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Notice of At & T inc. 2019 Annual Meeting Of Stockholders and Proxy Statement.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 | |
AT&T Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notice of At & T inc. 2019 Annual Meeting Of Stockholders and Proxy Statement.
TO OUR STOCKHOLDERS
 | Letter from the Chairman, CEO and President |
Dear Stockholders:
It’s a pleasure to invite you to our 2019 Annual Meeting of Stockholders. I hope you can join us on Friday, April 26, 2019, at 9:00 a.m., at the Moody Performance Hall, 2520 Flora Street, Dallas, Texas 75201.
At this year’s meeting, we will discuss our strategy to become a modern media company and deliver on our mission to inspire human progress through the power of communication and entertainment.
You’ll hear about how we’re executing on that strategy by building on the solid performance of our communications business, standing up a revolutionary advertising business and continuing to create great entertainment. Most important, we’ll discuss our plans to grow free cash flow and pay down our debt – all while continuing to invest in growth and maintain a solid, steady dividend for you, our owners.
In recent years, you have seen us transform our company in big and dramatic ways. But one thing has not – and will not – change. That’s our goal of delivering strong results for you and sustainable, long-term growth and success for AT&T. On behalf of the Board and our management team, thank you for your continued support.
Sincerely,
Randall Stephenson
| Letter from the Lead Director |
Dear Stockholders:
In my second term as your company’s Independent Lead Director, I want you to know how proud I am to reaffirm AT&T’s lasting commitment to thoughtful and effective governance.
The Board’s role is to keep our company focused on the long-term and protect the interests of our stockholders. We take a disciplined,hands-on approach to discharging that duty – questioning assumptions, offering alternative points of view and assessing every decision through the lens of building stockholder value.
We have worked hard to recruit and maintain a Board with deep experience and varied backgrounds. In a rapidly evolving marketplace, that diversity of perspectives is crucial to our success in serving our customers and creating value for you.
I hope to see you at our 2019 Annual Meeting. Until then, please accept the gratitude of our entire Board for your enduring confidence in AT&T.
Sincerely,
Matthew Rose
| AT&T Inc. One AT&T Plaza Whitacre Tower 208 S. Akard Street Dallas, TX 75202 |
NOTICE OF 20172019 ANNUAL MEETING
OF STOCKHOLDERS AND PROXY STATEMENT
To the holders of Common Stock of AT&T Inc.:
The 2017 annual meeting2019 Annual Meeting of stockholdersStockholders of AT&T Inc. will be held as follows:
When: | 9:00 a.m. local time, Friday, April | |
Where: |
2520 Flora Street Dallas, | |
The purpose of the annual meeting is to consider and take action on the following:
| 1. | Election of Directors |
| 2. | Ratification of Ernst & Young LLP as independent auditors |
| 3. | Advisory approval of executive compensation |
| 4. |
| Any other business that may properly come before the meeting, including |
Holders of AT&T Inc. common stock of record at the close of business on February 28, 2017,27, 2019, are entitled to vote at the meeting and any adjournment of the meeting. Please sign, date, and return your proxy card or submit your proxy and/or voting instructions by telephone or through the Internet promptly so that a quorum may be represented at the meeting. Any person giving a proxy has the power to revoke it at any time, and stockholders who are present at the meeting may withdraw their proxies and vote in person.
By Order of the Board of Directors.
Stacey Maris
Senior Vice President – Assistant General Counsel
and Secretary
March 11, 2019
YOUR VOTEIS IMPORTANT | ||
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Please sign, date and return your proxy card or submit your proxy and/or voting instructions by telephone or through the Internet promptly so that a quorum may be represented at the meeting. Any person giving a proxy has the power to revoke it at any time, and stockholders who are present at the meeting may withdraw their proxies and vote in person.
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ATTENDINGTHE MEETING | ||
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If you plan to attend the meeting in person, please
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Stacey Maris
Senior Vice President – Assistant General Counsel and Secretary
March 10, 2017
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This summary highlights information contained elsewhere in this Proxy Statement. Please read the entire Proxy Statement carefully before voting.
Attending the Annual Meeting of Stockholders
Important Notice
Regarding the
Availability of Proxy Materials
for the Stockholder Meeting
To Be Held on April 26, 2019:
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Agenda and Voting Recommendations
| Item | Description | Board Recommendation | Page | |||
| 1 | Election of Directors | FOR each nominee | 7 | |||
| 2 | Ratification of Ernst & Young LLP as auditors for 2017 | FOR | 17 | |||
| 3 | Advisory Approval of Executive Compensation | FOR | 18 | |||
| 4 | Advisory Approval of Frequency of Vote on Executive Compensation | FOR every year | 19 | |||
| 5 | Stockholder Proposal: Prepare Political Spending Report | AGAINST | 20 | |||
| 6 | Stockholder Proposal: Prepare Lobbying Report | AGAINST | 22 | |||
| 7 | Stockholder Proposal: Modify Proxy Access Requirements | AGAINST | 24 | |||
| 8 | Stockholder Proposal: Reduce Vote Required for Written Consent | AGAINST | 26 |
Director Nominees*
| Name | Age | Director Since | Principal Occupation | |||
Randall L. Stephenson | 56 | 2005 | Chairman, CEO, and President, AT&T Inc. | |||
Samuel A. Di Piazza, Jr. | 66 | 2015 | Retired Global CEO, PricewaterhouseCoopers International Limited | |||
Richard W. Fisher | 67 | 2015 | Former President and CEO, Federal Reserve Bank of Dallas | |||
Scott T. Ford | 54 | 2012 | Member and CEO, Westrock Group, LLC | |||
Glenn H. Hutchins | 61 | 2014 | Chairman, North Island and Co-Founder, Silver Lake | |||
William E. Kennard | 60 | 2014 | Former United States Ambassador to the European Union and former Chairman of the Federal Communications Commission | |||
Michael B. McCallister | 64 | 2013 | Retired Chairman and CEO, Humana Inc. | |||
Beth E. Mooney | 62 | 2013 | Chairman and CEO, KeyCorp | |||
Joyce M. Roché | 69 | 1998 | Retired President and CEO, Girls Inc. | |||
Matthew K. Rose | 57 | 2010 | Chairman and CEO, Burlington Northern Santa Fe, LLC | |||
Cynthia B. Taylor | 55 | 2013 | President and CEO, Oil States International, Inc. | |||
Laura D’Andrea Tyson | 69 | 1999 | Distinguished Professor of the Graduate School at the University of California at Berkley | |||
Geoffrey Y. Yang | 57 | 2016 | Founding Partner and Managing Director, Redpoint Ventures |
* All Director nominees are independent, except for Mr. Stephenson
 |
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GUIDE TO AT&T’S PROXY STATEMENT
Corporate Governance Highlights
We are committed to good corporate governance, which promotes the long-term interests of stockholders, strengthens Board and management accountability and helps build public trust in the Company. The Corporate Governance section beginning on page 27 describes our governance framework, which includes the following highlights: GENERAL
Executive Compensation Highlights
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Information About the Meeting and Voting
General
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of AT&T Inc. (AT&T, theCompany, orwe) for use at the 20172019 Annual Meeting of Stockholders of AT&T. The meeting will be held at 9:00 a.m. local time on Friday, April 28, 2017,26, 2019, at the Dallas CityMoody Performance Hall, 2520 Flora Street, Dallas, Texas 75201.
The purposes of the meeting are set forth in the Notice of Annual Meeting of Stockholders (see page i). This Proxy Statement and form of proxy are being sent or made available beginning March 10, 2017,11, 2019, to stock-
holdersstockholders who were record holders of AT&T’s common stock, $1.00 par value per share, at the close of business on February 28, 2017.27, 2019. These materials are also available at www.edocumentview.com/att. Each share entitles the registered holder to one vote. As of January 31, 2017,2019, there were 6,140,504,4017,290,236,907 shares of AT&T common stock outstanding.
To constitute a quorum to conduct business at the meeting, stockholders representing at least 40% of the shares of common stock entitled to vote at the meeting must be present or represented by proxy.
| TABLE OF CONTENTS | INDEX OF FREQUENTLY ACCESSED INFORMATION |
Voting
Stockholders of RecordAcronyms Used
Stockholders whose shares are registered in their name on the Company records (also known as “stockholders of record”) will receive either a proxy card by which they may indicate their voting instructions or a notice on how they may obtain a proxy. Instead of submitting a signed proxy card, stockholders may submit their proxies by telephone or through the Internet. Telephone and Internet proxies must be used in conjunction with, and will be subject to, the information and terms contained on the form of proxy. Similar procedures may also be available to stockholders who hold their shares through a broker, nominee, fiduciary or other custodian.
All shares represented by proxies will be voted by one or more of the persons designated on the form of proxy in accordance with the stockholders’ directions. If the proxy card is signed and returned or the proxy is submitted by telephone or through the Internet without specific directions with respect to the matters to be acted upon, it will be treated as an instruction to vote such shares in accordance with the recommendations of the Board of Directors. Any stockholder giving a proxy may revoke it at any time before the proxy is voted at the meeting by giving written notice of revocation to the Secretary of AT&T, by submitting a later-dated proxy, or by attending the meeting and voting in person. The Chairman of the Board will announce the closing of the polls during the Annual
CAM | Career Average Minimum | |
CCO | Chief Compliance Officer | |
CDP | Cash Deferral Plan | |
CEO | Chief Executive Office | |
CSR | Corporate Social Responsibility | |
DOJ | U.S. Department of Justice | |
EBITDA | Earnings Before Interest, Taxes, Depreciation, and Amortization | |
EPS | Earnings Per Share | |
EY | Ernst & Young LLP | |
FCF | Free Cash Flow |
Meeting. Proxies must be received before the closing of the polls in order to be counted.
A stockholder may designate a person or persons other than those persons designated on the form of proxy to act as the stockholder’s proxy by striking out the name(s) appearing on the proxy card, inserting the name(s) of another person(s) and delivering the signed card to that person(s). The person(s) designated by the stockholder must present the signed proxy card at the meeting in order for the shares to be voted.
Shares Held Through a Bank, Broker or Other Custodian
Where the stockholder is not the record holder, such as where the shares are held through a broker, nominee, fiduciary or other custodian, the stockholder must provide voting instructions to the record holder of the shares in accordance with the record holder’s requirements in order to ensure the shares are properly voted.
Shares Held on Your Behalf under Company Benefit Plans or under The Direct SERVICE Investment Program
The proxy card, or a proxy submitted by telephone or through the Internet, will also serve as voting
MCB | Management Cash Balance | |
NEO | Named Executive Officer | |
NYSE | New York Stock Exchange | |
ROIC | Return on Invested Capital | |
RSU | Restricted Stock Unit | |
SEC | Securities and Exchange Commission | |
SERP | Supplemental Employee Retirement Plan | |
SRIP | Supplemental Retirement Income Plan | |
SPDP | Stock Purchase and Deferral Plan | |
SRIP | Supplemental Retirement Income Plan | |
TSR | Total Stockholder Return |
 |
instructions to
This summary highlights information contained elsewhere in this Proxy Statement. Please read the plan administrator or trustee for any shares held on behalf of a participant under any of the following employee benefit plans: the AT&T Savings and Security Plan, the AT&T Puerto Rico Retirement Savings Plan, the AT&T Retirement Savings Plan, and the BellSouth Savings and Security Plan. Subject to the trustee’s fiduciary obligations, shares in each of the above employee benefit plans for which instructions are not received will not be voted. To allow sufficient time for voting by the trustees and/or administrators of the plans, your voting instructions must be received by April 25, 2017.
In addition, the proxy card or a proxy submitted by telephone or through the Internet will constitute voting
instructions to the plan administrator under The DirectSERVICE Investment Program sponsored and administered by Computershare Trust Company, N.A. (AT&T’s transfer agent) for shares held on behalf of plan participants.
If a stockholder participates in the plans listed above and/or maintains stockholder accounts under more than one name (including minor differences in registration, such as with or without a middle initial), the stockholder may receive more than one set of proxy materials. To ensure that all shares are voted, please submit proxies for all of the shares you own.
entire Proxy Statement carefully before voting.
Attending the Annual Meeting
Only AT&T stockholders may attend the meeting. of Stockholders
Stockholders of Record(shares are registered in your name)
An admission ticket is attached to your proxy card or Annual Meeting Notice and Admission Ticket. If you plan to attend the annual meeting in person, please retainbring the admission ticket and bring it with you(attached to the meeting. A stockholderproxy card or the Notice of record who doesInternet Availability of Proxy Materials) to the Annual Meeting. If you do not have an admission ticket will be admitted upon presentation of photo identification at the door.
Other Stockholders(or if you hold your shares are held in the name of a bank, broker, or other institution)
Youinstitution, you may obtain admission to the meeting by presenting proof of your ownership of AT&T common stockstock.
Agenda and photo identification. To be able to vote at the meeting, you will need the bank, broker, or record holder to give you a proxy.
Voting ResultsRecommendations
Item
| Description
| Board Recommendation
| Page
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MANAGEMENT PROPOSALS: | ||||||
1
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Election of Directors
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FOR each nominee
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5
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2
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Ratification of Ernst & Young LLP as auditors for 2019
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FOR
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13
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3
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Advisory Approval of Executive Compensation
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FOR
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14
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STOCKHOLDER PROPOSAL:
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4
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Independent Chair
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AGAINST
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15
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The voting resultsCorporate Governance Highlights
We are committed to good corporate governance, which promotes the long-term interests of the annual meeting will be published no later than four business days after the annual meeting on a Form 8-K filed with the Securities
stockholders, strengthens Board and Exchange Commission, which will be availablemanagement accountability, and helps build public trust in the investor relations area ofCompany. The Corporate Governance section beginning on page 16 describes our website at www.att.com.governance framework, which includes the following highlights:
Independent Lead Director | Proxy access | Stockholder right to call special meetings | ||||||
11 independent Director nominees | Independent Audit, Human Resources, and Corporate Governance and Nominating Committees | Directors required to hold shares until they leave the Board | ||||||
Demonstrated Board refreshment and diversity | Robust Board, Committee, and Director evaluation process | Clawback policy | ||||||
Annual election of Directors by majority vote | Long-standing commitment to sustainability | Regular sessions of non-management Directors |
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Current Directors*
Our Directors exhibit an effective mix of skills, experience, diversity, and perspectives | ||||
 |  |  | ||
Senior leadership/Ceo experience global business/ affairs finance/public accounting government/ regulatory industry/ technology investment/private equity
Name
| Age
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Director Since
| Principal Occupation
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Randall L. Stephenson
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58
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2005
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Chairman, CEO, and President, AT&T Inc.
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Samuel A. Di Piazza, Jr.
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68
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2015
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Retired Global CEO, PricewaterhouseCoopers International Limited
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Richard W. Fisher
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69
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2015
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Former President and CEO, Federal Reserve Bank of Dallas
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Scott T. Ford
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56
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2012
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Member and CEO, Westrock Group, LLC
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Glenn H. Hutchins
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63
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2014
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Chairman, North Island andCo-Founder, Silver Lake
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William E. Kennard
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62
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2014
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Former United States Ambassador to the European Union and former Chairman of the Federal Communications Commission
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Michael B. McCallister
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66
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2013
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Retired Chairman and CEO, Humana Inc.
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Beth E. Mooney
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64
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2013
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Chairman and CEO, KeyCorp
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Joyce M. Roché**
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71
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1998
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Retired President and CEO, Girls Incorporated
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Matthew K. Rose
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59
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2010
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Chairman and CEO, Burlington Northern Santa Fe, LLC
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Cynthia B. Taylor
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57
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2013
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President and CEO, Oil States International, Inc.
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Laura D’Andrea Tyson
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71
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1999
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Distinguished Professor of the Graduate School, Haas School of Business, and Chair of the Blum Center for Developing Economies Board of Trustees at the University of California, Berkeley
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Geoffrey Y. Yang
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60
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2016
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Founding Partner and Managing Director, Redpoint Ventures
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* All Directors are independent, except for Mr. Stephenson
** Retiring effective April 26, 2019
| 2 |  |
Executive Compensation Highlights
2019 Program Enhancement
The Committee has approved the use ofNet-Debt-to-Adjusted-EBITDA as a new performance metric with a 20% weighting for determining 2019 short-term incentive awards (payable 2020) for all Executive Officers.
The narrative on pages 40-60 more fully describes how the Committee, with the input of its consultant, has designed and evolved our Executive Officer compensation and benefits program using the Committee’s guiding pay principles as the pillars of the program. We also outline how we establish pay targets and how actual Executive Officer pay is determined. Finally, we provide a description of other benefits.
PAYAND PERFORMANCEATA GLANCE* |
2018 Corporate Short Term Awards
| Metric | Type of Metric | Metric Weight | Attainment | Payout% | ||||
2018 EPS | Quantitative | 60% | 92% | 81% | ||||
2018 FCF | Quantitative | 30% | 98% | 98% | ||||
Collaboration | Qualitative | 10% | n/a | 100% | ||||
| Weighted Average Payout | 88% |
| * | See performance adjustments beginning on page 45 |
Long Term Award – Performance Share Component
2016-2018 Performance Period
| Metric | Metric Weight | Attainment | Payout% | |||
3-Year ROIC | 75% | 7.56% | 101% | |||
3-Year Relative TSR | 25% | Level 6 | 0% | |||
Weighted Average Payout | 76% |
What We Do | What We Don’t Do | |||||||
✓ ✓Stock Ownership and Holding Period Requirements:NEOs must comply with stock ownership guidelines and hold 25% of post-2015 stock award distributions until retirement. ✓Dividend Equivalents:Paid at the ✓Annual Compensation-Related Risk Review:Performed annually to confirm that our programs do not encourage excessive risk taking and ✓Clawback Policy:Provides for the recovery of previously paid executive compensation for any fraudulent or illegal conduct. ✓Severance Policy:Limits payments to 2.99 times salary and target bonus. | ✘No “Single Trigger” Change in Control Provisions:No accelerated vesting of equity awards upon change in control. ✘No TaxGross-Ups:No excise taxgross-up payments; no other tax gross-ups, except in extenuating circumstances. ✘No Credit for Unvested Shareswhen determining stock ownership guideline compliance. ✘No Repricing orBuy-Outof underwater stock options. ✘No Hedging or Short Salesof AT&T stock. ✘No Supplemental Executive Retirement Benefitsfor officers promoted/hired after 2008. ✘No Guaranteed Bonuses:The Company does not guarantee bonus payments. ✘No Excessive Dilution:Our annual equity grants represent less than 1% of the total outstanding Common Stock each year. As of July 31, 2018, our total dilution was 1.4% of outstanding Common Stock.
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| 3 |
Voting ProceduresVOTING PROCEDURES
Each share of AT&T common stock represented at the Annual Meeting is entitled to one vote on each matter properly brought before the meeting. All matters, except as provided below, are determined by a majority of the votes cast, unless a greater number is required by law or our Certificate of Incorporation for the action proposed. A majority of votes cast means the number of votes cast “for” a matter exceeds the number of votes cast “against” such matter.
If the proxy is submitted and no voting instructions are given, the person or persons designated on the card will vote the shares for the election of the Board of Directors’ nominees and in accordance with the recommendations of the Board of Directors on the other subjects listed on the proxy card and at their discretion on any other matter that may properly come before the meeting.
The Board of Directors is not aware of any matters that will be presented at the meeting for action on the part of stockholders other than those described in this Proxy Statement.
Election of Directors:Directors
In the election of Directors, each Director is elected by the vote of the majority of the votes cast with respect to that Director’s election. Under our Bylaws, if a nominee for Director is not elected and the nominee is an existing Director standing forre-election (orincumbent Director), the Director must promptly tender his or her resignation to the Board, subject to the Board’s acceptance. The Corporate Governance and Nominating Committee will make a recommendation to the Board as to whether to accept or reject the tendered resignation or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Corporate Governance and Nominating Committee’s recommendation, and publicly disclose (by a press release, a filing with the SEC, or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. The Corporate Governance and Nominating Committee in making its recommendation and the Board of Directors in making its decision may each consider any factors or other information that they consider appropriate and relevant. Any Director who tenders his or her resignation
as described above will not participate in
the recommendation of the Corporate Governance and Nominating Committee or the decision of the Board of Directors with respect to his or her resignation.
If the number of persons nominated for election as Directors as of ten days before the record date for determining stockholders entitled to notice of or to vote at such meeting shall exceed the number of Directors to be elected, then the Directors shall be elected by a plurality of the votes cast. Because no persons other than the incumbent Directors have been nominated for election at the 20172019 Annual Meeting, each nominee must receive athe majority of the votes cast for that nominee to be elected to the Board.vote provisions will apply.
Advisory Vote on Executive Compensation and Frequency of the Vote on Executive Compensation:
The advisory votes on executive compensation and frequency of the vote on executive compensation are isnon-binding, and in each case the preference of the stockholders will be determined by the choice receiving the greatest number of votes.
All Other Matters to be Voted Upon:Upon
All other matters at the 20172019 Annual Meeting will be determined by a majority of the votes cast.
Abstentions: SharesAbstentions
Except as noted above, shares represented by proxies marked “abstain” with respect to the proposals described on the proxy card and by proxies marked to deny discretionary authority on other matters will not be counted in determining the vote obtained on such matters.
Broker Non-Votes:Non-Votes
Under the rules of the NYSE, on certain routine matters, brokers may, at their discretion, vote shares they hold in “street name” on behalf of beneficial owners who have not returned voting instructions to the brokers. On all other matters, brokers are prohibited from voting uninstructed shares. In instances where brokers are prohibited from exercising discretionary authority (so-called(so-calledbrokernon-votes), the shares they hold are not included in the vote totals.
At the 20172019 Annual Meeting, brokers will be prohibited from exercising discretionary authority with respect to each of the matters submitted other than the ratification of the auditors. As a result, for each of the matters upon which the brokers are prohibited from voting, the brokernon-votes will have no effect on the results.
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Item 1.No. 1 - Election of Directors
Under our Bylaws, the Board of Directors has the authority to determine the size of the Board and to fill vacancies. Currently, the Board is comprised of 13 Directors, one of whom is an executive officerExecutive Officer of AT&T. There are no vacancies on the Board. Under AT&T’s Corporate Governance Guidelines, a Director will not be nominated by the Board forre-election if the Director would be 72 or older at the time of the election.
Joyce M. Roché will retire at the 2019 Annual Meeting and will not stand for re-election. Accordingly, the Board has voted to reduce its size to 12 Directors effective immediately before the meeting.
The Board of Directors has nominated the 1312 persons listed below for election as Directors toone-year terms of office that would expire at the 20182020 Annual Meeting. Each of the nominees is an incumbent Director of AT&T recommended forre-election by the Corporate Governance and Nominating Committee. In making these nominations, the Board reviewed the background of the nominees (each nominee’s biography can be found beginning on page 8)the next page) and determined to nominate each of the current Directors for re-election.re-election, other than the retiring Director.
The Board believes that each nominee has valuable individual skills, attributes, and experiences that, taken together, provide us with the variety and depth of
knowledge, judgment and vision necessary to provide effective oversight of a large and varied enterprise like AT&T. As indicated in the following biographies, the nominees have significant leadership skills and extensive experience in a variety of fields, including telecommunications, technology, public accounting, health care, education, economics, financial services, law, consumer marketing, operations, logistics, government service, public policy, academic research, consulting, and nonprofit organizations, each of which the Board believes provides valuable knowledge about important elements of AT&T’s business. A number of the nominees also have extensive experience in international business and affairs, which the Board believes affords it an important global perspective in its deliberations.
If one or more of the nominees should at the time of the meeting be unavailable or unable to serve as a Director, the shares represented by the proxies will be voted to elect the remaining nominees and any substitute nominee or nominees designated by the Board. The Board knows of no reason why any of the nominees would be unavailable or unable to serve.
| Name | Age | Director Since | Principal Occupation | |||
Randall L. Stephenson | 56 | 2005 | Chairman, CEO, and President, AT&T Inc. | |||
Samuel A. Di Piazza, Jr. | 66 | 2015 | Retired Global CEO, PricewaterhouseCoopers International Limited | |||
Richard W. Fisher | 67 | 2015 | Former President and CEO, Federal Reserve Bank of Dallas | |||
Scott T. Ford | 54 | 2012 | Member and CEO, Westrock Group, LLC | |||
Glenn H. Hutchins | 61 | 2014 | Chairman, North Island and Co-Founder, Silver Lake | |||
William E. Kennard | 60 | 2014 | Former United States Ambassador to the European Union and former Chairman of the Federal Communications Commission | |||
Michael B. McCallister | 64 | 2013 | Retired Chairman and CEO, Humana Inc. | |||
Beth E. Mooney | 62 | 2013 | Chairman and CEO, KeyCorp | |||
Joyce M. Roché | 69 | 1998 | Retired President and CEO, Girls Inc. | |||
Matthew K. Rose | 57 | 2010 | Chairman and CEO, Burlington Northern Santa Fe, LLC | |||
Cynthia B. Taylor | 55 | 2013 | President and CEO, Oil States International, Inc. | |||
Laura D’Andrea Tyson | 69 | 1999 | Distinguished Professor of the Graduate School at the University of California at Berkley | |||
Geoffrey Y. Yang | 57 | 2016 | Founding Partner and Managing Director, Redpoint Ventures |
All Director nominees are independent, except for Mr. Stephenson
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Director Biographies
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The Board recommends you voteFOR each of the following candidates: |
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Name
| Age
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Director Since
| Principal Occupation
| |||
Randall L. Stephenson
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58
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2005
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Chairman, CEO, and President, AT&T Inc.
| |||
Samuel A. Di Piazza, Jr.
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68
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2015
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Retired Global CEO, PricewaterhouseCoopers International Limited
| |||
Richard W. Fisher
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69
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2015
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Former President and CEO, Federal Reserve Bank of Dallas
| |||
Scott T. Ford
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56
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2012
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Member and CEO, Westrock Group, LLC
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Glenn H. Hutchins
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63
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2014
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Chairman, North Island andCo-Founder, Silver Lake
| |||
William E. Kennard
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62
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2014
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Former United States Ambassador to the European Union and former Chairman of the Federal Communications Commission
| |||
Michael B. McCallister
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66
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2013
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Retired Chairman and CEO, Humana Inc.
| |||
Beth E. Mooney
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64
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2013
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Chairman and CEO, KeyCorp
| |||
Matthew K. Rose
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59
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2010
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Chairman and CEO, Burlington Northern Santa Fe, LLC
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Cynthia B. Taylor
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57
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2013
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President and CEO, Oil States International, Inc.
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Laura D’Andrea Tyson
|
71
|
1999
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Distinguished Professor of the Graduate School, Haas School of Business, and Chair of the Blum Center for Developing Economies Board of Trustees at the University of California, Berkeley
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Geoffrey Y. Yang
|
60
|
2016
|
Founding Partner and Managing Director, Redpoint Ventures
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All Director nominees are independent, except for Mr. Stephenson.
| 5 |
VOTING ITEMS
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Age | |||||||||||||||
| Mr. Stephenson is Chairman of the Board, Chief Executive Officer, and President of AT&T Inc. and has served in this capacity since 2007. He has held a variety ofhigh-level finance, operational, and marketing positions with AT&T, including serving as Chief Operating Officer from 2004 until his appointment as Chief Executive Officer in 2007 and as Chief Financial Officer from 2001 to 2004. He began his career with the Company in 1982. Mr. Stephenson received his B.S. in accounting from Central State University (now known as the University of Central Oklahoma) and earned his Master of Accountancy degree from the University of Oklahoma.
