FEATURING: DEALS OF THEYEAR; THE 2004 DERIVATIVES LEADERS JANUARY 2004 TEACHERS’ BET Allison readies his bold lesson plan for TIAA-CREF Plus: BAER MARKET POWER PLAYER Swiss banks are rolling in riches Can Galateri restore Mediobanca’s glow? GROWING PAINS Access doesn’t spell success for EU states COMCAST CEO BRIAN ROBERTS Why do John Chambers, AMERICA’S GeorgeDavid, Michael Dell, Richard Kovacevich, Reuben Mark, Henry McKinnell, BEST Lee Raymond, Dennis Reilley and BrianRoberts all click with investors? See inside CEOS for our exclusive rankings COVERBAND STORYTK INSTITUTIONAL INVESTOR MONTH 2003 HeadTHE univers 55 65/70pt BESTDeck Agaramomd plain 19/21ptsCEOS By lineIN AgaramondA bold 14/21ptMERICA T By Justin Schack Sure, higher earnings and a rising stock price matter most. But in grading CEOs investors also care a lot more than they used to about good governance, as our second annual survey reveals. ometimes good guys finish first. That’s certainly the case right now with chief executive officers. Investors, having lost billions on En- ron Corp., WorldCom, Adelphia Communications Corp., HealthSouth Corp. and other highfliers that Stanked following executive-suite shenanigans, still demand solid growth. But they also want to be sure that the CEOs they invest with don’t play fast and loose with the rules. That point was driven home dramatically last year at the epicenter of American capitalism: the New York Stock Exchange. The Big Board’s own CEO, Richard Grasso, may not have had his hand in the till like some other corporate malefactors, but he did extend it pretty deep into the exchange’s pockets. Grasso’s nearly $190 million compensation package outraged not only investors but also the CEOs whose companies are listed on the Big Board and who ultimately paid his salary. Grasso’s hypocrisy appeared, moreover, to be as rich as his remuneration: The NYSE had only recently tough- ened its own corporate governance requirements for listed companies. The Big Board boss’s ignominious ouster, which triggered a housecleaning at 11 Wall Street that saw all but two of the exchange’s directors tossed out, was in its way as much a symbol of corporate excess — and investors’ new zero tolerance of it — as the most Lucul- lan of former Tyco International CEO Dennis Kozlowski’s grand bacchanals. “Everybody now believes that there were strong governance risk indicators at the companies that have cratered m Graham hoto credit tk hoto credit over the past 18 months and that they don’t want to be fooled that way again,” says shareholder activist Nell P Ji INSTITUTIONAL000 INSTITUTIONAL INVESTOR INVESTOR JANUARY 2004 BRIAN ROBERTS Comcast Corp. Age: 44 Year named CEO: 2002* Number of employees: 66,000 2003 stock performance: +39.1 percent Annual compensation: $7.7 million** Stock options: $40.7 million Roberts: “We have nearly all of the family’s wealth in the stock. Shareholder value is the No. 1, ultimate metric that I’ve judged our success by.” One voter: “I think a lot of investors, myself included, had their doubts about Comcast’s acquisition of AT&T Broadband. It was very big and very messy. But he has made it work.” * Roberts was formally named CEO in 2002 when Comcast created the title. From 1990 until 2002, he was president but performed both functions. ** Includes salary, bonus and other cash and in-kind compensation. BRIAN ROBERTS Comcast Corp. nlike many CEOs these days, Brian Roberts seems to be enjoying quarter over the year-earlier period. Comcast has halted customer attri- U himself. “I’m having a blast,” reports the mild-mannered head of tion in the AT&T operations and pared its debt load by $5 billion, to Comcast Corp., now the largest cable company in the country. $25 billion, with an additional $2 billion reduction targeted for this year. What gives Roberts, 44, such pleasure is remaking the company his Investors have reason to appreciate all this change: The stock rose 39 father, Ralph, founded four decades ago. The younger Roberts’s biggest percent last year, far outpacing the Standard & Poor’s 500 index. coup: acquiring AT&T Broadband, the cable television and high-speed Like his bow-tied father, now 83 and chairman of Comcast’s execu- Internet business of the struggling long-distance carrier. The $58 billion tive committee, the lanky, buttoned-down Roberts keeps a low profile November 2002 purchase increased Philadelphia-based Comcast’s sub- and emphasizes teamwork. He compares the giant company to “a law scriber total to more than 21 million, giving it enormous influence over tele- firm with a number of partners — I may be the managing partner, but vision