"Happy families are all alike; every unhappy family is unhappy in its own way.” Leo Tolstoy, Anna Karenina
"Deciding whether or not to trust ... is like deciding whether or not to climb a tree, because you might get a wonderful view from the highest branch, or you might simply get covered in sap, and for this reason many people choose to spend their time alone and indoors, where it is harder to get a splinter." Lemony Snicket, The Penultimate Peril
Leaving a legacy means to extend one's identity, life work and values into the future, to outlive the physical self. Leaving a legacy in an estate planning context means designing an effective mechanism to promote your wishes for how your property will be administered after you die.
Unfortunately, many well-intentioned, technically precise estate plans reap unintended, negative consequences. The current Rogers family saga is hardly unique. The Griffiths family, the Doman family, the Bentall family and the Stronach family are all high profile Canadian business families where the inter-generational transmission of family business assets and control did not proceed as planned.
It seems that all the technical planning in the world still cannot control the future, particularly because beneath the documents lie emotions, relationships and families.
Family feuds over power, money and control have been the subject matter of great dramas, from King Lear to Succession. But really who needs fiction, when the actual facts are this interesting?
Table of Contents
1. The Rogers Timeline2. Trusts3. Families and Business4. Conflict5. How the Rogers Saga Could Potentially Have Been Prevented6. Conflict Management Strategies7. Conclusion
1. The Rogers Timeline
Rogers Communications Inc. ("RCI"), a family-run communications and media company founded by the late Ted Rogers, is one of Canada's largest companies with 23,500 employees, just under 14 billion in annual revenue and over 10 million customers. RCI shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI). The Rogers Control Trust is the controlling shareholder of RCI, owning 97.5% of the voting shares.
Edward Rogers, the only son of Ted Rogers, has been both the chair of the Rogers Control Trust and the chair of the Board of Directors of RCI since his father's passing in 2008. As the Control Trust Chair, Edward Rogers has the ultimate authority to act on behalf of the Trust, controls the votes of the Class A Voting Shares and thus Edward Rogers currently controls RCI.
The current Rogers Control Trust is comprised of the Control Trust Chair (Edward Rogers), the Control Trust Vice-Chair (Melinda Rogers-Hixon), the Trustee (Scotiatrust), and a committee of advisors appointed in accordance with Ted Rogers's estate arrangements (the "Advisory Committee").
The current members of the Advisory Committee are: Loretta Rogers (Ted's widow), Lisa Rogers (sibling), Edward Rogers, Melinda M. Rogers, Martha Rogers, and David A. Robinson (Rogers family members); Alan D. Horn, Thomas I. Hull and John H. Tory (trustees of a trust for the benefit of Rogers family members); and Philip B. Lind.
In the spring of 2021, RCI reached an agreement to purchase Shaw Communications Inc., a telecommunications company, for $26 billion. That acquisition is currently subject to regulatory review and approval by the Canadian Radio-television and Telecommunications Commission, the Competition Bureau, and the Ministry of Innovation, Science and Economic Development.
According to Edward Rogers, following the announcement of the Shaw deal, members of the Rogers family and directors of RCI discussed concerns they had regarding RCI President and CEO Joe Natale's leadership, the impending Shaw integration and his ability to manage the combined company.
According to the Globe and Mail on September 17, 2021, Mr. Natale was cooking dinner with his wife. On the other end of the line (referred to now as the infamous "butt-dial") was Tony Staffieri, RCI's CFO. Mr. Staffieri was speaking with David Miller, who had just recently been the chief legal officer at RCI. The two men were heard talking about how Mr. Staffieri was going to lead the company once Mr. Natale was out of the way. According to Mr. Natale, he heard that nine of 11 members of RCI senior management team would be purged as well, either forced out with Mr. Natale or following his departure.
On September 18, 2021, Mr. Natale took the matter to the board directors and also met with Mr. Rogers, saying that either he Mr. Natale or Mr. Staffieri would have to go. Edward Rogers did not support terminating Mr. Staffieri but was prepared to work with Mr. Natale on a resignation package and consulting agreement for the Shaw transaction.
On September 22, 2021, the Board of Directors of RCI held a meeting to discuss the retirement of Mr. Natale, the corresponding transition agreement and the election of the Chief Financial Officer, Anthony Staffieri, as RCl's new CEO. Edward Rogers asserts that his mother Loretta Rogers and his sister Martha Rogers spoke in support of this proposal at that meeting.
