The Wall Street Journal-20080122-Behind Greenberg Contest With Comcast-s Roberts
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Behind Greenberg Contest With Comcast's Roberts
Last fall, Wall Street money manager Glenn Greenberg kicked back in his orthopedic recliner and composed a letter of complaint to Comcast Corp. CEO Brian Roberts. A onetime squash champion, Mr. Greenberg used a sports analogy to appeal to Mr. Roberts, also an avid squash player.
"I know you are a competitive guy, as am I: I once had a number four U.S. squash ranking, so I know that you care about winning and are willing to push yourself hard to be a winner," he wrote in the letter, which went on to lay out a series of complaints about the cable company's performance. "You think you are hitting beautiful strokes, but you are losing the game."
The letter led to a frosty exchange that culminated in Mr. Greenberg's investment firm, Chieftain Capital Management Inc., demanding Mr. Roberts's ouster in a letter to Comcast's board that became public Thursday. Chieftain is one of Comcast's largest institutional investors, with 2% of its outstanding stock, valued at just over $1 billion.
Chieftain's call for Mr. Roberts's firing sparked a furious debate on Wall Street. Despite widespread frustration with a 40% slide in Comcast's stock price over the past year, Mr. Roberts retains a strong level of support from shareholders. The furor thrust into the spotlight a relatively low-profile money manager not known for his shareholder activism.
The son of legendary baseball player Hank Greenberg and Caral Gimbel, an heiress to the former Gimbel Brothers department-store fortune, 61-year-old Mr. Greenberg manages $5 billion of investments, mostly for wealthy individuals. Chieftain invests in a handful of stocks -- seven right now -- most of which they hold onto for years, rarely making a splash, unlike better-known activist investor Carl Icahn, who has made a career agitating for change at companies.
But in recent years, Mr. Greenberg has increasingly aired his opinions on Comcast's management in emails and letters. According to some familiar with Comcast, he's been known to call up investor- relations staff and swear at them in frustration. People close to Comcast say his campaign has created a distraction at the most turbulent time in the Philadelphia-based company's history, as it fends off fierce competition from phone companies and the effects of a weak economy.
"This guy has flunked CEO 101," Mr. Greenberg said in an interview Friday in his midtown Manhattan office, referring to Mr. Roberts.
Reclining to relieve sports-related injuries to his back, knee and shoulder, Mr. Greenberg complains that Mr. Roberts and his team have repeatedly brushed off Chieftain's concerns and suggestions.
Flipping abruptly into an upright position in his recliner, he accuses Mr. Roberts of "an arrogance and haughtiness that he feels he can do whatever he wants." He cites as evidence Comcast's disclosure that it will continue paying the annual salary of Mr. Roberts's father and company founder, Ralph Roberts -- $1.85 million in the latest federal disclosures -- for five years after his death, with the money going to his estate. Comcast says it has fully disclosed the arrangement with the elder Mr. Roberts.
Also irritating Chieftain is Comcast's dual-class voting structure, which gives Mr. Roberts 33.3% of the vote despite owning only 0.3% of the outstanding shares.
"My father taught me to be very driven and respect people who perform, not just because they're born into it," Mr. Greenberg said in the interview.
Comcast declined to make Mr. Roberts available for an interview. The company says his achievements are stellar, chief among them having grown the company from the fourth-largest cable operator by subscribers to the largest in just five years, as well as turning Comcast into a major player for phone service, a business it only recently entered.
David Cohen, Comcast's executive vice president, points to the company's "superb operating track record," which he says includes its ranking of 9th and 10th in terms of revenue and cash flow growth respectively among the top 100 companies by market capitalization. "Comcast stock appreciated 63% in 2006, making it the best performing widely held stock of the year," Mr. Cohen says.
Mr. Roberts has defenders outside the company, as well. IAC/InterActiveCorp Chief Executive Barry Diller, who has a history of feuding with Mr. Roberts over business dealings, says the Comcast CEO is "as first rate of an executive as you're lucky to get." Mr. Diller says he doesn't own any Comcast shares.
Mr. Greenberg is no stranger to competition. He played football at Yale University and years later became a champion squash player. Squashtalk.com, a Web site dedicated to the sport, describes his "intense aura" on the court reminiscent of his baseball player father's "no-nonsense attitude." "No one engaged in turf wars with Glenn Greenberg," said the site, which also noted his "tactical shrewdness."
Mr. Greenberg showed a passion for dissecting companies at Columbia Business School after Yale. Destined for the Gimbel family retail business, Mr. Greenberg wrote a paper that pulled it apart. Upon reading it, his relatives got upset and Mr. Greenberg decided to look for a new career, Mr. Greenberg says.
In 1984, he founded Chieftain with John Shapiro. A few years later, the two men were referred to as "the Passionate and the Skeptical" in Fortune magazine. That dichotomy created a "dynamic tension" that has helped Chieftain hit an average annual return of 21%, Mr. Greenberg says.
This isn't the first time Mr. Greenberg has tackled Comcast's Mr. Roberts. When Comcast surprised investors with an unsolicited bid for Walt Disney Co. in 2004, Mr. Greenberg was furious and fired off a letter to Mr. Roberts, urging him to rethink the costly bid. When Comcast later withdrew it, Mr. Greenberg wrote to Mr. Roberts, complimenting his team on a job well done.
Mr. Greenberg sent another letter later that year urging Mr. Roberts to return cash to shareholders through a share buyback. He says he never got a response from Mr. Roberts, although the CEO visited Chieftain's office in the summer of 2005.
By last September, the stock price had fallen and Mr. Greenberg was getting frustrated. Worried he was somehow "off base," Mr. Greenberg polled other major Comcast shareholders on why Comcast's stock had faltered. Twenty-three responded, blaming aspects of Comcast's management. Chieftain presented those findings in a meeting with Comcast in November.
Despite a further exchange of correspondence, Mr. Greenberg grew unhappy with Comcast's unwillingness to act on his suggestions. Mr. Roberts did, however, visit Mr. Greenberg in New York last fall. Now Mr. Greenberg is waiting to see how the board responds.
