AT&T Proxy Analysis

AT&TAT&T Inc. (T) provides telecommunications and digital entertainment services. The company operates through four segments: Business Solutions, Entertainment Group, Consumer Mobility, and International.  It is one of the stocks in my portfolio. had collected the votes of three fund families when I checked and voted. Their annual meeting is coming up on 4/27/2017. Sorry for the late post.

I voted FOR Proxy Access Amendments. See how and why I voted other items below. I voted with the Board’s recommendations only 10% of the time. View Proxy Statement.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.

AT&T: ISS Rating

From the Yahoo Finance profile: AT&T Inc.’s ISS Governance QualityScore as of April 1, 2017 is 4. The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 3; Compensation: 8. Brought to us by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures. That gives us a quick idea of where to focus: the Compensation.

AT&T: Compensation

AT&T’s Summary Compensation Table (page 70) shows the highest paid named executive officer (NEO) was Chairman and CEO R. Stephenson at $28.4M in 2016. I am using Yahoo! Finance to determine the market cap ($245B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. AT&T is a large-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2015, so pay was well above that amount. AT&T shares outperformed the NASDAQ over the most recent two year time period, but underperformed in the most recent one, five, and ten year time periods.

Egan-Jones Proxy Services takes various measures to arrive at a proprietary rating compensation score, which measure wealth creation in comparison to other widely held issuers.

AT&T earned a compensation score of “Good.”

After taking into account both the quantitative and qualitative measures outlined below, we believe that shareholders should support the current compensation policies put in place by the Company’s directors. Furthermore, we believe that the Company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, strongly aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and the enhancement of shareholder value. Therefore, we recommend a vote “FOR” this Proposal.

I voted “AGAINST” the say-on-pay item. The “Lake Woebegone effect,” where everyone is above average and the averages are recalculated upward every year, has to stop. We cannot just keep voting in favor of higher and higher pay packages. I could understand paying more than median, since AT&T is much larger than most but not this much more. I also voted against all the compensation committee members. However, in looking though the proxy (quickly), I could not determine the members of that committee, so voted against all directors.

AT&T: Accounting

I have no reason to believe the auditor has rendered an inaccurate opinion, is engaged in poor accounting practices, or has a conflict of interest. However, Egan-Jones recommends voting against, favoring auditor rotation after seven years. I am not quite ready to set that as the bar, so voted FOR.

AT&T: Board Proposals

As mentioned above, I voted “Against” the pay package. As is my habit, when I vote against the pay package, I also vote against/withhold on the compensation committee… in this case the full board.

Egan-Jones also recommended that clients

“WITHHOLD” votes from the Company’s CEO and Chairman, Inside director Randall L. Stephenson, for holding more than one other public directorship. We believe that the CEO and Chairman, being the most critical roles in a company, should hold no more than one other public directorship to ensure the effective and prudent exercise of his fiduciary duties and that his integrity and efficiency are not compromised.

AT&T: Shareholder Proposals

Egan-Jones recommended Against 5 and 6, For 7 and 8.

#5 Prepare Political Spending Report

I support transparency and accountability in political spending, so voted FOR.

#6 Prepare Lobbying Report

I support transparency and accountability in lobbying, so voted FOR.

#7  Proxy Access Bylaw Amendments

Myra Young (my wife) is the proponent. I voted ‘FOR.’AT&T has a “lite” version of proxy access. The following amendments would give it robust proxy access:

First Proxy Access -Cartoon from Pensions & Investments

20% Limit

Current bylaws allow shareholders to nominate only two, easily isolated, directors. My proposal would up that to 25%, yielding 3 nominees. As we know from research on women serving on boards, 3 represents critical mass, to have real impact.

20 Member Limit

Current bylaws limit nominating groups to 20 members. The Council of Institutional Investors studied such provisions and found their members, who hold in excess of $3 trillion in assets, would not be able to meet the requirement of 3% held for 3 years with a 20-member limit. The proposal seeks removal of the cap on the number of members that can form a group.

Most of the largest fund holders in AT&T have never filed a proxy proposal, so are very unlikely to lead a nominating group.

Three reasons for this inactivity come to mind:

  1. These funds frequently run company retirement programs. Research indicates they vote against management less frequently when they have such contracts. (Proxy Voting Conflicts: Asset Manager Conflicts of Interest in the Energy and Utility Industries, 50/50 Climate Project, 4/16/2017) Since conflicts of interest reduce voting against management for fear of losing contracts, we can assume filing proposals would have an even greater chance of reducing the likelihood of contract renewal.
  2. Since they are primarily indexed, these funds compete largely based on cost. Although the cost is relatively small, filing proposals does require time and money. Any benefit derived goes equally to competitors holding a similar amount of stock, while all expenses are borne solely by proponents. Filing proposals would put such funds at a competitive disadvantage.
  3. These funds hold such a relatively high percentage of stock in most companies that they might be able get the type of changes typically sought through shareholder proposals by simply expressing their desires to company management. Therefore, they have no need to file proposals.

