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The Rogers-Shaw-Quebecor megadeal highlights the fact that most of Canada's publicly traded companies are under the control of a minority of shareholders.Dave Chan/The Globe and Mail

Allan C. Hutchinson is a distinguished research professor at Osgoode Hall Law School and the author of The Companies We Keep: Corporate Governance for a Democratic Society.

As the Rogers-Shaw-Quebecor blockbuster deal stumbles to cross the completion line, many people are still concerned about its effect on competition in the communications marketplace. But 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 everyday people 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 concentrated, or even more so, than ever before. According to Statistics Canada data that I’ve parsed, once the complex schemes of intercorporate holdings are factored in, around 80 per cent of all publicly traded corporations in Canada are controlled by a handful of people; this compares with about 20 per cent in the United States.

This is nowhere better revealed than in the Rogers-Shaw-Quebecor megadeal. These media behemoths appear to be widely held; many Canadians, either personally or through mutual funds and pensions, own large chunks of the three companies’ 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.

The families who control the companies, often the offspring of company founders, have managed to retain a stranglehold 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 monopolized by these billionaire families.

The Rogers family owns less than 30 per cent of Rogers Communications Inc.’s RCI-B-T equity, but controls 97.5 per cent of the voting stock. The Shaw family owns much less of Shaw Communications Inc.’s SJR-B-T stock, but has around 80 per cent of the voting control. And the Péladeau family (mainly through Pierre Karl Péladeau), with 29 per cent of non-voting equity in Quebecor Inc. QBR-B-T, has almost 75 per cent of the voting control.

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 ordinary shareholders 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 judgment of what is in the public interest.

And the communications sector is no outlier. My research shows that only about 30 per cent of Canadian corporations are widely held; the remaining 70 per cent are controlled by one or a number of related shareholders. Over the years, many of Canada’s leading families have consolidated and extended their hold over some the country’s megacorporations.

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. There are two leading problems.

One is that controlling shareholders will appoint their cronies to the board and that such indebted appointees will defer to their wishes. The other is that the inside group will benefit themselves in many ways (e.g. favourable loans, inflated salaries, dividend payments rather than the company investing retained earnings, and so on).

Although often viewed as a technical issue of corporate organization, 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. And, most cannily, while perpetuating the belief that corporate power is being redistributed.

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.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 4:00pm EDT.

SymbolName% changeLast
Rogers Communications Inc Cl B NV
Quebecor Inc Cl B Sv

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