In praise of upheaval

DEIRDRE McMURDY February 21 1994

In praise of upheaval

DEIRDRE McMURDY February 21 1994

In praise of upheaval


Three cheers for the jolly Rogers gang. After a seemingly endless stretch of bleak tid-

ings, Ted Rogers &

Co., with bold

assault on the portals

of Maclean Hunter Ltd., have reminded us all of how brisk and bracing Canadian business can be. Although domestic equity markets have been booming for some time, nothing stirs the blood quite like a good old-fashioned corporate shootout. Above all, to his infinite credit, Rogers has also enriched the diet of the financial press, which was growing wan and peevish on a and downsizing.

Aside from the delicious drama of a 1980s-style “strategic merger” campaign—complete with a script of veiled invective and a cast of executive adversaries and their camp followers-.....there is some-

thing profoundly healthy abo1 it the whole Darwinian process. Although internal review - r conti i r i at all companies, the crescendo of xy spired by a

takeover play prompts both age through the attic of their operations witl a keener eye, to refine their priorities and to test the limits of the existing management team. It also forces mo "e meaningful and direct dials m among aenior executives, share-

>1 ers, employees, directors and the X ket abouta company’s past performance and its future direction. Finally, a significant corporate confrontation provides a crucible for abstract government policies and regulations, and an opportunity to identify any weaknesses in their structure. - m -i - re

Whi airing applies to most public companies, there are exceptions—including Rogers Communications where Ted, despite his claim of being an ardent advocate of cori rate democracy, directly controls about 90 per cent of tee voting shares. The most a nspicuous exclusions, however, are the chartered banks that perennially sit OR the sidelines, smug in the knowledge that they are immune from such intense scrutiny and debate. According to their federal charters, no one party may own more And even though ihai rule may ensure

Agi sive V x—: xx" can bring out the in both pa



. n ad a's banking sector, it also impedes constructive e from

the outside world.

Thus, if a bank’s investors object to its record of loan losses, its bloated bureaucracy or

the lavish level of executive compensation, about the worst dial can happen to management is that it will face some cranky questions from the floor at the annual meeting. Kven then, as at the ToronloDominion Bank’s meeting last month, senior executives can loftily refuse to answer the offending query or can terminate the proceedings to get on with much more pressing business. 'Hie implicit message: î The

noteworthy because it is the hank’s customers and shareholders who literally pay the price of any slips in judgment—

the massive loans to Olympia & York Dev«

Dome Petroleum and miscellaneous Third World countries spring immediately lo mind. But of particular con d that

<■: u -u c “ as x -

are increasingly concentrated in the hands of banks ilion of

■ ■ n trial services.

As in othe e

illation, which was intended

lo increase competition, has had exactly the opposite effect. Since 198(1, chartered banks havi systematically swallowed investment di alers. trust companies, leasing companies, insurance firms and money managers. Most recently, the Canadian Imperial Bank of Commerce acquired a Tí per cent interest in TAL Investment Counsel Lid., one of the largest pension (und managers in Canada. The merged entity will now control at least $20 billion. If such appetites for acquisition are not soon satiated, the only thing distinguishing Canada from Switzerk xx where massive banks have effectively closed the financial system to any competition, will be ¡he quality of the milk chocolate.

led and hri merry band may have disrupt id the age ida and sparked heated dispute a . I emerging technology, asset values and operating philosophy. But the ensuing uncertainty and upheaval are infinitely preferable io the altenjixtive silence.