The Wall Street Journal-20080118-Comcast Holder Seeks CEO-s Dismissal- Chieftain Targets Dual-Class Voting And Executive Pay
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Comcast Holder Seeks CEO's Dismissal; Chieftain Targets Dual-Class Voting And Executive Pay
Comcast Corp. is facing a rebellion from one of its largest institutional shareholders.
Chieftain Capital Management Inc., which manages 60.5 million Comcast shares, or about 2% of stock outstanding, this week wrote to Comcast calling for the ouster of Chief Executive Brian Roberts, describing his management as a "Comcastrophe" for shareholders after a decade of "zero return."
Chieftain also wants Comcast to return cash to shareholders, including a "meaningful" dividend; revise its executive compensation and dismantle its dual-class voting structure, which allows Mr. Roberts's family to control the Philadelphia company despite owning only a small percentage of the stock. The family owns supervoting shares that give it a majority of the votes.
Chieftain's call for action reflects intensifying frustration on Wall Street with Comcast's performance. Comcast, the biggest cable operator in the U.S. by subscribers, has seen its stock fall 40% in the past year as a growing number of cable customers defect to new TV services offered by phone companies like Verizon Communications Inc. Comcast's stock took a particular hit after third-quarter earnings showed a slowdown in its ability to add customers.
"We don't think the company is well-run and our view is shared by many others," Chieftain managing director Glenn Greenberg said in an interview. "We hope this will be a wake-up call to the board." He wouldn't discuss whether he was planning to form a shareholder group to pressure Comcast.
Comcast said in a statement it had met with Chieftain a number of times and while the company has disagreed with Chieftain in the past, it would review the letter and respond. The company defended its performance, saying Comcast "continues to perform well, consistently delivering superior revenue and cash-flow growth and significant free cash flow, despite a challenging economy and an increasingly competitive environment."
Comcast shares fell 4.2%, or 77 cents, to $17.41 in 4 p.m. composite trading on the Nasdaq Stock Market. News of the letter was reported by Barron's on its Web site.
While Chieftain has little prospect of forcing Mr. Roberts from his job, a public campaign by the institutional shareholder could force Comcast to take aggressive action to lift its stock price. A campaign is also likely to spotlight an issue of recurring frustration for investors: dual-class voting structures used by many family-controlled public companies.
Investors have different views about how the company should respond. Richard Greenfield, an analyst at Pali Research who has called for Comcast to be more aggressive responding to competitors, said in a note yesterday "the last thing we believe Comcast should do is drastically lever up and buy back stock."
