Editorial: Meddling follies, part 2

If BCE executives seem confused about what it takes to get a deal done in Canada, one can hardly blame them.

Ottawa’s decision to pander to the “hollowing out” on MDA’s space assets would be funny, if it wasn’t already hard enough to understand what exactly makes a merger or acquisition acceptable in this country.

Nothing makes this point better than the hoops BCE executives have had to jump through while trying to serve the shareholders who have voted to sell Bell Canada’s parent company to a group of investors led by Ontario Teachers’ Pension Plan. Indeed, BCE shareholders are lucky CRTC chairman Konrad von Finckenstein doesn’t run the Financial Services Commission of Ontario (FSCO) — a regulator that appears to think the spirit of its own rules is unnecessary.

Because of an antiquated Ontario pension law, Teachers’ cannot hold more than 30% of a company’s voting shares. So when offering to buy BCE for $52 billion — along with U.S. investors who are not allowed to control Canadian broadcast assets thanks to antiquated CRTC regulations — Teachers’ came up with a plan: it will own 51.6% of BCE equity, but a shell company will hold two-thirds of class A voting shares. The shell will be controlled by former Teachers’ executive Morgan McCague, who will vote its shares according to his former employer’s wishes.

This sounded fishy to von Finckenstein. But Teachers’ secured a letter from FSCO saying it had no problem with the arrangements since they met legal requirements. That “astounded” the CRTC chair, who said FSCO’s interpretation “is not one that I as a lawyer and a former judge would put on that legislation in the regulation.” The CRTC then focused on making sure ownership laws were obeyed. As a result, Teachers’ has promised that BCE’s 13-member board of directors will always have seven Canadians. That is somehow meant to protect Canadian interests, despite the fact that it limits the talent pool for BCE’s board.

Governance experts are now left to wonder if the lawyer in von Finckenstein understands that the law forces directors to act in the interests of the company and shareholders they serve — even when doing so conflicts with the interests of countries that make running companies difficult.