structure ensures the Star is steered by persons who honour the principles of its legendary proprietor, Joseph Atkinson, not to mention wield considerable control over both the CEO and the board.
--”Private feud, public company,” Globe and Mail, October 21, 2006
Class B shares are non-voting unless eight consecutive quarterly dividends have not been paid.
Registration of the transfer of any of the company’s shares may be refused if such transfer could jeopardize either the ability of the company to engage in broadcasting or its status as a Canadian publisher.
[N.B. that would be those Canadian ownership restrictions Olive mentions above that protect CanWest. And, apparently, Torstar]
--Torstar 2005 annual report, p. 52
But I guess what’s different from CanWest is that Torstar’s motivation for barring investors from having a say in the company’s management is to protect the Atkinson principles from greedy fund managers, who are more interested in maximizing returns for hapless RRSP investors than in police racial profiling or carbon taxes. It’s kind of like when Canada participated in the NATO bombing of Serbia 1999: that was “humanitarian” bombing. In other words, Torstar is protecting its managers from its investors for purely humanitarian reasons.
Oh, and here’s a 2005 Globe and Mail (arch-enemy of the National Post, in case you hadn’t heard) ranking of the governance of companies with similar share structures. Yes, Torstar does outrank CanWest, but not by much:
A dual-share structure doesn’t always mean low marks on the Board Games corporate governance rankings. An analysis of dual-share companies shows that governance practices vary widely. In this sample, we have used the standard Board Games marking criteria, but have not included the 10 points that deal with share structure. The total is out of 90.
Rank Company Score
1 Telus Corp. 80
2 Cogeco Cable Inc. 79
3 Torstar Corp. 78
4 Canadian Tire Corp. Ltd. 77
5 Celestica Inc. 74
6 Zenon Environmental Inc. 73
6 CCL Industries Inc. 73
8 CanWest Global Commun. 72
8 Astral Media Inc. 72
8 CHC Helicopter Corp. 72
8 Teck Cominco Ltd. 72
12 Brascan Corp. 71
12 Bombardier Inc. 71
14 Corus Entertainment Inc. 70
15 Maple Leaf Foods Inc. 69
--“Two classes, many opinions,” Globe and Mail, October 18, 2005
And speaking of dubious investments:
“My view is that the long-term performance of a company is the responsibility of the board, and Torstar certainly has struggled with its long-term performance, said Tim McElvaine, president of Vancouver-based McElvaine Investment Management Ltd, which owns about 475,000 Torstar shares. “So I think the board probably has to look carefully at itself.” Mr. McElvaine suggested he “scratched his head” somewhat over the company’s decision to buy into Bell Globemedia at a time its own stock was hurting.
--Globe and Mail, as above.
Full Disclosure: When I attended Ryerson, I was the recipient of an academic award in Olive’s father’s name. (I didn’t receive any Star scholarships.)