AT&T Inc.
Summary:
All this said, the current compensation being given out to executives at AT&T is not out of control yet but we fear it may be in the near future. Stockholders Beware!
Analysis:
The Telecommunications Services Industry can be summed up in two words: Highly Competitive. Heightened competition has put constant pressure on these companies to continue to reduce service fees and lower prices. The latest example comes from the wireless segment where AT&T, Verizon, and T-Mobile all released unlimited calling plans for a monthly fee. These developments and heightened competition is good for the consumer, but is hurting the profitability of the telecom industry. It's analogous to an arms race where everyone thinks that the one with the largest supply of nuclear weapons will win in the end. Combine this with a poor economy and you can see the difficulties facing the telecommunications industry.
AT&T has faced similar issues. They are one of the leaders in this arms race. Primarily through mergers and acquisitions, they have grown to be one of the largest telecommunications companies in the world, and THE largest company in the United States. A huge problem lately has been the reduction in revenue coming from their traditional phone services. Formerly their primary core business unit, this division has been hurt by the weak domestic economy.
Thank god for the iPhone though. One of AT&T's best moves was to become the exclusive service provider for the extremely popular iPhone. This area, combined with the success of their new "UVerse" bundle has allowed them to offset the losses from the weak economy and bodes well for continued growth in the future.
With the arms deals running rampant outside the company, how are the arms dealers themselves doing?
So… What Are They Paid?
Overall the pay given out to the current executives looks high, but not off the charts. Salaries, bonuses, stock and option awards… they are all a little high when compared to their DOW 30 peer group.
But to get a real idea of the Board's compensation philosophy we need to veer from the usual path and broaden our view to look at the compensation of the recently retired senior folks. These numbers show a very different story.
The former CEO, Mr. Whitacre, retired in 2007, and took with him a compensation package from which the company reports he made $60.7 million in 2006 and $78.4 million in 2007! And he still holds unvested stock worth $90 million. His compensation in nearly every category was truly amazing, and the benefits continue for several more years as a result of his ongoing consulting relationship with the company. Wow, what a deal for him… and his number two guy retired with a similar setup!
So why do we tell you all of this? Because we feel that this sets a precedent for how the Board views its fiduciary relationship with shareholders when it compensates executives. From our rating you'll see that we don't think they have things in good perspective.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,158,583 | $735,190 |
| Bonus | $648,750 | $262,500 |
| Stock | $8,283,288 | $5,339,577 |
| Options | $790,911 | $77,278 |
| non-Equity Incentives | $3,851,250 | $1,205,182 |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report