As we headed for the holiday weekend last week, it became clear that one of Comcast's (Nasdaq: CMCSA) largest shareholders, Chieftain Capital, was unhappy with the company. The firm owns 60.5 million shares, or 2% of Comcast's total shares outstanding, and it was calling for CEO Brian Roberts' head. (Figuratively, of course.)
Chieftain's chief beef is clearly the company's share price, which has fallen slightly more than 40% in the past year, after rising more than 60% in 2006. Those swings constitute a "Comcastrophe" to Chieftain's management. In a letter last week to Comcast's board, the powers that be at the management firm said that it and other shareholders deserve the best CEO the board can find, but that the record indicates that "Brian Roberts is not it."
For the sake of full disclosure, I must admit to serving as a broadcasting and cable analyst/dart thrower earlier in this decade. And I'm also on record calling the Comcast management team among the best I've encountered, regardless of industry. That said, I do believe that Comcast deserves criticism on two fronts:
- The company's dual-share structure affords Brian Roberts and the rest of the Roberts family 33% of its voting power, based on their ownership of just 1% of its shares. In my opinion, such super voting power is inappropriate for any company.
- It appears that founder and director Ralph Roberts' contract with Comcast contains a clause that would result in his salary continuing for five years after his departure from the company due to death or disability. That's perhaps a palatable clause for a private enterprise, but not for a public company.
But in the final analysis, it seems to me that Comcast and other cable operators such as Cablevision (NYSE: CVC), Time Warner Cable (NYSE: TWC), and Charter (Nasdaq: CHTR) are facing a pair of bogeymen not of their making. First, with $100 cable bills commonplace, I believe that U.S. consumers are increasingly willing to try a cable alternative. And second, satellite-TV providers such as DirecTV (NYSE: DTV) and telephone companies such as Verizon (NYSE: VZ) and AT&T (NYSE: T) are providing that alternative.
And while I've advised Foolish investors to remain on the sidelines relative to Comcast, I also think that the notion of sacking a competent Brian Roberts is so much hogwash.
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