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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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