Watchful Eyes: MSOs' Low Marks on Governance Explainable

With the Rigas trial underway and Comcast’s [CMCSA] Disney [DIS] bid in the spotlight, cable is getting more public scrutiny. One such area is corporate governance. Yesterday the AFL-CIO sent a letter to Comcast calling for more independent directors and an overhaul of its governance structure, saying it would be a barrier to any Disney merger. Comcast says it’s "always been driven by a culture of ethics and duty to shareholders," noting shares have outperformed the S&P 500 by more than 2 to 1 and that its corporate governance structure was approved by more than 99% of AT&T shareholders. But such public scrutiny highlights that MSOs are unlikely to rate among the best in governance, especially those with voting rights concentrated in one family or individual. Accounting and SEC investigations and family members in exec positions landed Cablevision [CVC] on "Lou Dobbs Tonight" recently as one of the 5 worst public companies of 2,100 ranked by GovernanceMetrics Intl. "Cablevision has complied with all applicable rules and will continue to do so," CVC says. Charter [CHTR] didn’t fare much better, while the Roberts family’s control of Comcast’s voting shares drag it down below the 6.1 ranking avg for media companies, GovernanceMetrics’ pres/CEO Gavin Anderson says. Cox [COX] and Time Warner [TWX] are average. Not to worry. Analysts don’t give governance reports too much credence, noting they’re only 1 aspect of a company. In addition, most family owned cable companies have exhibited strong growth and provided returns for shareholders. Such reports can be "a pretty healthy wake-up call" but industry observers won’t find anything surprising, JancoPartner sr research analyst Matthew Harrigan says. Says UBS’s Aryeh Bourkoff : "The cable industry historically has had super voting shares" in one family’s hands; … "however, many-like the Roberts family-have been very successful at growing the fundamentals for all of its shareholders." Staci D. Kramer