X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Philadelphia’s Comcast Corp. said Wednesday that controversial corporate governance provisions announced in recent proxy materials are necessary to guarantee the success of its AT&T Broadband acquisition. “An integration of this magnitude requires the complete focus of a company’s management and board of directors,” a company spokesman said. “The provisions in the proxy help to ensure that this continuity and stability will be maintained as the companies complete the integration.” Comcast and AT&T disclosed Monday in proxies filed with the Securities and Exchange Commission that it will be virtually impossible to remove any of the merged company’s 12 directors, chairman C. Michael Armstrong or CEO Brian L. Roberts until the 2005 annual meeting. AT&T Comcast also would not hold an annual meeting until April of that year, and shareholders would be barred from calling a special meeting before that date. After the 2005 annual meeting, directors would be elected annually. But the corporation would prohibit anyone from buying more than 10 percent of AT&T Comcast stock without the board’s permission. Yet such limits on shareholder power exceed what the average Fortune 500 company commonly employs, which is prompting objections from unions and investor advocates. “These are things investors do not like,” said Pat McGurn, a vice president at Institutional Shareholder Services, a Rockville, Md., proxy advisory firm. “It can change people’s minds about the economic merits of the deal.” Shareholders could object to checks on their influence over management. “In light of the Enron controversy, I cannot see any shareholder buying into this,” one analyst said. McGurn said investors may object to the guaranteed employment term for Armstrong and Roberts, though he still expects the economic merits of the merger to drive investor support for the deal. “Three years in today’s market can be a lifetime,” McGurn said. “To handcuff the board that long could be of significant concern to investors.” Seeking to allay such concerns, the Comcast spokesman said company shareholders should enjoy more authority over corporate affairs after the merger than they have now. “As a practical matter the voting power of the shareholders in the new company will be greater and more significant than exists today in Comcast,” he said. This appears to be because Roberts now controls 87.5 percent of Comcast’s voting stock, which gives him control over corporate decisions. After the deal, he will control only a third of the voting stock, which means that in 2005 he could be overruled by other investors. Yet it also appears that AT&T shareholders would have fewer voting rights after the merger. That is because AT&T is susceptible to shareholder pressure given that no single investor owns a majority of stock. An AT&T spokeswoman did not return calls for comment. The Communication Workers of America, which represents 28,000 employees at AT&T and 3,000 at Comcast, is also questioning the companies’ moves. The group objects to AT&T Comcast’s plan to give the board and top management guaranteed three-year jobs while ignoring job security concerns among lower-level employees. “This tactic demonstrates all too clearly the Enron-gap between companies’ treatment of corporate leaders and ordinary working people,” the union said in a statement. CWA spokesman Jeff Miller said the proposals would shield senior management and the board from investors, which means shareholders could not police the company’s activities. “Look at Enron and Global Crossing and other companies that have been insulated from shareholders,” he said. “We are very concerned about the corporate governance issues.” AT&T Comcast’s anti-takeover defenses would be among the most stringent in the industry. Tom Quinn, chief operating officer for TrueCourse Inc., a New York company that rates how “bulletproof” companies are to hostile bids, estimates that the new AT&T Comcast will earn a score of nine on a one to 10 scale, with 10 representing the toughest anti-takeover defenses possible. That dwarfs the average takeover rating of 1.8 for cable companies. It also towers above AT&T’s 2.0 rating and Comcast’s current 1.5 rating, though the latter score may be artificially low because it does not account for the ability of Roberts to use his 87.5 percent voting power to block any deal. According to TrueCourse, the company’s score also would be more than 50 percent higher than the 5.84 average for all Fortune 500 companies. Many companies require investors to get board permission before buying large chunks of stock, Quinn said. But the AT&T Comcast threshold of 10 percent is unusually low, he said. Only 6.5 percent of public companies that implemented a trigger in 2001 were that low, and most used 15 percent, he said. One analyst noted that the AT&T Comcast defenses are unique because most expire at the 2005 annual meeting. After that, the companies plan to appoint directors to one-year terms, opting against a staggered board, which is a common takeover defense used by most public corporations. “If they want to do this, why not keep it going forward,” the analyst asked. The companies announced their merger Dec. 19. The deal’s current value is about $41 billion. Copyright (c)2002 TDD, LLC. All rights reserved.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.