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AT&T Board Committees Executive (Chair)
The Boeing Emerson Electric Co. (2006-2017) | Qualifications, Attributes, Skills, and Experience | |||||||||||||||
Mr. Stephenson’s qualifications to serve on the Board include his more than
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| Senior Leadership/Chief Executive Officer Experience |   | Extensive Knowledge of the Company’s Business and/or Industry | |||||||||||||
| High Level of Financial Experience
|   | Public Company Board Service and Governance Experience
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Samuel A. Di Piazza, Jr.
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Age | |||||||||||||||
| Mr. Di Piazza served as Global Chief Executive Officer of PricewaterhouseCoopers International Limited (an international professional services firm) from 2002 until his retirement in 2009. Mr. Di Piazza began his36-year career with PricewaterhouseCoopers (PwC, formerly Coopers & Lybrand) in 1973 and was named Partner in 1979 and Senior Partner in 2000. From 1979 to 2002, Mr. Di Piazza held various regional leadership positions with PwC. After his retirement from PwC, Mr. Di Piazza joined Citigroup where he served as Vice Chairman of the Global Corporate and Investment Bank from 2011 until 2014. Since 2010, Mr. Di Piazza has served as the Chairman of the Board of Trustees of The Mayo Clinic. He received his B.S. in accounting from the University of Alabama and earned his M.S. in tax accounting from the University of Houston. He served as a Director of DIRECTV from 2010 until the company was acquired by AT&T Inc. in 2015.
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AT&T Board Committees Audit (Chair); Executive; Public Policy and Corporate Reputation
Other Public Company Directorships Jones Lang LaSalle Incorporated; ProAssurance Corporation; Regions Financial Corporation
Past Directorships DIRECTV (2010-2015) | Qualifications, Attributes, Skills, and Experience | |||||||||||||||
Mr. Di Piazza’s qualifications to serve on the Board include his executive leadership skills, his vast experience in public accounting with a major accounting firm, and his experience in international business and affairs, all strong attributes for the Board of AT&T. His qualifications also include his prior service as a Director of DIRECTV, a digital entertainment services company that we acquired.
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| Senior Leadership/Chief Executive Officer Experience | | Extensive Knowledge of the Company’s Business and/or Industry | |||||||||||||
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High Level of Financial Experience
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Global Business/Affairs Experience
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| 6 | |
VOTING ITEMS
Richard W. Fisher
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Age | |||||||||||
| Mr. Fisher served as President and Chief Executive Officer of the Federal Reserve Bank of Dallas from 2005 until March 2015. He has been Senior Advisor to Barclays PLC (a financial services provider) since
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AT&T Board Committees Corporate Development
Other Public Company Directorships PepsiCo, Inc.; Tenet Healthcare | Qualifications, Attributes, Skills, and Experience | |||||||||||
Mr. Fisher’s qualifications to serve on the Board include his extensive financial, trade and regulatory expertise, and a deep understanding of Mexico and Latin America, all of which enable him to provide valuable financial and strategic insight to AT&T.
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| Senior Leadership/Chief Executive Officer Experience |   | Government/Regulatory Expertise | |||||||||
| High Level of Financial Experience
|  | Global Business/Affairs Experience
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Scott T. Ford
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Age | |||||||||||
| Mr. Ford founded Westrock Group, LLC (a private investment firm in Little Rock, Arkansas) in 2013, where he has served as Member and Chief Executive Officer since its inception. Westrock Group operates Westrock Coffee Company, LLC (a
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AT&T Board Committees Corporate Development and Finance (Chair); Executive; Human Resources
Bear State Financial, Inc. (2011-2018) | Qualifications, Attributes, Skills, and Experience | |||||||||||
Mr. Ford’s qualifications to serve on the Board include his extensive experience and expertise in the telecommunications industry, his strong strategic focus, his leadership experience in the oversight of a large, publicly traded company, and his experience in international business and private equity, all of which bring valuable contributions to AT&T’s strategic planning and industry competitiveness.
| ||||||||||||
 | Senior Leadership/Chief Executive Officer Experience | | Extensive Knowledge of the Company’s Business and/or Industry | |||||||||
| Public Company Board Service and Governance Experience |   | Investment/Private Equity Experience
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|
VOTING ITEMS
Glenn H. Hutchins
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Age | |||||||||||
| Mr. Hutchins is Chairman of North Island
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AT&T Board Committees Corporate Development
Other Public Company Directorships Virtu Financial, Inc. Past Directorships Nasdaq, Inc. (2005-2017) | Qualifications, Attributes, Skills, and Experience | |||||||||||
Mr. Hutchins’ qualifications to serve on our Board include his extensive experience and expertise in the technology and financial sectors, his public policy experience, and his strong strategic focus, all of which enable him to provide valuable financial and strategic insight to AT&T.
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| Senior Leadership/Chief Executive Officer Experience | | Government/Regulatory Expertise
| |||||||||
| Technology Expertise
| | Investment/Private Equity Experience
| |||||||||
William E. Kennard
|
Age | |||||||||||
| Mr. Kennard served as the United States Ambassador to the European Union from 2009 to 2013. From 2001 to 2009, Mr. Kennard was Managing Director of The Carlyle Group (a global
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AT&T Board Committees Corporate Governance and Nominating; Public Policy and Corporate Reputation
Other Public Company Directorships Duke Energy Corporation; Ford Motor Company; MetLife, Inc. | Qualifications, Attributes, Skills, and Experience | |||||||||||
Mr. Kennard’s qualifications to serve on our Board include his expertise in the telecommunications industry, his understanding of public policy, and his international perspective, as well as his background and experience in law and regulatory matters, all strong attributes for the Board of AT&T.
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| Senior Leadership/Chief Executive Officer Experience | | Government/Regulatory Expertise | |||||||||
| Extensive Knowledge of the Company’s Business and/or Industry
|   | Legal Experience
| |||||||||
|
VOTING ITEMS
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Michael B. McCallister
|
Age | |||||||||||
| Mr. McCallister served as Chairman of Humana Inc. (a health care company in Louisville, Kentucky) from 2010 to
| |||||||||||
AT&T Board Committees Audit; Human Resources
Other Public Company Directorships Fifth Third Bancorp; Zoetis Inc.
| Qualifications, Attributes, Skills, and Experience | |||||||||||
Mr. McCallister’s qualifications to serve on the Board include his executive leadership experience in the oversight of a large, publicly traded company and his depth of experience in the health care sector, which is of increasing importance to a company like AT&T.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Public Company Board Service and Governance Experience
| |||||||||
| Healthcare Expertise
|   | High Level of Financial Experience
| |||||||||
Beth E. Mooney
|
Age | |||||||||||
| Ms. Mooney is Chairman and Chief Executive Officer of KeyCorp (a bank holding company in Cleveland, Ohio) and has served in this capacity since 2011. She previously served as KeyCorp’s President and Chief Operating Officer from 2010 to 2011. Ms. Mooney joined KeyCorp in 2006 as a Vice Chair and head of Key Community Bank. Prior to joining KeyCorp, beginning in 2000 she served as Senior Executive Vice President at AmSouth Bancorporation (now Regions Financial Corporation), where she also became Chief Financial Officer in 2004. Ms. Mooney served as a Director of the Federal Reserve Bank of Cleveland in 2016 and was appointed to represent the Fourth Federal Reserve District on the Federal Advisory Council beginning in 2017. She received her B.A. in history from the University of Texas at Austin and earned her M.B.A. from Southern Methodist University.
| |||||||||||
AT&T Board Committees Corporate Development
Other Public Company Directorships KeyCorp | Qualifications, Attributes, Skills, and Experience | |||||||||||
Ms. Mooney’s qualifications to serve on the Board include her executive leadership skills in the oversight of a large, publicly traded and highly-regulated company and her more than 30 years of experience in the banking and financial services industry, which bring valuable financial and strategic insight to AT&T.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Government/Regulatory Expertise
| |||||||||
| High Level of Financial Experience
| | Public Company Board Service and Governance Experience
| |||||||||
|
|
VOTING ITEMS
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Age | |||||||||||
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| Mr. Rose is Chairman of the Board and Chief Executive Officer of Burlington Northern Santa Fe, LLC (a freight rail system based in Fort Worth, Texas and a subsidiary of Berkshire Hathaway Inc., formerly known as Burlington Northern Santa Fe Corporation) and has served in this capacity since 2002, having also served as President until 2010. Before serving as its Chairman, Mr. Rose held several leadership positions there and at its predecessors, including President and Chief Executive Officer from 2000 to 2002, President and Chief Operating Officer from 1999 to 2000, and Senior Vice President and Chief Operations Officer from 1997 to 1999. Mr. Rose also serves as Executive Chairman of BNSF Railway Company (a subsidiary of Burlington Northern Santa Fe, LLC), having served as Chairman and Chief Executive Officer from 2002 to 2013. He earned his B.S. in marketing from the University of Missouri. Mr. Rose has announced his intention to retire from BNSF in April of 2019.
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AT&T Board Committees Corporate Governance and Nominating (Chair); Executive; Human Resources
Other Public Company Directorships BNSF Railway Company; Burlington Northern Santa Fe, LLC; Fluor Corporation
| Qualifications, Attributes, Skills, and Experience | |||||||||||
Mr. Rose’s qualifications to serve on the Board include his extensive experience in the executive oversight of a large, complex and highly-regulated organization, his considerable knowledge of operations management and logistics, and his experience and skill in managing complex regulatory and labor issues comparable to those faced by AT&T.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Government/Regulatory Expertise | |||||||||
| Labor Experience
| 
| Operations/Logistics Experience
| |||||||||
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Cynthia B. Taylor
|
Age | |||||||||||
| Ms. Taylor is President, Chief Executive Officer and a Director of Oil States International, Inc. (a diversified solutions provider for the oil and gas industry in Houston, Texas) and has served in this capacity since 2007. She previously served as Oil States International, Inc.’s President and Chief Operating Officer from 2006 to 2007 and as its Senior Vice President-Chief Financial Officer from 2000 to 2006. Ms. Taylor was Chief Financial Officer of L.E. Simmons & Associates, Inc. from 1999 to 2000 and Vice President-Controller of Cliffs Drilling Company from 1992 to 1999, and prior to that, held various management positions with Ernst & Young LLP, a public accounting firm. She received her B.B.A. in accounting from Texas A&M University and is a Certified Public Accountant.
| |||||||||||
AT&T Board Committees Audit; Public Policy and Corporate Reputation
Other Public Company Directorships Oil States International, Past Directorships Tidewater Inc. (2008-2017) | Qualifications, Attributes, Skills, and Experience | |||||||||||
Ms. Taylor’s qualifications to serve on the Board include her executive leadership skills in the oversight of a large, publicly traded company, her vast experience in finance and public accounting, and her experience in international business and affairs, all of which bring a broad spectrum of management experience to our Board.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Global Business/Affairs Experience | |||||||||
| High Level of Financial Experience |  | Operations/Logistics Experience | |||||||||
|
VOTING ITEMS
Laura D’Andrea Tyson
|
Age | |||||||||||
| Dr. Tyson is a Distinguished Professor of the Graduate School at the Haas School of Business, University of California,
| |||||||||||
AT&T Board Committees Audit; Executive; Public Policy and Corporate
Other Public Company Directorships CBRE Group, Inc.
Past Directorships Morgan Stanley (1997-2016); Silver Spring Networks, Inc. (2009-2018) | Qualifications, Attributes, Skills, and Experience | |||||||||||
Dr. Tyson’s qualifications to serve on the Board include her expertise in economics and public policy, her experience as an advisor in various business and political arenas, and her vast knowledge of international business and affairs, all strong attributes for the Board of AT&T. Her qualifications also include her prior service as a director of a telecommunications company that we acquired.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Government/Regulatory Expertise | |||||||||
| High Level of Financial Experience
|
| Public Company Board Service and Governance Experience | |||||||||
|
VOTING ITEMS
|
Geoffrey Y. Yang
|
Age | |||||||||||
|
Mr. Yang is a founding partner and Managing Director of Redpoint Ventures (a global private equity and venture capital firm based in Menlo Park, California) and has served in this capacity since 1999. Prior to founding Redpoint, Mr. Yang was a General Partner with Institutional Venture Partners (a private equity investment firm in Menlo Park, California), which he joined in 1987. Mr. Yang has over 30 years of experience in the venture capital industry and has helped found or served on the boards of a variety of consumer media, internet, and infrastructure companies.
| |||||||||||
AT&T Board Committees Corporate Development
Other Public Company Directorships Franklin Resources, Inc.
| Qualifications, Attributes, Skills, and Experience | |||||||||||
Mr. Yang’s qualifications to serve on the Board include his extensive experience in technology and emerging forms of media and entertainment, his decades of experience and expertise in venture capital, his strong strategic focus, as well as his vast experience in serving on the boards of private and public technology companies, all of which enable him to provide valuable contributions to AT&T’s financial and strategic planning and industry competitiveness.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Global Business/Affairs Experience | |||||||||
| Investment/Private Equity Experience
|   | Technology Expertise
| |||||||||
|
VOTING ITEMS
Management Proposal
Item 2.No. 2 - Ratification of the Appointment
of Ernst & Young LLP as Independent Auditors
This proposal would ratify the Audit Committee’s appointment of Ernst & Young LLP (EY)to serve as independent auditors of AT&T for the fiscal year ending December 31, 2017.2019. The Audit Committee’s decision tore-appoint our independent auditor was based on the following considerations:
quality and performance of the lead audit partner and the overall engagement team,
knowledge of the telecommunications, industrymedia and enternainment, and technology industries and company operations,
global capabilities and technical expertise,
auditor independence and objectivity, and
the potential impact of rotating to another independent audit firm.
The Audit Committee’s oversight of EY includes regular private sessions with EY, discussions about audit scope and business imperatives, and—as described above—a comprehensive annual evaluation to determine whether tore-engage EY. Considerations concerning auditor independence include:
Limits onnon-audit services: The Audit Committee preapproves audit and permissiblenon-audit services provided by EY in accordance with itspre-approval policy.
Audit partner rotation:EY rotates the lead audit partner and other partners on the engagement consistent with independence requirements. The Audit Committee oversees the selection of each new lead audit partner.
EY’s internal independence process: EY conducts periodic internal reviews of its audit and other work and assesses the adequacy of partners and other personnel working on the Company’s account.
Strong regulatory framework: EY, as an independent registered public accounting firm, is subject to PCAOB inspections, “Big 4” peer reviews and PCAOB and SEC oversight.
Based on these considerations, the Audit Committee believes that the selection of Ernst & Young LLP is in the best interest of the company and its stockholders. Therefore, the Audit Committee recommends that stockholders ratify the appointment of Ernst & Young LLP. If stockholders do not ratify the appointment, the Committee will reconsider its decision. One or more members of Ernst & Young LLP are expected to be present at the Annual Meeting, will be able to make a statement if they so desire, and will be available to respond to appropriate questions.
 | The Board recommends you voteFOR this proposal | | ||||||
|
|
VOTING ITEMS
Management Proposal
Item 3.No. 3 - Advisory Approval of Executive Compensation
This proposal would approve the compensation of executive officersExecutive Officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the accompanying narrative disclosures (see pages 4240 through 84)75). These sections describe our executive compensation program.
The Human Resources Committee is responsible for executive compensation and works to structure a balanced program that addresses the dynamic, global
marketplace in which AT&T competes for talent. The compensation structure includespay-for-performance and equity-based incentive programs and seeks to reward executives for attaining performance goals.
AT&T has implementedsubmits this proposal to stockholders on an annual basis. While this is a numbernon-binding, advisory vote, the Committee intends to take into account the outcome of changesthe vote when considering future executive compensation arrangements. AT&T is providing this vote as required pursuant to its compensation and benefits program in recent years to better serve its stockholders.Section 14A of the Securities Exchange Act.
Guiding Pay Principles (discussed in detail on page 45)
GUIDING PAY PRINCIPLES | ||||||
(discussed in detail on page 40) | ||||||
Alignment with Stockholders | ||||||
Provide compensation elements and set performance targets that closely align executives’ interests with those of stockholders. For example, approximately | ||||||
Competitive and Market Based | ||||||
Evaluate all components of our compensation and benefits program in light of appropriate peer company practices to ensure we are able to attract and retain world-class talent with the leadership abilities and experience necessary to develop and execute business strategies, obtain superior results, and build long-term stockholder value in an organization as large and complex as AT&T. | ||||||
Pay for Performance | ||||||
Tie a significant portion of compensation to the achievement of predetermined goals and recognize individual accomplishments that contribute to our success. For example, in | ||||||
Balanced Short- and Long-Term Focus | ||||||
Ensure that the compensation program provides an appropriate balance between the achievement of | ||||||
Alignment with Generally Accepted Approaches | ||||||
Provide policies and programs that fit within the framework of generally accepted approaches adopted by leading major U.S. companies. | ||||||
AT&T submits this proposal to stockholders on an annual basis. While this is a non-binding, advisory vote, the Committee intends to take into account the outcome of the vote when considering future executive compensation arrangements. AT&T is providing
this vote as required pursuant to Section 14A of the Securities Exchange Act.
The Board recommends that our stockholders approve the program.
| The Board recommends you voteFOR this proposal | | ||||||
| 14 |
|
VOTING ITEMS
Management Proposal
Item 4. Advisory Approval of Frequency of Vote on Executive CompensationSTOCKHOLDER PROPOSALS
This proposal will allow stockholders to indicate their preference for whether the vote on executive compensation (see Item 3, above) should be held every three years, every two years, or every year, or to abstain from the vote.
The Board recommends a vote once every year. BecauseA stockholder has advised the Company is required by SEC rulesthat he intends to report on compensation annually, it is appropriate that stockholders be givenintroduce at the opportunity to share their views with2019 Annual Meeting the same frequency.
proposal set forth below. The option that receivesname and address of, and the highest number of votes castshares owned by, stockholderssuch stockholder will be consideredprovided upon request to the preferred frequency. While this is a non-binding, advisory vote, the Committee will take into account the outcomeSenior Vice President and Secretary of this vote when considering how often it will recommend submitting the advisory vote on executive compensation to stockholders. AT&T is providing this vote as required pursuant to section 14A of the Securities Exchange Act.at 208 S. Akard Street, Suite 2954, Dallas, Texas 75202.
Your Board recommends that you choose to hold the vote on executive compensation every year.
|
Item 5. Prepare Political Spending Report
Political Spending Report
Resolved, that the shareholders of AT&T (“Company”) hereby request that the Company provide a report, updated semi-annually, disclosing the Company’s:
Indirect monetary and non-monetary expenditures used for political purposes, i.e., to participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, and used in any attempt to influence the general public, or segments thereof, with respect to elections.
The report shall include:
This proposal does not encompass payments used for lobbying.
The report shall be presented to the board of directors’ audit committee or other relevant oversight committee and posted on the Company’s website.
Supporting Statement
As long-term AT&T shareholders, we support transparency and accountability in corporate political spending. Disclosure is in the best interest of the Company and its shareholders. The Supreme Court recognized this in its 2010Citizens United decision: “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
Publicly available records show AT&T has contributed over $92 million in corporate funds since the 2004 election cycle. (CQMoneyLine: http:moneyline.cq.com; FollowtheMoney: http://followthemoney.org)
We acknowledge that AT&T publicly discloses a policy on corporate political spending and its direct contributions to candidates, parties and committees. We believe this is deficient because AT&T does not disclose the following:
Information on indirect political engagement through trade associations and 501(c)(4) groups cannot be obtained by shareholders unless the Company discloses it. This would bring our Company in line with a growing number of leading companies, including Time Warner and CenturyLink, that present this information on their websites.
Forty five percent of the S&P 500 currently disclose some level of payments to trade associations, or say they instruct trade associations not to use these payments on election-related activities (CPA-Zicklin Index of Corporate Political Disclosure and Accountability).
Indirect political spending presents unique risks that are not addressed by AT&T’s current policies. Opacity allows trade associations and other tax exempt entities to use AT&T funds for purposes that may conflict with AT&T’s policies and best interests. Disclosure permits oversight and accountability.
 |
The Board recommends you voteAGAINST this proposal. | | ||||
Your Board of Directors believes that AT&T and its stockholders are best served by having Mr. Stephenson serve as both Chairman and CEO.
TheAt this juncture in our Company’s history, your Board believes that the reports requested in this proposal are duplicativeCompany can more effectively execute its strategy and business plans to maximize stockholder value if the Chairman of the Board is also responsible for the Company’s existing practices and are unnecessary. AT&T receivedoperations on a nearly identical proposal for its 2016 Annual Meeting, and more than 70%daily basis. At the same time, the Board believes that, as a matter of the votes cast at the meeting were against the proposal.
As a company that operates in a highly regulated industry,sound corporate governance, it is important to pair its Chairman with an independent Lead Director who is vested with substantial responsibility for all Board matters, including its oversight of management. To that AT&T participate inend, the electoral process to protect the interests of its stockholders. Political contributions, where permitted, areBoard has again appointed an important part of that process, and AT&T adheres to the highest ethical standards when it engages in political activities.
AT&T publicly discloses its participation in the legislative process in the AT&T Political Engagement Report, which contains an itemized list of corporate contributions and employee PAC contributions to candidates and candidate committees; national, state, and local party committees and other groups; and PACs and other committees. This report is published semiannually and is available on the Company’s website (at http://www.about.att.com/content/dam/csr/Political%20Engagement%20Reports/ATT_PoliticalEngagementReport_2016_Jan-Jun.pdf)
In addition, as also disclosed in the AT&T Political Engagement Report, the Company participates in various industry associations to further its business interests. These memberships not only provide valuable industry expertise, but they also advocate positions on behalfindependent Lead Director (currently, Matthew K. Rose) who presides over regular executive sessions of the communications industry or that impactnon-management members of the communicationsBoard. Members of management do not attend these sessions. The Lead Director is also responsible for approving the agenda for each Board meeting, presiding at Board meetings at which the Chairman is not present, and other industries. These industry associations include, for example,acting as the United States Telecom Association,principal liaison between the Cellular Telephone Industry AssociationChairman and CEO and the Future of Privacy Forum.
AT&T is committed to adhering to the highest ethical standards when engaging in any political activities. AT&T’s policies and procedures with respect to political contributions are clearly set forth on the Company’s website in the Corporate Governance section (available at http://www.att.com/gen/investor-relations?pid=7726). In making political contributions the Company is committed to complying with campaign finance laws, including the laws requiring public disclosure of political contributions. The amountnonmanagement Directors. For a complete description of the Company’s political expendituresLead Director’s responsibilities, please see page 18.
As CEO, Mr. Stephenson is an insignificant portionthe only Director that is also a member of its total annual expenses.
Each year, the Board authorizesmanagement. As a maximum amount of political contributions that can be made by the Company, as permitted by, and in strict compliance with, applicable law, for the purposes of supporting or opposing any party,result, each committee candidate for public office, or ballot measure, or for any other political purpose. For 2017, this amount is $6.0 million. Also, for calendar years 2015-2016, the Board authorized contributions or expenditures by the Company, as permitted by, and in strict compliance with, applicable law, relating to the 2016 presidential nominating conventions and ensuing inaugural activities, in the amount of $24.4 million. This amount includes in-kind services. These contributions also provide valuable advertising opportunities for the Company’s services and products. In addition, the Public Policy and Corporate Reputation Committee of the Board composed entirelyother than the Executive Committee is made up solely of independent directors, reviews corporate political contributionsDirectors. The appointment of an independent Lead Director and Company-sponsored political action committees (PACs). Except for contributions for ballot measures, no expenditure over $1,000 maythe use of executive sessions of the Board, along with the Board’s strong committee system and substantial majority of independent Directors, allow the Board to maintain effective oversight of management.
For these reasons, the Board does not support an inflexible policy that the CEO and Chairman roles should never be made unless approvedheld by the Chief Executive Officer. Additionally, expenditures mustsame person. Instead, the Board has established what it believes to be submitted to the Company’s attorneys to confirm that each contribution is lawful.
AT&T’s federal PACs file regular reports of receipts and disbursements with the Federal Election Commission (the “FEC”) which are disclosed to the public in the reports filed with the FEC and include identification of all individuals who contributed $200 or more as well as all candidates or committees that received a political contribution.an appropriate balance for AT&T complies with all obligations with regard to its state and local political activities, including reporting and disclosure requirements. Additionally, under the Lobbying Disclosure Act of 1995, as amended, the Company files semi-annual reports with the Secretary of the U.S. Senate (available at http://www.senate.gov/legislative/Public_Disclosure/LDA_reports.htm) and Clerk of the U.S. House of Representatives (available at http://disclosures.house.gov/ld/ldsearch.aspx).
The Board believes that spending further corporate funds to generate additional reports would not be a productive use of corporate resources. The Board therefore recommends that you vote against this proposal.
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Stockholder Proposal
Item 6. Prepare Lobbying Report
Whereas, we believe in full disclosure of our company’s direct and indirect lobbying activities and expenditures to assess whether our company’s lobbying is consistent with AT&T’s expressed goals and inbased on the best interests of shareholders.
Resolved, theAT&T’s stockholders of AT&T request the preparation ofand recommends a report, updated annually, disclosing:
For purposes ofvote against this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which AT&T is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.
The report shall be presented to the Audit Committee or other relevant oversight committees and posted on AT&T’s website.
Supporting Statement
As stockholders, we encourage transparency and accountability in AT&T’s use of corporate funds to influence legislation and regulation, both directly and indirectly. According to Senate reports, AT&T spent $62.5 million between 2012 and 2015 on federal lobbying activities. This figure does not include lobbying expenditures to influence legislation in states where AT&T also lobbies, but disclosure is uneven or absent. For example, AT&T spent $1.6 million lobbying in California in 2014 (http://cal-access.ss.ca.gov/).
AT&T sits on the board of the Chamber of Commerce, which has spent over $1.2 billion on lobbying since 1998. AT&T does not disclose its memberships in, or payments to, trade associations, or the portions of such amounts used for lobbying. Absent a system of accountability, company assets could be used for objectives contrary to AT&T’s long-term interests. For example, AT&T recognizes climate change is a serious concern that warrants meaningful action, yet the Chamber publicly attacks the EPA on its new Clean Power Plan addressing climate change and has sued to block it.
And AT&T does not disclose its membership in tax-exempt organizations that write and endorse model legislation, such as American Legislative Exchange Council (ALEC). ALEC promoted legislation to repeal state renewable energy standards and undermine the EPA’s Clean Power Plan. AT&T’s ALEC membership has drawn press scrutiny that may affect the company’s reputation adversely (“T-Mobile Ditches ALEC,”The Hill, Apr. 8, 2015). More than 100 companies, including Emerson Electric, General Electric, Google, Sprint and T-Mobile, have publicly left ALEC.
This resolution received 34% vote in 2015.
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The Board believes that the reports it publishes on its website, along with the reports it files with the Federal government, provide its shareholders and the public with ample transparency and accountability with
respect to lobbying activities. It believes that the preparation and publication of another report as called for by this proposal is neither necessary nor an efficient use of the Company’s resources. AT&T
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received a nearly identical shareholder proposal for its 2016 Annual Meeting, and approximately two-thirds of the votes cast at the meeting were against the proposal.
As a participant in a highly regulated industry, AT&T is significantly impacted by public policy decisions at the local, state, and national levels. Accordingly, the Company actively participates in the legislative processes in order to protect and further stockholders’ interests by contributing prudently to lobbying organizations that constructively advocate positions which advance the Company’s business objectives and stockholders’ interests. Similarly, the Company belongs to industry associations and coalitions, where it benefits from the general business, technical, and industry standard-setting expertise these organizations provide.