On September 24, 2021, the Board of Directors (all except David Peterson) accepted the retirement of Mr. Natale effective October 1, 2021, and authorized Edward Rogers to enter into a severance agreement and transition and long-term support agreement with Mr. Natale. The Board deferred the resolution appointing Mr. Staffieri as the new CEO to finalize his compensation package, and a further meeting was scheduled for Sunday, September 26 for that purpose.
By Saturday, September 25th, the opinion of the board had started to change. Martha Rogers had become increasingly concerned after learning that the independent directors had a different set of facts on Mr. Natale’s performance than what was presented to the family. Conversations took place between Ms. Rogers-Hixon, Martha Rogers and the independent directors, who raised issues with Mr. Rogers’s behaviour over several years. By the end of the day, Mr. Natale had changed his mind and agreed to stay on as CEO.
On Sunday, September 26, 2021, members of the Board of directors, led by Martha Rogers, tabled resolutions rescinding the resolutions adopted on September 24, 2021 and authorizing the termination of Mr. Staffieri as CFO. The resolutions further proposed to appoint a committee of the Board known as the "Executive Oversight Committee" to establish protocols for the chair of the board, "including restricting engagement with other members of management" and to authorize that committee to undertake a corporate governance review. A vote on these resolutions was deferred to a subsequent Board meeting on September 29.
On September 27, 2021, Mr. Horn, Ms. Rogers-Hixon, Mr. Edward Rogers, Ms. Loretta Rogers and Ms. Martha Rogers met and Mr. Edward Rogers proposed a compromise that would see Mr. Natale and Mr. Staffieri continue working together through the closing of the Shaw merger.
On September 28, 2021, Mr. MacDonald sent Mr. Rogers an e-mail dismissing the idea. By then, several of the independent directors including Mr. MacDonald, Mr. Peterson, Bonnie Brooks and Ellis Jacob had aligned as a group and retained their own lawyer.
On the morning of Wednesday, September 29, 2021, in his capacity as chairman of the Board of RCI, Edward Rogers moved to defer the Board meeting scheduled for that day until Friday, October 1, 2021 to allow the Rogers Control Trust to meet and to allow for more time for the Board to address the outstanding issues and try to reach a resolution.
On the afternoon of Wednesday, September 29, 2021, the lead independent director John MacDonald advised Edward Rogers that a majority of the directors disagreed with the proposed change in the date of that day's Board meeting and would be attending at the time and place called for the meeting. RCl's Board meeting proceeded on the afternoon of September 29, 2021, and the rescinding resolutions were passed. Mr. Robert Gemmel was the only director present who voted against it.
On October 21, 2021, Edward Rogers announced his intention to make changes to the Board of Directors. Together with that press release, Mr. Rogers and the Rogers Control Trust took steps to replace certain directors of RCI via a written consent resolution.
On October 22, 2021, Mr. Rogers sent to his new Board of Directors, including Michael Cooper, Jack Cockwell, Jan Innes, Ivan Fecan, and John Kerr, a Notice of Directors Meeting on Sunday, October 24, 2021. The purpose of the meeting was to approve the appointment of a Chairperson of the new Board of Directors, and approve the appointment of the new members of each committee of the Board.
In response on October 22, 2021, John A. MacDonald, as Chair of the existing Board of Directors of RCI, published a statement of RCI providing: (i) RCI had received the consent resolution; (ii) RCI had "reviewed the consent resolution with its external legal counsel and has determined the resolution is invalid"; and (iii) the "Board of Directors of Rogers ... remained unchanged".
On October 23, 2021, by correspondence to Mr. Rogers and copied directly to each member of the new Edward Rogers constituted Board, Goodmans LLP, as counsel to RCI, advised that it was RCl's position that the resolution did not comply with the provisions of the BC Business Corporations Act, that the Board remained unchanged, that proceedings at the meeting of the newly constituted Board would be invalid and stating that reliance by anyone on the resolution and proceedings taken under it will result in them being "accountable for all damages caused to Rogers and its shareholders".
October 23, 2021, Martha Rogers tweeted:
and
Edward Roger's new Board of Directors met on October 24, 2021, beginning at 7:00 p.m. ET. Also on October 24, 2021, at 7:06 p.m. ET, Loretta Rogers, Melinda Rogers- Hixon, Martha Rogers, John A. MacDonald, John Clappison, David Peterson, Bonnie Brooks, and Ellis Jacob published a statement from RCI stating:
... We remain as duly elected members of the Rogers Communications Inc. Board and represent the majority of the Board members of the company. No other group of individuals has any authority to purport to act as the Board of Directors of Rogers Communications Inc.
