As the Rogers-Shaw-Quebecor blockbuster deal stumbles to cross the completion line, many are still concerned about its effect on competition in the communications marketplace. But, as we await the Minster’s possible, but unlikely veto, there is another perhaps larger issue lurking behind the competition headlines.
It is one of the great myths of the Canadian corporate and investing scene that shareholding is becoming more diffuse and, therefore, more Canadians now own more corporate stocks than ever before. In other words, whatever the competition challenges among the largest corporations, there is a steady move to opening up corporate power to more openness and, as such, more competition for control. Democracy seems to be on the march.
However, whatever the basic corporate ownership figures disclose on the surface, there is a reverse and contradictory process taking place beneath that surface. Corporate power is as or more concentrated than ever before. Some of Canada’s leading families have consolidated and extended their hold over some the country’s mega-corporations. And, most cannily, while perpetuating the belief that corporate power is being re-distributed.
This is nowhere better revealed than in the Rogers-Shaw-Quebecor debacle. These media behemoths appear to be widely-held; many Canadians either personally or through mutual funds and pensions own large chunks of their shares. The problem is that, contrary to common assumptions, there is no connection between the shares owned and the control exercised. People remain on the outside looking in.
These families, often the offspring of their companies’ founders, have managed to retain a stranglehold on their companies by relying on a dual-class shareholding structure. This is perfectly lawful in Canada. While the vast majority of the companies’ non-voting shares are widely-held, a much smaller class of voting shares are monopolised by these billionaire families.
The Rogers family owns less than 30 per cent of the company’s equity, but controls 97.5 per cent of the voting stock. The Shaw family has around 80 per cent of the voting control and much less of the stock. And the Peladeau family (mainly through Pierre Péladeau) has almost 75% of the voting control of the company.
So, these three families dominate and control the communications infrastructure of Canada. Their companies’ shares might be owned by many Canadians (who might well thereby get a distributed piece of the available economic pie), but they have very little or no control over the running of those companies. The upshot of this is that a very a wealthy elite control and exercise corporate power in their own interests or, at best, in their own judgement of what is in the public interest.
And the communications sector is no outlier. Only about 30% of Canadian corporations are widely held; the remaining 70 per cent are controlled by one or a number of related shareholders. Once the complex schemes of inter-corporate holdings are factored in, around 80 per cent of all publicly-traded corporations in Canada are seen to be controlled by a handful of people; this compares with about 20 per cent in the United States.
Apart from the debilitating democratic impact of this corporate concentration on the Canadian polity generally, there are many drawbacks for the specifics of corporate governance. The two leading ones are — that controlling shareholders will appoint their cronies to the board and that such indebted appointees will defer to their wishes; and that the inside group will benefit themselves in many ways (e.g., favourable loans, inflated salaries; dividend payments over retained earnings; etc.).
Although often viewed as a technical issue of corporate organisation, the use of dual-class shares enables a handful of families (and often one member of that family) to exert massive political and social influence through their corporate fiefdoms. While such dual-class arrangements might be defensible in straight financial terms, they make a mockery of any claim that there is a vigorous and healthy ‘shareholder democracy’ at work.
(Published in The Globe and Mail, Feb. 15, 2023)