AT&T publishes its AT&T Political Engagement Report semiannually; it contains an itemized list of corporate contributions and employee PAC contributions to candidates and candidate committees; national, state, and local party committees and other groups; and PACs and other committees. This report is available on the Company’s website (athttp://www.about.att.com/content/dam/csr/Political%20Engagement%20Reports/ATT_PoliticalEngagementReport_2016_Jan-Jun.pdf) and currently covers January through June 2016.
In addition to the AT&T Political Engagement Report, the Company is required to file other reports with various state and federal agencies. Pursuant to the federal Lobby Disclosure Act, the Company files federal lobbying reports quarterly with the Office of the Clerk of the U.S. House of Representatives and the Secretary of the U.S. Senate. These reports are publicly available and disclose corporate expenditures related to lobbying and issues lobbied. Publicly available contribution and lobbying data can be found at the below sources:
AT&T is committed to adhering to the highest ethical standards when engaging in any political activities. AT&T’s policies and procedures with respect to political contributions are clearly set forth on the Company’s website in the Corporate Governance section (available at www.att.com/gen/investor-relations?pid=7726).
The Board is confident that the Company’s lobbying activities are aligned with its stockholders’ long-term interests. As described above, the Company already makes available information concerning its political and lobbying activities to its stockholders and the public. The proposal would impose requirements on the Company that are not dictated by law and that are not standard among other companies. Any new requirements should be addressed by lawmakers and uniformly imposed on all entities. The Board believes that an additional report beyond the Company’s current disclosures is neither necessary nor an efficient use of Company resources.
For these reasons, the Board recommends that you vote against this proposal.
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Stockholder Proposal
Item 7. Modify Proxy Access Requirements
Proposal 7—Shareowner Proxy Access Amendment
RESOLVED: Shareholders of AT&T Inc. (the “Company”) ask the board of directors (the “Board”) to amend its bylaws on “Stockholder Nominations Included in the Corporation’s Proxy Statement,” and any other associated documents, to includeessentialelementsforsubstantial implementationtobetterfacilitatemeaningfulproxyaccessbymoreshareholdersas follows:
Supporting Statement:
The SEC’s universal proxy access Rule 14a-11 (https://www.sec.gov/rules/final/2010/33-9136.pdf) was vacated after a court decision regarding the SEC’s cost-benefit analysis. Therefore, proxy access rights must be established on a company-by-company basis. Subsequently,ProxyAccessintheUnitedStates:Revisitingthe ProposedSECRule(http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1) a cost-benefit analysis by CFA Institute, found proxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” raising US market capitalization by up to $140.3 billion.PublicVersus PrivateProvisionofGovernance:TheCase ofProxyAccess(http://ssrn.com/abstract=2635695) found a 0.5 percent average increase in shareholder value for proxy access targeted firms.
Proxy Access: Best Practices (http://www.cii.org/files/publications/misc/08_05_15_Best%20Practices%20-%20Proxy%20Access.pdf) by the Council of Institutional Investors, “highlights the most troublesome provisions” in recently implemented proxy access bylaws.
Although the Company’s Board adopted a proxy access bylaw, it contains troublesome provisions, as addressed above, that significantly impair the ability of shareholders to participate as Eligible Holders, the ability of Proxy Access Nominees to effectively serve if elected, and the ability of Proxy Access Nominees to run again if they receive less than 25% of the vote. Adoption ofallthe requested amendments would largely remedy these issues and would better ensure meaningful proxy assess is eligible to a greater number of shareholders.
Increase Shareholder Value
Vote for Shareowner Proxy Access Amendment—Proposal 7
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The Board recommends that you vote against this proposal. The Company’s current proxy access bylaw strikes an appropriate balance between the benefits and risks of proxy access. The proposal seeks the adoption of provisions that would unnecessarily disrupt that balance.
In December of 2015, the Board of Directors adopted a proxy access bylaw for the Company after reviewing
the provisions adopted by other companies and consulting with investors regarding their views on proxy access and the specific provisions they considered important. The bylaw adopted allows a group of up to 20 stockholders holding an aggregate of 3% of the outstanding shares of the Company for at least three years to have Director nominees representing up to 20% of the Board or two Directors, whichever is greater, included in the Company’s proxy statement.
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In crafting the bylaw, the Board sought to achieve the appropriate balance between accommodating investors’ interests in proxy access while protecting against the disruption that investors and the Board acknowledged could arise from a contested election. In so doing, the Board considered and rejected the three provisions set out in the proposal for the reasons related below. The provisions adopted by the Board were and remain consistent with the best practices of other significant U.S. public companies with proxy access rights.
The changes to the Company’s proxy access right requested by this proposal would upset the balance reflected in the current bylaw. Specifically:
The unnecessary changes requested by this proposal should be viewed in light of the full array of governance practices the Company has adopted. These practices include:
The robust proxy access provisions the Board has recently adopted, together with these other practices, promote Board independence and provide substantial opportunities consistent with best practices for stockholder input into the governance process. The changes to proxy access requested by the proposal are unnecessary and disrupt the balanced approach reflected in our current bylaws.
For these reasons, the Board recommends that you vote against this proposal.
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Stockholder Proposal
Item 8. Reduce Vote Required for Written Consent
Proposal 8—Right to Act by Written Consent
Resolved, Shareholders request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law.
This proposal topic won majority shareholder support at 13 major companies in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent. This proposal topic, sponsored by Kenneth Steiner of Great Neck, New York, received a high level of support at our 2014 annual meeting. The level of support at our 2014 annual meeting could means that more than 51% of AT&T shareholders experienced in matters of corporate governance voted in favor of this proposals topic.
Taking action by written consent in lieu of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle. A shareholder right to act by written consent and to call a special meeting are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. Taking action by written consent saves the expense of holding a special shareholder meeting.
Please vote to enhance shareholder value:
Right to Act by Written Consent-Proposal 8
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AT&T’s charter provides that actions by written consent must be executed by two-thirds of the outstanding shares. This proposal seeks to have the Company change this requirement to a majority of the outstanding shares. To make this change, the Board would need to submit a formal charter amendment to stockholders at a later meeting. To pass, the amendment would need to be approved by two-thirds of the outstanding shares.
Following the passage of a prior, similar stockholder proposal in 2011, your Board submitted a proposed charter amendment to stockholders the next year that would have reduced the approval required for an action by written consent to a majority of the outstanding shares. The proposed amendment only received the vote of 50.9% of the outstanding shares, far short of the two-thirds vote required by Delaware law to pass the amendment. Subsequently, at its 2014 Annual meeting, another similar stockholder proposal was voted down by approximately 60% of the votes cast.
Your Board believes further action on this proposal would cause an unnecessary waste of corporate funds and would not necessarily further the interests of stockholders. Our Bylaws already permit a group of stockholders holding 15% of the outstanding shares to call for a special meeting of stockholders. At a special
meeting, stockholders would have the opportunity to review and debate the merit of the proposals submitted to the meeting. In contrast, when a group of stockholders take action by written consent, they may do so in secret and without the opportunity for a meeting that would ensure that all stockholders had access to the same information and the opportunity to debate the proposal. The heightened vote requirement for actions by written consent, in fact, encourages stockholders to act through open meetings to ensure the opportunity for debate.
In addition, under New York Stock Exchange rules, brokers are prohibited from casting uninstructed votes on certain corporate governance proposals, including charter amendments to eliminate supermajority voting requirements. This has sharply reduced the number of shares available to vote for any amendment, and it is highly unlikely that any such amendment would receive the affirmative vote of two-thirds of the outstanding shares necessary to pass. Repeatedly bringing the amendment before stockholders serves no interests of the stockholders.
Your Board believes this proposal is superfluous because a proposed amendment was already submitted to a stockholder vote and it failed by a very wide margin. Resubmitting the amendment to stockholders would only result in additional, unnecessary expense.
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Corporate GovernanceCORPORATE GOVERNANCE
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Table of Contents
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16 |
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THE ROLEOFTHE BOARD |
23 |
ETHICSAND COMPLIANCE PROGRAM
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17 |
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RISK OVERSIGHT |
24 |
ANNUAL MULTI-STEP BOARD EVALUATION | |||
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18 |
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BOARD STRUCTURE |
25 |
COMMUNICATINGWITH YOUR BOARD | |||
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19 |
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DIRECTOR NOMINATION PROCESS |
25 |
AVAILABILITYOF CORPORATE GOVERNANCE DOCUMENTS | |||
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19 |
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BOARD COMPOSITIONAND REFRESHMENT |
25 |
HOWTO SUBMITA STOCKHOLDER PROPOSAL | |||
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20 |
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DIRECTOR INDEPENDENCE |
26 |
RELATED PERSON TRANSACTIONS | |||
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21 |
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BOARD COMMITTEES |
26 |
DIRECTOR COMPENSATION | |||
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23 |
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PUBLIC POLICY ENGAGEMENT
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29 |
COMMON STOCK OWNERSHIP | |||
AT&T is committed to strong corporate governance principles. Effective governance protects the long-term interests of our stockholders, promotes public trust in AT&T, and strengthens management accountability. AT&T regularly reviews and updates its corporate governance practices to reflect evolving corporate governance principles and concerns identified by stockholders and other stakeholders.
In order for management and the Board to better understand and consider stockholders’ views and perspectives, we regularly communicate with our stockholders to solicit and discuss their views and perspectives on governance, executive compensation, and other topics that are important to them.
Engaging with Stockholders
AT&T has a long tradition of engaging with our stockholders. We believe it is important for our governance process to have meaningful engagement with our stockholders and understand their perspectives on executive compensation and other issues that are important to them. The Company meets with institutional investors throughout the year, both in person and by teleconference. This year, management met with investors who represented over 17% of outstanding shares. We share the feedback from this
engagement with the Board and incorporate it into our policies and practices. A recent example is the Company’s proxy access bylaw, which was adopted in 2016 after discussions with stockholders. In addition to direct communication with stockholders, the Company also provides several online reports designed to increase transparency on issues of importance to our investors, including sustainability, diversity, political contributions, transparency, and the proxy statement and annual report.
Key Responsibilities of the Board | ||||||||
Strategy Oversight | Risk Oversight | Succession Planning | ||||||
| Ö The Board oversees risk management. | Ö The Board oversees succession planning and talent development for senior executive positions. | ||||||
Ö Business strategy is a key focus at the Board level and is embedded in the work of Board committees. | Ö Board committees, which meet regularly and report back to the full Board, play significant roles in carrying out the risk oversight function. | Ö The Human Resources Committee, which meets regularly and reports back to the Board, has primary responsibility for developing succession plans for the CEO position. | ||||||
Ö Company management is charged with
| Ö Company management is charged with managing risk, through | Ö The senior executives and their potential successors. | ||||||
The Role of the BoardTHE ROLEOFTHE BOARD
The Board of Directors is responsible for oversight of management and strategic direction and for establishing broad corporate policies. In addition, the Board of Directors and various committees of the Board regularly meet to review and discuss operatingoperational and financial reports presented by the Chairman of the Board and Chief Executive Officer and other members of management as well as reports by experts and other advisors. Corporate review sessions are also offered to Directors to give them more detailed views of our businesses, such as corporate opportunities, technology, and operations.
Members of the Board are expected to attend Board meetings in person, unless the meeting is held by teleconference. The Board held 1110 meetings in 2016.2018. Directors are also expected to attend the Annual Meeting of Stockholders. All ofDirectors were present at the 2018 Annual Meeting. In 2018, all Directors attended at least 75% of the total number of meetings of the Board and of the Committees on which each served. Directors are also expected to attend the Annual Meeting of Stockholders. All but one of the Directors were present at the 2016 Annual Meeting.
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CORPORATE GOVERNANCE
The Board is responsible for overseeing our policies and procedures for assessing and managing risk. Management is responsible for assessing and managing our exposures to risk on aday-to-day basis, including the creation of appropriate risk management policies and procedures. Management also is responsible for informing the Board of our most significant risks and our plans for managing those risks. Annually, the Board reviews the Company’s strategic business plans, which includes evaluating the competitive, technological, economic and other risks associated with these plans.
In addition, under its charter, the Audit Committee reviews and discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies, as well as overseeing our compliance program, compliance with legal and regulatory requirements and associated risks. This includes, among other matters, evaluating risk in the context of financial policies, counterparty and credit
risk, and the appropriate mitigation of risk, including through the use of insurance where appropriate. Members of the Company’s finance, internal audit, and compliance organizations are responsible for managing risk in their areas and reporting regularly to the Audit Committee.
The Company’s senior internal auditing executive and Chief Compliance Officer each meet annually in executive session with the Audit Committee. The senior internal auditing executive and Chief Compliance Officer review with the Audit Committee each year’s annual internal audit and compliance risk assessment, which is focused on significant financial, operating, regulatory and legal matters. The Audit Committee also receives regular reports on completed internal audits of these significant risk areas.
In addition, the Audit Committee, as well as the Board of Directors, receive reports from responsible officers on cybersecurity. The AT&T Chief Security Office establishes policy and requirements for the security of AT&T’s computing and networking environments.
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Risk Assessment Responsibilities and Processes
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THE BOARD The full board has primary responsibility for risk oversight. The Board executes its oversight duties through: • Assigning specific oversight duties to the Board committees • Periodic briefing and informational sessions by management on risk identification, mitigation, and control | MANAGEMENT Management is primarily responsible for: • Identifying risk and risk controls related to significant business activities • Mapping the risks to company strategy • Developing programs and recommendations to determine the sufficiency of risk identification, the balance of potential risk to potential reward, and the appropriate manner in which to manage risk With respect to the risk assessment of the company’s compensation programs, management is primarily responsible for: • Reviewing all significant compensation programs, focusing on programs with variable payouts • Assessing the company’s executive and broad-based compensation and benefits programs to determine whether the programs’ provisions and operation create undesired or unintentional material risk. | |||||||
| BOARD COMMITTEES | ||||||||
¯ Audit Oversees issues related to financial, compliance, ethics, and operational risks. | ¯ Human Resources Oversees issues related to risk in the Company’s compensation programs, including the Board’s conclusion that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the company. | |||||||
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CORPORATE GOVERNANCE
Board Composition and Director Nomination Process
Thenon-management members of the Board of Directors meet in executive session (without management Directors or management personnel present) at least four times per year. The Lead Director, who is appointed for aone-year term, presides over these sessions. Matthew K. Rose currently serves as Lead Director; his term is scheduled to expire January 31, 2020.
Chairman of the Board and CEO: Randall L. Stephenson
Lead Director: Matthew K. Rose
Audit, Human Resources, Corporate Governance and Nominating, Corporate Development and Finance, and Public Policy and Corporate Reputation Committees composed entirely of independent Directors
Duties and Responsibilities |
Chairman of the Board
Presides over meetings of the Board
Presides over meetings of stockholders
Prepares the agenda for each Board meeting
Prepares the agenda for each stockholder meeting
Chief Executive Officer
In general charge of the affairs of the Company, subject to the overall direction and supervision of the Board and its committees
Consults and advises the Board and its committees on the business and affairs of the Company
Performs such other duties as may be assigned by the Board
Lead Independent Director
| ✓ | Presides at meetings of the Board at which the Chairman is not present; |
| ✓ | Presides at executive sessions of thenon-management Directors; |
| ✓ | Prepares the agenda for the executive sessions of thenon-management Directors; |
| ✓ | Acts as the principal liaison between thenon-management Directors and the Chairman and Chief Executive Officer; |
| ✓ | Coordinates the activities of thenon-management Directors when acting as a group; |
| ✓ | Approves the agenda for each Board meeting; |
| ✓ | Approves meeting schedules to ensure there is sufficient time for discussion of all agenda items; |
| ✓ | Advises the Chairman and Chief Executive Officer as to the quality, quantity and timeliness of the flow of information from management, including the materials provided to Directors at Board meetings; |
| ✓ | If requested by major stockholders, ensures that he or she is available for consultation and direct communication and acts as a contact for other interested persons; |
| ✓ | Shares with other Directors, as he or she deems appropriate, letters and other contacts that he or she receives; and |
In addition, the Lead Director may:
| ✓ | call meetings of thenon-management Directors in addition to the quarterly meetings, and |
| ✓ | require information relating to any matter be distributed to the Board. |
Randall Stephenson currently serves as both Chairman of the Board and Chief Executive Officer. The Board believes that having Mr. Stephenson serve in both capacities is in the best interests of AT&T and its stockholders because it enhances communication between the Board and management and allows Mr. Stephenson to more effectively execute the Company’s strategic initiatives and business plans and confront its challenges. The Board believes that the appointment of a strong independent Lead Director and the use of regular executive sessions of thenon-management Directors, along with the Board’s strong committee system and substantial majority of independent Directors, allow it to maintain effective oversight of management.
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CORPORATE GOVERNANCE
DIRECTOR NOMINATION PROCESS
The Board of Directors believes that the Company benefits from having experienced Directors who bring a wide range of skills and backgrounds to the Boardroom. The Corporate Governance and Nominating Committee is responsible for identifying eligible candidates based on our Corporate Governance Guidelines. The Committee considers a candidate’s:
general understanding of elements relevant to the success of a large publicly traded company in the current business environment;
understanding of our business;
educational and professional background;
judgment, competence, anticipated participation in Board activities;
experience, geographic location, and special talents or personal attributes.
Although the Committee does not have a formal diversity policy, it believes that diversity is an important factor in determining the composition of the Board and considers it in making nominee recommendations.
Stockholders who wish to suggest qualified candidates should write to the Senior Vice President - President—Assistant General Counsel and Secretary, AT&T Inc., 208 S. Akard Street, Suite 3241,2954, Dallas, Texas 75202, stating in detail the qualifications of the persons proposed for consideration by the Committee.
BOARD COMPOSITIONAND REFRESHMENT*
Blend of Experiences and
Qualifications of Our Directors
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Blend of experiences and Qualifications Senior leadership/Ceo experience global business/ affairs finance/public accounting government/ regulatory industry/ technology investment/private equity Other: law, marketing, labor, operations and logistics, healthcare
Director Tenure and Age
Diversity
*Includes Joyce Roché, who is not standing forre-election at the 2019 Annual Meeting.
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CORPORATE GOVERNANCE
Board Performance Assessment
The Board, through the Corporate Governance and Nominating Committee and the independent Lead Director, assesses its performance by conducting annual self-evaluations, in which each director provides his or her candid assessment of the effectiveness of the Board. The Board also conducts annual committee assessments and reviews individual director performance and overall Board dynamics. The Chair of the Corporate Governance and Nominating Committee shares the results of the assessments with the Board and reads the discussion regarding potential changes. The Board evaluation includes an assessment of both Board process and substance, including:
As part of the self-evaluation process, each director is asked to provide feedback with respect to the performance of each other director. We believe this approach supports the Board’s effectiveness and continuous improvement.
Director Independence
Our Corporate Governance Guidelines require that a substantial majority of our Board of Directors consist of independent Directors. In addition, the New York Stock Exchange (NYSE) Listing Standards require a majority of the Board and every member of the Audit Committee, Human Resources Committee, and Corporate Governance and Nominating Committee to be independent. For a Director to be “independent” under the NYSE standards, the Board must affirmatively determine that the Director has no material relationship with AT&T, either directly or as a partner, stockholder or officer of an organization that has a relationship with AT&T, other than in his or her capacity as a Director of AT&T. In addition, the Director must meet certain independence standards specified by the NYSE as well as the additional standards referenced in our Corporate Governance Guidelines (found at www.att.com).
Using these standards for determining the independence of its members, the Board has determined that the following Directors are independent:
Samuel A. Di Piazza, Jr. | Beth E. Mooney | |
Richard W. Fisher | Joyce M. Roché | |
Scott T. Ford | Matthew K. Rose | |
Glenn H. Hutchins | Cynthia B. Taylor | |
William E. Kennard | Laura D’Andrea Tyson | |
Michael B. McCallister | Geoffrey Y. Yang |
In addition, each member of the Audit Committee, the Corporate Governance and Nominating Committee, and the Human Resources Committee is independent.
In determining the independence of the Directors, the Board considered the following commercial relationships between AT&T and companies at which our Directors serve as executive officers:Executive Officers: payments by AT&T for the use of rights of way and facilities at Burlington Northern Santa Fe, LLC, where Mr. Rose serves as CEO; and interest paid from participation in a structured finance program through KeyCorp, where Ms. Mooney serves as CEO. In addition, each of the foregoing companies as well as each of the entities where Mr. Ford, Ms. Taylor, and Mr. Yang serve as executive officers purchased communications services from subsidiaries of AT&T. In each case for the year 2016:2018:
The relevant products and services were provided by AT&T or to AT&T on terms determined on anarm’s-length basis that were comparable to the terms provided to or by similarly situated customers or suppliers;
The transactions were made in the ordinary course of business of each company; and
The total payments by AT&T to the Director’s company (for rights of way or for interest) or to AT&T by the Director’s company (for communications services) were each substantially less than 1% of the consolidated gross revenues of each of AT&T and the other company. This level is significantly below the maximum amount permitted under the NYSE listing standards for director independence (i.e., 2% of consolidated gross revenues).
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Board Leadership Structure
The non-management members of the Board of Directors meet in executive session (without management Directors or management personnel present) at least four times per year. The Lead Director, who is
appointed for a two-year term, presides over these sessions. Matthew K. Rose currently serves as Lead Director; his term is scheduled to expire January 31, 2019.
Board Leadership Structure
Responsibilities of the Lead Director include:
In addition, the Lead Director may:
Randall Stephenson currently serves as both Chairman of the Board and Chief Executive Officer. The Board believes that having Mr. Stephenson serve in both capacities is in the best interests of AT&T and its stockholders because it enhances communication between the Board and management and allows Mr. Stephenson to more effectively execute the Company’s strategic initiatives and business plans and confront its challenges. The Board believes that the appointment of a strong independent Lead Director and the use of regular executive sessions of the non-management Directors, along with the Board’s strong committee system and substantial majority of independent Directors, allow it to maintain effective oversight of management.
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CORPORATE GOVERNANCE
Board CommitteesBOARD COMMITTEES
From time to time the Board establishes permanent standing committees and temporary special committees to assist the Board in carrying out its responsibilities. The Board has established six standing committees of Directors, the principal responsibilities of which are described below. The charters for each of these committees may be found on our website at www.att.com.
Audit Committee
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Meetings in Fiscal
Samuel A. Di Piazza, Jr., Chair∎ Michael B. McCallister Cynthia B. Taylor∎ Laura D. Tyson
∎ – Financial Expert
Consists of four independent Directors. | • Oversees:
- the integrity of our financial statements
- the independent auditor’s qualifications and independence
- the performance of the internal audit function and independent auditors
- our compliance with legal and regulatory matters.
• Responsible for the appointment, compensation, retention and oversight of the work of the independent auditor.
• The independent auditor audits the financial statements of AT&T and its subsidiaries.
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Corporate Governance and Nominating Committee
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Meetings in Fiscal
Matthew K. Rose, Chair Richard W. Fisher William E. Kennard Beth E. Mooney Joyce M. Roché*
Consists of five independent Directors. | • Responsible for recommending candidates to be nominated by the Board for election by the stockholders, or to be appointed by the Board of Directors to fill vacancies, consistent with the criteria approved by the Board, and recommending committee assignments.
• Periodically assesses AT&T’s Corporate Governance Guidelines and makes recommendations to the Board for amendments and also recommends to the Board the compensation of Directors.
• Takes a leadership role in shaping corporate governance and oversees an annual evaluation of the Board.
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* Retiring effective April 26, 2019
Human Resources Committee
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Meetings in Fiscal
Joyce M. Roché, Scott T. Ford Michael B. McCallister Matthew K. Rose Geoffrey Y. Yang
Consists of | • Oversees the compensation practices of AT&T, including the design and administration of employee benefit plans.
• Responsible for:
- establishing the compensation of the Chief Executive Officer and the other
- establishing stock ownership guidelines for officers and developing a management succession plan.
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* Retiring effective April 26, 2019
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CORPORATE GOVERNANCE
Corporate Development and Finance Committee
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Meetings in Fiscal
Scott T. Ford, Chair Richard W. Fisher Glenn H. Hutchins Beth E. Mooney Geoffrey Y. Yang
Consists of five independent Directors. | • Assists the Board in its oversight of our finances, including recommending the payment of dividends and reviewing the management of our debt and investment of our cash reserves.
• Reviews mergers, acquisitions, dispositions and similar transactions; reviews corporate strategy and recommends or approves transactions and investments.
• Reviews and makes recommendations about the capital structure of the Company, and the evaluation, development and implementation of key technology decisions.
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Public Policy and Corporate Reputation Committee
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Meetings in Fiscal
Laura D. Tyson, Chair Samuel A. Di Piazza, Jr. Glenn H. Hutchins William E. Kennard Cynthia B. Taylor
Consists of five independent Directors. | • Assists the Board in its oversight of policies related to corporate social responsibility including public policy issues affecting AT&T, its stockholders, employees, customers, and the communities in which it operates.
• Oversees the Company’s management of its brands and reputation.
• Recommends to the Board the aggregate amount of contributions or expenditures for political purposes, and the aggregate amount of charitable contributions to be made to the AT&T Foundation.
• Consults with the AT&T Foundation regarding significant grants proposed to be made by the Foundation. | |||
Executive Committee
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Randall L. Stephenson, Chair Samuel A. Di Piazza, Jr. Scott T. Ford Joyce M. Roché* Matthew K. Rose Laura D. Tyson
Consists of the Chairman of the Board and the Chairmen of our five other standing committees. |
• Established to assist the Board by acting upon urgent matters when the Board is not available to meet. No meetings were held in
• Has full power and authority of the Board to the extent permitted by law, including the power and authority to declare a dividend or to authorize the issuance of common stock.
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* Retiring effective April 26, 2019
ACTIVE ONGOING STOCKHOLDER ENGAGEMENT
AT&T has a long tradition of engaging with our stockholders. We believe it is important for our governance process to have meaningful engagement with our stockholders and understand their perspectives on corporate governance, executive compensation, and other issues that are important to them. The Company meets with institutional investors throughout the year, both in person and by teleconference. We share the feedback from this
engagement with the Board and incorporate it into our policies and practices. The Company also provides online reports designed to increase transparency on issues of importance to our investors, including sustainability, diversity, political contributions, transparency, and the Proxy Statement and Annual Report.
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CORPORATE GOVERNANCE
Public Policy Engagement
We participate in public policy dialogues around the world related to our industry and business priorities, our more than 268,000 employees, our stockholders, and the communities we serve.
In the U.S., the Company and our affiliated political action committees comply with applicable laws and other requirements regarding contributions to: political organizations, candidates for federal, state and local public office, ballot measure campaigns, political action committees, and trade associations. We engage with organizations and individuals to make our views clear and uphold our commitment to help support the communities in which we operate. We base our U.S.
political contributions on many considerations, supporting candidates who take reasonable positions on policies that promote economic growth as well as affect our long-term business objectives.
The Public Policy and Corporate Reputation Committee of our Board of Directors reviews our advocacy efforts, including political contributions. Additional information about our public policy engagement efforts, including our political contributions policyPolitical Contributions Policy and a report of U.S. political contributions from our Company and from AT&T’s Employee Political Action Committees, can be viewed on our website at www.att.com.
Find more online.
Our Political Contributions Policy and the AT&T Political Engagement Report are available on our website at www.att.com.