RCI, a multi-billion dollar publicly traded company, had two competing boards, two competing board chairs and a contested CEO as it headed into critical regulatory hearings on the $26 billion Shaw takeover.
On October 26, 2021, Edward Rogers, represented by McEwan Partners, filed a Petition with the BC Supreme Court, seeking:
- A declaration that the written ,consent resolution dated October 22, 2021, signed by the shareholders holding at least 2/3 of the Class A Voting Shares of RCI is valid and effective (the "Consent Resolution");
- A declaration that John Clappison, David Peterson, Bonnie Brooks, Ellis Jacob, and John A. MacDonald were removed as directors of RCI pursuant to and as at the date and time of signing of the Consent Resolution;
- A declaration that Michael Cooper, Jack Cockwell, Jan Innes, Ivan Fecan, and John Kerr were validly appointed as directors of RCI pursuant to and as at the date and time of signing of the Consent Resolution;
- An order requiring Rogers Communications Inc. ("RCI") to correct its register of directors to remove the names of John Clappison, David Peterson, Bonnie Brooks, Ellis Jacob, and John A. MacDonald and enter the names of Michael Cooper, Jack Cockwell, Jan Innes, Ivan Fecan, and John Kerr as directors of RCI pursuant to ss. 228 and 230 of the Business Corporations Act, SBC 2002, c 57 (the "Act');
- An order directing RCI to complete and file with the registrar a notice of change of directors and pursuant to ss. 126, 127, and 228 of the Act;
- An order that the notice and service requirements for this Petition and its supporting affidavit, as set forth in the Supreme Court Civil Rules, are hereby waived; and
- Costs.
A hearing was held on Monday, November 1 at 10 a.m. in Vancouver at the British Columbia Supreme Court, where no decision was made. The case was adjourned to 2 p.m. on Friday, November 5, 2021.
The court held in favour of Edward Rogers. RCI decided not to appeal the court decision, handing company chair Edward Rogers a decisive victory in his battle for control of the telecom company that bears his family name.
While the ruling handed the keys of the castle to Edward Rogers for the foreseeable future, the costs associated with his win may make for a pyrrhic victory — making it even harder for him to fix the mismanagement and stock underperformance that he says has plagued the company for years.
2. Trusts
A trust is a relationship under which a person, called the settlor, transfers property to another person, called the trustee, who holds the property for the benefit of another person, called the beneficiary.
The trustee owes a fiduciary duty to the beneficiaries, meaning a duty to place those interests ahead of her own interests at all times, to act with honesty and care in the discharge of her duties and to act with the utmost good faith. The quintessential fiduciary, a trustee wields tremendous power based on her legal ownership and control of the trust property, her superior access to information, and, in many cases, the experience, expertise, and status that caused her to be appointed in the first place.
As reported by his biographer Robert Brehl, Ted Rogers had two fundamental wishes:
- For "the family to keep control of the company he worked so damn hard to build up over 47 years. And he’s done everything he can — I’ve done everything I can — to cause that to happen within the law." and
- "I believe strongly there should be somebody in charge. I want a separation between the ownership and the voting of the shares so that I can give more votes to someone without necessarily having to give them all the wealth. That’s critical. Most people won’t do that.”
“So they don’t all have a meeting over my grave and scream and yell at each other, I’m naming Edward (to vote the Control Trust shares) for the first two years. They just have to accept my judgment for two years. After that, then the procedures kick in and Edward could be kicked out
and somebody else could be brought in.”
In the case of the Rogers Control Trust, he said, the performance of the controlling shareholder is assessed and put to a vote once a year. Edward has been the controlling shareholder since Ted’s death in 2008. To make a change, two-thirds of trustees must vote to remove Edward and, at the same time, two-thirds must agree to a successor, Ted told me. (Robert Brehl).
There are currently 10 trustees for the Control Trust: Loretta Rogers and her four children, her nephew David Robinson, and Alan Horn, Phil Lind, Toby Hull and John Tory. Two-thirds
would require seven votes.
