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Labor Group Calls on Comcast to Overhaul Governance, Voting Control

Posted on: Wednesday, 25 February 2004, 06:00 CST

Feb. 26--As Comcast Corp.'s size and national profile have increased, so has scrutiny of its corporate-governance policies, which give one-third of the voting control of the public company to chief executive officer Brian L. Roberts -- who owns less than 1 percent of the company's stock.

Yesterday, the AFL-CIO, a national federation of labor unions, called on Comcast to overhaul the way it selects and runs its board of directors, or risk alienating shareholders of Walt Disney Co., which Comcast has offered to buy.

"We believe the current governance situation [at Comcast] is a significant downside to Disney holders," said Brandon Rees, a research analyst for the AFL-CIO.

In a letter to Roberts and the Comcast board, the AFL-CIO said, among other things, that Roberts should resign his seat on the board committee that nominates directors.

A Comcast official responded that Comcast shareholders were happy with both the board and the company, and that the proof was that people buy and hold the stock.

"We have no evidence that that would be an issue," Comcast executive vice president David L. Cohen said. "Certainly if you compare Comcast's [financial] performance to Disney's performance, we think Disney shareholders would be very pleased with the Comcast corporate-governance record."

Over the last 10 years, Comcast stock has risen from about $10 to $30, while Disney's has gone from about $16 to $26.

A number of shareholder advocates, such as the Corporate Library, and the California Public Employees' Retirement System have taken issue with Comcast's corporate setup.

Among the issues that concern them: The company crafted provisions making it virtually impossible for Roberts to be fired and giving him significant power to select board members.

"When you're looking to bid for a huge company like Disney, you should have democracy," said Ann Yerger, codirector of the Council of Institutional Investors.

The AFL-CIO said Roberts' sweeping powers and the composition of Comcast's board called into question the board's objectivity.

Examples of the types of relationships that bother corporate watchdogs:

Comcast board member Sheldon Bon-ovitz works for a Center City law firm that used to do business with Comcast.

Brian Roberts is a big contributor to his alma mater, the University of Pennsylvania's Wharton School. Board member Judith Rodin is Penn's president.

Board member Decker Anstrom is president of the company that owns the Weather Channel, with which Comcast has a business relationship.

Cohen said such links had no bearing on how the board made decisions.

"We focus on the fact that the purpose of corporate governance is to ensure the company is operated to the benefit of all shareholders, pursuant to principles of ethics and integrity," Cohen said.

The AFL-CIO, however, said Comcast's lopsided distribution of power was likely to spook Disney investors, who enjoy a one-share, one-vote policy.

Comcast is proposing to buy Disney in a stock transaction that would give Disney shareowners 0.78 of a Comcast share for each Disney share.

Today, one Comcast Class A share gets one-fifth of a vote. That voting power would be diluted if the Disney acquisition went through.

While Roberts controls one-third of Comcast's voting power, Cohen noted that two-thirds of votes rest with other shareholders. He also pointed out that AT&T Corp. shareholders approved Comcast's corporate-governance methods by 99 percent when they voted to sell AT&T's cable division to Comcast in 2002.

"Shareholder democracy governs," Cohen said. "Our shareholders are extremely pleased."

Rees, the AFL-CIO analyst, said he found that logic flawed, because the Comcast-AT&T Broadband merger and the corporate-governance standards were bundled together, so that a "no" vote for the governance provisions would have doomed the merger.

"The problem with that analysis is that they had no choice but to swallow the corporate governance with it," Rees said.

Worth noting is that the number of Comcast workers represented by AFL-CIO unions has dropped from about 3,600 to 2,200 since Comcast acquired AT&T Broadband.

Roberts' armor-plated governance provisions are "not very common at all" among companies of Comcast's size, said Lawrence Mitchell, a professor at George Washington University. He added, though, that similar protections are found at family-owned media firms, including the Washington Post Co. and the New York Times Co.

Mitchell said the onus was on shareholders, who accept the risk of a minority-controlled company when they buy the stock.

"What they're buying is the product, the management, and the controlling family. ... They know what they're getting into," Mitchell said. "If the controlling shareholders are good, honest, competent businesspeople, it's fine. ... The problem is when they're not."

The Communications Workers of America, which is among the 64 member unions of the AFL-CIO, is the parent organization of the union that represents many nonmanagement employees of The Inquirer.

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