Board’s Role in Risk OversightETHICSAND COMPLIANCE PROGRAM
The Board is responsible for overseeing our policies and procedures for assessing and managing risk. Management is responsible for assessing and managing our exposures to risk on a day-to-day basis, including the creation of appropriate risk management policies and procedures. Management also is responsible for informing the Board of our most significant risks and our plans for managing those risks. Annually, the Board reviews the Company’s strategic business plans, which includes evaluating the competitive, technological, economic and other risks associated with these plans.
In addition, under its charter, the Audit Committee reviews and discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies, as well as overseeing our compliance program, compliance with legal and
regulatory requirements and associated risks. This includes, among other matters, evaluating risk in the context of financial policies, counterparty and credit risk, and the appropriate mitigation of risk, including through the use of insurance where appropriate. Members of the Company’s finance, internal audit, and compliance organizations are responsible for managing risk in their areas and reporting regularly to the Audit Committee.
The Company’s senior internal auditing executive and Chief Compliance Officer each meet annually in executive session with the Audit Committee. The senior internal auditing executive and Chief Compliance Officer review with the Audit Committee each year’s annual internal audit and compliance risk assessment, which is focused on significant financial, operating, regulatory and legal matters. The Audit Committee also receives regular reports on completed internal audits of these significant risk areas.
Ethics and Compliance Program
The Board has adopted a written Code of Ethics applicable to Directors, officers, and employees that outlines our corporate values and standards of integrity and behavior and is designed to foster a culture of integrity, drive compliance with legal and regulatory requirements and protect and promote the reputation of our Company. The full text of the Code of Ethics is posted on our website at www.att.com.
Our Chief Compliance Officer has responsibility to implement and maintain an effective ethics and compliance program. He also has responsibility to provide updates on our ethics and compliance programprograms to the Audit Committee.
Find more online.
Our Code of Ethics is available on our website at www.att.com.
|
CORPORATE GOVERNANCE
ANNUAL MULTI-STEP BOARD EVALUATIONS
Each year, the Corporate Governance and Nominating Committee and the Lead Director lead the Board through three evaluations: a Board self-evaluation, Committee self-evaluations, and peer evaluations. Through this process, Directors provide feedback,
assess performance, and identify areas where improvement can be made. We believe this approach supports the Board’s effectiveness and continuous improvement.
| Committee Self-Evaluations | |||
Members discuss the performance of other members of the Board including, their: • Understanding of the business • Meeting attendance • Preparation and participation in Board activities • Applicable skill set to current needs of the business Responses are discussed with the individual Director if applicable | Candid open discussion to review the following: • Committee process and substance • Committee effectiveness, structure, composition, and culture • Overall Committee dynamics • Committee Charter | |||
Ongoing Feedback | Board Self-Evaluation Survey | |||
Directors provide ongoing, real-time feedback outside of the evaluation process. Lines of communication between our directors and management are always open. | Evaluation survey (reviewed annually by the Corporate Governance and Nominating Committee) addresses key topics such as those below, among other things: • Process and substance • Effectiveness, structure, composition, culture, and overall Board dynamics • Performance in key areas • Specific issues which should be discussed in the future • Responses are discussed and changes and improvements are implemented, if applicable | |||
| 24 | |
CORPORATE GOVERNANCE
Related Person Transactions DisclosureCOMMUNICATINGWITH YOUR BOARD
Interested persons may contact the Lead Director or thenon-management Directors by sending written comments through the Office of the Secretary of AT&T Inc., 208 S. Akard Street, Suite 2954, Dallas, Texas 75202. The Office will either forward the original materials as addressed or provide Directors with summaries of the submissions, with the originals available for review at the Directors’ request.
AVAILABILITYOF CORPORATE GOVERNANCE DOCUMENTS
A copy of AT&T’s Annual Report to the SEC onForm 10-K for the year 2018 may be obtained without charge upon written request to AT&T Stockholder Services, 208 S. Akard, Room 1830, Dallas, Texas 75202. AT&T’s Corporate Governance Guidelines, Code of Ethics, and Committee Charters for the following committees may be viewed online at www.att.com and are also available in print to anyone who requests them (contact the Senior Vice President and Secretary of AT&T at 208 S. Akard, Suite 2954, Dallas, Texas 75202): Audit Committee, Human Resources Committee, Corporate Governance and Nominating Committee, Corporate Development and Finance Committee, Public Policy and Corporate Reputation Committee, and Executive Committee.
HOWTO SUBMITA PROPOSALFOR NEXT YEAR
If a stockholder wishes to present a proposal or nominate a person for election as a Director at the 2020 Annual Meeting of Stockholders without such proposal or nomination being included in the Company’s proxy materials, such proposal or nomination must be received by the Senior Vice President and Secretary of AT&T at 208 S. Akard, Suite 2954, Dallas, Texas 75202 not less than 90 days nor more than 120 days before the anniversary of the prior Annual Meeting of Stockholders. Since the Annual Meeting of Stockholders will be held on April 26, 2019, written notice of any such proposal or nomination must be received by the Company no earlier than December 28, 2019 and no later than January 27, 2020. In addition, such proposal or nomination must meet certain other requirements and provide such additional information as provided in the Company’s Bylaws. A copy of the Company’s Bylaws may be obtained without charge from the Senior Vice President and Secretary of AT&T. Special notice provisions apply under the Bylaws if the date of the Annual Meeting is more than 30 days before or 70 days after the anniversary date.
Stockholder proposals intended to be included in the proxy materials for the 2020 Annual Meeting must be received by November 12, 2019. 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 2954, 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.
Nominations for a Director intended for inclusion in the Company’s proxy materials for the 2020 Annual Meeting must be made in accordance with the proxy access provisions of the Company’s Bylaws and such nomination must be received by the Senior Vice President and Secretary of AT&T at 208 S. Akard, Suite 2954, Dallas, Texas 75202 not less than 120 days nor more than 150 days before the anniversary of the date that the Company mailed its Proxy Statement for the prior year’s Annual Meeting of Stockholders. Written notice of any such nomination must be received by the Company no earlier than October 13, 2019 and no later than November 12, 2019.
| 25 |
CORPORATE GOVERNANCE
Under the rules of the SEC, public issuers, such as AT&T, must disclose certain “Related Person Transactions.” These are transactions in which the Company is a participant where the amount involved exceeds $120,000, and a Director, executive officer,Executive Officer, or holder of more than 5% of our common stock has a direct or indirect material interest.
AT&T has adopted a written policy requiring that each Director or executive officerExecutive Officer involved in such a transaction notify the Corporate Governance and Nominating Committee and that each such transaction be approved or ratified by the Committee.
In determining whether to approve a Related Person Transaction, the Committee will consider the following factors, among others, to the extent relevant to the Related Person Transaction:
whether the terms of the Related Person Transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related person,
whether there are business reasons for the Company to enter into the Related Person Transaction,
whether the Related Person Transaction would impair the independence of an outside director, and
whether the Related Person Transaction would present an improper conflict of interest for any of our Directors or executive officers,Executive Officers, taking into account the size of the transaction, the
|
A Related Person Transaction entered into without the Committee’spre-approval will not violate this policy, or be invalid or unenforceable, so long as the transaction is brought to the Committee as promptly as reasonably practical after it is entered into or after it becomes reasonably apparent that the transaction is covered by this policy.
The employment of the following persons was approved by the Corporate Governance and Nominating Committee under the Company’s Related Party Transactions Policy. The rate of pay for each of these employees is similar to those paid for comparable positions at the Company. During 2016,2018, asister-in-law of John Stankey, Chief Executive Officer, – AT&T Entertainment Group, AT&T Services, Inc.,Warner Media, LLC, was employed by a subsidiary with an approximate rate of pay, including commissions, of $127,000. This rate of pay is similar to those paid for comparable positions at the Company.$132,530. Also during 2016,2018, a brother of John Donovan, Chief StrategyExecutive Officer, and Group President – AT&T Technology and Operations,Communications, LLC, was employed by a subsidiary with an approximate rate of pay, including commissions, of $139,000. This$197,376. In addition, during 2018, a son of William Blase, Senior Executive Vice President – Human Resources, was employed by a subsidiary with an approximate rate of pay, is similar to those paid for comparable positions at the Company.including commissions, of $127,943.
The compensation of Directors is determined by the Board with the advice of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee is composed entirely of independent Directors. None of our employees serve on this Committee. The Committee’s current members are Matthew K. Rose (Chair), Richard W. Fisher, William E. Kennard, Beth E. Mooney and Joyce M. Roché. Under its charter, (available on our website at www.att.com), the Committee annually reviews the compensation and benefits provided to Directors for their service and makes recommendations to the Board for changes. This includes not only Director retainers, and fees, but also Director compensation and benefit plans.
The Committee’s charter authorizes the Committee to employ independent compensation and other consultants to assist in fulfilling its duties. From time to time, the Committee engages a compensation consultant to advise the Committee and to provide information regarding director compensation paid by other public companies, which may be used by the Committee to make compensation recommendations to the Board. In addition, the Chief Executive Officer may make recommendations to the Committee or the Board about types and amounts of appropriate compensation and benefits for Directors. Directors who are employed by us or one of our subsidiaries receive no separate compensation for serving as directors or as members of Board committees.
| 26 | |
CORPORATE GOVERNANCE
The Company offers Directors both cash and equity compensation. Cash compensation comes in the form of an annual cash retainer that may be deferred and earn interest at the election of a Director. Equity is offered both as an annual grant and as an opportunity to defer the cash compensation into deferred stock units. The value of deferred stock units is based on the stock price and is converted to a cash payout after retiring from the Board.
| Amount ($) | |||
Annual Retainer | 140,000 | |||
Lead Director Retainer | 60,000 | |||
Chair Retainer | ||||
Audit Committee | 25,000 | |||
| ||||
| 25,000 | |||
Corporate Development and | ||||
| ||||
|
15,000 |
|
| |
Corporate Governance and Nominating Committee |
| 15,000 | ||
Public Policy and Corporate Reputation Committee | 15,000 | |||
Annual Award | 170,000 | |||
Communications Equipment and Services | up to 25,000 |
Under theNon-Employee Director Stock and Deferral Plan (theDirector Plan) eachnon-employee Director annually receives a grant of deferred stock units. Each deferred stock unit is equivalent to a share of AT&T stock and earns dividend equivalents in the form of additional deferred stock units. The annual grants are fully earned and vested at issuance and are distributed beginning in the calendar year after the Director leaves the Board. At distribution, the deferred stock units are converted to cash based on the then price of AT&T stock and are paid either in a lump sum or in up to 15 annual installments. Beginning in 2016, the deferred stock units had a grant date value of $170,000. To determine the number of deferred stock units granted, we calculate the nominal value of the award, which is the value that would yield the grant date value after applying an illiquidity discount. We
use the average remaining tenure of the non-employee Directors as the discount period. We then divide the nominal value by the price of AT&T stock on the grant date to determine the number of deferred stock units issued. The nominal value of the award before application of the discount was $231,924 in 2018. Beginning in 2019, the Company will annually issue Directors $220,000 in deferred stock units without an illiquidity discount and the Chair Retainers will increase by $5,000 for the Audit, Corporate Governance and Nominating, and Corporate Development and Finance Committees.
Additionally, Directors may defer the receipt of their retainers into either additional deferred stock units or into a cash deferral account under the Director Plan. Directors purchase the deferred stock units at the fair market value of AT&T common stock. Deferrals into the cash deferral account under the plan earn interest during the calendar year at a rate equal to the Moody’s Long-Term Corporate Bond Yield Average for September of the preceding year (Moody’s Rate). Directors may annually choose to convert their cash deferral accounts into deferred stock units at the fair market value of our stock at the time of the conversion. Directors may also use all or part of their retainers to purchase AT&T stock at fair market value under theNon-Employee Director Stock Purchase Plan.
To the extent earnings on cash deferrals under the Non-Employee Director Stock and Deferral Plan exceed the interest rate specified by the Securities and Exchange Commission (SEC) for disclosure purposes, they are included in the “Director Compensation” table on page 3628 under the heading “Nonqualified Deferred Compensation Earnings.”
Non-employee Directors may receive communications equipment and services pursuant to the AT&T Board of Directors Communications Concession Program. The equipment and services that may be provided to a Director, other than equipment at his or her primary residence, may not exceed $25,000 per year. All concession services must be provided by AT&T affiliates, except that the Director may use another provider for the Director’s primary residence if it is not served by an AT&T affiliate.
| 27 |
2016 Director Compensation Table
CORPORATE GOVERNANCE
2018 DIRECTOR COMPENSATION TABLE
The following table contains information regarding compensation provided to each person who served as a Director during 20162018 (excluding Mr. Stephenson, whose compensation is included in the Summary Compensation Table and related tables and disclosure).
Name | Fees Earned ($) (a) | Stock ($) (b) | Nonqualified ($) (c) | All Other ($) (d) | Total ($) | Fees Earned (a) | Stock (b) | Nonqualified ($) (c) | All Other (d) | Total ($) | |||||||||||||||||||||||||||||||||||
Samuel A. Di Piazza, Jr. | 162,450 | 170,000 | 0 | 9 | 332,459 |
|
$ 165,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 15,000
|
|
$
|
350,000
|
| |||||||||||||||||||||||||
Richard W. Fisher | 139,400 | 170,000 | 0 | 9 | 309,409 |
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 982
|
|
|
$ 0
|
|
$
|
310,982
|
| |||||||||||||||||||||||||
Scott T. Ford | 147,600 | 170,000 | 0 | 9 | 317,609 |
|
$ 155,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
325,000
|
| |||||||||||||||||||||||||
Glenn H. Hutchins | 135,700 | 170,000 | 0 | 11,731 | 317,431 |
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
310,000
|
| |||||||||||||||||||||||||
William E. Kennard | 137,250 | 170,000 | 0 | 15,009 | 322,259 |
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
310,000
|
| |||||||||||||||||||||||||
Jon C. Madonna* | 58,500 | 0 | 0 | 265,888 | 324,388 | ||||||||||||||||||||||||||||||||||||||||
Michael B. McCallister | 146,600 | 170,000 | 0 | 11,807 | 328,407 |
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 14,655
|
|
$
|
324,655
|
| |||||||||||||||||||||||||
John B. McCoy* | 53,167 | 0 | 0 | 250,009 | 303,176 | ||||||||||||||||||||||||||||||||||||||||
Beth E. Mooney | 139,400 | 170,000 | 0 | 15,009 | 324,409 |
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
310,000
|
| |||||||||||||||||||||||||
Joyce M. Roché | 223,900 | 170,000 | 0 | 13,047 | 406,947 |
|
$ 165,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 17,700
|
|
$
|
352,700
|
| |||||||||||||||||||||||||
Matthew K. Rose | 149,850 | 170,000 | 0 | 9 | 319,859 |
�� |
$ 215,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 14,113
|
|
$
|
399,113
|
| |||||||||||||||||||||||||
Cynthia B. Taylor | 147,700 | 170,000 | 0 | 9 | 317,709 |
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 23,145
|
|
$
|
333,145
|
| |||||||||||||||||||||||||
Laura D’Andrea Tyson | 157,000 | 170,000 | 8,994 | 13,509 | 349,503 |
|
$ 155,000
|
|
|
$ 170,000
|
|
|
$ 5,153
|
|
|
$ 30,000
|
|
$
|
360,153
|
| |||||||||||||||||||||||||
Geoffrey Y. Yang* | 76,517 | 0 | 0 | 0 | 76,517 | ||||||||||||||||||||||||||||||||||||||||
Geoffrey Y. Yang
|
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 15,000
|
|
$
|
325,000
|
| ||||||||||||||||||||||||||||||
Note (a). Fees Earned or Paid in Cash
The table below shows the number of deferred stock units purchased in 20162018 by each Director with their Board fees and/or retainers under theNon-Employee Director Stock and Deferral Plan.
| Director | Deferred Stock Units Purchased in 2018 | ||||
| |||||
Samuel A. Di Piazza, Jr. | 4,998 | ||||
Scott T. Ford | 4,695 | ||||
Glenn H. Hutchins | 4,241 | ||||
Beth E. Mooney | 4,241 | ||||
Joyce M. Roché | 2,499 | ||||
Matthew K. Rose | |||||
| |||||
|
In addition, the following table below shows the number of shares of AT&T common stock purchased in 20162018 by each Director with their retainers under theNon-Employee Director Stock Purchase Plan.
| Director | Shares Purchased in 2018 | ||||
| |||||
Michael B. McCallister | 2,119 | ||||
| 4,238 | ||||
Note (b). Stock Awards
Amounts in this column represent the annual grant of deferred stock units that are immediately vested but are not distributed until after the retirement of the Director. The grant date value was determined by applying an illiquidity discount of 18.4%26.7%. The illiquidity discount was determined by taking the average expected remaining tenure of the Directors (9.5(8.2 years) and then using that average to calculate the illiquidity discount under FASB ASC Topic 718. The nominal value of each award (before applying the discount) was $208,333.$231,924. The deferred stock units will be paid out in cash in the calendar year after the Director ceases his or her service with the Board, at the times elected by the Director. The aggregate number of stock awards outstanding at December 31, 20162018, for each Director can be found in the “Common Stock Ownership” section beginning on page 38.29.
| 28 | |
CORPORATE GOVERNANCE
Note (c). Nonqualified Deferred Compensation Earnings
Amounts shown represent the excess earnings, if any, ofbased on the actual rates used to determine earnings on deferred compensation over the market interest rates determined pursuant to SEC rules.
Note (d). All Other Compensation
Amounts in this column include personal benefits for Directors that in the aggregate equal or exceed $10,000, which for 20162018 consisted of communications equipment and services provided under the AT&T Board of Directors Communications Concession Program (described on page 36)27) and holiday or retirement gifts, as follows: Mr. HutchinsMcCallister ($11,49313,397 and $230,$1,258, respectively), Mr. MadonnaRose ($6,40713,305 and $8,973,$808, respectively), and Mr. McCallisterMs. Taylor ($11,56912,337 and $230,$808, respectively).
All Other Compensation also includes charitable matching contributions of up to $15,000 per year made by the AT&T Foundation on behalf of Directors and employees under the AT&T Higher Education/Cultural Matching Gift Program. Charitable contributions were made on the Directors’ behalf under this program as follows:
Name | Matching Gifts | ||||
| |||||
| |||||
| |||||
| |||||
|
In addition, charitable contributions of $250,000 per Director were made on behalf of Mr. Madonna and Mr. McCoy to the charities of their choice in connection with their retirement from the Board.
This column also includes $9.00 per Director for group life insurance, which was discontinued in January 2016.
Samuel A. Di Piazza, Jr. | $15,000 | |
Joyce M. Roché* | $17,700 | |
Cynthia B. Taylor | $10,000 | |
Laura D’Andrea Tyson* | $30,000 | |
Geoff Y. Yang | $15,000 |
| * | For Ms. Roché and Dr. Tyson, $3,000 and $15,000, respectively, relate to contributions made in 2017. |
Certain Beneficial Owners
The following table lists the beneficial ownership of each person holding more than 5% of AT&T’s outstanding common stock as of December 31, 20162018 (based on a review of filings made with the Securities and Exchange Commission on Schedules 13D and 13G).
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||||
BlackRock, Inc. 40 East 52nd St., New York, NY 10022 |
|
358,350,283 |
(1) |
|
5.8 |
% | ||||
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 |
|
402,773,306 |
(2) |
|
6.55 |
% | ||||
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||
BlackRock, Inc. 55 East 52nd St., New York, NY 10055 | 454,818,785(1) | 6.2% | ||
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 | 548,446,423(2) | 7.53% | ||
| 1. | Based on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on |
| 2. | Based on a Schedule 13G/A filed by The Vanguard Group with the SEC on February |
| 29 |
CORPORATE GOVERNANCE
The following table lists the beneficial ownership of AT&T common stock andnon-voting stock units as of December 31, 2016,2018, held by each Director, nominee, and officer named in the “Summary Compensation Table” on page 70.62. As of that date, each Director and officer listed below, and all Directors and executive officersExecutive Officers as a group, owned less than 1% of our outstanding common stock. Except as noted below, the persons listed in the table have sole voting and investment power with respect to the securities indicated.
Name of BeneficialOwner | Total AT&T Ownership options) (1) | Non-Voting Units (2) | ||||||
Samuel A. Di Piazza, Jr. | 26,790 | 9,729 | ||||||
Richard W. Fisher | 0 | 5,496 | ||||||
Scott T. Ford | 66,319 | 30,998 | ||||||
Glenn H. Hutchins (3) | 103,322 | 17,684 | ||||||
William E. Kennard | 0 | 10,173 | ||||||
Michael B. McCallister | 29,278 | 19,764 | ||||||
Beth E. Mooney | 12,600 | 22,550 | ||||||
Joyce M. Roché | 8,660 | 155,849 | ||||||
Matthew K. Rose | 112,950 | 59,735 | ||||||
Name of BeneficialOwner | Total AT&T Ownership options) (1) | Non-Voting Units (2) | ||||||
Cynthia B. Taylor | 5,718 | 14,960 | ||||||
Laura D’Andrea Tyson | 0 | 118,515 | ||||||
Geoffrey Y. Yang | 27,129 | 0 | ||||||
Randall L. Stephenson | 2,376,478 | 378,192 | ||||||
Rafael de la Vega | 890,933 | 330,950 | ||||||
John J. Stephens | 601,426 | 82,037 | ||||||
John T. Stankey | 541,646 | 46,958 | ||||||
John Donovan | 168,778 | 8,657 | ||||||
All executive officers and Directors as a group (consisting of 22 persons, including those named above) | 5,503,495 | 1,333,034 | ||||||
Beneficial Owner | | Total AT&T Beneficial Ownership options) (1) |
| | Non-Voting Stock Units (2) |
| ||
Samuel A. Di Piazza, Jr. | 34,480 | 33,961 | ||||||
Richard W. Fisher | 10,000 | 19,462 | ||||||
Scott T. Ford | 81,319 | 52,757 | ||||||
Glenn H. Hutchins (3) | 167,651 | 41,369 | ||||||
William E. Kennard | 0 | 24,687 | ||||||
Michael B. McCallister | 41,221 | 35,403 | ||||||
Beth E. Mooney | 28,700 | 46,805 | ||||||
Joyce M. Roché | 11,860 | 192,400 | ||||||
Matthew K. Rose | 208,050 | 92,675 | ||||||
Cynthia B. Taylor | 5,718 | 30,035 | ||||||
Laura D’Andrea Tyson | 0 | 145,736 | ||||||
Geoffrey Y. Yang | 205,530 | 13,320 | ||||||
Randall L. Stephenson | 2,253,739 | 402,639 | ||||||
John J. Stephens | 667,836 | 78,212 | ||||||
John M. Donovan | 343,518 | 14,608 | ||||||
David R. McAtee II | 35,677 | 18,763 | ||||||
John T. Stankey | 591,643 | 47,605 | ||||||
All Executive Officers and Directors as a group (consisting of 21 persons, including those named above) | 5,207,952 | 1,353,895 |
|
Note 1.
The table aboveto the left includes presently exercisable stock options as well as stock options that became exercisable within 60 days of the date of this table. The following executive officersExecutive Officers held the following numbers of options:
| Beneficial Owner | Number of Stock Options Held | ||||
| |||||
Randall L. Stephenson | 474,444 | ||||
| 122,174 | ||||
John T. Stankey | 10,098 | ||||
| |||||
| |||||
In addition, of the shares shown in the table above,to the left, the following persons share voting and investment power with other persons with respect to the following numbers of shares:
| Beneficial Owner | Number of Shared Voting and Investment Power Shares | ||||
| |||||
John M. Donovan | 251,844 | ||||
Glenn H. Hutchins | 167,651 | ||||
Michael B. McCallister | 33,290 | ||||
David R. McAtee II | 32,736 | ||||
Beth E. Mooney | 28,700 | ||||
Matthew K. Rose | 208,050 | ||||
Randall L. Stephenson | 1,772,935 | ||||
John T. Stankey | 573,787 | ||||
John J. Stephens | 376,502 | ||||
Cynthia B. Taylor | 196 | ||||
Geoffrey Y. Yang | 131,035 | ||||
Note 2.
Represents number of vested stock units held by the Director or executive officer,Executive Officer, where each stock unit is equal in value to one share of AT&T stock. The stock units are paid in stock or cash depending upon the plan and the election of the participant at times specified by the relevant plan. None of the stock units listed may be converted into common stock within 60 days of the date of this table. As noted under “Compensation of Directors,” AT&T’s plans permitnon-employee Directors to acquire stock units (also referred to as deferred stock units) by deferring the receipt of fees and retainers into stock units and through a yearly grant of stock units. Officers may acquire stock units by participating in stock-based compensation deferral plans. Certain of the Directors also hold stock units issued by companies prior to their acquisition by AT&T that have been converted into AT&T stock units. Stock units carry no voting rights.
Note 3.
Mr. Hutchins disclaims beneficial ownership of 3,322 shares held in trust for his mother.siblings.
|
|
CORPORATE SOCIAL RESPONSIBILITY
Audit Committee
|
 | Governance | AT&T’s commitment to CSR means integrating it into every aspect of our business, starting with governance. | ||
| CSR INTEGRATION |
Our corporate social responsibility (CSR) approach is based on the foundational belief in the interconnection of our long-term business success with the strength of our communities and the world. CSR oversight rests with the Public Policy and Corporate Reputation Committee of the AT&T Board of Directors. Our CSR Governance Council is led by our Chief Sustainability Officer and comprises senior executives representing business areas linked to CSR topics we and our stakeholders deem important. Our Code of Business Conduct puts our values into action and details our commitments to ethics, diversity, privacy, the environment, and our communities. Our Principles of Conduct for Suppliers outlines expectations for working with AT&T, including environmental stewardship, diversity, conflict minerals, ethics, labor, and human rights – and every new supplier contract requires acknowledgement. In addition, as members of the Joint Audit Cooperation, we work with other telecoms to ensure suppliers uphold our values, and we audit and measure progress regularly.
| OUR NETWORK | |||
Our 8 Security Operations Centers are monitored 24/7/365 – addressing approximately 110 billion potential vulnerability probes on an average business day.
| We are using the power of our network to build a better tomorrow, and foundationally that means maintaining strong governance systems to manage network reliability and the security of our customers’ data. Connecting millions of devices, we continually enhance our network to drive service improvements – investing more than $105 billion in the last 5 years alone. | |||
We safeguard data using approaches such as encryption, anonymization, and other security controls, as well as maintaining strict privacy and security policies and systems.
 | Environment | AT&T is demonstrating corporate leadership on climate change by setting strong goals and taking purposeful action in and outside our company. | ||
| CLIMATE CHANGE |
On top of our continuous improvements in network energy efficiency, last year we signed agreements to purchase 820MW of wind power annually, making AT&T one of the largest corporate purchasers of renewable energy in the U.S. In 2019, we plan to build on our leadership in renewable energy as well as take steps to improve our company’s climate resiliency.
| AT&T’s wind projects are expected to reduce greenhouse gas emissions equivalent to taking more than 530,000 cars off the road or providing electricity for more than 372,000 homes per year. |
| CUSTOMER SOLUTIONS |
AT&T has a goal to enable carbon savings 10x the footprint of our own operations by 2025. We will reach that goal by enhancing the efficiency of our network and delivering sustainable customer solutions. To highlight progress on how our customers are using our technology to reduce carbon emissions, we are developing a portfolio of 10x Case Studies, available atatt.com/10x.
| OPERATIONAL IMPACTS |
Striving to better manage our operational impacts, including energy, water and waste, is a key focus. We are taking proactive measures to reduce our footprint and be a better steward of the environment.
