July 16, 2002
Shareowner Vote Keeps Pension Plan an Issue with AT&T
by William Baue
A resolution calling for employee choice in selecting pension plans can be resubmitted next year,
and a resolution seeking to strike sexual orientation from AT&T's nondiscrimination policy is
Last week, AT&T (ticker: T)
shareowners voted on resolutions that required more than a cursory glance at the proxy statement.
One shareowner resolution, filed by Domini Social Investments, involved a choice of benefit plans
for veteran employees. Another resolution asked the company to eliminate sexual orientation from
its nondiscrimination policy, the oldest such corporate policy in the nation.
Domini resolution, co-sponsored by NorthStar Asset Management and members of United for a Fair
Economy, received approximately ten percent support, or the votes of some 252 million shares.
Under Securities and Exchange Commission regulations, ten percent support is enough to allow the
resolution to be filed again next year.
The pension issue dates back to 1997, when AT&T
converted its defined benefit pension plan to a cash balance plan. Domini contends that the
conversion method AT&T used could eventually affect as many as 30,000 longtime employees, freezing
their pension benefits to zero growth for up to 13 years.
Domini points out that other
companies, such as Kodak, Citibank, and Aetna, offered their affected employees a choice between
plans. Domini does not necessarily oppose the cash balance plan that AT&T chose to institute; but
it does oppose denying AT&T employees a choice. Shareowners are worried that AT&T is losing
talented employees because of the move.
"Our understanding is that this decision has
turned AT&T into a management farm team for its competitors," said Adam Kanzer, Director of
Shareholder Activism at Domini.
Domini objects to AT&T's actions because denying
employees a choice in determining their pension plan undermines loyalty and morale, which can
threaten company performance. The Domini resolution therefore asked the AT&T board of directors to
offer its employees this choice now. AT&T Chairman and CEO C. Michael Armstrong agreed to arrange
a meeting between executives and affected employees to discuss the financial implications of the
different pension plans.
"We consider this [ten percent support] an important victory,"
said Mr. Kanzer. "Bringing AT&T's executives together with managers affected by this conversion
was an important goal of our resolution. If these discussions don't result in an amicable solution,
this year's vote is high enough to allow us to return next year with the same resolution."
The other resolution AT&T shareowners filed was in consultation with Pro Vita Advisors, a
non-profit group that sponsors pro-life shareowner resolutions. The resolution asked AT&T to drop
sexual orientation from the list of issues specified in its nondiscrimination policy. The
resolution contended that sexual orientation is a personal matter.
AT&T's board of
directors did not agree.
"The AT&T Board believes . . . that adoption of this proposal
would inappropriately signal a departure from historic policy, wrongly suggest tolerance for
discrimination based on sexual orientation, negatively impact our workplace environment, and would
not be in the best interests of AT&T," stated AT&T's proxy statement, which recommended that
shareowners vote against the proposal.
Ninety-four percent of shareowners, or 2.3 billions
shares, voted against the resolution.
"We are proud of the continued support of AT&T's
leadership. The primary purpose of this twenty-seven year old policy has always been to foster an
inclusive workplace. This is not a special right. All employees should be free of discrimination,"
said Gregory P. Srnick, co-president of AT&T's Lesbian and Gay Business Resource Group (LEAGUE).