So we have a Control Trust and all those sort of details,” Ted told me (Robert Brehl) back in 2007. “But the essence of it is that subject to good performance, one kid is picked and they would be the face of the controlling shareholder to RCI, to its CEO, to its board of directors, and so on. That person would be the controlling shareholder. They have obligations. They’ve got to consult with the members of the family. They’ve got to make sure certain people are elected to the board. They’ve got to be good listeners as well as talkers, get along with the CEO, and so on. But in the worst case, he could call a shareholders meeting and fire the board and the CEO — worst case.”
From an Affidavit of Loretta Anne Rogers made on October 28, 2021:
"In the years leading up to his death in 2008, Ted took great interest in establishing a framework for safeguarding the interests of Rogers' many stakeholders, including our family and Rogers' shareholders.
Ted was very concerned about preserving a role and interest in Rogers for future generations of the Rogers family -well beyond the current generation - as well as protecting other stakeholders and enterprise value. That included a deep concern about how control of the company should be shared among the family. He was very much alive to the failures of other family-owned businesses where the votes and the shares were split equally among family members who had different agendas, and the dangers this posed to the ongoing success of the business. Ted therefore wanted a clear separation between ownership of Rogers and the voting of the shares so that stewardship of the family control could be entrusted to one family member without that person having all of the wealth associated with the shares, but subject to certain protections for other family members.
To that end, Ted created the Control Trust and prepared a Memorandum of Wishes setting out his intentions with respect to how the Control Trust would operate, including checks and balances on the Control Trust Chair. ...
Ted intended for the Control Trust Chair to be rotated. Ted named Edward as the initial Control Trust Chair, with the authority to vote the Rogers Class A voting shares for a period of two years. Ted expected that, following those two years, the performance of the Control Trust Chair would be assessed and put to a vote once a year, with the possible consequence that Edward could be replaced as Chair. To make such a change, two-thirds of the members of the Advisory Committee must vote to remove the Control Trust Chair and, at the same time, two-thirds must agree to a successor. ...
The Memorandum of Wishes requires the Control Trust Chair to consult widely and earnestly with our family and the Advisory Committee:
Heaven forbid there arises a situation when the majority of the Board of [Rogers] are totally opposed to the interests of the Rogers family as represented by the Control Trust Chair.
(i) It is hard to speculate on what type of issue could result in this "worst of all options." It could be issues which affect votes or the rights of the Class A shareholders or a major acquisition or divestiture or the continuance of a CEO.
(ii) First, the Control Trust Chair should give considerable thought to whether the issue is important enough to the Rogers family to risk a very public spectacle. If not, the Control Trust Chair should accept it and move on without rancour.
(iii) Second, the Control Trust Chair should strongly negotiate for a solution with honour and respect for all involved.
(iv) But if the issue is of bed-rock seriousness then the Control Trust Chair would have to go through the public gauntlet of Immediately calling a special shareholders meeting to replace them, unless they have resigned first.
We appear to be at Ted Roger's worst case scenario. How did the Rogers family get here?
3. Families and Business
In sagas such at Rogers family or the Stronach family discussed in my book, a heady alchemy of power, politics, identity, money and family create endless possibilities for both success and strife.
Although there is no common definition of what constitutes a family business, family businesses generally have the following characteristics:
- Multiple members of the same family are involved as major owners or managers, either contemporaneously or over time;
- The family controls the business through involvement in ownership and management positions;
- The family has inter-generational intent; and
- The business contributes significantly to the family’s wealth, income, and/or identity.
The complexity of family business arises from trying to balance family demands and the needs of the business, while addressing the complex interaction between the two. As well as dealing with commonplace business issues, such as changes in markets, evolving technology and challenges from competitors, family businesses must deal with the unique psychological dimensions of having family members work together.
Each of the family members in the business will have their own characteristics, perspectives and goals. Working together intensifies family interactions and can exacerbate family problems such as sibling rivalry or competition between generations. Unresolved conflicts and diminishing communication and trust can undermine the operation of the business and ultimately result in a detrimental effect on the business.
In the systems theory approach, a family business is modeled as comprising three overlapping, interacting, and interdependent subsystems of family, ownership, and management (Tagiuri & Davis, 1996).
Each subsystem maintains boundaries that separate it from the other subsystems and the general external environment, within which the family business operates. This model suggests that a family firm is best understood and studied as a complex and dynamic system in which each of the subsystems has a strong impact on the other subsystems and accordingly the larger system as a whole.