In 2018 we set a goal to achieve “zero waste”1 at 100 | ||
| Headquarters in Dallas – by the end of 2020. This includes strategies to reduce waste and increase recycling and composting, with a goal of diverting 90% or more of our waste from landfills. | |
| 31 |
CORPORATE SOCIAL RESPONSIBILITY
Progress Toward 2020 Goals2
60% energy intensity reduction 75% of goal completed |
30% fleet emissions reduction 66% of goal completed |
Refurbish, reuse or recycle 200m devices 73% of goal completed | ||||||
 | Social | AT&T is focused on issues important to our business and our communities, including safety, education, diversity and inclusion, and the welfare of our fellow citizens. | ||||
| RESPONSIBLE USE |
One of our top priorities is empowering customers to use our products and services in a safe and responsible manner.
| Since inception, our It Can Wait® campaign has generated more than 33 million pledges to never drive distracted. |
The AT&T Digital You® website includes a collection of resources that educate customers about online safety. Our #LaterHaters movement helps teens find positive reinforcement and the tools they need to boost positivity online and offline. We’re working to elevate the gaming experience through technology, and in doing so, our new #GreatGame campaign encourages good sportsmanship among gamers. And in 2018 we launched ScreenReady, an online safety pilot program, in our greater New York City retail stores.
| EDUCATION AND UPSKILLING |
We are building a stronger business and a more dynamic workforce for all companies as we prepare individuals for the workforce demands of tomorrow.
$450 million | In 2018, we celebrated 10 years of our Aspire program, through which we’ve provided more than $450M toward student success and career readiness, with an emphasis on STEM-related fields. |
Internally, we invested approximately $200 million and 16 million hours training our employees last year, and we contributed $23 million to their tuition aid.
Through the end of 2018, 60 percent of AT&T’s management workforce had enrolled in reskilling programs provided or subsidized by the company. And more than 50,000 learners worldwide, including more than 5,000 AT&T employees, had enrolled in nanodegree credential programs, a new pathway to higher education pioneered by Udacity and AT&T.
| DIVERSITY AND INCLUSION |
Our efforts to create a culture in which all employees can learn and grow are led by the Chairman’s Diversity Council and our Chief Diversity Officer.
AT&T U.S. workforce diversity:
| AT&T’s 24 Employee Resource Groups and Employee Networks help advance our professional development and represent cultures, genders, generations, veterans, individuals with disabilities, and members of the LGBTQ+ community. Our ERG and EN membership totals more than 133,000. Additionally, in 2018 WarnerMedia announced a new Diversity & Inclusion Policy that is an industry-pioneering commitment to give more opportunities to more | |||
women and people of color – both in front of and behind the cameras. This is aided by WarnerMedia’s OneFifty initiative, a platform that disrupts the way content is developed and places diverse storytellers in the spotlight. | ||||
| COMMUNITY ENGAGEMENT |
AT&T employees donated $29 million to more than 30,000 charities in 2018 to help make our communities stronger and have pledged to give $27.8 million in 2019. Our culture of giving provides resources to support employees’ charitable interests through AT&T Foundation grants, resulting in an additional $4.4 million in 2018. Employees also donated time in their communities, volunteering more than 1 million hours valued at more than $25 million.
1AT&T utilizes the 90% threshold standard for “zero waste” as defined by the Zero Waste International Alliance,http://zwia.org/standards/zw-business-principles/b/
2Represents progress through end of year 2017
3Represents total U.S. workforce numbers, excluding WarnerMedia, through end of year 2018
| 32 | |
AT&T has a separately designated standing Audit Committee. The Audit Committee oversees the integrity of AT&T’s financial statements, the independent auditors’ qualifications and independence, the performance of the internal audit function and independent auditors, and AT&T’s compliance with legal and regulatory matters. The members of the Audit Committee are Mr. Di Piazza (Chairman), Mr. McCallister, Ms. Taylor, and Dr. Tyson, each of whom was appointed by the Board of Directors.
The Board has adopted a written charter for the Audit Committee, which may be viewed on the Company’s web site at www.att.com. The Audit Committee performs a review and reassessment of its charter annually. The Audit Committee oversees the integrity of AT&T’s financial statements, the independent auditors’ qualifications and independence, the performance of the internal audit function and independent auditors, and AT&T’s compliance with legal and regulatory matters.
The Audit Committee is composed entirely of independent Directors in accordance with the applicable independence standards of the New York Stock Exchange and AT&T. The members of the Audit Committee are Mr. Di Piazza (Chairman), Mr. McCallister, Ms. Taylor, and Dr. Tyson, each of whom
was appointed by the Board of Directors. The Board of Directors has determined that Mr. Di Piazza and Ms. Taylor are “audit committee financial experts” and are independent as defined in the listing standards of the New York Stock Exchange and in accordance with AT&T’s additional standards. Although the Board of Directors has determined that these individuals have the requisite attributes defined under the rules of the SEC, their responsibilities are the same as those of the other Audit Committee members. They are not AT&T’s auditors or accountants, do not perform “field work” and are not full-time employees. The SEC has determined that an audit committee member who is designated as an audit committee financial expert will not be deemed to be an “expert” for any purpose as a result of being identified as an audit committee financial expert.
PRIMARY RESPONSIBILITIES
The Audit Committee is responsible for oversight of management in the preparation of AT&T’s financial statements and financial disclosures. The Audit Committee relies on the information provided by management and the independent auditors. The Audit Committee does not have the duty to plan or conduct audits or to determine that AT&T’s financial statements and disclosures are complete and accurate. AT&T’s Audit Committee charter provides that these are the responsibility of management and the independent auditors.
Independent Auditor Oversight
The Audit Committee has oversight of the Company’s relationship with the independent auditor and is directly responsible for the annual appointment, compensation and retention of the independent auditor. The independent auditor reports directly to the Audit Committee.
Financial Reporting Review
The Audit Committee reviews and discusses with management and the independent auditor:
the annual audited financial statements and quarterly financial statements;
any major issues regarding accounting principles and financial statement presentations; and
earnings press releases and other financial disclosures.
Internal Audit Oversight
The Audit Committee oversees the activities of the Company’s senior internal auditing executive, including internal audit’s assessment of operational and financial risks and associated internal controls. Significant internal audit reports and corrective action status are regularly discussed with the Audit Committee.
Risk Review
The Audit Committee reviews and discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. This includes, among other matters, evaluating risk in the context of financial policies, counterparty and credit risk, and the appropriate mitigation of risk, including through the use of insurance where appropriate.
Compliance Oversight
The Audit Committee meets with the Company’s Chief Compliance Officer (CCO) regarding the CCO’s assessment of the Company’s compliance and ethics risks, the effectiveness of the Company’s Corporate Compliance Program, and any other compliance related matters that either the Committee or the CCO deems appropriate. The Audit Committee oversees the administration and enforcement of the Company’s Code of Business Conduct, Code of Ethics, and Corporate Compliance Program.
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Principal Accountant Fees and Services
PRINCIPAL ACCOUNTANT FEESAND SERVICES
Ernst & Young LLP acts as AT&T’s principal auditor and also provides certain audit-related, tax and other services. The Audit Committee has established apre-approval policy for services to be performed by Ernst & Young. Under this policy, the Audit Committee approves specific engagements when the engagements have been presented in reasonable detail to the Audit Committee before services are undertaken.
This policy also allows for the approval of certain services in advance of the Audit Committee being presented details concerning the specific service to be undertaken. These services must meet service definitions and fee limitations previously established by the Audit Committee. Additionally, engagements exceeding $500,000 must receive advance concurrence from the Audit Committee Chairman. After an auditor is engaged under this authority, the services must be described in reasonable detail to the Audit Committee at the next meeting.
Allpre-approved services must commence, if at all, within 14 months of the approval.
The fees for services provided by Ernst & Young (all of which werepre-approved by the Audit Committee) to AT&T in 20162018 and 20152017 are shown below.
| Principal Accountant Fees (dollars in millions) | ||||||||
Item | 2016 | 2015 | ||||||
Audit Fees (a) | $ | 30.7 | $ | 29.6 | ||||
Audit Related Fees (b) | 3.3 | 5.2 | ||||||
Tax Fees (c) | 11.4 | 10.5 | ||||||
All Other Fees (d) | 0.0 | 0.0 | ||||||
| Principal Accountant Fees (dollars in millions) |
| |||||||
| Item | 2018 | 2017 (e) | ||||||
Audit Fees (a) | $ | 49.3 | $ | 37.3 | ||||
Audit Related Fees (b) | 5.6 | 3.5 | ||||||
Tax Fees (c) | 10.1 | 9.3 | ||||||
All Other Fees (d) | 0.0 | 0.0 | ||||||
Included in this category are fees for the annual financial statement audit, quarterly financial statement reviews, audits required by Federal and state regulatory bodies, statutory audits, and comfort letters.
Note (b). Audit Related Fees.
These fees, which are for assurance and related services other than those included in Audit Fees, include charges for employee benefit plan audits, due diligence associated with acquisition and disposition activity, control reviews of AT&T service organizations, governmental grant-related attestations, and con-
sultationsconsultations concerning financial accounting and reporting standards.
Note (c). Tax Fees.
These fees include charges for various Federal, state, local and international tax compliance and research projects, as well as tax services for AT&T employees working in foreign countries.
Note (d). All Other Fees.
No fees were incurred in 20162018 or 20152017 for services other than audit, audit related and tax.
Note (e). Time Warner Inc. Principal Accountant Fees for 2017.
Time Warner Inc. disclosed the following principal accountant fees for 2017 (dollars in millions), which are not included in this column: Audit - $19.6; Audit Related - $0.5; Tax - $1.8; and All Other - $0.0. 2017 was the last full calendar year prior to AT&T’s acquisition of Time Warner Inc.
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AUDIT COMMITTEE
Compensation Discussion and Analysis
AUDIT COMMITTEE REPORT
Compensation Committee Report
The Based on
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February | The | |||
Samuel A. Di Piazza, Jr., Chairman | ||||
Michael B. McCallister | ||||
Cynthia B. Taylor | ||||
Laura D’Andrea Tyson |
| 35 |
COMPENSATION DISCUSSION AND ANALYSIS
Table of Contents
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Determination of Award Payouts for Performance Periods Ending December 31, | ||||
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Acronyms Used
CAM | Career Average Minimum | |
CDP | Cash Deferral Plan | |
CEO | Chief Executive Officer | |
DOJ | U.S. Department of Justice | |
EBITDA | Earnings Before Interest, Taxes, Depreciation, and Amortization | |
EPS | Earnings Per Share | |
EY | Ernst & Young LLP | |
FCF | Free Cash Flow | |
MCB | Management Cash Balance | |
NEO | Named Executive Officer | |
NYSE | New York Stock Exchange | |
ROIC | Return on Invested Capital | |
RSU | Restricted Stock Unit | |
SEC | Securities and Exchange Commission | |
SERP | Supplemental Employee Retirement Plan | |
SRIP | Supplemental Retirement Income Plan | |
SPDP | Stock Purchase and Deferral Plan | |
SRIP | Supplemental Retirement Income Plan | |
TSR | Total Stockholder Return |
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COMPENSATION DISCUSSION AND ANALYSIS
Our Human Resources Committee (Committee) takes great care to develop and refine an executive compensation program that recognizes its stewardship responsibility to our stockholders while ensuring the availability of talent to support a culture of growth, innovation, and performance in an extraordinarily large and complex organization.
In this section, we summarize the elements of our compensation program, how our program supports pay for performance, and our key performance achievements.
| Topic | More Information | |||||||||
The foundation of our program | Our Committee believes that our programs should: | Page | 40 | |||||||
– | be aligned with stockholder interests, | |||||||||
– | be competitive and market-based, | |||||||||
– | pay for performance, | |||||||||
– | balance both short- and | |||||||||
– | be aligned with generally accepted approaches. | |||||||||
To that end, we incorporate many best practices in our compensation program and avoid ones that are not aligned with our guiding pay principles. | ||||||||||
| Stockholder Engagement | Each year, we engage with large stockholders to understand their views on executive compensation. In light of their feedback, results of the stockholder advisory vote on our executive compensation program, and market trends, the Committee adjusts our compensation program periodically as it determines to be appropriate. | Page | 41 | |||||||
Our compensation program elements and percentage of pay tied to performance and stock price | – | Our program includes a number of different elements, from fixed compensation (base salaries) to performance-based variable compensation (short- and long-term incentives), to key benefits, which minimize distractions and allow our executives to focus on our success. | Page | 42 | ||||||
– | Each element is designed for a specific purpose, with an overarching goal of encouraging a high level of sustainable individual and Company performance well into the future. | |||||||||
– | For • 90% of short-term incentives; and • | |||||||||
– | All long-term grants are tied to our stock price performance. | |||||||||
– | Our Committee retains the authority to increase or decrease final award payouts, after adjustment for financial performance, to ensure pay is aligned with performance. | |||||||||
| How we make compensation decisions | The starting point for determining Executive Officer compensation is an evaluation of market data. Our consultant compiles | Page | 43 | |||||||
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COMPENSATION DISCUSSION AND ANALYSIS
2018 COMPANY PERFORMANCE HIGHLIGHTS
STRATEGIC EXECUTION | ||
• Successfully defended our acquisition of Time Warner in U.S. v. AT&T, the first litigated challenge to a vertical merger by the DOJ in decades. Obtained a comprehensive order from the U.S. District Court categorically rejecting each of DOJ’s claims and
• Closed the acquisitions of Time Warner, now WarnerMedia, and AppNexus, creating a modern media company built around premium content, direct-to-consumer relationships, advertising technology, and high-speed wireless and wireline networks.
| • Revenues of $170.8 billion, up 6.4%. • Reported diluted EPS was $2.85, down 40.1% from $4.76 in 2017 (2017 impacted by tax reform remeasurement). Adjusted diluted EPS of $3.52, up 15.4% from 2017.1 • Strong Cash from Operations of $43.6 billion with record FCF of $22.4 billion.1 • Dividend increased for 35th consecutive year. • Full-year dividend payout ratio of 60%.2 • Ranked #1 among telecom companies in the 2018Fortune Most Admired Companies rankings and among the 50 Most Admired Companies across any industry. | |
OPERATIONAL ACCOMPLISHMENTS | ||
AT&T Communications • Returned to revenue growth in Mobility, with full-year total revenues up 2.1% and service revenues up 0.9%, both on a comparable basis. • Recognized as having the best wireless network video streaming quality, quickest loading times and best voice retainability by Global Wireless Solutions, America’s biggest test.3 • First to introduce standards-based mobile 5G service, ending 2018 with 5G in parts of 12 cities. • Ended the year 6 months ahead of schedule on the FirstNet deployment and with more than 425,000 FirstNet subscribers across 5,250 agencies. • Covered more than 11 million customer locations with our fiber network. • Extended the company’s high-speed fiber network to nearly 2.2 million U.S. business customer locations. Xandr • Acquired AppNexus, bringing expertise in automation, engineering and advanced advertising to Xandr. • Including AppNexus, revenues grew by 26.7%. | WarnerMedia • Continued CNN’s run as the #1 digital news destination.4 • Had 3 of the top 5 ad-supported cable networks— TNT, TBS, and Adult Swim—in primetime among adults 18-49 for the full year. • Saw Warner Bros. films gross more than $5.5 billion in global box office receipts, making 2018 the studio’s biggest year ever, led by hits includingAquaman, Crazy Rich Asians, Fantastic Beasts, The Crimes of Grindelwald, Ready Player One, and A Star is Born. AT&T Latin America • Vrio, a leader in the Latin America prepaid video segment, grew subscribers by 1.5%. • Added 3.2 million wireless subscribers in Mexico to reach a total of 18.3 million, up 21.3% year over year. AT&T has added more subscribers in Mexico than any other wireless provider each of the last 10 quarters. | |
Notes 1 See Annex A for EPS and FCF reconciliation. 2 FCF dividend payout ratio is dividends divided by FCF. 3 Based on OneScore Sept. 2018 report. Excludes crowdsourced studies. 4 Based on multiplatform unique visitors and video starts for the 12th and 15th consecutive quarters, respectively. | ||
| 38 | |
COMPENSATION DISCUSSION AND ANALYSIS
2016 Company Performance Highlights
SUMMARYOF INCENTIVE PAYOUTS
2018 CORPORATE SHORT TERM AWARDS*
| Metric | Type of Metric | Metric Weight | Attainment | Payout% | ||||||
2018 EPS | Quantitative | 60% | 92% | 81% | ||||||
2018 FCF | Quantitative | 30% | 98% | 98% | ||||||
Collaboration | Qualitative | 10% | n/a | 100% | ||||||
Weighted Average Payout | 88% |
Highlights of Incentive PayoutsLONG TERM AWARD – PERFORMANCE SHARE COMPONENT
2016 Short Term Award2016-2018 PERFORMANCE PERIOD
| Metric | Metric Weight | Attainment | Payout% | |||||||||
2016 Earnings per Share (EPS) | 70 | % | 96 | % | 90 | % | ||||||
2016 Free Cash Flow (FCF) | 30 | % | 115 | % | 126 | % | ||||||
Weighted Average Payout | 100 | % | ||||||||||
Long Term Award – Performance Share Component
2014-2016 Performance Period
| Metric | Metric Weight | Attainment | Payout% | Metric Weight | Attainment | Payout% | ||||||||||||||
3-Year Return on Invested Capital (ROIC) | 75 | % | 100% | 100 | % | |||||||||||||||
3-Year Relative Total Stockholder Return (TSR) | 25 | % | Quintile 2 | 125 | % | |||||||||||||||
3-Year ROIC | 75% | 7.56% | 101% | |||||||||||||||||
3-Year Relative TSR | 25% | Level 6 | 0% | |||||||||||||||||
Weighted Average Payout | 106 | % | 76% | |||||||||||||||||
After the impact of change in stock price over the 2016 – 2018 performance period, our NEOs received approximately 133%64% of their original performance sharePerformance Share grant value.
———————————————————————————————————————————————————-2019 PROGRAM ENHANCEMENT
The Committee has approved the use ofNet-Debt-to-Adjusted-EBITDA as a performance metric with a 20% weighting for determining 2019 short-term incentive awards (payable 2020) for all Executive Officers.
The narrative on the following pages more fully describes how the Committee, with the input of its consultant, has designed and evolved our Executive Officer compensation and benefits program using the Committee’s guiding pay principles as the pillars of the program. The narrativeWe also outlinesoutline how we establish pay targets and how actual Executive Officer pay is determined. Finally, we provide a description of other benefits.
* For more information on the J.D. Power Studies, see the Annex on page A-3.
Strategic Execution Announced the acquisition of Time Warner, Inc Launched DIRECTV Now. Expanded the reach of our ultra-fast internet service. Launched AT&T Flexware. Virtualized over 30% of network functions. Earned top honors in 3 different J.D. Power studies. Business Solutions Delivered good momentum in Business Solutions with growth in wireless and strategic business services offsetting declines in legacy services. Together, wireless and strategic business services made up more than 70% of Business Solutions revenues in 2016 and grew by 3.9%. Entertainment Group Continued the successful integration of DIRECTV, adding a total of 1.5 million satellite subscribers since our acquisition in July 2015. Introduced integrated offers, with 7.9 million postpaid subscribers on unlimited wireless with TV plans. Consumer Mobility Achieved low postpaid churn and best-ever, full-year wireless operating income margin in our U.S. Mobility operations. International Added 3.3 million wireless subscribers in Mexico, reaching 12 million total wireless subscribers, a 38% increase. 29.9% 1-Year Total Stockholders Return 41.6% 3-Year Total Stockholder Return
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COMPENSATION DISCUSSION AND ANALYSIS
Role of the Human Resources CommitteeROLEOFTHE HUMAN RESOURCES COMMITTEE
The Committee’s charter is available on our website at www.att.com. Our Committee is composed entirely of independent Directors. The current members of the Committee are: Ms. Roché (Chairman), Mr. Ford, Mr. McCallister, Mr. Rose, and Mr. Rose.Yang. Our Committee is responsible for:
Compensation-related Tasks | Organizational Tasks | |
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| – Evaluating the performance of the CEO; – Reviewing the performance and capabilities of the other Executive Officers, based on input from the CEO; and – Reviewing succession planning for Executive Officer positions including the CEO’s position. |
Guiding Pay PrinciplesGUIDING PAY PRINCIPLES
Our Committee has designed an executive compensation program that encourages our leaders to produce outstanding financial and operational results, create sustainable long-term value for our stockholders, and lead the company with ethics and integrity. Our guiding pay principles are:
Alignment with Stockholders
Provide compensation elements and set performance targets that closely align executives’ interests with those of stockholders. For example, approximately 69% of target pay for NEOs is tied to stock price performance. In addition, we have executive stock ownership guidelines and stock holding requirements, as described on page 60.
Competitive and Market Based
Evaluate all components of our compensation and benefits program in light of appropriate peer company practices to ensure we are able to attract and retain world-class talent with the leadership abilities and experience necessary to develop and execute business strategies, obtain superior results, and build long-term stockholder value in an organization as large and complex as AT&T.
Tie a significant portion of compensation to the achievement of predetermined goals and recognize individual accomplishments that contribute to our success. For example, in 2018, 93% of the CEO’s target compensation (and, on average, 89% for other NEOs) was variable and tied to short- and long-term performance incentives, including stock price performance.
Balanced Short- and Long-Term Focus
Ensure that the compensation program provides an appropriate balance between the achievement of short- and long-term performance objectives, with a clear emphasis on managing the sustainability of the business and mitigating risk.
Alignment with Generally Accepted Approaches
Provide policies and programs that fit within the framework of generally accepted approaches adopted by leading major U.S. companies.
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COMPENSATION DISCUSSION AND ANALYSIS
These guiding pay principles serve as the pillars of our compensation and benefits program and any potential changes to the program are evaluated in light of their ability to help us meet these goals.
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Checklist of Compensation Practices
Our compensation program is designed around the following market-leading practices:
| ûNo “Single Trigger” Change in Control Provisions:No accelerated vesting of equity awards upon a change in control.
ûNo TaxGross-Ups: No excise taxgross-up payments; no other taxgross-ups, except in extenuating circumstances.
ûNo Credit for Unvested Shares when determining compliance with stock ownership guidelines.
û No Repricing orBuy-Out of underwater stock options.
ûNo Hedging or Short Sales of AT&T stock.
û No Supplemental Executive Retirement Benefits for officers promoted/hired after 2008.
ûNo Guaranteed Bonuses.
û No Excessive Dilution: Our annual equity grants represent less than 1% of the total outstanding Common Stock each year. As of July 31, |
Executive Compensation Program Enhancements
The Committee tookhas taken into account feedback from our 2015annual outreach to large stockholders when making the following enhancements toevaluating our program:
2016 Program Enhancements
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During 2016 and early 2017, we again met with large stockholders and stockholder advisory groups to discuss their perspectives on our compensation and benefits practices. The Committee considered these perspectives when making changes to our 2017 compensation program even though 90.11% ofprogram. Of the votes cast at the 20162018 Annual Meeting of Stockholders, over 90% were in favor of the advisory vote on executive compensation.
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COMPENSATION DISCUSSION AND ANALYSIS
2017 Program Enhancements
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It is in our stockholders’ interest that our compensation program be structured to make attraction, retention, and motivation of the highest quality talent a reality. Our executive compensation and benefits program includes a number of different elements, designed for different purposes, with an overarching goal to encourage a high level of sustainable individual and Company performance well into the future:
| Current Year Performance | + | Multi-Year Performance | + | Attraction & Retention | ||||||||||||
Salary and Short-Term Incentives | Long-Term Incentives ( and Units) | Retirement, Deferral/Savings Plans, Benefits, and Personal Benefits |
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The chart below more fully describes the three elements of total direct compensation and their link to our business and talent strategies.
| Weightings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reward Element | Form | Link to Business and Talent Strategies | CEO | Other NEOs | Weightings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reward Element | Form | Link to Business and Talent Strategies | CEO | Average for Other NEOs | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash
| • | Provides compensation to assume theday-to-day responsibilities of the position. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A portion may be deferred into AT&T stock. | Base Salary
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Cash
| • | Provides compensation to |
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7% |
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11% |
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| Provides compensation to assume theday-to-day responsibilities of the position. | A portion may be contributed to AT&T stock and cash deferral plans. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provides compensation to | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Pay | • | Pay level recognizes experience, skill, and performance, with the goal of being market-competitive.
| • | Pay level recognizes experience, skill, and performance, with the goalof being market-competitive.
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Base Salary
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A portion may be deferred into AT&T stock. | 8 | % | 12 | % | Base Salary
| A portion may be contributed to AT&T stock and cash deferral plans. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A portion may be deferred into AT&T stock. | Pay level recognizes experience, skill, and performance, with the goal of being market-competitive.
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| • | Adjustments may be made based on individual performance, pay relative to other executives, and | • | Adjustments may be made based on individual performance, pay relative to other executives, and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
pay relative to market. | pay relative to market. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash
| • | Aligns pay with the achievement of short-term objectives.
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Cash
| • | Aligns pay with the achievement of short-term objectives.
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A portion may be deferred into AT&T stock. |
A portion may be contributed to AT&T stock and cash deferral plans. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Incentives (see page 53)
| Aligns pay with the achievement of short-term objectives.
| Short-Term Incentives (see page 45)
| Aligns pay with the achievement of short-term objectives.
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A portion may be deferred into AT&T stock. | • | Payouts based on achievement of predetermined goals, with potential for upward or downward adjustment by the Committee to align pay with performance. | 25 | % | 23 | % |
A portion may be contributed to AT&T stock and cash deferral plans. | • | Payouts based on achievement of goals, with potential for upward or downward adjustment by the Committee to align pay with performance. |
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23% |
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24% |
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At Risk Pay | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock |
Stock
| 70% | 65% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
At Risk Pay | Long-Term Incentives (see page 48) |
75% Performance Shares (paid 34% in stock, 66% in cash)
25% Restricted Stock Units (paid in stock) | • | Motivates and rewards the achievement of long-term performance.
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Long-Term Incentives (see page 55) |
50% Performance Shares (paid in cash)
50% Restricted Stock Units (paid in stock) | • | Motivates and rewards the achievement of long-term performance.
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| 67 | % | 65 | % | • | Aligns executive and stockholder interests. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| • | Aligns executive and stockholder interests. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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COMPENSATION DISCUSSION AND ANALYSIS
Determining 2016 Target CompensationDETERMINING 2018 TARGET COMPENSATION
The starting point for determining Executive Officer compensation begins with an evaluation of market data. The consultant compiles this data for the Peer Group companies from both proxy and third-party compensation surveys conducted by third parties for companies in the peer groups selected by the Committee.surveys.
How the |
The Committee’s compensation consultant developed the Peer Group with input from the Committee and management based on the following criteria: • • • • |
Following areis the peer groupsPeer Group our consultant used to assess market-based compensation for Executive Officers in 2016. Although some companies overlapped between the groups, there were 38 unique companies (shown in bold text).2018.
