Shareholders take final swipe at CCU


Clear Channel may be on the verge of becoming a private company, but shareholders got in a final swipe at management. They voted at their annual meeting to require greater independence of directors serving on the company's compensation committee, despite a unanimous recommendation by the board of directors that the proposal be voted down.

Clear Channel already has a compensation committee, of course, and all of its members meet the New York Stock Exchange definition of an independent director. But the dissidents, led by a group of pension funds, said that wasn't good enough. They want the standard set by the Council of Institutional Investors. According to the resolution, "for the purpose of this proposal an independent director is someone whose only nontrivial professional, familial or financial connection to the corporation, its chairman or its executive officers is his/her directorship…" and neither they nor any of their relatives have been employed by the company within the past five years.

The vote may prove to be a meaningless gesture, since the compensation committee is not likely to have any work to do before the vote on selling the entire company to a new entity headed by Thomas H. Lee Partners and Bain Capital. The San Antonio Express News quoted CCU CEO Mark Mays as saying the buyout is experiencing "nothing but momentum" following the latest revision to 39.20 per share, with current shareholders permitted to claim a stake in the new company.

RBR observation: The obvious target of this measure is B.J. "Red" McCombs, who co-founded Clear Channel with Lowry Mays and has been a company director for every minute of its existence over the past 35 years. According to the CCU proxy, the company leases some office space in San Antonio from a company owned by the adult offspring of Lowry Mays and Red McCombs for just under 17K per month. The adult children of McCombs also now control the family partnership which owns the string of auto dealerships by which Red made his original fortune.

Those auto dealerships bought 873K of advertising last year from various Clear Channel radio, TV and outdoor entities. The McCombs family also owns five sites where Clear Channel Outdoor has billboard leases, for which 2006 payments totaled 156K.

These deals have all been publicly disclosed and CCU says the rates are no different than what could be obtained with nonaffiliated parties. Indeed, these all seem like small change when compared to the total holdings of the two families, each of which have 10-figure fortunes. And given the size of the McCombs family stake in Clear Channel, it seems that Red McCombs would tend to hold the purse strings more tightly than someone with little or no personal stake in the company. The other members of the compensation committee are its chairman, construction company executive John Zachry, and former US Representative J.C. Watts.