Sign up USA
Proactive Investors - Run By Investors For Investors

Telus stock consolidation brews "potential conflict of interest" - Academic

Telus stock consolidation brews "potential conflict of interest" - Academic

Canadian telecoms company Telus' (TSE:T) plans to end its dual-class share structure could be a "potential conflict of interest" for certain executives, according to a Canadian business academic.

Earlier this year, a proposal to convert Telus non-voting shares into a common share on a one-for-one basis was dropped by Telus as activist U.S.-based hedge fund Mason Capital Management, which controls 20 per cent of Telus common shares, launched a campaign against the consolidation. Mason saw the proposal as unfair and is seeking a higher conversion premium as Telus voting shares have historically traded higher than non-voting shares.

In a recent blog posting, Dr Richard Leblanc, Associate Professor in Law, Governance & Ethics at Toronto's York University said that Telus' plans to collapse its dual-share structure brought up "red flags".

"We will see how this case plays out, but the red flags to me at least, are (i) the potential unfair treatment of one class of shareholders to the benefit of another; and (ii) the potential conflict of interest by the Telus board and certain executives. These are both legitimate questions and areas of inquiry," Leblanc wrote.

"Telus appears to be attempting to collapse voting and non-voting shares without apparently acknowledging a relevant historical practice of around a 4-5% premium at which voting shares have been trading. The case is important as other companies with dual class shares may contemplate similar collapses," York University's Leblanc wrote.

Leblanc cited one expert report that said: "16 individuals on the board and in the executive office stand to benefit a total of $3,370,003."

The York University professor write that a board of directors cannot disregard the interests of one class of shareholders in favour of another. 

"If it does, voting shareholders may properly claim that their interests have been unfairly disregarded or prejudiced under what is known as the "oppression remedy."

Telus has scheduled a meeting in October at which shareholders will be able to vote on the proposal. The firm believes that the activist investor may not be able to block the plan this time round.

"We're going to defeat Mason, which will be cheered on by good corporate governance advocates," Telus CFO Robert McFarlane told the press recently. 

Mason's principal and co-founder Michael Martino responded: "Mason will vigorously oppose Telus' latest attempt to take value from voting shareholders and transfer it to the non-voting shareholders, including Telus' board of directors and company executives, whose personal economic interests are tied to the non-voting stock."

The full blog posting from Dr Leblanc can be read here:

View full T profile View Profile

Telus Timeline

August 10 2015

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You understand that the Company receives either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate.

You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Copyright ©, 2018. All Rights Reserved - Proactive Investors North America Inc., Proactive Investors LLC

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use