programming and the equipment that brings it into American homes. everybody gets a vote.” More than 30 Comcast execs, for example, Roberts gets high marks for integrating the acquisition. Comcast is were privy to the AT&T negotiations and voted on the deal. delivering the efficiencies it promised from the newly acquired AT&T Roberts recently discussed the challenges of being a CEO with systems. Cash flow from operations increased 35 percent in the third Institutional Investor Senior Writer Justin Schack. Institutional Investor: How hard has it been Shareholder value is the No. 1, ultimate met- new places. If you walk into Circuit City or Best to be a CEO over the past couple of years? ric that I’ve judged our success by. Buy, you see Comcast all over the place — Roberts: With September 11, Sarbanes-Oxley, high-definition TV, high-speed Internet, digital the economy and Enron, certainly everything What qualities do you possess that help you cable, video on demand. We had none of that has changed in corporate America in the past be an effective CEO? three years ago. We are now in 4,500 stores. 24 months. We’re in a new world. In talking I have tried to model myself after some of my with others, I get the sense that many CEOs father’s most successful traits. One of those is Comcast’s governance has been criticized for seem to be less satisfied with their jobs. There fostering a team environment. Comcast is led the family’s voting control, for lack of board are new regulations to comply with, and some by a team of executives, not just one or two in- independence and for your being protected CEOs feel that a lot of executive time gets spent dividuals, and there’s a very collegial style to from being fired under the terms of the AT&T on process and not on managing the business. making decisions. My father is 83 years old deal. How do you defend those policies? I think we’re in a transition period in job defini- and still active as a senior statesman. I’m 44. I think that we’ve done well for all sharehold- tion and job description for boards, stockhold- I’m enthusiastic, energetic. I definitely like be- ers. There are a number of quality companies ers, CEOs and other employees. ing part of the day-to-day action and not just that have multiple voting classes of stock. In being a coach. There are certain projects I take this era it puts more of a premium on having How close are we to regaining investor con- on myself. But over the years my father has an outstanding board and outstanding integri- fidence after all the recent scandals? handed the ball off to other people, including ty. Investors don’t wait for annual meetings. There’s been a perceived and real breach of me, and said, “Run with the ball and let me They vote every day by buying or selling shares. confidence by some in corporate America that coach.” I’m blending what I see as the suc- Structure matters, but I think results, quality has had lasting effects for all. But the market cessful mentoring and coaching skills that he management and stability are what investors in general appears to be recognizing that these has without changing who I am. are looking for today. Also, our family has had are isolated incidents, not necessarily symp- voting control of Comcast since the inception tomatic of a general corporate malaise. And I Is delegating becoming more important now of the company. On three separate occasions think there’s been a tangible reassessment of that the company has become so much larger? 99 percent of institutional investors voted to in- practices in corporate America that has been It’s very hard for any one person to know what’s crease the family’s percentage vote and ulti- healthy. The pendulum needed to swing back, happening with all 75,000 employees. We’ve mately to create a nonvoting class of stock. and it has. If it keeps swinging to the point that had to blend the financial skills that the found- With the AT&T Broadband acquisition, AT&T we stifle innovation, then the swinging needs ing generation brought with new operating ex- asked us to reduce our interest from 86 per- to ease up. I hope that we find the right bal- perience in a number of areas. We recruited cent to 33 percent. We were willing to do that, ance without an overreaction. Steve Burke, our cable president, from ABC and without remuneration, to complete the acquisi- Walt Disney Co. Steve has a tremendous ser- tion. That had never happened in our history. Do you think the pendulum is swinging too far? vice skill set gained from running theme parks Pre-Sarbanes-Oxley, we also agreed to a cor- It’s hard to generalize. For our company, no.