Key issues to be tackled include coordinated decision-making across the family, business, and ownership arenas; facilitating long term family ownership and succession of the business and/or wealth; issues of nepotism and entitlement; balancing the involvement and performance of family members with their skill set and those required by the business, while above all operating in the best interests of the business, family and ownership group as a whole.
4. Conflict
Conflict, an inevitable part of human interaction, is an apparent or latent opposition between two or more parties that results from differences that are either real or imagined (Budd, Colvin & Pohler, 2019).
Conflict begins where one party perceives that another party has negatively affected, or is about to negatively affect, something that the first party cares about (Robbins & Judge, 2006). More broadly, conflict is an interactive process manifested in incompatibility, disagreement, or dissonance within or between social entities (i.e., individual, group, organization, etc.) (Rahim, 2002).
Relationship conflict deals with interpersonal tensions between individuals, can result in negative emotions such as anger, distrust, animosity, and rivalry between family members and is recognized to adversely impact family business performance (McKee, 2014). Relationship conflict interferes with task-related efforts and decreases the goodwill and mutual understanding of group members. Chronic relationship conflict can have serious detrimental effects on a family firm’s functioning. To date, there has been little evidence of any positive effects of relationship conflict on either firm performance or family member satisfaction (Jehn et al, 2008).
Conflicts sometimes develop in a sequential manner, often referred to as a spiral or escalation ladder of conflict:
Not all conflicts develop in exactly this sequence. Certain phases of the spiral may be skipped or may occur in different orders or entirely different phases may occur. The spiral is designed to be similar to a tornado. The more a conflict progresses up the spiral, the stronger the effect and the more difficult it is to get out of. The spiral has two main zones: the covert and the overt. The covert zone is where the conflict has not yet emerged or erupted into public view, and the overt zone is where the conflict becomes public and direct. There are multiple strategies available for getting off the spiral at each stage, including avoidance and various problem solving and conflict management techniques.
In addition to a spiral, conflict can be interpreted as a process having five stages: potential opposition or incompatibility, cognition and personalization, intentions, behaviour and outcomes (Robbins & Judge, 2013):
In addition, the Conflict-Intensity Continuum provides a way of visualizing conflict behaviour:
There can be functional outcomes of conflict for a family business, such as improving the quality of decision making, stimulating creativity and innovation, encouraging interest and curiosity among parties, providing the mechanism through which problems can be aired and tensions released, and fostering an environment of self-evaluation and change.
On the other hand, dysfunctional conflicts clearly reduce family business effectiveness, as is being demonstrated in the Rogers saga. Among the undesirable consequences of conflict on a family business are poor communication, reduced trust between parties, reductions in firm cohesiveness and the subordination of business goals to the primacy of infighting between parties. Researchers have found that all forms of conflict, even the functional varieties, appear to reduce group member satisfaction and trust (Jehn et al, 2008). At the extreme, conflict can bring firm functioning to a halt and threaten its very survival. Many researchers theorize that conflict is likely a major contributor to business succession failure.
Whereas conflict has multiple sources, human needs are at the core of all conflicts. People engage in conflict either because they have needs that are met by the conflict process itself or because they have needs that they believe they can only attain by engaging in conflict (Mayer, 2000). These human needs are expressed through other proximate causes: history, structure or context, emotions, values, and communication. Human needs and the proximate causes of conflict are illustrated in Bernard Mayer’s Wheel of Conflict:
Attempts to understand a conflict should start by examining the proximate causes. A better understanding of the conflict's history and its context, and of the parties' feelings, values and patterns of communication, will reveal their deeper human needs. Human needs range from survival; to substantive, procedural, and psychological concerns; to identity-based needs for community, meaning, intimacy, and autonomy (Mayer, 2000).
The structure or context within which a conflict takes place can contribute to conflict, including available resources, decision-making procedures, time constraints, legal requirements, communication mechanisms, and physical setting. For example, the litigation process is a context that can exacerbate conflict by making compromise more difficult and casting issues into right versus wrong and win versus lose struggles.
Emotion is the energy the fuels conflict. Emotions can be generated by the interactions of the conflict, the circumstances surrounding the conflict, or by previous experiences. Emotions can fuel conflict, but they can also be part of deescalating it, as on some level all people share the desire to seek connection, affirmation, and acceptance (Mayer, 2000).
