INVESTORS CALL ON SEC TO STOP AT&T, COMCAST GOVERNANCE PLAN
Comptroller of N.Y.C. is latest to urge SEC Chmn. Harvey Pitt to stop AT&T and Comcast from creating new corporate governance for their proposed merger of AT&T Broadband unit and Comcast. Comptroller William Thompson, trustee of 4 and investment adviser to 5 N.Y.C. pension funds, told Pitt he objects to preliminary proxy statements to shareholders that show companies want to keep new board of directors in place for 3 years and disallow any challenges by shareholders and new company wouldn’t hold annual shareholders meeting until 2005. “The proposed broadband spinoff/merger transaction is bundled with a number of new, significant corporate governance changes, which, in their totality, would deal a crippling blow to shareholder rights, while insulating [the] AT&T Comcast board of directors from accountability to the shareholders,” Thompson wrote in April 10 letter. He argued that bundling merger deal with corporate governance changes would violate Securities Exchange Act of 1934, which limited companies’ ability to group related matters into single proposal.
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SEC spokesman had no immediate comment. Spokeswoman for AT&T said merging 2 companies that were so large required transition period with stable leadership. She said merger might not actually be executed until early 2003, so shareholders would miss only one annual meeting. AT&T never would do anything illegal, she said, and she wasn’t aware of any changes requested by SEC on corporate governance. She said changes had been made in preliminary proxy but none were related to this issue. However, people close to situation said they didn’t think corporate governance provisions were idea of AT&T, which turned down Comcast’s initial offer for AT&T Broadband in part because of substantially similar issues that AT&T’s board found objectionable at time. Comcast declined to comment.
Thompson said in his letter to SEC that new AT&T Comcast CEO Brian Roberts could be removed from his position before 2010 only if at least 75% of board agreed. Thompson asked SEC to step in and ask AT&T to at least separate proposals so shareholders could vote on each one. Also objecting to set- up were AFL-CIO and Council of Institutional Investors, which chided SEC in its own letter for not doing more to stop such practices. “The ‘unbundling’ rule was designed to protect investors against being strong-armed to vote for certain proposals combining shareholder-friendly and unfriendly features. Unfortunately, the SEC doesn’t appear to [be] enforcing this law,” Council Exec. Dir. Sarah Teslik wrote. Council’s Research Dir. Ann Yerger told us such governance set-up was unprecedented and was dangerous for shareholders. “I think that companies will try to do what they can get away with, and I think this is a situation where shareholders need to stand up and say, ‘We don’t want you to get away with this,'” she said.
Council also is discussing whether to take action on issue of companies’ issuing loans to its executives. Yerger acknowledged discussion had come up in context of Adelphia, which recently disclosed it had entered into co-borrowing arrangements with its founding Rigas family, and those off- balance sheet loans could total $2.7 billion. Adelphia has acknowledged that it’s subject of informal investigation by SEC. “It’s just extraordinary,” Yerger said. “It’s inappropriate for a company to act as a bank for its executives.” She said issue would be discussed at Council’s next policy meeting and proposals could follow. Adelphia official didn’t return phone message seeking comment.