SOCIAL TOPICS (Archive): EQUITY ISSUES

Published, July 1997

       United States Trust Company’s executive compensation resolution received support from 14% of AT&T's shareholders. The resolution, calling for AT&T to conduct an in-depth review of executive compensation policies, was motivated by the huge increases in senior officer pay at a time when the phone giant was preparing to announce the layoff of 40,000 employees and continued deterioration of core business results. Among the issues we asked AT&T to consider was whether executive pay should be frozen during periods of significant downsizing.

       Introducing the resolution at the annual meeting, USTC's Scott Klinger called upon the company to provide shareholders with additional information about how the various components of executive compensation are determined. For instance, a significant portion of officer bonuses are based on employee and customer satisfaction. Shareholders were informed that 100% of employee and customer targets were met, despite the fact that the company has announced some of the largest layoffs in American history, seen the departure of several key executives and continues to experience a steady loss of customers in its core long distance business. A representative of the Communications Workers union followed Klinger’s statement introducing the resolution with a powerful endorsement that brought a hearty ovation from the crowd.

       AT&T’s executive compensation practices continued as an important theme of the meeting with shareholders asking questions ranging from how new President John Walter could justify a $300,000 moving allowance to whether Chairman Bob Allen would assume leadership on the issue of excessive compensation and take a 10% pay cut. “If I thought it would make any difference to the country or the company I would,” Allen explained, “but I don’t think it would matter.”

       The acceleration of executive compensation relative to other employees in the US since the decade of the eighties is causing the wage gap to explode. In 1980, top executives on average earned 42 times a factory worker’s pay; by 1991 the multiple reached 104. Today’s corporate chieftain enjoys a compensation level that is 209 times the average factory worker, a multiple more than twice that of most other industrialized nations.