The history of participants in a conflict or in the system in which the conflict is occurring has a powerful influence on the course of that conflict. The relationships and past experiences between parties involved in a conflict can lead them to make both positive and negative assumptions about the other, sometimes forming a bias even prior to engaging with the other party (Mayer, 2000).
Clear communication is a constant challenge, particularly under emotionally charged circumstances. Conflict frequently escalates because parties act on the assumption that they have communicated, or understood another party’s communication, accurately when they have not. Culture, gender, age, class, cognitive capacity, and environment all impact communication. Parties often rely on inaccurate or incomplete perceptions, form stereotypes, and carry into communications conclusions drawn from previous interactions or experiences.
Values are beliefs about what is important, what distinguishes right from wrong, and what principles should govern how we lead our lives. When a conflict is defined or experienced as a struggle about values, it becomes more charged and intractable. As people define themselves in part through core beliefs, a values conflict can make them feel attacked or that they are compromising their sense of self or integrity in some way.
Although some conflicts are clearly about fundamental value differences, often parties have a choice about whether a conflict will be defined in this way. If a party develops righteous certainty that they hold the moral high ground, it rigidifies the conflict and narrows options for resolution.
If a true value difference exists, which is less common than often thought, parties may arrive at an understanding about how to move forward despite the value differences but the core conflict will likely remain unless circumstances change, more perceived important values intervene, or the parties modify their core values in some way (Mayer, 2000).
Mayer sets out four contextual factors that cut across all sources of conflict: culture, power, personality and data. Culture affects conflict as it is embedded in parties’ communication styles, their history, their ways of dealing with emotions, their values, and the structure within which conflict occurs. Power is the ability to have one’s needs met and to further one’s goals. Power dynamics can obscure the roots of conflict but can also help us understand the nature of an interaction. Power is embedded in the structure within which the conflict is occurring and is also a product of the personal styles and interpersonal interactions of the parties. How data is handled and communicated can exacerbate conflict. Parties can battle for access to data or dispute what data is correct, and data is embedded in both communication and structure (Mayer, 2000).
As mentioned above, human needs are the ultimate causes of conflict and appear at the hub of Mayer’s Wheel of Conflict:
Mayer suggests that identity needs are fundamental to our sense of selves and our place in the world, and have four elements: meaning, community, intimacy, and autonomy. The need for meaning has to do with establishing a purpose for one’s life and existence. Sometimes pursuing a conflict is a great source of meaning for people and may cause them to hold onto a conflict to avoid the loss of meaning. Community refers to that aspect of people’s identity that derives from feeling connected to groups with which they can identify and in which they feel recognized. Mayer points out that when people pursue a conflict to solidify a sense of community or to protect their community against the forces of disintegration, they are in part struggling to preserve their identity (2000).
Mayer conceives of needs as three overlapping types that operate in conflict and can assist in understanding the core of what motivates parties in conflict: survival needs, interest needs, and identity needs. Interests can be short term, long term, individual, group, outcome-based, process-based, conscious, and unconscious. Christopher Moore suggests that interest needs can be substantive (concerned with tangible benefits), procedural (concerned with the process for interacting, communicating, or decision making), and psychological (concerned with how one is treated, respected, or acknowledged) (2014).
Intimacy involves the need to be special, unique, and important to other people, and such needs are mostly met in family and friendship structures. Intimacy implies some reciprocity. In family disputes, it is often the loss of intimacy or the fact that a façade of intimacy has been shattered that causes pain and challenges people’s sense of identity. A loss of intimacy may interfere with a party’s acceptance of the outcome of a conflict as they may not be ready to move on from the loss.
The need for autonomy is the flip side of the needs for community and intimacy. Autonomy is the need for independence, freedom, and individuality. Within families, it is common for tensions to exist between the needs for intimacy and connection versus autonomy and for these tensions to manifest in internal and interpersonal conflicts. When conflicts are identity based, improving relationships and communication is required to achieve resolution and any possible resolution will be incremental rather than an immediate fix (Mayer, 2000).
Mayer points out that survival needs are concerns for fundamental safety and security, in addition to food, shelter, and clothing. Sometimes parties feel that their survival is at stake in a conflict, even if it may not appear that way from an external perspective. When a party feels their survival needs are at risk, immediate assistance or attention to the perceived or actual threats are required before any other conflict management strategy is able to be employed (Mayer, 2000).
