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Comcast Corp. and AT&T Broadband are unlikely to mollify corporate governance critics of the $72 billion merger if they decide to hold elections for directors 12 months earlier than initially proposed. Holding elections early is insufficient because the new board would still be in place for nearly two years before facing shareholders, critics argued. “That does nothing,” said Ann Yerger, director of research services at the Council of Institutional Investors, a Washington, D.C., advocacy group representing pension funds. “All directors should stand for election each year.” Yerger said it is “unprecedented” to lock in an entire board for more than a year, adding that annual elections are the only way to enhance accountability at large corporations. Comcast and AT&T are expected by the start of today’s Senate Judiciary antitrust subcommittee hearing on the deal to announce that they have amended the merger agreement so investors may elect directors in 2004 rather than in 2005, according to published reports. A Comcast spokesman declined to comment. It was unclear Monday why the companies had not yet announced the change, if they were still committed to changing the election date or if they were prepared to offer additional concessions. Besides failing to satisfy critics, AT&T Comcast’s plan to hold elections 12 months earlier will not end a shareholder lawsuit challenging the deal, said James G. Flynn, a partner at Wechsler, Harwood, Halebian & Feffer in New York who represents the two investors who filed suit. A New York judge ruled this month that Comcast and AT&T had a right to suspend elections until 2005. Flynn said the shareholders plan to appeal even though elections may now occur in 2004. “The underlying principle is that you have to elect directors every year,” Flynn said. “If it can be more than one year, then it could be 100 years. It is the same theoretical problem.” Yerger said the election of directors was just one of several controversial corporate governance provisions in the merger that the council opposes. “This is a deal that is poorly structured from a corporate governance standpoint,” she said. New York Comptroller William C. Thompson Jr. sent Securities and Exchange Commission chairman Harvey Pitt a letter April 10 complaining that the corporate governance provisions would “deal a crippling blow” to shareholder rights. “It is difficult to recall ever having seen a management proposal which by design would so severely disenfranchise the owners of a company,” Thompson said in the three-page letter. Beyond the election of directors, Thompson also said that AT&T Comcast shareholders will not have a right to call special meetings or acquire more than 10 percent of voting stock without board approval. He also derided a requirement that neither the company’s chairman nor CEO may be removed without support from 75 percent of the board. Also raising Thompson’s ire is a prohibition on changing the AT&T Comcast charter without approval of 75 percent of the board until either 2010 or the departure of Brian L. Roberts as either chairman or CEO. Finally, he objected to giving the Roberts family a non-dilutable 33.3 percent voting stake in the combined company even though it will only hold less than a 1.5 percent economic stake in the firm. “In their totality, these proposed governance provisions changes would devastate the rights of AT&T Comcast shareholders,” Thompson said. Thompson and the Council of Institutional Investors said they want AT&T and Comcast to give shareholders the right to vote separately on the merger and the corporate governance provisions. “The council urges the commission staff to review AT&T’s preliminary proxy materials and require the company to separate the various proposals,” council Executive Director Sarah A.B. Teslik said in a Feb. 21 letter to the SEC. “As the commission noted in its 1992 proposal release, separate votes ‘allow shareholders to communicate to the board of directors their view on each of the matter put to a vote.’” Philadelphia-based Comcast agreed Dec. 19 to acquire the cable assets of New York-based AT&T. AT&T shareholders will get 0.34 shares in the new company for each existing share, and Comcast shareholders will exchange their stock on a one-for-one basis. AT&T shareholders will own 56 percent of the combined company. The deal still requires antitrust clearance. Copyright (c)2002 TDD, LLC. All rights reserved.

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