Corporate Governance Scoring and Assessment Project

Corporate Governance Scoring and Assessment of Comcast Inc.

 Haocheng Du

Executive Summary

        The objective of the project is to find out feasible ways to improve the corporate governance of Comcast by conduct a CG survey of Comcast, since a good corporate governance ensures the company’s efficiency of daily operation, also gave the company higher shareholder value and reputational benefits. So by studying the result of the CG survey, the strength and weakness of Comcast’s Corporate governance can be found and corresponding improvement can be applied.

        Comcast is a is a global media and technology company, the second largest internet service provider in the US. And according to the result of CG survey, Comcast did well on undertaking its social responsibility (CSR) and very shareholder-friendly, by which it pays a solid dividend. And some flaws of Comcast’s corporate governance are: the CEO and Chairman position is not separated; external auditor was not rotated periodically; the CEO has an excessive influence over the BOD, by controls 1/3 of the votes. Meanwhile, Comcast needs to improve its transparency of related information like BOD member training, performance measurement result, etc..

Background

        Comcast Inc. was founded in 1963 by Ralph J. Roberts and his co-founder Daniel Aaron and Julian A. Brodsky. It is a global media and technology company with two primary businesses, Comcast Cable and NBCUniversal. Comcast Cable provides video, high-speed internet and phone to residential customers. NBCUniversal operates news, entertainment and sports cable networks, Universal Pictures and Universal Parks and Resorts. The executive management team is attached in appendix(table 2).

        Fundamental statistics of Comcast (table 3) show that Comcast does not actually have advantages on either P/E ratio, Price/Book ratio, ROE and ROI compare to its peers and industry average. What mentionable is either the sales growth rate or dividend growth rate doubled Comcast’s peers and far more higher than the industry average. High sales and dividend growth rate consists with its assessment as shareholder friendly. But consider its low ROE, Comcast may not have a very effective capital utilization.

The CG Survey Results:

        Comcast’s CG survey score is 87, which put it in the 4th ranking(table1, fig1). So Comcast overall has a good performance of corporate governance. And from the distribution of each category, the only shortage of Comcast is the responsibility of BoD, which is mainly because it did not separate CEO and chairman position also lacking transparency of many related information. And based on the CG survey result, a SWOT analysis was made.

Strength

CSR was well implemented

According to the annual CSR report, Comcast very well implemented its social responsibility. Comcast view its CSR as three aspects: education, change and innovation. For education, Comcast sets up a scholarship named Value of Comcast Leaders and Achievers® Scholarships and it has awarded $21.6 million to over 21,000 students. To inspire change, Comcast focuses on raise people's awareness of critical issues through the news channel of NBCUniversal, also its employee and Comcast foundation donated over $10 million to United Way. And to encourage innovation, Comcast adopted a program called “The Idea” to gather employee’s ideas, also keep hiring people with diverse backgrounds and experiences.

Shareholder friendly

Comcast was named as one of the most shareholder-friendly companies by Institutional Investor magazine. And it keeps paying a solid dividend with compound annual growth about 21.5% over the last five years. (fig 2)

Maintained a good structure of the BOD

9 out of 12 Comcast’s Bod directors are independent directors, 4 of them are financial experts and 1 lead independent director. No apparent material relationship between independent directors and the company found.

Weakness

Lacking transparency of related information

Information like the training of members of the board and corporate secretary; the result of annual independent performance measurement of the company; the policies and procedures which allow a minimum 10% of its shareholders to request to replace one or more members of the BOD; the frequency of internal audit committee’s meeting.

Did not separate CEO and the BOD Chairman position

The CEO of Comcast, Brain L. Robert, is also the chairman of the BOD, which also made the Chairman not an independent director. Also, audit function is not fully independent from CEO since the audit committee report to directly to the chairman of the BOD, which in this case is also the CEO.

Not rotate its external auditors periodically

Deloitte & Touche has been the external auditor of Comcast since 1995.

Opportunity

Disclose information like the training of BOD, result of annul performance of the company, etc. will help Comcast to improve its transparency. Also, Comcast should keep undertaking its CSR also maintain a solid dividend payment.  

Threats

The CEO of Comcast, Brain L. Roberts owns almost 1/3 of the company’s votes, despite his ownership of only 1% shares of the company. It is not only violating the principle of one share- one vote, but also very risky since it gave the CEO too much power.

Findings

Comcast’s well undertaking of its CSR is good for its sustainable growth and company reputation. For example, the scholarship Comcast set up can not only earn good reputation for helping poor students, but also cultivate potential employee for the company, since those talented students who were sponsored by Comcast would likely to work for Comcast with grateful and high loyalty. Another potential benefit of CSR is it can encourage employees to become more innovative and productive(Asemah,Okpanachi, Edegoh). Innovation and productivity happen to be the two most important factors for Comcast, an internet service provider, due to the dramatically fast improvement of information technology.

Another highlight of Comcast is its dividend payment, dividend is the simplest and most direct measure to deliver a message that the company is making a profit. A solid dividend payment can build up shareholders’ confidence in the company and attract more investment for Comcast.

Comcast also did well on kept a decent structure of the BOD and over 75% of its director is independent, which is good for the BOD to make unbiased decisions also increase the accountability of the BOD. And according to Stein and Plaza, Independent directors always play an important role in supervision and the replacement of the board member for the best interest of the company, including the CEO, since they have no material relationship with the company.