M&A

AFL-CIO Questions Comcast’s Governance

A merger with Disney, maintains the union, will concentrate even more power in the hands of the chief executive and his family.
Stephen TaubFebruary 27, 2004

While governance experts and pension funds are beating up on Walt Disney Co., the nation’s largest union is questioning the corporate citizenship of Disney’s suitor, Comcast Corp.

According to Reuters, AFL-CIO leaders are suggesting that the cable giant’s governance could be an impediment to its $48 billion hostile takeover offer for Disney.

AFL-CIO secretary-treasurer Richard Trumka reportedly fired off a letter to Comcast chairman C. Michael Armstrong calling on the company to alter its charter. The union seeks to eliminate some of Comcast’s “unfair” corporate governance features, which put too much power in the hands of chief executive Brian Roberts and his family, maintains the AFL-CIO.

Trumka also called on Roberts to immediately resign from the board’s governance and directors nominating committee, according to the letter, obtained by Reuters.

In a statement, Comcast defended its “culture of ethics” and pointed out that its shares outperforming the S&P 500 by a 2-to-1 margin since the company went public in 1972, according to the wire service. The company reportedly added that its governance plan, which Comcast altered when it AT&T’s cable systems last year, was approved by more than 99 percent of AT&T shareholders.

Under the governance structure, shareholders cannot amend the Comcast charter or call special meetings, according to Reuters’ report of the AFL-CIO letter. Until 2010 — or until Roberts resigns — it can be amended only with approval of 75 percent of the board.

The Roberts family controls one-third of the combined voting power in the company in shares that cannot be diluted, explains Reuters — which means that other shareholders will see their shares diluted if Comcast’s all-stock offer for Disney is approved.

“Comcast’s restrictive charter, dual-class voting arrangement, CEO-dominated nominating committee and lack of director independence are all contrary to the interests of Comcast and its shareholders,” Trumka reportedly wrote. “In particular, Disney shareholders will perceive Comcast’s corporate governance as a significant reason not to support any proposed merger.”