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May 31, 2000
AT&T Shareholders Ask Management to Share in Sacrifices
Seven shareholder resolutions on social and corporate governance issues stir up shareholder
activism in the second most widely owned company in the U.S.
SocialFunds.com --
Despite record profitability in the 1990s, U.S. corporations have laid off legions of workers in
recent years, asserting that such cost-cutting measures would assure their long-term success. But
one AT&T shareholder resolution suggests that these employee sacrifices, with untold costs to the
economy and society, should be accompanied by sacrifices in upper management.
The resolution, presented at AT&T's annual meeting
in Chicago last Wednesday, asks the company to freeze executive pay during times of significant
downsizing. This proposal follows CEO C. Michael Armstrong's announcement that AT&T will cut
another 6,200 employees, promising to "reignite growth" after the company's stock plummeted this
month.
"I believe that a good leader is someone who leads by example," said Judith Barnet,
AT&T shareholder and member of Responsible Wealth, a network of business owners and investors
promoting widely shared prosperity. "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."
AT&T employees that retain their jobs are being told to
make other sacrifices, that are not shared by upper management. AT&T has 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.
The issue of executive pay freezes has some history at AT&T. In 1996, then CEO Robert
Allen saw his compensation nearly double 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 1997 resolution won an
unprecedented 14 percent support from shareholders (support for social shareholder resolutions is
typically in the single digits), and had an apparent impact on policy at AT&T. 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, Armstrong earned $3.8 million in salary
and bonus in 1998 and $4.3 million in 1999, a 14 percent hike.
Despite management
opposition, this year's executive pay freeze resolution won 7.3 percent support from shareholders,
the second highest vote for any of the seven shareholder proposals at the meeting. The Screen
Actors Guild and communications workers had an organized presence at the meeting, speaking in
support of the resolution and repeatedly challenging company management on this and other issues of
corporate responsibility.
Other shareholder resolutions at AT&T were chiefly concerned
with corporate management, including severance pay policy, employee workplace decision-making,
political non-partisanship, and hiring a "resident analyst" for directors to improve their
performance. One resolution suggested a "stockholder matching gift program" for shareholders to
leverage company charitable donations with their own donated dividends.
But perhaps the
weightiest of the resolutions asks AT&T to prepare a report on how much corporate welfare they
receive, such as direct government subsidies, tax credits, below-market financing, and the like.
The federal government spent an estimated $125 billion annually on corporate welfare in 1998, an
astounding 26 percent of total after-tax corporate profits in the U.S., and AT&T was among the
largest recipients.
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 year 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 member of United for a Fair Economy who presented 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 resolution on corporate welfare from federal, state, and
local sources received 5.2 percent support from shareholders, qualifying it for resubmission next
year. Perhaps more significantly, the proposal prompted CEO Armstrong to look into the issue before
the annual meeting and report that federal corporate welfare, at least, accounted for about 3
percent of AT&T's profits.
Although the single-digit results of the social shareholder
resolutions at AT&T are typical, reflecting shareholder unawareness and a voting policy that casts
unmarked ballots in favor of management opinion, they suggest a deeper purpose. As always, these
resolutions were important steps in initiating debate, and in creating the space for shareholders
to participate, on these important issues.
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SRI World Group, Inc. All Rights Reserved.
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