US regulators have forced AT&T to ask shareholders whether they want a
non-binding vote on executive pay in a move that will bolster investors'
efforts to have a greater say on the compensation of America's corporate
The decision by the Securities and Exchange Commission,
contained in a letter seen by the Financial Times, is a major blow to
AT&T, which has been one of corporate America's staunchest opponents of an
unprecedented campaign by investors and lawmakers to introduce a UK-style,
yearly vote on executives' pay.
The issue will feature prominently in this season of shareholder
meetings following investor outrage at the huge severance packages
awarded to executives at companies such as Home Depot, the retailer, and
Pfizer, the drugmaker.
State and union pension funds have filed motions at more than 60
companies demanding a non-binding vote on compensation amid concerns that
executive pay has not been adequately linked to companies' performances.
The SEC adjudicates when a company objects to such a motion.
AT&T confirmed yesterday that the SEC had rejected its request to
exclude the motion on executive pay from the "proxy" form containing
matters to be voted on at its annual investor meeting on April 27.
In its submission to regulators, the telecommunications group had
maintained that the proposal by the Ameritech/SBC Retirees group breached
SEC rules because it "merely purports to express shareholders' views"
rather than requiring action from the board.
The months-long tussle between AT&T and its shareholders has become
famous in corporate governance circles because the telecoms group
supported its argument by quoting what some considered to be an irrelevant
decision regarding a shareholder's demand to include his poems in a
AT&T said that a yearly vote on compensation conflicted with the legal
power of directors and the board to manage the company.
However, in its letter - sent to the company last month - the office of
the SEC's chief counsel said it was "unable to concur" with AT&T's views.
It also rejected AT&T's contention that the proposal breached state law in
Delaware, where the company is incorporated.
If the proposal is passed, shareholders could be able to vote on the
compensation of AT&T's executives, led by chairman and chief executive
Edward E. Whitacre, from as early as next year. In 2005, Mr Whitacre
earned $17.3m, a 25 per cent rise on the previous year.