Corporate Governance Scoring and Assessment Project

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However, the CEO of the company also serves as the chairman of the board, such mechanism will weak the BOD’s monitoring over the CEO, since the one of the BOD’S main duties is to monitor the company’s operation, and the CEO is the one who responsible for those operations. So when the CEO and chairman position is not separated, the monitoring of the BOD will be less effective (Mohar).

Besides that, the mechanism will lead to conflict of interests. BOD vote to decide the compensation of executive management, because the payment comes at the expense of shareholder profits, and BOD’s duty is to safeguard shareholders’ interests. So when the CEO also serves as the chairman of the BOD, he or she is voting for the compensation of himself or herself.

It also weakens the independence of the Audit Committee. Because the audit committee should by law contains no member of management and direct report to the chairman. But when the CEO is also the chairman, the effectiveness of the audit committee is limited, and it no longer can be considered as independent.

Another flaw is that Comcast did not fully disclose all relevant information that will affect the shareholders’ interest, such as the annual independent performance measurement, whether the BOD member take training to enhance their performance and skills, or whether the company allows the shareholder to request to remove one of the BOD members, etc.. Disclose those “less important” information can improve Comcast’s transparency, and increased transparency helps to develop employee satisfaction and loyalty, build community support, and provide a venue for the company to publicize innovative practices.(Monks, Minow)

Other than the transparency problem, the external auditor of Comcast needs to be rotated periodically to ensure its independence. Comcast is using Deliotte & Touche as its external auditor for at least 20 years. And a close relationship between the auditor and the company increase the risk of financial scandal. But in the other side, changing an external auditor may also lead to some concerns, like the cost of the rotation and it may hinder the ability of the audit committee to oversee the external audit, etc. (Rosivach). However, compared to the disaster caused by the financial fraud of large companies, like Lehman Brothers, it is still necessary to change external auditor periodically.

And the most serious problem of Comcast is its CEO, Brain L. Robert, controls too much power over the BOD. Comcast has two classes of common stock, class A and Class B,each share of Class A has 1/5 of voting power, and each share of class B has 15 voting power, It gives The owner of all class B common stock, Brian Roberts almost 1/3 of the company’s votes, despite his ownership of only 1% shares of the company. The dual class mechanism is mostly adopted by to protect founder’s control over the company. But the problem is this mechanism closely ties the company with a single person, in this case is the CEO. Which is very risky since it is fine when the CEO performances good, but once the CEO made a bad decision, the company will suffer a heavy loss.

Conclusion

Overall, Comcast conducts a pretty decent corporate governance. To further improve the corporate governance, Comcast should keep its good good CSR and keep paying dividend meanwhile maintain the growth rate of the dividend. Also, the company needs to separate CEO position from the chairman position, by which the board can get their job, monitoring the operation of the company and providing guides and judges, done more effective. Also, the voting power of the CEO, Brain L. Roberts, need to be limited to reduce the risk of giving a single person too much power. Another benefit of doing it is to enhance the influence of independent directors, and not wasting its good structure of the BOD, having 75% of independent directors of all directors. Also, Comcast needs to improve their information transparency to let shareholder and investors know more about the operation and governance of it. And finally Comcast should rotate its external auditor despite the cost and inconvenience to avoid potential risk of financial fraud.

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