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July 19, 2000
AT&T Shareholders React to Pornographic TV Deal
A coalition of religious and socially concerned institutional investors calls on the
telecommunications giant to reconsider partnership with The Hot Network.
SocialFunds.com --
As the year 2000 proxy season slows down and the results of shareholder resolutions begin to add
up, it is all too easy to forget that much shareholder activism happens behind the scenes as
dialogue with corporate managers. A very immediate, and highly publicized case at AT&T provides a
valuable glimpse of shareholder advocacy in action at the dialogue level.
 This week, a coalition of 27 institutional investors
called upon AT&T management to reconsider their recent decision to partner with The Hot Network,
which distributes sexually pornographic material for broadcast on cable television. In a letter
addressed to CEO C. Michael Armstrong, the investors appealed to AT&T's reputation of responsible
corporate behavior.
"We're surprised, actually," said Mark Regier, Social Research and
Advocacy Coordinator at Mennonite Mutual Aid (MMA), home of the MMA Praxis Mutual Funds. "AT&T has
established itself as a front-runner among socially responsible companies. Why they'd choose to
embarrass their employees, shareholders and the company in such a way is unfathomable to us."
The coalition of concerned institutional investors, led by MMA, controls over 2.8 million
shares of AT&T stock. Although most of the signers represent faith-based investors, such as MMA,
Aquinas Funds, Adrian Dominican Sisters, and United Methodist General Board of Pensions and Health
Benefits, they also include prominent social funds, The Parnassus Fund and Pax World Funds.
Citing workplace benefits, community relations, and charitable giving, the coalition's letter
to AT&T points out that the blue-chip corporation has a long-established reputation as a
responsible corporate citizen. The signers also emphasize that they are not calling for censorship
and, instead, are simply exercising their right as owners to discourage irresponsible corporate
behavior.
The investors call into question serious management issues, citing media
reports that the alliance with The Hot Network was a strategic business decision designed to
improve their sagging cable business. Their letter states, "What management missteps are behind a
situation where AT&T must turn to strategies appealing to the basest elements of our culture -
violating a corporate tradition of positive social behavior?"
At the core of the
investors' argument is that AT&T has proven its leadership in finding financial success while
building up-rather than depleting-the positive social values that are the foundation of our
society. Their letter even cites other competing telecommunications companies that have upheld
these values by eschewing graphic cable pornography.
"Both Time Warner and Comcast took a
pass on adding The Hot Network to their cable packages," said Regier of MMA. "Shouldn't that tell
AT&T something? Ma Bell just does not belong in the hard-core pornography business."
It
is too early to tell how AT&T management will respond to this call to conscience by socially
responsible investors, or if it will be the subject of further dialogue or a shareholder resolution
next year. But the case stands as testimony to the vigilance of many investors on social issues and
the willingness to take their role as corporate shareholders seriously.
©
SRI World Group, Inc. All Rights Reserved.
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