CII - Proxy Access: Best PracticesOur proposal asks the Board to remove the cap on shareholders that can form nominating groups. When the SEC enacted a proxy access rule, it contained no cap; neither should AT&T’s bylaws.

Renomination Limit

The third requested change addresses a bylaw provision that prohibits a proxy access candidate who receives less than 25% of the vote to be nominated as a proxy access candidate for the following two years. We would delete that cap, just as the SEC did when it wrote proxy access rules. No proxy access candidates have ever run at any company. When it happens, it will be novel and will take some getting used to, just like any new idea — like integrating lunch counters. Shareholders may take some time to get used to the idea of proxy access candidates.


AT&T’s proxy access more of an illusion than reality. Just as the word “natural” doesn’t mean “organic,” proxy access at AT&T doesn’t mean shareholders can actually nominate even a single director.  Vote FOR #7.

#8 Reduce Vote Required For Written Consent

Shareholders should have the ability to take action by written consent, if such written consent or consents sets forth the action to be taken and is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to take such action at a meeting . Vote FOR #8.

AT&T: Votes Against Board Position in Bold Proxy Insight

As mentioned above, had collected the votes of three funds when I voted.  Proxy Insight reported additional votes from Florida SBA, Canada Pension (CPPIB), Teacher Retirement System of Texas (TRS), and others. While their votes varied, all voted FOR #5, 6, 7 & 8.

1.1Elect Director Randall L. StephensonAgainstForAgainstFor
1.2Elect Director Samuel A. Di Piazza, Jr.AgainstForAgainstFor
1.3Elect Director Richard W. FisherAgainstForAgainstFor
1.4Elect Director Scott T. FordAgainstForAgainstFor
1.5Elect Director Glenn H. HutchinsAgainstForAgainstFor
1.6Elect Director William E. KennardAgainstForAgainstFor
1.7Elect Director Michael B. McCallisterAgainstForAgainstFor
1.8Elect Director Beth E. MooneyAgainstForAgainstFor
1.9Elect Director Joyce M. RocheAgainstForAgainstFor
1.10Elect Director Matthew K. RoseAgainstForAgainstFor
1.11Elect Director Cynthia B. TaylorAgainstForAgainstFor
1.12Elect Director Laura D’Andrea TysonAgainstForAgainstFor
1.13Elect Director Geoffrey Y. YangAgainstForAgainstFor
2Ratify Ernst & Young LLP as AuditorsForAgainstAgainstAgainst
3Advisory Vote to Ratify Named Executive Officers’ CompensationAgainstForAgainstFor
4Advisory Vote on Say on Pay FrequencyOne YearOne YearOne YearOne Year
5Report on Indirect Political ContributionsForForForFor
6Report on Lobbying Payments and PolicyForForForFor
7Amend Proxy Access RightForForForFor
8Provide Right to Act by Written ConsentForForForFor

AT&T: Issue for Future Proposals

SharkRepellentLooking at for other provisions unfriendly to shareowners. The main outstanding issue is proxy access:

  •  Action without a meeting by written consent is permitted, if written consent, seeing forth the action so taken, shall be signed by stockholders holding not less than 66.67 percent of the outstanding shares of the Company’s stock entitled to vote with respect to the subject matter thereof.
  •  Proxy access provision whereby a shareholder or group of no more than 20 stockholders holding at least 3% of the outstanding common stock continuously for at least three (3) years may nominate directors, so long as the number of directors elected via proxy access does not exceed 20% of the board. In proxy access, for nominations to be timely, notice must be delivered to the Secretary at the principal executive offices of the Corporation not less than 120 days nor more than 150 days prior to the anniversary of the date that the corporation mailed its proxy statement for the prior year’s annual meeting of stockholders. Nominees who receive less than 25% of the votes would be ineligible for nomination under the proxy access provision for the next two (2) annual meetings.

AT&T: Mark Your Calendar

Stockholder proposals intended to be included in the proxy materials for the 2018 Annual Meeting must be received by November 10, 2017. Such proposals should be sent in writing by courier or certified mail to the Senior Vice President and Secretary of AT&T at 208 S. Akard Street, Suite 3241, Dallas, Texas 75202. Stockholder proposals that are sent to any other person or location or by any other means may not be received in a timely manner.


Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime).I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.

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