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• 21st Century Fox • Alphabet •Amazon • Apple • •
| • Charter • Chevron • Cisco • Comcast • Exxon Mobil • General Electric
| • Intel •
| • Microsoft • Oracle • •
| • Verizon Communications • Viacom • Wal-Mart • Walt Disney | ||||||
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Note: | ||||||||||
The consultant reviewed the market data for the peer groupsPeer Group with members of management and the CEO (for officersExecutive Officers other than himself) to obtain their viewsconfirm the job matches and scoping of market data based on the relative value of each position and differences in responsibilities between our jobs and those in the comparator groups. Based onAfter completing this analysis,review, the consultant presented the market values(AT&T Market Values)data to the Committee to use as a reference point for the Committee’s determination of actual compensation levels. The 2016 market values recommended by the consultant (before adjustment to reflect the relative value of each Executive Officer position) reflected the 50th percentile of market
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data for base salary and the 62nd percentile of market data for both total cash and long-term incentives. These pay targets reflect the scale of AT&T relative to our peer companies (see below). Beginning in 2017 we will not target pay to a specific market percentile.Committee.
The Committee reviewedused the AT&T Market Valuesmarket data and the CEO’s compensation recommendations for the other Executive Officers and then applied theirits judgment and experience to set Executive Officer compensation for the coming year. When setting compensation, the Committee may determine that Executive Officers with significant experience and responsibilities or who demonstrate exemplary performance have higher target compensation, while less experiencedother Executive Officers may have lower target compensation.
| 43 |
COMPENSATION DISCUSSION AND ANALYSIS
2016 Performance2018 PERFORMANCE
AT&T is investinga global leader in telecommunications, media, entertainment, and technology. We are transforming into a truly modern media company that will work to becreate the premier integratedbest entertainment and communications companyexperiences in the world. During 2016,2018 was a transformational year as we completed the acquisition of Time Warner, and we continued to successfully execute on our strategic goals, delivering strong operating and financial results while also making progress on our growth initiatives.goals.
To put in perspective the scale, scope, and complexity of our business as compared to our 3822 compensation benchmark companies (as shown on page 50)43), below is a comparison of Market Cap, Revenues,market cap, revenues, and Net Income for 2015, the most recent data available for all companies:net income:
Comparison of Scope and Scale
AT&T and Peer Companies Group1($M)
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* FCF and Adjusted Diluted EPS arenon-GAAP financial measures. For reconciliation of these metrics to the most comparable GAAP measurements and other information, see the Annex on page A-1.
** For more information on the J.D. Power studies, see the Annex on page A-3.
For more information on our financial and operational performance, please see our Annual Report at www.att.com.
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We provide returns through both robust dividends and stock price appreciation. We continue to deliver consistent, positive returns to our stockholders over the long-term and have a long history of increasing dividends and conducting share repurchases.dividends.
35 —Years— Consecutive Increase in Quarterly Dividend | 2.0 —Percent— Increase in Quarterly Dividend in 2018 |
 |
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In 2016 we experienced a1-year TSR, including reinvested dividends, of 29.9%, almost 2.5 times the S&P 500 returns during the same period. We also achieved a strong3-year TSR of 41.6%, 43% more than the S&P 500 during the same period.
Total Stockholder Return
COMPENSATION DISCUSSION AND ANALYSIS
| Time Horizon | AT&T | DJIA | S&P 500 | S&P 100 | ||||
| 1-Year | 29.9% | 16.5% | 12% | 11.4% | ||||
| 3-Year | 41.6% | 28.5% | 29% | 28.9% |
Determination of Award Payouts for Performance Periods Ending DecemberDETERMINATIONOF AWARD PAYOUTSFOR PERFORMANCE PERIODS ENDING DECEMBER 31, 20162018
20162018 Short-Term Incentive Plan Metrics and Performance Attainment
After reviewing our business plan and determining the business metrics on which our Executive Officers should focus, the Committee established the following performance targets applicable to payment of short-term awards for 2016:2018:
2018 SHORT-TERM INCENTIVE PLAN METRICS
| 2016 Short-Term Incentive Performance Metrics | Relevance of Metric | Metric Weight | Threshold Performance Payout% | Target Performance Payout% | Maximum Performance Payout% | |||||
| Earnings per Share | Indicator of company profitability and a window into long-term sustainability | 70% | • Performance achievement of 80% of target results in a 50% payout
• No payout for
| 100%
| Performance at 130% of target results in a 150% payout
| |||||
| Free Cash Flow | Important for us to continue to invest, pay down debt, and provide strong dividends to our stockholders | 30% | ||||||||
Mr. Stephenson, Mr. McAtee, Mr. Stankey, and Mr. Stephens | Mr. Donovan | |||||||
| Metric | Weight | Metric | Weight | |||||
EPS | 60% |
EPS | 10% | |||||
FCF | 30% | Collaboration | 10% | |||||
Collaboration | 10% | AT&T Communications FCF | 40% | |||||
AT&T Communications Operating Contribution | 40% | |||||||
AT&T Communications Revenue Kicker (see below) | 0 to + 75% | |||||||
2018 SHORT TERM INCENTIVE AWARD PAYOUT STRUCTURE
| Name/(Metric Set) | Performance Metrics | Relevance of Metric | Threshold Performance Payout% | Target Performance Payout% | Maximum Performance Payout% 1 | |||||
Mr. Stephenson Mr. Stephens Mr. McAtee Mr. Stankey Mr. Donovan (EPS only) (Corporate) | EPS | Indicator of profitability and a window into our long-term sustainability | Performance 80% of target | 100% | Performance achievement of 120% of target results in a 150% payout | |||||
| FCF | Important to continue to invest, pay down debt, and provide strong | |||||||||
Mr. Donovan (AT&T Communications) | AT&T Communications FCF | dividends to our stockholders | No payout for performance below 80% of target | |||||||
AT&T Communications Operating Contribution | Incorporates a focus on revenues and expense control/reduction | |||||||||
AT&T Communications Revenue Kicker | Top and bottom line growth of largest subsidiary to drive stockholder returns | Potential for up to an additional 75% payout for revenue growth in excess of 1.25% and operating contribution of 110% or higher of target | ||||||||
All NEOs | Collaboration | Leverage robust portfolio of assets to benefit stockholders | Qualitative assessment by the Committee | |||||||
| 1 | In each case, an overall payout cap of 125% applies to the final, weighted payout before any applicable AT&T Communications Revenue Kicker (Mr. Donovan only). |
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COMPENSATION DISCUSSION AND ANALYSIS
The following charts show the performance goals, actual performance attainment and payout percentage for each short-term performance metric.
Short-Term Incentive Performance Goals and Attainment Corporate Financial Metrics Earnings Per Share 60% Weighting Free Cash Flow 30% Weighting Payout %125% 100% 75% 50% 25% 0%Payout 81% $3.50 $3.21 92% of Goal Performance Goal Attainment (after performance adjustments) 1Payout 98% $21.5B $21.1B98% of Goal Performance Goal Attainment (after performance adjustments) 2 1. EPS results were adjusted as follows: Reported EPS Adjustments per per-established award terms: M&A Pension Plan Gains/Losses Tax Reform Discretionary Reductions: Asset Revaluation EPS for Compensation $2.85 .94(.43)(.10)(.05) $3.21 2. Free Cash Flow is net cash from operating activities minus capital expenditures. Free Cash Flow results were adjusted as follows: Reported Free Cash Flow Adjustments per pre-established award terms: M&A Excess Benefit Plan Contributions Free Cash Flow for Compensation $22.4B (1.6) 0.4 $21.1B
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The following chart shows the: performance goals, actual performance attainment, payout percentage for each performance metric, and overall weighted average award payout for short-term awards.COMPENSATION DISCUSSION AND ANALYSIS
In accordance
Short-Term Incentive Performance Goals and Attainment AT&T Communications Financial Metrics Free Cash Flow 40% Weighting Operating Contribution 40% Weighting Payout %125% 100% 75% 50% 25% 0% Payout 78% $24.5B $22.2B91% of Goal Performance Goal Attainment Payout 87% $34.5B $32.3B 94% of Goal Performance Goal Attainment Mr. Donovan was also eligible for an AT&T Communications 2018 Revenue Kicker. This kicker provided for a potential payout of up to an additional 75% of Mr. Donovans short-term target. However, AT&T Communications revenue and operating contribution did not meet the criteria for a payout.
Collaboration - 10% Weighting
The Committee reviewed the ways the executive team and four operating entities worked together to leverage AT&T assets to drive results that benefit stockholders. The Committee determined that each of the NEO’s earned a payout of 100% based on the following accomplishments (among others):
Our merger synergies remain on target to achieve a $2.5B billion run rate by the end of 2021.
Launch of the first, large-scale integrated marketing campaign between WarnerMedia and AT&T Communications.
More relevant advertising across Turner’s TV networks, through the combined efforts of Xandr, AT&T Communications, and WarnerMedia.
Creation of the WarnerMedia Innovation Lab that will combine emerging technologies such as AT&T’s 5G services, Xandr’s advanced ad tech platform capabilities, and content from WarnerMedia to create new and innovative business and consumer experiences.
Deployment of a low cost Direct to Consumer Video service in AT&T Latin America that delivered 85+ live channels, Video on Demand, and multi-language capabilities, with our formulaic approach, the assistance of Turner’s iStreamPlanet.
Because of the Time Warner acquisition, AT&T was able to launch WatchTV, a 30+ channel, live-TV streaming service.
Final Award Determination
The NEOs whose awards are based on corporate performance metrics each received a performance-adjusted award payout of 100%88%, and Mr. Donovan’s performance-adjusted award payout was 84%. The Committee maintains the ability to make further adjustments to the formula-driven payout as it deems appropriate in order to ensure alignment of Executive Officer pay with performance. Adjustments may not exceed 200% of the Executive Officer’s performance-adjusted target award.
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COMPENSATION DISCUSSION AND ANALYSIS
Long-Term Incentive Plan Metrics and Performance Attainment – Performance/–Performance/Restriction Periods Ending in 20162018
The following chart describes the structure and terms of long-term awards with performance or restriction periods ending in 2018 or early 2019:
Form of Award | Weight | Performance Metrics and Vesting Period | Description | |||||
| Performance Shares Granted in | 50% | 3-year performance period
– 75% ROIC – 25% Relative TSR
Payout value based on combination of performance attainment and stock price performance. | • Each
•
• Because awards are based on a3-year performance period, they maximize the leverage of both short- and long-term performance. The impact of a single year’s performance is felt in each of the three
• Dividend equivalents are paid at the end of the performance period, based on the number of | |||||
RSUs Granted in | 50% | 4-year restriction period
Payout value based on stock price performance. | We structure RSUs to be paid in stock at the end of | |||||
ROIC Payout Table and Actual Performance Attainment – 2014-20162016-2018 Performance Period
Determination of Performance Goal | ||||
Performance Below Target Range | ||||
We established a performance target range of | ||||
No payout is earned if less than | ||||
Performance | ||||
100% payout if performance falls within the target range. | ||||
Performance Above Target Range | ||||
Maximum payout of 150% is earned if | ||||
Actual Performance | ||||
After conclusion of the performance period, the Committee determined (using the ROIC payout table) that we achieved | ||||
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COMPENSATION DISCUSSION AND ANALYSIS
ROIC Performance metric (2016-2018 performance period) Performance adjustments used in ROIC calculation Adjustments per pre-established award terms: Reported amount Net Income Plus Interest Expense was adjusted as follows: $ 67.2B 1. M&A Transaction Costs $ 10.5B 2. Asset Abandonments and Impairments (Gains)/Losses$ 2.3B 3. Natural Disasters $ 0.4B 4. Pension Remeasurementc (Gains)/Losses $ 0.3B 5. Changes in Accounting Principle$ (2.9)B 6. Tax Reform $ (20.3)B Adjusted Net Income Plus Interest Expense $ 57.4B Performance Range For100% Payout ACTUAL PERFORMANCE Weighted Average Cost of Capital 8.00% 7.75% 6.75% 6.00%
TSR Payout Table and Actual Performance Attainment – 2014–20162016-2018 Performance Period
At the beginning of the performance period, the Committee established the following table for determining payout of the performance sharesPerformance Shares tied to the TSR metric.
Our actual performance attainment is also shown:
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COMPENSATION DISCUSSION AND ANALYSIS
TSR was measured relative to the following 37 companies, as determined when the grant was established in 2016*:
Alphabet Amazon Apple Boeing CenturyLink Charter Communications Chevron Cisco Coca-Cola Comcast | Exxon Mobil
General Electric Gilead Sciences Hewlett Packard Home Depot Honeywell IBM Intel | Johnson & Johnson Johnson Controls Lockheed Martin Merck Microsoft Oracle PepsiCo Pfizer Phillip Morris Intl | Procter & Gamble Qualcomm Twenty-First Century Fox United Technologies Verizon Walt Disney Wal-Mart Sprint T-Mobile |
*Time Warner Inc. was included in this group; AT&T completed its acquisition of Time Warner Inc. in 2018.
Percent of Grant Value RealizedPERCENT OF GRANT VALUE REALIZED – 2014 Performance Share Grant (2014-2016 Performance Period)2016 PERFORMANCE SHARE GRANT (2016-2018 PERFORMANCE PERIOD)
As a result of the combined ROIC and TSR performance attainment, each NEO received 106%76% of the number of shares granted.
75% of Performance Shares Granted | Ó | Payout Percentage of
| Ì | 25% of Performance Shares Granted | Ó | Payout Percentage of
| = |
to be Paid | ||||||||||||||||||||||||||||||
However, the performance sharesPerformance Shares were also subject to stock price fluctuation over the3-year performance period as another element of our long-term incentivepay-for-performance design. Based on the $8.42 change$5.47 decrease in our stock price from $33.35$35.53 at grant to $41.77$30.06 at payout, the value of the shares actually payable increased 25%decreased 15.4% over the3-year performance period.
Ending Stock Price of $30.06* | - | Beginning Stock Price of $35.53** | ÷ | Beginning Stock Price of $35.53** | = |
Price | ||||||||||||||||||||||||
As a result of both ROIC and relative TSR performance and the absolute change in our stock price, our NEOs realized approximately 133%64% of their original performance share grant value.
NEOs Received 64% of Original Grant Value |
Percent of Grant Value Realized
PERCENT OF GRANT VALUE REALIZED – 2013 Restricted Stock Units2015 RSUs
Our 2013 restricted stock units2015 RSUs had a4-year vesting period and were paid in 2017.early 2019. The final value delivered from these awards was based on our stock price. Over the4-year restriction period, the stock price increased $7.37decreased $2.26 per share, delivering 121%93% of the original grant value.
Ending Stock Price of $30.70* | - | Beginning Stock Price of $32.96** | ÷ | Beginning Stock Price of $32.96** | = |
Price | ||||||||||||||||||||||||
NEOs Received
Grant Value |
* Stock price when award payout is approved for performance shares (typically the January
| * | Stock price when award payout is approved for Performance Shares (typically the first Committee meeting after the end of the performance period), or the stock price on the last date of the restriction period for RSU grants. |
** Stock price used to determine the number of shares to be granted (target award value is divided by this stock price).
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COMPENSATION DISCUSSION AND ANALYSIS
Named Executive Officer CompensationNAMED EXECUTIVE OFFICER COMPENSATION
In this section we detail how each NEO’s compensation was impacted by performance attainment. The following tables summarize the compensation our NEOs realized in 2016. These tables2018. The long-term values below do not align to what is reported in the 20162018 Summary Compensation Table (SCT) for every pay component, because:
AT&T’s 2018 performance highlights are summarized on page 38.
Randall Stephenson Chairman of the Board, Chief Executive Officer, and President | ||||
| Mr. Stephenson has served as Chairman of the Board, Chief Executive Officer, and President since 2007. Throughout his career at the Company, he has held a variety of high-level finance, operational, and marketing positions, including serving as Chief Operating Officer from 2004 until his appointment to Chief Executive Officer in 2007, and as Chief Financial Officer from 2001 to 2004. He began his career with the Company in 1982. | |||
Element of Compensation | Compensation Amount | Rationale | ||
2018 Base Salary |
$1,800,000
| Mr. Stephenson’s salary did not increase in | ||
2018 STIP | Target Award = Final Award Paid = $5,192,000 88% of target award value realized
| Mr. Stephenson’s STIP payout was based on: • A formulaic payout of • | ||
Performance Share Payout (2016-2018 Performance Period) | Target Award = $7,750,000
Final Award Paid =
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| Mr. Stephenson’s performance share payout was based on: • A formulaic payout of • The company’s stock price change over the3-year performance period, which
Performance Shares were paid in cash. | |||
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Target Award = $7,375,000
93% of grant value realized
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| The company’s stock price change over the4-year vesting period
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Total Realized Compensation |
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COMPENSATION DISCUSSION AND ANALYSIS
John Stephens Senior Executive Vice President and Chief Financial Officer | ||||||
| John Stephens has | |||||
2018 Realized Compensation | ||||||
| Element of Compensation | Compensation Amount | Rationale | ||||
Commensurate with the close of the Time Warner merger, the Committee increased Mr. Stephens’ compensation to reflect the expanded scope and complexity of his position after the merger. In addition, the Committee determined that Mr. Stephens’ unique skills and experience are critical to executing the Company’s post-close strategic plan. In setting his compensation, the Committee used data provided by its independent consultant for comparable positions in the marketplace. | ||||||
2018 Base Salary | $ | Mr. Stephens received a | ||||
| Target Award = $2,338,542
Final Award Paid = $2,057,917
88% of target award value realized |
| Mr. Stephens’ STIP payout was based on: • A • No discretionary adjustment was made by the Committee. | |||
Performance Share Payout (2016-2018 Performance Period) | Target Award = $2,575,000
Final Award Paid =
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| Mr. Stephens’ performance share payout was based on: • A formulaic payout of • The company’s stock price change over the3-year performance period, which
Performance Shares were paid in cash. | |||||
RSU Payout (2014 Grant) |
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71,299 shares paid; valued at $2,188,879
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| The company’s stock price change over the4-year vesting period
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Merger Completion Bonus | $2,000,000 |
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Total Realized Compensation
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$8,999,383
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| 52 | |
COMPENSATION DISCUSSION AND ANALYSIS
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Chief Strategy Officer and Group President, | ||||
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2018 Realized Compensation | ||||
| Element of Compensation | Compensation Amount | Rationale | ||
2018 Base Salary |
$
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Mr. Donovan did not receive a base salary increase in 2018. | |||
2018 STIP | Target Award =
Final Award Paid = $2,410,000 88% of target award value realized | Mr. Donovan’s target STIP did not increase in 2018. Mr. Donovan’s STIP payout was based on: • A • | ||
Performance Share Payout (2016-2018 Performance Period) | Target Award = $2,100,000
Final Award Paid =
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| Mr. Donovan’s performance share payout was based on: • A formulaic payout of • The company’s stock price change over the3-year performance period, which
Performance Shares were paid in cash. | |||
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Target Award = 59,163 shares paid; valued at $1,816,304 93% of grant value realized
| The company’s stock price change over the4-year vesting period
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Total Realized Compensation |
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| 53 |
COMPENSATION DISCUSSION AND ANALYSIS
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2018 Realized Compensation | ||||
| Element of Compensation | Compensation Amount | Rationale | ||
Commensurate with the close of the Time Warner merger, the Committee increased Mr. McAtee’s compensation to reflect the expanded scope and complexity of his position after the merger. In addition, the Committee determined that Mr. McAtee’s unique skills and experience are critical to executing the Company’s post-close strategic plan. In setting his compensation, the Committee used data provided by its independent consultant for comparable positions in the marketplace. | ||||
2018 Base Salary | $1,058,333 | Mr. | ||
2018 STIP | Target Award = $1,925,000 Final Award Paid = $1,694,000 88% of target award value realized | Mr. McAtee’s target STIP was increased to $1,600,000 effective January 1, 2018, and to $2,250,000 effective July 1, 2018. Mr. McAtee’s award targets were applied to the associated time periods and the resulting weighted STIP target award for 2018 was $1,925,000. Mr. McAtee’s STIP payout was based on: • A payout of 78% of his target award based on formulaic performance attainment of EPS and FCF goals, plus 100% of the qualitative collaboration goal. • The Committee did not make any discretionary adjustment to formulaic results. | ||
Performance Share Payout (2016-2018 Performance Period) | Target Award = $1,625,000 Final Award Paid = $1,044,866 64% of grant value realized | Mr. McAtee’s Performance Share payout was based on: • A formulaic payout of
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• The company’s stock price change over the3-year performance period, which
Performance Shares were paid in cash. | |||
RSU Payout (2014 Grant) | Target Award = $1,000,000 30,339 shares paid; valued at $931,407 93% of grant value realized | Mr. McAtee was granted 8,343 RSUs in January 2015 and received a supplemental grant of 21,996 units in August 2015 upon his promotion to Executive Officer. The company’s stock price change over the vesting period decreased the value of the units granted, on a combined basis, by 6.9%. RSUs were paid in stock. | ||
Merger Completion Bonus | $5,000,000 | The Committee awarded Mr. McAtee a cash payment in recognition of his significant contributions that led to the completion of the merger. Mr. McAtee led the legal strategy and litigation teams that diligently prepared for litigation and successfully defended our acquisition of Time Warner against the DOJ’s antitrust lawsuit, which was a departure from decades of antitrust precedent. After conducting a full and fair trial on the merits, the U.S. District Court categorically rejected the government’s lawsuit to block our merger with Time Warner. The transaction also received regulatory and competition approvals in 20 jurisdictions outside the United States. | ||
Total Realized Compensation | $9,728,606 | |||
| 54 | |
COMPENSATION DISCUSSION AND ANALYSIS
John Stankey Chief Executive Officer, Warner Media, LLC | ||||
| John Stankey leads WarnerMedia, whose HBO, Turner, and Warner Bros. divisions are leaders in creating premium content, operate the world’s largest TV and film studio, and own a world-class library of entertainment. Mr. Stankey has held various roles during his 33 years of service with the Company, includingCEO-AT&T Entertainment Group; Chief Strategy Officer; President and CEO of AT&T Business Solutions; President and CEO of AT&T Operations; Group President-Telecom Operations; Chief Technology Officer; and Chief Information Officer. | |||
2018 Realized Compensation | ||||
| Element of Compensation | Compensation Amount | Rationale | ||
Commensurate with the close of the Time Warner merger, the Committee increased Mr. Stankey’s compensation to reflect his new responsibility for all of AT&T’s content-related assets, including each of Time Warner’s businesses. In addition, the Committee determined that Mr. Stankey’s unique skills and experience are critical to executing the Company’s post-close strategic plan. In setting his compensation, the Committee used data provided by its independent consultant for comparable positions in the market. Mr. Stankey’s target compensation pay mix was adjusted to be more consistent with pay mixes in the media industry. | ||||
2018 Base Salary | $2,058,333 | Mr. Stankey received a base salary increase to $1,100,000 effective March 1, 2018. Effective June 16, 2018, Mr. Stankey’s base salary was increased from $1,100,000 to $2,900,000 to reflect the increased scope and complexity of his new role as CEO of WarnerMedia. | ||
2018 STIP | Target Award = $4,970,833
Final Award Paid = 88% of target award value realized | Mr. Stankey’s target STIP was increased to $2,100,000 effective January 1, 2018, and to $7,400,000 effective June 16, 2018. Mr. Stankey’s award targets were applied to the associated time periods and the resulting weighted STIP target award for 2018 was $4,970,833. Mr. Stankey’s STIP payout was based on: • A payout of 78% of his target award based on formulaic performance attainment of EPS and FCF goals, plus 100% of the qualitative collaboration goal. • The Committee did not make any discretionary adjustment to the formulaic results. | ||
Performance Share Payout (2016-2018 Performance Period) | Target Award = $2,837,500 Final Award Paid = $1,824,495 64% of grant value realized | Mr. Stankey’s performance share payout was based on: • A formulaic payout of 76% of the 79,862 shares granted, based on the Company’s performance achievement for ROIC and relative TSR, plus • The company’s stock price change over the3-year performance period, which decreased the value of the shares earned by 15.4%. Performance Shares were paid in cash. | ||
RSU Payout (2015 Grant)
| ||||
Target Award = $2,662,500
valued at $2,479,946 93% of grant value realized
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| The company’s stock price change over the4-year vesting period
| |||
Merger Completion Bonus | $2,000,000 |
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Total Realized Compensation
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| $12,737,107 |
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COMPENSATION DISCUSSION AND ANALYSIS
2016 Long Term Grants2018 LONG TERM GRANTS
Our previous sections detailed compensation paid in 20162018 and/or compensation for grants with performance or restriction periods ending in 2016.2018 or early 2019. This section addresses the long-term grants we made in 2016.2018.
The forms of long-term compensation granted to NEOs in 20162018 were:
Forms of | Weight | |||||
Performance
| Vesting Period
| |||||
Performance Shares | 75% | |||||
Performance Metrics - 100% ROIC Payout Modifier - Relative TSR Modifier | ||||||
RSUs | 25% | Payout value based on stock price performance only | ||||
| 4-year restriction period |
Grant values for these awards were as follows:
2016 Long Term Incentive Grant Values for NEOs2018 LONG TERM INCENTIVE TARGET GRANT VALUES FOR NEOS
| Name | Target Performance (amounts are rounded) | Target Restricted Stock Unit Grant Values ($) (amounts are rounded) | Performance Shares ($)(1) | RSUs ($)(1) | ||||||||||||||||
Randall Stephenson | 7,750,000 | 7,750,000 | 13,725,000 | 4,575,000 | ||||||||||||||||
John Stephens | 2,575,000 | 2,575,000 | 6,750,000 | 2,250,000 | ||||||||||||||||
Ralph de la Vega | 2,750,000 | 2,750,000 | ||||||||||||||||||
John Donovan | 2,100,000 | 2,100,000 | 8,531,250 | 2,843,750 | ||||||||||||||||
David McAtee(2) | 3,750,000 | 1,250,000 | ||||||||||||||||||
John Stankey | 2,837,500 | 2,837,500 | 5,531,250 | 1,843,750 | ||||||||||||||||
(1) These amounts represent the rounded value of the awards on February 1, 2018, the date the Committee authorized the awards; however, the final terms of the Performance Share grants were not determined until March 29, 2018, which is the grant date for valuation of the awards in the Summary Compensation Table.
(2) Target value includes the value of supplemental long-term grants made upon the Time Warner merger close. The grants made were in the same form (weight 75% Performance Shares and 25% Restricted Stock Units) and subject to the same terms and conditions as the annual grants.
20162018 Performance Share Grants
The performance sharesPerformance Shares granted in 20162018 are for the 2016-20182018-2020 performance period. The Committee establisheddetermined that the followingPerformance Shares would be tied to a ROIC performance measures (similarmetric with a payout modifier based on a comparison of AT&T’s TSR to 2014 and 2015):our22-company Peer Group (as shown on page 43).
