AT&T Shareholders Urge CEO to Share in Sacrifices

Press Release
For Immediate Release - May 22, 2000
Contact:">Stacie Garnett
(617) 423-2148 x19

Update . . . 5/24/00

Resolution Vote Results

% voting YES:

  • Pay Freeze: 7%
  • Corporate Welfare: 5%

Note: Shareholder resolutions face a variety of obstacles. For this reason, it is considered significant if a resolution garners at least 5% of the vote. Votes over 10% indicate exceptional shareholder support for an issue.

Filers of "social-issue" resolutions generally don't expect their resolution to receive a majority vote and be adopted by management. Rather, filers use these resolutions to get management's attention, and to raise the issue with other shareholders. They hope to achieve a vote sufficient to allow them to return the next year.

According to SEC rules, a resolution must receive 3% of the vote the first year it is filed, 6% in year two and 10% thereafter in order to be included on the proxy the following year.

AT&T Shareholders Urge CEO to Share in Sacrifices and Ask AT&T to Disclose Corporate Welfare Received from Government

AT&T shareholders and Responsible Wealth members will present two shareholder resolutions at AT&T's annual meeting on Wednesday, May 24, in Chicago. One resolution asks the company to freeze executive pay during times of significant downsizing. The other asks AT&T to prepare a report on how much corporate welfare they receive, such as direct government subsidies and tax credits.

AT&T's stock, the nation's second most widely owned security, plummeted this month after the company warned that earnings would miss analysts' forecasts. Promising to "reignite growth," CEO C. Michael Armstrong said AT&T will cut another 6,200 employees.

AT&T employees are being told to make other sacrifices as well. AT&T instituted a cash-balance pension plan that potentially reduces the pension benefits available to older, long-term workers by as much as 60 percent, according to AT&T Concerned Employees Council on Retirement Protection.

In 1996, then CEO Robert Allen saw his compensation nearly double only weeks after announcing the layoff of 40,000 employees. This prompted US Trust of Boston and the Women's Division of the United Methodist Church to file a shareholder resolution in 1997 asking for an executive compensation review including consideration of a CEO pay freeze during periods of downsizing. The resolution won an unprecedented 14 percent of the vote.

This resolution apparently had an impact. In 1998, when CEO Armstrong announced the layoff of an additional 18,000 employees, he also announced a pay freeze for hundreds of top officers and senior managers.

Still, costs continue to rise in the executive suite. Armstrong earned $3.8 million in salary and bonus in 1998 and $4.3 million in 1999, a 14 percent hike. In addition, he earned $2.5 million in 1999 in realized stock options and he has accumulated many millions more in stock options not yet exercised.

According to the Wall Street Journal, Armstrong returned a negative 91 percent in total shareholder value relative to industry peers in 1999.

"I believe that a good leader is someone who leads by example," said Judith Barnet, AT&T shareholder and Responsible Wealth member who will present the pay freeze resolution at the annual meeting. "I don't think it's asking too much to urge CEO Armstrong and other officers to share in the sacrifices and send a message to AT&T employees and shareholders that we're all in this together."

The second shareholder resolution asks for a report outlining the corporate welfare the company receives, including direct government subsidies, tax credits, below-market financing, loan guarantees, and real estate transactions. AT&T is a large recipient of corporate welfare according to Time magazine's award winning 1998 series on the subject.

That AT&T would be a top recipient of public assistance is not surprising given that the company is also a leader in investing shareholder money in the political process. According to the non-partisan Center for Responsive Politics, AT&T is the leading corporate soft-money contributor to federal elections during the 1999-2000 election cycle.

"I want to know how much of AT&T's profits are being propped up by tax dollars," said Ann Sink, Responsible Wealth supporter and United for a Fair Economy member who will present the resolution at the meeting. "As an AT&T shareholder, I'm concerned about the security of my investment, but more importantly, as a citizen and taxpayer, I'm concerned about corporate influence over government."

The AT&T shareholder resolutions are two of fourteen filed by Responsible Wealth this year. Responsible Wealth is a growing network of over 450 business owners and investors in the top 5 percent of income or wealth in the United States who are working to promote widely shared prosperity. Responsible Wealth is affiliated with United for a Fair Economy, a national nonprofit that spotlights growing economic inequality.

The AT&T and other shareholder resolutions are available here.