Family business disputes are usually multifaceted, with numerous causes that interact in complex ways. Relationship conflict in particular is prevalent in family firms and can often have very adverse consequences for the business (Eddleston & Kellermanns, 2007). Relationship conflicts decrease goodwill, mutual understanding, and camaraderie (Deutsch, 1969) and lead to reduced satisfaction and a lack of regard for other group members (Jehn, 1995), all of which hinder family firm performance and undermine its “familiness” advantage.
Family business conflicts can be categorized four ways: justice conflict, role conflict, identity conflict, and succession conflict. Justice conflict concerns problems of compensation and quality of treatment, along with a perceived fair allocation of resources between parties. Role conflict centers on confusion among roles when family members work together, on the inside/outside phenomenon when the family business employs non-family members, and on which parties are permitted to be owners. Identity conflicts involve family members’ need to differentiate themselves from family expectations and act as independent, autonomous people. Identity conflicts often surface through gender conflicts, sibling rivalry, and parent/child inter-relationships. Succession conflicts are related to ownership issues, which party in the next generation will obtain control over the family firm (power) and the success (or not) of the wealth transfer from one generation to the next (Danes et al, 1999).
The Interfacing Life Cycles Model is based on the assumption that the most intractable family business issues are not the business problems the organization faces, but the psychological and emotional issues that compound them. Applying the model is intended to help to explain behaviour and enable the family to prepare for life cycle transitions and other issues that may arise in the family business.
5. How the Rogers Saga Could Potentially Have Been Prevented
Good governance is the best defense to prevent destructive family business conflict before it starts. That said, Ted Rogers appears to have thought deeply about governance and put in place a robust governance system. The key governance structure that Ted Rogers put in place was the Control Trust.
There are many benefits afforded by the use of a trust, including:
- centralized asset ownership and management of assets;
- flexibility in determining the method of future wealth distributions;
- enhanced asset protection for beneficiaries from third-party claims, including potential creditor and other actions;
- increased confidentiality; and
- potential avoidance of probate procedure and consequent probate fees.
A key feature of a trust is the separation of ownership and control of an asset from the benefit of that asset. This separation of ownership and control of an asset from the benefit of it often makes the trust a very useful tool in the preservation of wealth and the succession of the family business. In the Rogers case, it hasn't prevented the family conflict and struggle for control.
Likely a significant factor in the Rogers conflict, despite the sophisticated governance structure, was a lack of regular, full, accurate and transparent communication between the parties.
6. Conflict Management Strategies
Based on conflict, intensity, and care for other parties, family members can adopt five styles of conflict management: collaborating, competing, avoiding, accommodating, and compromising (Womack, 1988). Managing conflict is function of how assertive a party is in satisfying their own group or self-concern, and how cooperative they are in satisfying those of the other party (Robbins et al., 2013). The figure below shows where each style of conflict management is placed according to how much assertive and cooperative it is.
The avoiding style of conflict management has both the lowest cooperation with other parties and lowest assertiveness of a party’s own interests. This style is often used to hide from a situation or to avoid immediate stress. Moreover, it usually does not address the underlying conflict sources. Its main advantage is a cooling down of conflict whenever there are no clear solutions. Avoidance is based on distancing from problems and is effective for small problems and for difficult and escalating problems with no clear or immediate solution.
The accommodating style takes place whenever there is total cooperation with the other party while not asserting one’s own concerns. Accommodation is not necessarily a sign of weakness. It may be the best and most suitable style of conflict management in certain situations, especially when the party accommodating is aware that he is wrong or when he wants improve goodwill with other parties to the conflict.
The compromising style fits in the center, with intermediate levels of cooperation and assertiveness. It is a compromise between pure competition and pure accommodation and is based on accomplishing a balance between personal and common interests. This approach is labeled as, distributed conflict management” because no one gets exactly what they want but rather a portion of everyone’s goals is accomplished (Sorenson, 1999). This conflict management strategy doesn’t generally resolve the underlying sources of disputes but rather finds a way around them. Particularly with respect to relational disputes, the underlying causes often remain despite the overt compromise.
The competing style, also known as the dominating or contending style, is when parties try to force their will, wishes, and perspectives on others, creating competition between family members. Contending blocks other people from achieving their goals and can elicit feelings of anger, stress, and distrust which lead to misunderstandings and potentially damaged relationships. It has the characteristics of maximum assertiveness for one’s own concerns and a minimum cooperativeness with another’s concerns. This is a zero sum, win-lose conflict management strategy which can have adverse long-term outcomes for a family firm. Contending works best when a party has all the power and doesn’t care about long-term relationships or wants to take the risk of damage to long-term goodwill in order to take control of a dangerous or difficult situation.
