Shareholders Press AT&T on Wage Gap, Exec Raises After Lay-Offs

Press Advisory
For Immediate Release - May 17, 1999
Contact:Betsy Leondar-Wright
(617) 423-2148 x13

Shareholders Press AT&T on Wage Gap, Executive Raises After Lay-Offs

A group of AT&T shareholders are challenging the company's Board of Directors to set a maximum ratio between the pay of the CEO and that of the lowest-paid worker in the company.

AT&T shareholders will vote Wednesday, May 19, in Houston, Texas, on a shareholder resolution, which is part of a national campaign addressing the wage gap by Responsible Wealth, a project of the Boston-based national nonprofit United for a Fair Economy. Responsible Wealth members and supporters filed shareholder resolutions about wage inequities between CEOs and average workers at nine U.S. corporations this year.

In 1996, AT&T drew widespread criticism for doubling its chairman's compensation at the same time as it was eliminating 40,000 jobs. In 1997, shareholders gave an unprecedented 14% vote in favor of a resolution to freeze executive pay at times of lay-offs. In response to shareholder and other criticism, AT&T changed its policy. In early 1998, in the same press conference that announced a new round of layoffs, new CEO C. Michael Armstrong announced a freeze on the salary and bonuses of nearly 1,000 top managers. The 1999 resolution would institutionalize a similar link between the top management and wage workers at the company.

Armstrong earned $1.4 million salary and $1.9 million in bonus in 1998, 10% above the median realized CEO compensation within the technology industry, according to the Wall Street Journal. Mr. Armstrong received an additional $507,338 in other compensation, including $32,785 for personal use of corporate aircraft and $14,790 for personal use of company leased automobile. Mr. Armstong did not exercise any stock options in 1998. The value of the unexercised options he received during his first 15 months on the job, including 300,000 new options granted in 1998, were $26.6 million as of December 31, 1998. Downsizing continues at AT&T, with 20,000 jobs eliminated during Mr. Armstrong's tenure as CEO.

Resolution proponents were prompted to act by the threat that the growing wage gap poses working Americans and to the nation's economic well-being. According to Business Week, CEOs at the largest US companies now earn an astounding 419 times the pay of average blue-collar workers, up from 42 times as recently as 1980.

In addition to AT&T, the Responsible Wealth shareholder resolutions have been introduced at AlliedSignal, BankAmerica, BankBoston, Citigroup, Computer Associates, General Electric, Huffy, and R.R. Donnelley.

Most of the resolutions ask the company to set a reasonable ratio between CEO pay and the lowest-paid full-time employee in the company. One resolution asks the company to report on this ratio. Another resolution, at R.R. Donnelley, asked the company to conduct a pay equity study by race and gender.

A resolution seeking to cap the pay of Citigroup co-CEO and AT&T Director Sanford Weill, whose $167 million in compensation makes him 1998's third-highest paid executive, was supported by 10.89% of the shareholders. This is a very strong showing given voting procedures that favor management positions on proxy resolutions; double-digit votes are rare. The AlliedSignal resolution received 11% of the vote, the R.R. Donnelley resolution received 16.2%, the Huffy resolution 8.34%, the BankBoston resolution 4.83%, the BankAmerica resolution 7%, and the General Electric resolution 5%.

"Many Americans now see CEO pay as out of control. Even Federal Reserve Chairman Alan Greenspan has publicly criticized such lavish compensation and severance packages," said Responsible Wealth Director Scott Klinger. "At the other end of the wage gap, a minimum wage worker makes less than the poverty level for a family of two."

United for a Fair Economy (UFE) is a national nonprofit organization that spotlights growing economic inequality and advocates shared prosperity. UFE recently published Shifting Fortunes: The Perils of the Growing American Wealth Gap.

Responsible Wealth, a project of UFE, is a growing network of over 400 business people, investors and affluent individuals in the top 5 percent of income and wealth working together to reverse the trend toward growing economic inequality.