the audit

Comcast CEO Is/Is Not Loved By Shareholders

You need to read three separate articles to find out
January 24, 2008

This is a tale of two CEOs. One abuses his customers, but delivers profits to shareholders. The other has angered shareholders to the point that a major investor wants him removed. The catch? These two CEOs are the same person: Comcast Corp. head Brian Roberts, described by Forbes on the one hand, and by Barron’s on the other.

A handful of recent articles on the same company all provide a look at a controversial executive, but Forbes makes the mistake of assuming shareholders like Roberts. They don’t. A reader had to turn to Barron’s and The Wall Street Journal to find out.

The Forbes slip is interesting particularly in light of the fact that its story, headlined “The People vs. Comcast,” was hardly a puff piece.

The article offers a consumer-rights angle on the company. It describes how Comcast under Roberts has forced customers to buy cable packages instead of allowing them to choose channels a la carte, has limited choices in set-top cable boxes, and interfered with some downloads of high-traffic, peer-to-peer Internet programs like BitTorrent .

So far, so good. We are glad to see a business publication looking out for consumers. But now comes the source of confusion. Comcast’s actions have brought opposition from regulators and customers, the article continues, but:

all that fury has changed nothing. Comcast made $1.7 billion on $23 billion in revenue during the first nine months of 2007, up 14% and 28%.

Sign up for CJR's daily email

These numbers come in the context of an article whose subhead announces that Roberts “excels at turning power over his customers into profits for his shareholders.” So should we assume shareholders are happy? No. Let’s look at what Barron’s and The Wall Street Journal have to say.

Barron’s broke a story on January 17, headlined “Institutional Shareholder Seeks Ouster of Comcast CEO Roberts,” that describes how one of the company’s largest institutional shareholders, Chieftan Capital Management Inc, has called for Roberts’s resignation. Why? Because the CEO’s management has been, in Chieftan’s words, a “Comcastrophe” for shareholders. Chieftan also called for Comcast to:

return more cash to shareholders in buybacks or dividends, and scrap the cable giant’s dual-class voting structure, which gives effective control to the Roberts family despite its ownership of just 1% of Comcast stock.

The Wall Street Journal reported on (non-subscriber link) the Barron’s scoop the following day, summing up the issue:

Wall Street is growing increasingly frustrated as Comcast’s shares have fallen 40% in the past year.

So, which is the real Roberts? Is Roberts bringing in profits for shareholders or isn’t he? And if he is, then why aren’t shareholders happy?

The Forbes piece looked at company profits and seems to have made the leap that solid finances have led to happy shareholders. It doesn’t mention the 40 percent drop in share price. It includes valuable information on how Comcast has badly served consumers, and thus why consumers have reason to object to Roberts. But it doesn’t mention that some shareholders also have reason to take aim at Roberts.

By fitting the Comcast situation into a simple dichotomy—consumers vs. the CEO and shareholders—Forbes has ignored clear dissatisfaction among shareholders.

The Wall Street Journal and Barron’s cover the shareholder angle well. They don’t give us information on consumers. But as much as we like to see Forbes looking out for the consumer, we have more of a problem with its piece, because the article seems to have given us the shareholder angle without really doing so. (Barron’s and the Journal, on the other hand, clearly left out the consumer angle.)

While Forbes did ignore shareholder discontent, we should note that any move to oust Roberts doesn’t appear to have traction.

The Journal did well to follow up (non-subscriber link) on the Chieftan letter with Wall Street’s response, concluding that:

Despite widespread disillusionment with the recent stock performance of cable operator Comcast Corp., Wall Street appeared to be divided over whether a major shareholder’s call for the ouster of the company’s chief executive makes sense.

While some “think Comcast has been slack in its approach to fighting back” against competition, the article reports, others find the call for Roberts’s resignation to be extreme.

Reporters Merissa Marr and Dionne Searcey, who wrote the January 18 piece, follow up again with an interesting history of the tension between Roberts and Chieftan managing director Glenn Greenberg. Chieftan’s letter, we learn, did not come out of the blue, but rather followed a “frosty exchange.” Click here for a good read (non-subscriber link).

Comcast must deal with technological transformations in the cable, broadcast, and telephone industries. Shareholders must decide whether they support Roberts’s response to that change, as well as whether they support the company’s share structure. Consumers dissatisfied with Comcast must decide whether to look at other options that are becoming available.

To understand all of these players, you need to read Barron’s, The Wall Street Journal, and Forbes.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.