Comcast flunked a corporate governance test from the Corporate Library, which ranked it the same as the Walt Disney Co., the company it’s trying to buy for $54.1 billion.
Comcast, the biggest U.S. cable TV operator, got an “F” from the investor advisory group,which said six of Comcast’s 12 directors either work for the company or have business ties to it. Disney, under fire from dissident shareholders for what they call undue influence on the board by topper Michael Eisner, got the same grade.
The Corporate Library and other Comcast critics, such as Institutional Shareholder Services, say CEO Brian Roberts, the son of founder Ralph Roberts, exerts too much control. Brian Roberts is chairman of the board’s nominating and governance committees. Roberts, whose family owns 1% of the company, controls 33% of Comcast through a special class of stock, a dual structure common to family-run companies.
Comcast CFO John Alchin said Roberts will continue holding those voting rights should the purchase succeed.
“The dual stock is a real issue for Disney investors,” said Beth Young, a Corporate Library analyst. “If investors get into bed with Comcast, they don’t really have the ability to influence the company.”
Comcast meets the Nasdaq and SEC requirements in terms of corporate governance, said Comcast exec VP David Cohen. Company doesn’t expect Disney shareholders to vote against the proposed transaction because of the dual-class stock structure, he said. “Our shareholders are extremely comfortable with our corporate governance,” said Cohen.
Shareholder short shrift
Institutional Shareholder Services, the No. 1 proxy adviser to U.S. fund mangers, gave Comcast 2.7 points out of a potential 100 points in a governance ranking. Shareholder Services gave Comcast low marks for policies that allow the board to amend company rules without shareholder approval and don’t allow shareholders to call special meetings. Comcast’s charter requires a 75% board vote to remove Roberts as CEO.
In the past two years Disney has revamped its board and changed its charter to improve governance. Reflecting those changes, its Shareholder Services score rose from 10 points to 75 points in the past five months.
“Both companies have governance problems,” said Charles Elson, director of the U. of Delaware corporate governance center. “The question is which company’s problems are more immediate and more severe.”