ROIC Performance Metric (Applicable to 75% of the 2016 Performance Share Grant)
We calculate ROIC for the 2018-2020 performance period by averaging over the three-year performance period: (1) our annual reported net income plusafter-tax interest expense minus minority interest, divided by (2) the total of the average debt and average stockholder equity for the relevant year. For mergers and acquisitions over $2.0 billion, we exclude the dilutive impacts of intangible amortization, asset write-offs, accelerated depreciation, and transaction and restructuring costs so that the impact of certain significant transactions, including those which may not have been contemplated in the determination of a performance metric, will not have an impact on the performance results. We also exclude the net impact of certain of the following items after taxes and available collectible insurance, if they exceed, individually or in certain combinations, $500 million in a calendar year and satisfy other conditions,conditions; changes in tax laws, changes in accounting principles (except for the impacts of Revenue Recognition under ASC 606, “Revenue from Contracts with Customers”), expenses caused by natural disasters or intentionally caused damage to the Company’s property, andnon-cash accounting write-downs of goodwill, other intangible assets and fixed assets. Additionally, we disregard the net dilutive impact of mandatory changes resulting from the Patient Protection and Affordable Care Act of 2010 as well as gains and losses related to the assets and liabilities of pension and other post-retirement benefit plans (and associated tax effects).
|
The ROIC target range for the 2016-20182018-2020 performance period was set 75100 basis points above our cost of capital, a target that we believe to be challenging, but attainable. For performance above or below the performance target range, the number of performance sharesPerformance Shares are increased or reduced, respectively. Potential payouts range from 0% to 150% of the number of performance sharesPerformance Shares granted.
| 56 | |
COMPENSATION DISCUSSION AND ANALYSIS
TSR Performance Metric (Applicable to 25% of the 2016 Performance Share Grant)Modifier
This measure compares our TSR (stock appreciation plus reinvestment of dividends) relative to that of the 3822 companies in our TSR peer group.Peer Group. We believe that TSR is an important measure because it helps ensure that our executives remain focused on the value they are delivering to our stockholders.
2018-2020 Performance Period | ||
AT&T Return vs. | Payout Modifier | |
Top Quartile | Add 10 Percentage Points to Final ROIC Payout Percentage | |
Quartile 2 Quartile 3 | No Adjustment to ROIC Payout Percentage | |
Quartile 4 | ||
* Payouts are capped at 90% of the target award if our absolute TSR is negative, regardless of relative performance.
Subtract 10 Percentage Points from Final ROIC Payout Percentage
|
TSR Peer Group
Award payouts will be determined based on our TSR performance relative to our22-company Peer Group shown on page 43. These companies are the same ones that comprise the Peer Group used to assess market- based compensation for 2018. TSR performance will be measured over the entire performance period.
At the end of the performance period, the number of performance sharesPerformance Shares to be paid out, if any, will be determined by comparing the actual performance of the Company against the predetermined performance objectivesobjective for ROIC, and modifying the award for relative TSR and weighting each appropriately.achievement, if applicable. Performance Shares, if earned, are paid 34% in stock, 66% in cash.
20162018 Restricted Stock Unit Grants
Restricted stock unitsRSUs granted in 20162018 vest 100% after four years or upon retirement eligibility, whichever occurs earlier, but do not pay out until the scheduled distribution date. These unitsRSUs receive quarterly dividend equivalents, paid in cash, at the time regular dividends are paid on our stock. Restricted stock unitsRSUs pay 100% in stock to further tie executive and stockholder interests.
By ensuring that a significant portion of compensation is based on our long-term performance, we reduce the risk that executives will place too much focus on short-term achievements to the detriment of our long-term sustainability. Further, we structureOur short-term incentive compensation is structured so that the accomplishment of short-term goals supports the achievement of long-term goals. Both of theseThese elements work together for the benefit of AT&T and our stockholders and to reduce risk in our incentive plans.
In addition, each year the Committee reviews an analysis of our compensation policies and practices in order to evaluate whether they create unintended risks. This analysis includes the steps we take to mitigate risk in our compensation plans:CLAWBACK POLICY
The Committee’s compensation consultant has reviewed the risk analysis and advised the Committee that the programs do not encourage excessive risk-taking.
In addition to the above risk moderation actions, we intend, in appropriate circumstances, to seek restitution of any bonus, commission, or other compensation received by an employee as a result of such employee’s intentional or knowing fraudulent or illegal conduct, including the making of a material misrepresentation in our financial statements.
| 57 |
COMPENSATION DISCUSSION AND ANALYSIS
Benefits and Policies
Personal Benefits
Benefits are an important tool to maintain the market competitiveness of our overall compensation package. We provide personal benefits to our Executive Officers for three main reasons:
To effectively compete for talent: The majority of companies against which we compete for talent provide benefits to their Executive Officers. We must have a program that is robust and competitive enough to attract and retain key talent.
To support Executive Officers in meeting the needs of the business:We require thearound-the-clock commitment and availability of our Executive Officers. Therefore, we provide benefits that allow us to have greater access to them. These benefits should not be measured solely in terms of any incremental financial cost, but rather the value they bring to us through maximized productivity and availability of our Executive Officers.availability.
To provide for the safety, security, and personal health of executives:OurWe provide Executive Officers are charged to care for the long-term health of the Company. In order to facilitate them doing so, we provide certain personal benefits to provide for their safety and personal health.
Our benefitsBenefits for our Executive Officers are outlined below. The Committee continues to evaluate our personal benefits based on needs of the business and market practices/trends.
|
WarnerMedia employees did not participate in the following plans in 2018:
Deferral Opportunities
Deferral Opportunities
Tax-qualified 401(k) Plans
Our 401(k) plans offer substantially all employees, including each of the NEOs, the opportunity to defer income and receive company matching contributions. Substantially all of our plans provide our employees the ability to invest in AT&T or other investments. We match 80% of employee contributions, limited to the first 6% of cash compensation (only base salary is matched for officers). Employees hired externally on or after January 1, 2015, do not receive a pension, and to account for the lack of a pension benefit, we increased the 401(k) match to 100% of the first 6% of eligible contributions for these employees.
Nonqualified Plans
We providemid-level and above managers the opportunity fortax-advantaged savings through two nonqualified plans:
•Stock Purchase and Deferral Plan
This is our principal nonqualified deferral program, which we use as a way to encourage our managers to invest in and hold AT&T stock on atax-deferred basis. Under this plan,mid-level managers and above may annually elect to defer, through payroll deductions, up to 30% of their salary and annual bonus (officers, including the NEOs, may defer up to 95% of their short-term award, which is similar to, and paid in lieu of, the annual bonus paid to other management employees) to purchase AT&T deferred share units at fair market value on atax-deferred basis. Participants receive a 20% match on their deferrals in the form of additional AT&T deferred share units. Participants also
also receive makeup matching deferred AT&T share units to replace the match that is not available in the 401(k) because of their participation in our nonqualified deferral plans or because they exceeded the IRS compensation limits for 401(k) plans. Officers do not receive the makeup match on the contribution of their short-term awards.
•Cash Deferral Plan
Through this plan, eligible managers may also defer cash compensation in the form of salaries and bonuses. The plan pays interest at the Moody’s Long-Term Corporate Bond Yield Average, reset annually, which is a common index used by companies for deferral plans. The SEC requires disclosure in the “Summary Compensation Table” of any earnings on deferred compensation that exceed an amount set by the SEC.
These plans are described more fully beginning on page 81.74.
Pension Benefits
We offer atax-qualified group pension plan to substantially all of our managers. However, managers hired externally on or after January 1, 2015, who would otherwise be eligible to participate in the pension plan will instead receive an enhanced match in the 401(k) plan.
We also provide supplemental retirement benefits under nonqualified pension plans, or SERPs, to employees who became officers before 2009. Additional information on pension benefits, including these plans, may be found beginning on page 76,68, following the “Pension Benefits” table.
|
COMPENSATION DISCUSSION AND ANALYSIS
Personal Benefits
We provide our Executive Officers with other limited and market-based personal benefits, as follows:
Benefit/Perquisite | Description | |||||
Rationale | ||||||
Financial Counseling | Includes tax preparation, estate planning, and financial counseling. | Allows our executives to focus more on business responsibilities by providing financial counselors to help | ||||
Health Coverage | A consumer-driven health plan for | |||||
Maintains executives’ health and welfare, helping to ensure business continuity. | ||||||
Executive Physical | Annual physical for executives who do not receive the health coverage shown above. | |||||
Communications | AT&T products and services provided at little or no incremental | |||||
Provides 24/7 connectivity and | ||||||
Automobile | Includes allowance, fuel, and maintenance. | |||||
Recruiting and retention tool. | ||||||
Executive Disability | Provides compensation during a leave of absence due to illness or injury. | |||||
Provides security to executives’ family | ||||||
Home Security | Residential security system and monitoring. | |||||
Executive Life Insurance | See page 72. | |||||
Company-Owned Club Memberships | In some cases we allow personal use, but do not pay country club fees or dues for Executive Officers. | Affords executives the opportunity to conduct business in a more informal environment. | ||||
Personal Use of Company Aircraft | Messrs. Stephenson, Donovan, Stankey, and Stephens are required to reimburse the incremental Company cost of personal | Provides for safety, security, and reduced travel time so executives may focus on their responsibilities. |
Certain of these benefits are also offered as post-retirement benefits to officers who meet age and service requirements. Additional information on these post-retirement benefits can be found beginning on page 79.71.
|
|
COMPENSATION DISCUSSION AND ANALYSIS
Equity Retention and Hedging PolicyEQUITY RETENTIONAND HEDGING POLICY
Stock Ownership Guidelines
The Committee has established stock ownership guidelines for all officers,Executive Officers, as follows. We include vested shares held in our benefit plans in determining attainment of these guidelines.
| Level | Ownership Guidelines | |
CEO | 6X Base Salary | |
Executive Officers | Lesser of 3X Base Salary or 50,000 Shares | |
| ||
All officersExecutive Officers are given 5 years from assuming their position to achieve compliance.
NEO stock holdings as of December 31, 2016,2018, can be found in the “Common Stock Ownership” section beginning on page 38.29. As of December 31, 2016,2018, Randall Stephenson held 1,666,8352,175,574 vested shares of AT&T stock, a multiple of 3934 times his base salary, well exceeding his
6X requirement. In addition, Mr. Stephenson also holds 822,169633,226 shares of vested Restricted Stock Units,RSUs, which are still subject to a retention period, making his total vested shares a multiple of 5844 times his base pay.
Retention of Awards
Executive Officers are required to hold shares equivalent, in aggregate, to 25% of the AT&T shares they receive (after taxes and exercise costs) from an incentive, equity, or option award granted to them after January 1, 2012, until they leave the Company.terminate employment with AT&T.
Hedging Policy
Executive officers are prohibited from hedging their AT&T stock and awards. The prohibition will continueor stock based awards, including through trading in publicly-traded options, puts, calls, or other derivative instruments related to apply to stock issued from Company awards until they leave the Company.
Limit on Deductibility of Certain Compensation
Federal income tax law prohibits publicly held companies, such as AT&T from deducting certain compensation paid to an NEO that exceeds $1 million during the tax year. To the extent that compensation is based upon the attainment of performance goals set by the Committee pursuant to plans approved by the stockholders, the compensation is not included in the limit. The Committee intends, to the extent feasible and where it believes it is in the best interests of AT&T and its stockholders, to attempt to qualify executive compensation as tax deductible where it does not adversely affect the Committee’s development and
execution of effective compensation plans. For example, to enable short- and long-term compensation to be deductible, the Committee strives to make these awards under stockholder-approved incentive plans.
Similarly, gains on stock option exercises may be deductible if granted under a stockholder-approved plan since they are tied to the performance of the Company’s stock price. Salaries and other compensation that are not tied to performance are not deductible to the extent they exceed the $1 million limit.
|
Employment Contracts and Change in Control Severance Plan
We have an employment contract with Mr. Stankey. Mr. de la Vega retired on December 31, 2016, and in connection with his retirement we entered into an agreement with him. Both agreements are described on page 76.
Our Executive Officers are eligible to participate in the Change in Control Severance Plan, which is more fully
described on page 83. We believe this type of plan is necessary to ensure that participants receive certain double-trigger benefits in the event of a (1) change in control and (2) subsequent termination of employment, so the participating officers may focus on their duties during an acquisition. The plan is not intended to replace other compensation elements.stock.
Role of the Compensation ConsultantROLEOFTHE COMPENSATION CONSULTANT
The Committee is authorized by its charter to employ independent compensation consultants and other advisors. The Committee has selected Total Rewards Strategies to serve as its independent consultant from January to April of 2016 and then chose Frederic W. Cook & Co., Inc. (“(FW Cook”Cook) to serve as its independent consultant beginning in May of 2016.consultant. The consultant reports directly to the Committee. Total Rewards Strategies provides no other services to AT&T; FW Cook advisesOther than advising the Corporate Governance and Nominating Committee on director compensation.compensation, FW Cook provides no other services to AT&T.
The Committee reviewed the following six independence factors, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, when evaluating the consultant’s independence:
Other services provided to AT&T
Percentage of the consultant’s revenues paid by AT&T
Consultant’s policies to prevent conflicts of interest
Other relationships with compensation committee members
AT&T stock owned by the consultant
Other relationships with Executive Officers
Based on its evaluation of the consultant and the six factors listed above, the Committee has determined that the consultantsconsultant met the criteria for independence.
The consultant’s duties include:
Attends all Committee meetings;
Regularly updates the Committee on market trends, changing practices, and legislation pertaining to executive compensation and benefits;
Reviews the Company’s executive compensation strategy and program to ensure appropriateness and market-competitiveness;
Makes recommendations on the design of the compensation program and the balance ofpay-for-performance elements;
Provides market data and makes recommendations for establishing the market rates for jobs held by senior leaders;
Analyzes compensation from other companies’ proxy and financial statements for the Committee’s review when making compensation decisions;
Assists the Committee in making pay determinations for the Chief Executive Officer; and
Advises the Committee on the appropriate comparator groups for compensation and benefits as well as the appropriate peer group against which to measure long-term performance.
|
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Committee Report
The Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the Human Resources Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our Annual Report on Form10-K and Proxy Statement for filing with the SEC. |
February 12, 2019 | The Human Resources Committee | |||
Joyce M. Roché, Chairman | ||||
Scott T. Ford | ||||
Michael B. McCallister | ||||
Matthew K. Rose | ||||
Geoffrey Y. Yang | ||||
| 61 |
The table below contains information concerning the compensation provided to the Chief Executive Officer, the Chief Financial Officer, and the three other most highly compensated executive officersExecutive Officers of AT&T (theNamed Executive Officers). Compensation information is provided for the years each person in the table was a Named Executive Officer since 2014.2016.
Summary Compensation TableSUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary (1) ($) | Bonus ($) | Stock Awards (2) ($) | Option Awards ($) | Non- Equity Incentive Plan Compen- sation (1) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (3) ($) | All Other Compen- sation (4) ($) | Total ($) | |||||||||||||||||||||||||||
R. Stephenson Chairman, CEO and President | 2016 | 1,791,667 | 0 | 16,063,344 | 0 | 5,700,000 | 3,474,304 | 1,404,401 | 28,433,716 | |||||||||||||||||||||||||||
| 2015 | 1,741,667 | 0 | 14,623,014 | 0 | 5,500,000 | 2,728,138 | 553,095 | 25,145,914 | ||||||||||||||||||||||||||||
| 2014 | 1,691,667 | 0 | 14,248,893 | 0 | 4,350,000 | 3,206,277 | 487,478 | 23,984,315 | ||||||||||||||||||||||||||||
J. Stephens Sr. Exec. Vice Pres. and CFO | 2016 | 870,833 | 0 | 5,337,167 | 0 | 1,840,000 | 2,942,086 | 591,854 | 11,581,940 | |||||||||||||||||||||||||||
| 2015 | 837,500 | 0 | 4,659,568 | 0 | 2,100,000 | 1,565,671 | 435,942 | 9,598,681 | ||||||||||||||||||||||||||||
| 2014 | 765,833 | 0 | 4,294,312 | 0 | 1,425,000 | 3,733,775 | 492,177 | 10,711,097 | ||||||||||||||||||||||||||||
R. de la Vega Vice Chairman, AT&T Inc. and CEO, AT&T Business Solutions and AT&T International, LLC | 2016 | 965,833 | 0 | 5,699,856 | 0 | 1,920,000 | 1,467,079 | 1,976,762 | 12,029,530 | |||||||||||||||||||||||||||
| 2015 | 940,000 | 0 | 5,279,175 | 0 | 2,100,000 | 1,334,308 | 433,219 | 10,086,702 | ||||||||||||||||||||||||||||
| 2014 | 911,667 | 0 | 7,099,287 | 0 | 1,425,000 | 178,814 | 459,479 | 10,074,247 | ||||||||||||||||||||||||||||
J. Donovan Chief Strategy Officer and Group President AT&T Technology & Operations | 2016 | 858,833 | 0 | 4,352,640 | 0 | 1,650,000 | 2,388,147 | 259,190 | 9,508,310 | |||||||||||||||||||||||||||
|
| 2015
|
|
| 808,333
|
|
| 0
|
|
| 4,871,764
|
|
| 0
|
|
| 2,000,000
|
|
| 1,817,204
|
|
| 241,105
|
|
| 9,738,406
|
| ||||||||||
J. Stankey CEO AT&T Entertainment Group | 2016 | 965,833 | 0 | 5,881,237 | 0 | 1,930,000 | 3,730,962 | 257,263 | 12,765,295 | |||||||||||||||||||||||||||
| 2015 | 941,667 | 0 | 5,279,175 | 0 | 2,100,000 | 1,501,718 | 218,250 | 10,040,810 | ||||||||||||||||||||||||||||
| 2014 | 920,000 | 0 | 5,085,374 | 0 | 1,665,000 | 2,301,109 | 218,680 | 10,190,163 | ||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary (1) ($) | Bonus ($) | Stock Awards (2) ($) | Option Awards ($) | Non- Equity Incentive Plan Compen- sation (1) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (3) ($) | All Other Compen- sation (4) ($) | Total ($) | |||||||||||||||||||||||
R. Stephenson Chairman, CEO and President | 2018 |
| 1,800,000 |
|
| 0 |
|
| 17,069,774 | 0 |
| 5,192,000 |
| 3,517,806 |
| 1,538,538 |
| 29,118,118 |
| |||||||||||||
2017 |
| 1,800,000 |
|
| 0 |
|
| 16,699,980 | 0 |
| 5,310,000 |
| 3,420,059 |
| 1,490,681 |
| 28,720,720 |
| ||||||||||||||
2016 |
| 1,791,667 |
|
| 0 |
|
| 16,063,344 | 0 |
| 5,700,000 |
| 3,474,304 |
| 1,404,401 |
| 28,433,716 |
| ||||||||||||||
J. Stephens Sr. Exec. Vice Pres. and CFO | 2018 |
| 1,096,875 |
|
| 2,000,000 |
|
| 8,542,439 | 0 |
| 2,057,917 |
| 1,324,399 |
| 620,674 |
| 15,642,304 |
| |||||||||||||
2017 |
| 979,167 |
|
| 0 |
|
| 6,999,984 | 0 |
| 1,710,000 |
| 3,574,285 |
| 629,371 |
| 13,892,807 |
| ||||||||||||||
2016 |
| 870,833 |
|
| 0 |
|
| 5,337,167 | 0 |
| 1,840,000 |
| 2,942,086 |
| 591,854 |
| 11,581,940 |
| ||||||||||||||
J. Donovan CEO-AT&T Communications, LLC | 2018 |
| 1,175,000 |
|
| 100,000 |
|
| 10,610,326 | 0 |
| 2,310,000 |
| 50,211 |
| 340,330 |
|
| 14,585,867 |
| ||||||||||||
2017 |
| 1,035,833 |
|
| 0 |
|
| 9,202,738 | 0 |
| 1,965,000 |
| 2,666,182 |
| 323,947 |
| 15,193,700 |
| ||||||||||||||
2016 |
| 858,333 |
|
| 0 |
|
| 4,352,640 | 0 |
| 1,650,000 |
| 2,388,147 |
| 259,190 |
| 9,508,310 |
| ||||||||||||||
D. McAtee Sr. Exec. Vice Pres. and | 2018 |
| 1,058,333 |
|
| 5,000,000 |
|
| 4,731,281 | 0 |
| 1,694,000 |
| 100,295 |
| 265,367 |
|
| 12,849,276 |
| ||||||||||||
2017 |
| 791,667 |
| 0 |
|
| 3,699,987 | 0 |
| 1,350,000 |
| 166,390 |
| 216,501 |
| 6,224,545 |
| |||||||||||||||
J. Stankey CEO – Warner Media, LLC | 2018 |
| 2,058,333 |
|
| 2,000,000 |
|
| 6,889,708 | 0 |
| 4,374,333 |
| 574,835 |
| 655,696 |
| 16,552,905 |
| |||||||||||||
2017 |
| 995,000 |
|
| 0 |
|
| 6,999,984 | 0 |
| 1,800,000 |
| 3,356 |
| 296,243 |
| 10,094,583 |
| ||||||||||||||
2016 |
| 965,833 |
|
| 0 |
|
| 5,881,237 | 0 |
| 1,930,000 |
| 3,730,962 |
| 257,263 |
| 12,765,295 |
| ||||||||||||||
Realized Pay
Mr. Stephenson’s realized pay for 2018 was $18,844,528. A summary of realized pay for each of the NEOs is provided on pages 51-55.
Note 1.
Each of the Named Executive OfficersNEOs deferred portions of their 20162018 salary and/ornon-equity incentive awards into the Stock Purchase and Deferral Plan to make monthly purchases of Company stock in the form of stock units based on the price of the underlying AT&T stock as follows: Mr. Stephenson—$5,951,875,5,472,400, Mr. Stephens—$2,008,938, Mr. de la Vega—$2,113,438,2,282,521, Mr. Donovan—$257,000,352,500, Mr. McAtee—$579,438, and Mr. Stankey—$57,888.118,750. Each unit that the employee purchases is paid out in the form of a share of AT&T stock at the time elected by the employee, along with applicable matching shares. The value of the matching contributions made during the relevant year is included under “All Other Compensation.” A description of the Stock Purchase and Deferral Plan may be found beginning on page 81.74.
Note 2.
Amounts in the Stock Awards column for 2018 represent the grant date values of performance shares, restricted stock,Performance Shares and restricted stock units granted in 2016.Restricted Stock Units. The grant date values were determined pursuant to FASB ASC Topic 718. Assumptions used for determining the value of the stock awards reported in these columns are set forth in the relevant AT&T Annual Report to Stockholders in Note 1315 to Consolidated Financial Statements, “Share-Based Payments.” The grant date values of performance shares (which approximate 107% of the target awards)Performance Shares included in the table for 20162018 were: Mr. Stephenson—$8,313,327,12,494,790, Mr. Stephens—$2,762,165, Mr. de la Vega—$2,949,869,6,284,996, Mr. Donovan—$2,252,639,7,766,566, Mr. McAtee—$3,477,876, and Mr. Stankey—$3,043,740.5,045,456. The number of performance sharesPerformance Shares distributed at the end of the performance period is dependent upon the achievement of performance goals. Depending upon such achievement, the poten-
|
tialpotential payouts range from 0% of the target number of performance sharesPerformance Shares to a maximum payout of 162.5%160% of the target number of performance shares.Performance Shares. The value of the awards (performance shares, restricted stock,(Performance Shares and restricted stock units)Restricted Stock Units) will be further affected by the price of AT&T stock at the time of distribution.
| 62 | |
EXECUTIVE COMPENSATION TABLES
Note 3.
Under this column, we report earnings on deferrals of salary and incentive awards to the extent the earnings exceed a market rate specified by SEC rules. For the Named Executive Officers,NEOs, these amounts are as follows for 2016:2018: Mr. Stephenson—$321,364,131,143, Mr. Stephens—$0, Mr. de la Vega—Donovan—$274,029,50,211, Mr. Donovan—McAtee—$56,239,0, and Mr. Stankey—$3,100.1,910. Other amounts reported under this heading represent an increase, if any, in pension actuarial value during the reporting period. Mr. Donovan’s actuarial change in pension was ($94,372); the amount reported is $0 pursuant to the SEC rules.
Note 4.
This column includes personal benefits, Company-paid life insurance premiums, Company matching contributions to deferral plans, and state and local income tax reimbursements made in connection with business travel (Mr. Stankey) or with the relocation plan (Mr. de la Vega). AT&T does not provide other tax reimbursements to executive officersExecutive Officers except for state and local income taxes resulting from travel outside of Texas or under the Company’s relocation plan.
In valuing personal benefits, AT&T uses the incremental cost of the benefits to the Company of the benefit.Company. To determine the incremental cost of aircraft usage, we multiply the number of hours of personal flight usage (including “deadhead” flights) by the hourly cost of fuel (Company average) and the hourly cost of maintenance (where such cost is based on hours of use), and we add per flight fees such as landing, ramp and hangar fees, catering, and crew travel costs. Beginning with travel in 2013, Mr. Stephenson reimburses the Company for the incremental cost of his personal use of Company aircraft.
The aggregate Messrs. Donovan, Stankey, and Stephens are also required to reimburse the Company for the incremental cost of the personal benefits in 2016 providedusage of corporate aircraft, other than for travel to the Namedoutside board meetings. Other Executive Officers was: Mr. Stephenson—$87,493, Mr. Stephens—$69,926, Mr. de la Vega—$1,120,949, Mr. Donovan—$90,880, and Mr. Stankey—$91,959. Included inmay be required by the aboveCEO to reimburse the incremental cost of their personal benefits amounts are (1) financial counseling, including tax preparation and estate planning: Mr. Stephenson—$14,000, Mr. Stephens—$11,500, Mr. de la Vega—$14,000, Mr. Donovan—$20,153 and
Mr. Stankey—$14,161; (2) auto benefits: Mr. Stephenson—$27,234, Mr. Stephens—$15,804, Mr. de la Vega—$15,443, Mr. Donovan—$16,414 and Mr. Stankey—$13,783; (3) personal use of Company aircraft: Mr. Stephenson—$0, Mr. Stephens—$17,254, Mr. de la Vega—$279,138, Mr. Donovan—$30,094, and Mr. Stankey—$34,480; (4) supplemental health insurance premiums: for each of Messrs. Stephenson and de la Vega—$22,020, and for each of Messrs. Stephens, Donovan, and Stankey—$21,072; (5) club memberships: Mr. Stephenson—$2,838, for each of Messrs. Stephens, de la Vega and Donovan—$0, and Mr. Stankey—$2,793; (6) communications: Mr. Stephenson—$10,016, Mr. Stephens—$3,452, Mr. de la Vega—$28,149, Mr. Donovan—$2,803, and Mr. Stankey—$4,168; (7) home security: Mr. Stephenson—$11,385, Mr. Stephens—$844, Mr. de la Vega—$838, Mr. Donovan—$344, and Mr. Stankey—$1,502; and (8), for Mr. de la Vega only, relocation—$761,361. Mr. de la Vega’s relocation expenses were paid under the AT&T Management Relocation Plan A, which is generally available to management employees makingusage on a company-initiated move. The relocation expenses included moving and miscellaneous expenses of $271,361; a bonus of $15,000 to Mr. de la Vega for finding a buyer for his house; and $475,000 to offset losses incurredcase-by-case basis. Reimbursements will not be made where prohibited by Mr. de la Vega in the sale of his home. Under the terms of the plan, in order to facilitate the sale of the home, once Mr. de la Vega entered into the sales contract, the sales contract was assigned and the home transferred to AT&T in exchange for the sales price, and AT&T subsequently completed the sale to the ultimate buyer.
Other items included in All Other Compensation:
Company-paid premiums on supplemental life insurance in 2016 were: Mr. Stephenson—$78,976, Mr. Stephens—$79,990, Mr. de la Vega—$0, Mr. Donovan—$76,082, Mr. Stankey—$88,691.