In the collaborative conflict management style, both the assertiveness to satisfy one’s own concerns and the cooperativeness to satisfy the other party’s concerns are maximized. Also known as an integrating conflict management style, this strategy results in a mutually acceptable situation that accommodates all concerned parties and is considered win-win. When it’s possible, the collaborative conflict management style increases team effectiveness, leads to solutions that satisfy all parties, and reduces the chance that conflicts will re-emerge. The result of such style is the satisfaction of the interests of both parties involved in the conflict.
In terms of the conflict itself, conflicts are usually dynamic rather than static, with the potential for the source of conflict to change during attempts to resolve the initial source of the dispute. Conflict resolution professionals need to remain attuned to the range of possible sources of conflict, so that changes in the nature or sources of a particular dispute can be identified and appropriately addressed. The dynamic nature of disputes means that conflict management needs to be flexible to allow the dispute resolution method to match the changing nature and/or differing perceptions of the conflict sources.
One or more of the following conflict resolution processes could be part of a family business conflict management strategy:
- Negotiation is any form of communication in which opposing parties discuss steps they could take to resolve a dispute between them. Negotiation can occur directly between the parties and/or family members or indirectly through agents acting on behalf of the parties, such as family friends, community leaders such as clergy or formal advocates such as lawyers. Negotiation can be managed by a third party such as a professional facilitator.
- Mediation is a non-binding process in which a neutral, impartial third party with no decision-making authority attempts to facilitate an agreement between disputing parties. Mediation is generally a private dispute resolution process.
- Conciliation can range from an approach that is essentially mediation with a more interventionist third party or shuttle negotiations where the third-party neutral shuttles between the parties who are unwilling to meet in person.
- Med-Arb, short for mediation-arbitration, is a process in which one person acts first as a mediator and then as an arbitrator. If the initial mediation is unsuccessful, the mediator becomes an arbitrator and makes a binding decision.
- Arbitration is a dispute resolution process in which disputes are submitted to a neutral adjudicator through presentation of evidence and arguments. The arbitrator is empowered to render a binding decision. Arbitration is generally a private, voluntary method of adjudication.
- Adjudication refers to a dispute resolution process in which a neutral third party hears each party's evidence and arguments and renders a decision that is binding on them. This includes arbitration and traditional litigation (for example, a trial).
Which dispute resolution process is right for that particular family at that particular point in time with that particular conflict is, of course, contextual and dependent on many factors. Before choosing a conflict management process, it’s important to assess in a systematic way the source of the conflict, the type of the conflict, the severity of the conflict, how the conflict could be resolved, and the possible benefits and risks of each potential conflict management process.
Certainly a preferred method of conflict resolution for family business disputes lies in collaboration or cooperative forms of third-party intervention. If conflict can be resolved constructively, it will minimize negative impacts on the parties, the family and the business and may even serve to improve relationships going forward.
7. Conclusion
When we can better understand how a business family experiences and manages conflict, we will be better equipped to prevent it or resolve it when it occurs.
A family business is an “infinite game,” the object of which is not to win, but to perpetuate the game, to perpetuate the family and the family business and, in the process, continually strengthen and improve both. Inside the infinite game of family business conflict doesn't have to be all bad news.
Conflict management and resolution can be a space in which the relationships within the family, within the business, and between the family and the business, can continuously evolve, strengthen and improve.
P.S. For more information, you can contact Heritage Trust which offers the following Multi-Family Office Services:
- Tax, estate, business succession and philanthropic planning.
- Document management and record keeping services.
- Expense management, bill paying and bookkeeping services.
- Family member financial, legal and business education.
- Family dispute prevention, resolution and governance assistance.
Nicole Garton is president and co-founder of Heritage Trust.
Recognized by Best Lawyers in Canada for trusts and estates and family law, she previously chaired the Canadian Bar Association Wills and Trusts Subsection (Vancouver).
Contact Nicole by email or phone at (778) 742-5005 x216.
Heritage Trust is a leading non-deposit taking financial institution, regulated by the BC Financial Services Authority (BCFSA), a government agency of the Province of British Columbia. Heritage Trust offers caring and professional executor, trustee, power of attorney, committee, escrow and family office services to BC resident clients.
We welcome you to contact us.