The Company provides a matching contribution in the 401(k) plan and certain “makeup” matching contributions in the Stock Purchase and Deferral Plan, the latter plan is discussed in detail beginning on page 81. Total matching contributions in 2016 were: Mr. Stephenson—$1,237,932, Mr. Stephens—$441,938, Mr. de la Vega—$468,198, Mr. Donovan—$92,228, Mr. Stankey—$57,888.law.
| Stephenson | Stephens | Donovan | McAtee | Stankey | ||||||||||||||||
Personal Benefits | ||||||||||||||||||||
Financial counseling (includes tax preparation and estate planning) |
| 22,074 |
|
| 11,500 |
|
| 14,000 |
|
| 12,318 |
|
| 14,000 |
| |||||
Auto benefits |
| 27,213 |
|
| 16,176 |
|
| 14,261 |
|
| 16,562 |
|
| 13,736 |
| |||||
Personal use of Company aircraft |
| 0 |
|
| 0 |
|
| 31,233 |
|
| 0 |
|
| 13,223 |
| |||||
Health coverage |
| 52,152 |
|
| 50,064 |
|
| 50,064 |
|
| 50,064 |
|
| 50,064 |
| |||||
Club membership |
| 2,877 |
|
| 0 |
|
| 0 |
|
| 2,793 |
|
| 2,793 |
| |||||
Communications |
| 6,037 |
|
| 3,149 |
|
| 4,427 |
|
| 8,007 |
|
| 7,245 |
| |||||
Home security |
| 7,866 |
|
| 50 |
|
| 344 |
|
| 50 |
|
| 1,453 |
| |||||
Total Personal Benefits |
| 118,219 |
|
| 80,939 |
|
| 114,330 |
|
| 89,794 |
|
| 102,514 |
| |||||
Company matching contributions to deferral plans |
| 1,202,860 |
|
| 442,800 |
|
| 126,581 |
|
| 148,588 |
|
| 118,750 |
| |||||
Life insurance premiums applicable to the employees’ death benefit |
| 217,459 |
|
| 96,935 |
|
| 99,419 |
|
| 26,985 |
|
| 365,790 |
| |||||
State and Local Income tax reimbursements in connection with business travel |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 68,642 |
| |||||
Total |
| 1,538,538 |
|
| 620,674 |
|
| 340,330 |
|
| 265,367 |
|
| 655,696 |
| |||||
|
|
EXECUTIVE COMPENSATION TABLES
Under an agreement with Mr. Stankey described on page 76, the Company reimbursed Mr. Stankey $18,725 in 2016 for state and local income taxes that he incurred while on business travel outside of Texas, as well as for taxes on the reimbursements. Pursuant toGRANTSOF PLAN-BASED AWARDS
AT&T Management Relocation Plan A, the Company reimbursed Mr. de la Vega $387,615 in 2016 for taxes incurred on the payment of his relocation expenses as well as for taxes on the reimbursements.
Grants of Plan-Based Awards
| Name | Grant Date |
Estimated Possible Payouts UnderNon-Equity Incentive | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | All Other Stock Awards: Number of Shares of Stock or Units (2) (#) | All Other Option Awards: Number of Securities Underlying (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option ($) | Grant Date | Date of Action by |
Estimated Possible Payouts UnderNon-Equity Incentive | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | All Other Stock Awards: Number of Shares of Stock or Units (2) (#) | All Other Option Awards: Number of Securities Underlying (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephenson | 1/28/2016 | 0 | 5,700,000 | 11,400,000 | 111,244 | 218,126 | 354,455 | 218,126 | 16,063,344 |
3/29/18
|
|
2/1/18
|
|
| 2,655,000
|
|
|
5,900,000
|
|
|
7,375,000
|
|
|
140,194
|
|
|
350,485
|
|
|
560,776
|
|
|
12,494,790
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/1/18
|
|
2/1/18
|
|
|
116,828
|
|
|
4,574,984
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephens | 1/28/2016 | 0 | 1,840,000 | 3,680,000 | 36,962 | 72,474 | 117,770 | 72,474 | 5,337,167 |
3/29/18
|
|
2/1/18
|
|
|
900,000
|
|
|
2,000,000
|
|
|
2,500,000
|
|
|
55,541
|
|
|
138,853
|
|
|
222,165
|
|
|
4,950,109
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
de la Vega | 1/28/2016 | 0 | 1,920,000 | 3,840,000 | 39,473 | 77,399 | 125,733 | 77,399 | 5,699,856 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/1/18
|
|
2/1/18
|
|
|
46,284
|
|
|
1,812,481
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/15/18
|
|
9/28/17
|
|
| 152,344
|
|
|
338,542
|
|
| 423,178
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/28/18
|
|
6/28/18
|
|
|
16,588
|
|
|
41,469
|
|
|
66,350
|
|
|
13,823
|
|
|
1,779,849
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Donovan | 1/28/2016 | 0 | 1,650,000 | 3,300,000 | 30,144 | 59,105 | 96,046 | 59,105 | 4,352,640 |
3/29/18
|
|
2/1/18
|
|
| 1,237,500
|
|
|
2,750,000
|
|
|
5,500,000
|
|
|
87,142
|
|
|
217,856
|
|
|
348,570
|
|
|
7,766,566
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/1/18
|
|
2/1/18
|
|
|
72,619
|
|
|
2,843,760
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
McAtee
|
3/29/18
|
|
2/1/18
|
|
|
720,000
|
|
|
1,600,000
|
|
|
2,000,000
|
|
|
32,176
|
|
|
80,439
|
|
|
128,702
|
|
|
2,867,650
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/1/18
|
|
2/1/18
|
|
|
26,813
|
|
|
1,049,997
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/1/18
|
|
6/28/18
|
|
| 146,250
|
|
|
325,000
|
|
| 406,250
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/28/18
|
|
6/28/18
|
|
|
7,583
|
|
|
18,957
|
|
|
30,331
|
|
|
6,319
|
|
|
813,634
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stankey | 1/28/2016 | 0 | 1,930,000 | 3,860,000 | 40,730 | 79,862 | 129,776 | 79,862 | 5,881,237 |
3/29/18
|
|
2/1/18
|
|
|
945,000
|
|
|
2,100,000
|
|
| 2,625,000
|
|
|
55,541
|
|
|
138,853
|
|
|
222,165
|
|
|
4,950,109
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/1/18
|
|
2/1/18
|
|
|
46,284
|
|
|
1,812,481
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/15/18
|
|
9/28/17
|
|
| 1,291,875
|
|
|
2,870,833
|
|
| 3,588,541
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6/28/18
|
|
6/28/18
|
|
|
1,185
|
|
|
2,962
|
|
|
4,739
|
|
|
987
|
|
|
127,118
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 1.
Represents performance sharePerformance Share awards, discussed beginning on page 63.56.
Note 2.
Represents restricted stock unitRestricted Stock Unit grants, discussed beginning on page 64.57. The 2016 units granted in 2018 are scheduled to vest and distribute in January 2020.2022. Units will also vest upon an employee becoming retirement eligible; however, they are not distributed until the scheduled distribution date. All of the Named Executive OfficersNEOs except for Mr. McAtee were retirement eligible as of the grant date.
|
EXECUTIVE COMPENSATION TABLES
EMPLOYMENT CONTRACTS
Messrs. Donovan, Stankey, and Stephens
Both the 2011 Incentive Plan and the 2016 Incentive Plan provide that in the event an employee retires while retirement eligible under the plan, an award of Performance Shares will be prorated based on the number of months worked during the performance period. AT&T has provided that Performance Shares granted after September 28, 2017, to Messrs. Donovan, Stankey, or Stephens will not be prorated if they remain employed through December 30, 2020. Further, the Company has agreed that their Performance Shares shall not be prorated if (a) they report to an officer or employee of the Company or any of its affiliates other than the Chief Executive Officer of AT&T Inc.; or (b) if the Company creates a higher-level position (e.g., Vice Chairman or Chief Operating Officer of AT&T Inc.) and they are not placed in that role or an equivalent role.
Mr. Stankey
Following the acquisition of DIRECTV, AT&T entered into an agreement with Mr. Stankey, whose responsibilities included the oversight of DIRECTV operations. The Company agreed to reimburse him for state and local income taxes that he incurred while on business travel outside of Texas (Texas is his primary work location and residence) as well as the income taxes owed on the reimbursement of such state and local income taxes. Amounts reimbursed are reported annually in the Summary Compensation Table under All Other Compensation. Upon Mr. Stankey being reassigned to oversee merger integration planning for our acquisition of WarnerMedia on August 1, 2017, this agreement no longer applied to subsequent compensation.
Upon closing of the acquisition of WarnerMedia, Mr. Stankey was appointed CEO of WarnerMedia. Subsequently, as part of his new position, he is expected to engage in extensive business travel, which will require him to file state and local income tax returns in a number of jurisdictions. AT&T has agreed to reimburse Mr. Stankey for any legal fees he incurs in the defense of his state and local income tax returns.
|
|
EXECUTIVE COMPENSATION TABLES
Outstanding Equity Awards at December
OUTSTANDING EQUITY AWARDSAT DECEMBER 31, 20162018
| Option Awards (1) | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexer- cisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (2) (#) | Market Value of Shares or Units of Stock That Have Not Vested (2) ($) | Equity Plans Awards: Number of Unearned Shares, Units or Other Vested (3) (#) | Equity Payout Value of Unearned Shares, Units Vested (3) ($) | ||||||||||||||||||||||||||||||||
Stephenson | 230,102 | — | 36.17 | 6/16/18 | ||||||||||||||||||||||||||||||||||||
| 30,472 | — | 23.22 | 2/17/19 | |||||||||||||||||||||||||||||||||||||
| 14,627 | — | 24.63 | 6/15/19 | |||||||||||||||||||||||||||||||||||||
| 20,664 | — | 25.32 | 2/16/20 | |||||||||||||||||||||||||||||||||||||
| 379,336 | — | 25.54 | 6/15/20 | |||||||||||||||||||||||||||||||||||||
| 29,345 | — | 28.24 | 2/15/21 | |||||||||||||||||||||||||||||||||||||
2016-2018 Perf. Shares | — | — | 354,455 | 15,074,971 | ||||||||||||||||||||||||||||||||||||
2015-2017 Perf. Shares | — | — | 363,604 | 15,464,078 | ||||||||||||||||||||||||||||||||||||
Stephens | 16,241 | — | 36.17 | 6/16/18 | ||||||||||||||||||||||||||||||||||||
| 6,656 | — | 23.22 | 2/17/19 | |||||||||||||||||||||||||||||||||||||
| 16,973 | — | 24.63 | 6/15/19 | |||||||||||||||||||||||||||||||||||||
| 8,454 | — | 25.32 | 2/16/20 | |||||||||||||||||||||||||||||||||||||
| 38,069 | — | 25.54 | 6/15/20 | |||||||||||||||||||||||||||||||||||||
| 9,730 | — | 28.24 | 2/15/21 | |||||||||||||||||||||||||||||||||||||
| 39,919 | — | 30.35 | 6/15/21 | |||||||||||||||||||||||||||||||||||||
| 2,373 | — | 29.87 | 2/15/22 | |||||||||||||||||||||||||||||||||||||
2016-2018 Perf. Shares | — | — | 117,770 | 5,008,758 | ||||||||||||||||||||||||||||||||||||
2015-2017 Perf. Shares | — | — | 115,861 | 4,927,568 | ||||||||||||||||||||||||||||||||||||
de la Vega | 12,397 | — | 24.63 | 6/15/19 | ||||||||||||||||||||||||||||||||||||
| 6,251 | — | 25.32 | 2/16/20 | |||||||||||||||||||||||||||||||||||||
| 22,160 | — | 25.54 | 6/15/20 | |||||||||||||||||||||||||||||||||||||
| 6,838 | — | 28.24 | 2/15/21 | |||||||||||||||||||||||||||||||||||||
| 17,971 | — | 30.35 | 6/15/21 | |||||||||||||||||||||||||||||||||||||
| 1,068 | — | 29.87 | 2/15/22 | |||||||||||||||||||||||||||||||||||||
2016-2018 Perf. Shares | — | — | 125,773 | 5,349,126 | ||||||||||||||||||||||||||||||||||||
2015-2017 Perf. Shares | — | — | 131,268 | 5,582,828 | ||||||||||||||||||||||||||||||||||||
Donovan | ||||||||||||||||||||||||||||||||||||||||
2016-2018 Perf. Shares | — | — | 96,046 | 4,084,836 | ||||||||||||||||||||||||||||||||||||
2015-2017 Perf. Shares | — | — | 96,140 | 4,088,834 | ||||||||||||||||||||||||||||||||||||
2014 Restricted Stock | 56,673 | 2,410,303 | — | — | ||||||||||||||||||||||||||||||||||||
2015 Restricted Stock | 29,542 | 1,256,421 | — | — | ||||||||||||||||||||||||||||||||||||
Stankey | 1,234 | — | 37.88 | 2/15/18 | ||||||||||||||||||||||||||||||||||||
| 1,073 | — | 36.17 | 6/16/18 | |||||||||||||||||||||||||||||||||||||
| 2,073 | — | 23.22 | 2/17/19 | |||||||||||||||||||||||||||||||||||||
| 1,675 | — | 24.63 | 6/15/19 | |||||||||||||||||||||||||||||||||||||
| 2,366 | — | 25.32 | 2/16/20 | |||||||||||||||||||||||||||||||||||||
| 1,658 | — | 25.54 | 6/15/20 | |||||||||||||||||||||||||||||||||||||
| 2,326 | — | 28.24 | 2/15/21 | |||||||||||||||||||||||||||||||||||||
2016-2018 Perf. Shares | — | — | 129,776 | 5,519,373 | ||||||||||||||||||||||||||||||||||||
2015-2017 Perf. Shares | — | — | 131,268 | 5,582,828 | ||||||||||||||||||||||||||||||||||||
| Option Awards (1) | Stock Awards | |||||||||||||||||||||||||||||||
| Name | | Number of Securities Underlying Unexercised Options Exercisable (#) |
| | Number of Securities Underlying Unexercised Options Unexer- cisable (#) |
| | Option Exercise Price ($) |
| | Option Expiration Date |
| | Number of Shares or Units of Stock That Have Not Vested (2) (#) |
| | Market Value of Shares or Units of Stock That Have Not Vested (2) ($) |
| | Equity Incentive Plans Awards: Number of Unearned Shares, Units or Other Vested (3) (#) |
| | Equity Incentive Plans Awards: Market or Payout Value of Unearned Shares, Units Vested (3) ($) |
| ||||||||
Stephenson |
| 30,472 |
|
| 23.22 |
|
| 2/17/19 |
| |||||||||||||||||||||||
| 14,627 |
|
| — |
|
| 24.63 |
|
| 6/15/19 |
| |||||||||||||||||||||
| 20,664 |
|
| — |
|
| 25.32 |
|
| 2/16/20 |
| |||||||||||||||||||||
| 379,336 |
|
| — |
|
| 25.54 |
|
| 6/15/20 |
| |||||||||||||||||||||
| 29,345 |
|
| — |
|
| 28.24 |
|
| 2/15/21 |
| |||||||||||||||||||||
2017-2019 Perf. Shares |
| — |
|
| — |
|
| 269,870 |
|
| 7,702,090 |
| ||||||||||||||||||||
2018-2020 Perf. Shares |
| — |
|
| — |
|
| 315,437 |
|
| 9,002,572 |
| ||||||||||||||||||||
Stephens |
| 6,656 |
|
| — |
|
| 23.22 |
|
| 2/17/19 |
| ||||||||||||||||||||
| 16,973 |
|
| — |
|
| 24.63 |
|
| 6/15/19 |
| |||||||||||||||||||||
| 8,454 |
|
| — |
|
| 25.32 |
|
| 2/16/20 |
| |||||||||||||||||||||
| 38,069 |
|
| — |
|
| 25.54 |
|
| 6/15/20 |
| |||||||||||||||||||||
| 9,730 |
|
| — |
|
| 28.24 |
|
| 2/15/21 |
| |||||||||||||||||||||
| 39,919 |
|
| — |
|
| 30.35 |
|
| 6/15/21 |
| |||||||||||||||||||||
| 2,373 |
|
| — |
|
| 29.87 |
|
| 2/15/22 |
| |||||||||||||||||||||
2017-2019 Perf. Shares |
| — |
|
| — |
|
| 113,119 |
|
| 3,228,416 |
| ||||||||||||||||||||
2018-2020 Perf. Shares |
| — |
|
| — |
|
| 124,968 |
|
| 3,566,587 |
| ||||||||||||||||||||
2018-2020 Perf. Shares
|
| 37,322
|
|
| 1,065,170
|
| ||||||||||||||||||||||||||
Donovan | ||||||||||||||||||||||||||||||||
2014 Restricted Stock |
| 56,673 |
|
| 1,617,447 |
|
| — |
|
| — |
| ||||||||||||||||||||
2015 Restricted Stock |
| 29,542 |
|
| 843,129 |
|
| — |
|
| — |
| ||||||||||||||||||||
2017-2019 Perf. Shares |
| — |
|
| — |
|
| 113,119 |
|
| 3,228,416 |
| ||||||||||||||||||||
2017-2019 Perf. Shares
|
| —
|
|
| —
|
|
| 38,085
|
|
| 1,086,946
|
| ||||||||||||||||||||
2018-2020 Perf. Shares |
| 196,070 |
|
| 5,595,838 |
| ||||||||||||||||||||||||||
McAtee | ||||||||||||||||||||||||||||||||
2014 Restricted Stock Units |
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||
2015 Restricted Stock Units |
| 8,343 |
|
| 238,109 |
|
| — |
|
| — |
| ||||||||||||||||||||
2015 Restricted Stock Units
|
| 21,996
|
|
| 627,766
|
|
| —
|
|
| —
|
| ||||||||||||||||||||
2016 Restricted Stock Units |
| 45,736 |
|
| 1,305,305 |
|
| — |
|
| — |
| ||||||||||||||||||||
2017 Restricted Stock Units |
| 22,145 |
|
| 632,018 |
|
| — |
|
| — |
| ||||||||||||||||||||
2018 Restricted Stock Units |
| 26,813 |
|
| 765,243 |
| ||||||||||||||||||||||||||
2018 Restricted Stock Units |
| 6,319 |
|
| 180,344 |
| ||||||||||||||||||||||||||
2017-2019 Perf. Shares |
| — |
|
| — |
|
| 59,792 |
|
| 1,706,464 |
| ||||||||||||||||||||
2018-2020 Perf. Shares |
| — |
|
| — |
|
| 72,395 |
|
| 2,066,153 |
| ||||||||||||||||||||
2018-2020 Perf. Shares |
| 17,061 |
|
| 486,921 |
| ||||||||||||||||||||||||||
Stankey |
| 2,073 |
|
| — |
|
| 23.22 |
|
| 2/17/19 |
| ||||||||||||||||||||
| 1,675 |
|
| — |
|
| 24.63 |
|
| 6/15/19 |
| |||||||||||||||||||||
| 2,366 |
|
| — |
|
| 25.32 |
|
| 2/16/20 |
| |||||||||||||||||||||
| 1,658 |
|
| — |
|
| 25.54 |
|
| 6/15/20 |
| |||||||||||||||||||||
| 2,326 |
|
| — |
|
| 28.24 |
|
| 2/15/21 |
| |||||||||||||||||||||
2017-2019 Perf. Shares |
| — |
|
| — |
|
| 113,119 |
|
| 3,228,416 |
| ||||||||||||||||||||
2018-2020 Perf. Shares |
| — |
|
| — |
|
| 124,968 |
|
| 3,566,587 |
| ||||||||||||||||||||
2018-2020 Perf. Shares
|
| —
|
|
| —
|
|
| 2,666
|
|
| 76,088
|
| ||||||||||||||||||||
|
EXECUTIVE COMPENSATION TABLES
|
Note 1.
Stock options were granted based upon the amount of stock purchased bymid-level and above managers under the Stock Purchase and Deferral Plan, described beginning on page 81.74. Stock options are not currently offered under the plan. Options were vested at issuance but were not exercisable until the earlier of the first anniversary of the grant or the termination of employment of the option holder. Options expire ten years after the grant date; however, option terms may be shortened due to termination of employment of the holder.
Note 2.2.
Mr. Donovan’s 2014 and 2015 restricted stockRestricted Stock grants vest in 2019 and 2020, respectively.
Note 3.
Performance sharesShares are paid after the end of the performance period shown for each award. The actual number of shares paid out is dependent upon the achievement of the related performance objectives
and approval of the Committee. In this column, we report
the number of outstanding performance sharesPerformance Shares and their theoretical value based on the price of AT&T stock on December 31, 2016.2018. In calculating the number of performance sharesPerformance Shares and their value, we are required by SEC rules to compare the Company’s performance through 2016 under2018 for each outstanding performance sharePerformance Share grant against the threshold, target, and maximum performance levels for the grant and report in this column the applicable potential payout amount. If the performance is between levels, we are required to report the potential payout at the next highest level. For example, if the previous fiscal year’s performance exceeded target, even if it is by a small amount and even if it is highly unlikely that we will pay the maximum amount, we are required by SEC rules to report the awards using the maximum potential payouts. The performance measure for 75% of the shares in each grant2017 and 2018 grants is ROIC andwith a payout adjustment for the remaining 25%, the performance measure is TSR.relative TSR achievement. As of the end of 2016,2018, the ROIC achievement for each of the 2017 and 2018 grants was at target while the TSR achievements for bothperformance was in the 2015 and 2016bottom quartile of the peer group. As a result, the grants were above target level, requiring both the ROIC and TSR portions of these grants to be reported at their maximum award values.the target for ROIC reduced for TSR performance.
Option Exercises and Stock Vested During 2016OPTION EXERCISESAND STOCK VESTED DURING 2018
| Option Awards | Stock Awards (1) | |||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||
Stephenson | 128,586 | 445,288 | 448,560 | 17,375,264 | ||||||||||||||||
Stephens | 21,963 | 82,470 | 141,922 | 5,475,845 | ||||||||||||||||
de la Vega | 0 | 0 | 217,611 | 8,590,996 | ||||||||||||||||
Donovan | 4,406 | 75,010 | 109,165 | 4,190,989 | ||||||||||||||||
Stankey | 2,131 | 10,691 | 162,103 | 6,272,710 | ||||||||||||||||
Option Awards | Stock Awards (1) | |||||||||||||||||||
Name | | Number of Shares Acquired on Exercise (#) |
| | Value Realized on Exercise ($) |
| | Number of Shares Acquired on Vesting (#) |
| | Value Realized on Vesting ($) | |||||||||
Stephenson |
| 0 |
|
| 0 |
|
| 282,604 |
| 9,558,204 | ||||||||||
Stephens |
| 0 |
|
| 0 |
|
| 115,187 |
| 3,913,156 |
| |||||||||
Donovan |
| 0 |
|
| 0 |
|
| 117,539 |
| 4,194,049 |
| |||||||||
McAtee |
| 0 |
|
| 0 |
|
| 42,630 |
| 1,339,557 |
| |||||||||
Stankey |
| 2,307 |
|
| 4,910 |
|
| 107,966 |
| 3,668,748 |
| |||||||||
Note 1.
Included in the above amounts are restricted stock unit grantsRestricted Stock Units that vested in 2016 but are not yet distributable. These units2018. Restricted Stock Units vest at the earlier of the scheduled vesting date or upon the employee becoming retirement eligible. If the units vest because of retirement eligibility, they will stillare not be distributed until the scheduled vesting date. Each of the Named
Executive Officers received restricted stock unitsRestricted Stock Units granted in 2016 that2018 to the following NEOs vested at grant because of their retirement eligibility but will not be distributed until 2020 as follows:2022: Mr. Stephenson—218,126,116,828, Mr. Stephens—72,474,60,107, Mr. de la Vega—77,399, Mr. Donovan—59,105,72,619, and Mr. Stankey—79,862.47,271. Mr. McAtee is not retirement eligible and his 2014 Restricted Stock Units (7,871) vested and were distributed on the scheduled distribution date in 2018.
|
|
EXECUTIVE COMPENSATION TABLES
Pension Benefits (Estimated for December
PENSION BENEFITS (ESTIMATEDFOR DECEMBER 31, 2016)2018)
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits (1) ($) | Payments During Last Fiscal Year ($) | |||||||||||||
Stephenson | Pension Benefit Plan—Nonbargained Program | 34 | 1,554,723 | 0 | |||||||||||||
Pension Benefit Make Up Plan | 15 | 6,838 | 0 | ||||||||||||||
SRIP | 22 | 2,528,702 | 0 | ||||||||||||||
SERP | 30 | 49,940,953 | 0 | ||||||||||||||
Stephens | Pension Benefit Plan—Nonbargained Program | 24 | 1,223,246 | 0 | |||||||||||||
Pension Benefit Make Up Plan | 8 | 55,140 | 0 | ||||||||||||||
SRIP | 12 | 372,503 | 0 | ||||||||||||||
SERP | 24 | 15,774,751 | 0 | ||||||||||||||
de la Vega | Pension Benefit Plan—Mobility Program | 13 | 197,837 | 0 | |||||||||||||
BellSouth SERP | 36 | 15,414,454 | 0 | ||||||||||||||
SERP | 40 | 9,342,727 | 0 | ||||||||||||||
Donovan | Pension Benefit Plan—MCB Program | 7 | 140,827 | 0 | |||||||||||||
SERP | 8 | 11,378,322 | 0 | ||||||||||||||
Stankey | Pension Benefit Plan—Nonbargained Program | 31 | 1,480,255 | 0 | |||||||||||||
SRIP | 19 | 457,607 | 0 | ||||||||||||||
SERP | 31 | 27,296,027 | 0 | ||||||||||||||
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits (1) ($) | Payments During Last Fiscal Year ($) | |||||||||||||||||||||||
Stephenson | Pension Benefit Plan—Nonbargained Program | 36 | 1,797,231 | 0 | |||||||||||||||||||||||
Pension Benefit Make Up Plan | 15 | 6,671 | 0 | ||||||||||||||||||||||||
SRIP | 22 | 2,416,985 | 0 | ||||||||||||||||||||||||
SERP | 30 | 56,303,088 | 0 | ||||||||||||||||||||||||
Stephens | Pension Benefit Plan—Nonbargained Program | 26 | 1,441,770 | 0 | |||||||||||||||||||||||
Pension Benefit Make Up Plan | 8 | 60,536 | 0 | ||||||||||||||||||||||||
SRIP | 12 | 425,232 | 0 | ||||||||||||||||||||||||
SERP | 26 | 20,396,786 | 0 | ||||||||||||||||||||||||
Donovan | Pension Benefit Plan—MCB Program | 9 | 163,540 | 0 | |||||||||||||||||||||||
SERP | 10 | 13,857,440 | 0 | ||||||||||||||||||||||||
McAtee | Pension Benefit Plan—MCB Program | 6 | 80,041 | 0 | |||||||||||||||||||||||
Pension Benefit Make Up Plan | 6 | 401,457 | 0 | ||||||||||||||||||||||||
Stankey | Pension Benefit Plan—Nonbargained Program | 33 | 1,811,692 | 0 | |||||||||||||||||||||||
SRIP | 19 | 438,355 | 0 | ||||||||||||||||||||||||
SERP | 33 | 27,327,212 | 0 | ||||||||||||||||||||||||
Note 1.
Pension benefits reflected in the above table were determined using the methodology and material assumptions set forth in the 20162018 AT&T Annual Report to Stockholders in Note 1214 to Consolidated Financial Statements, “Pension and Postretirement Benefits,” except that, as required by SEC regulations, the assumed retirement age is the specified normal retirement age in the plan unless the plan provides a younger age at which benefits may be received without a discount based on age, in which case the younger age is used. For the Nonbargained Program under the AT&T Pension Benefit Plan and the Pension Benefit Make Up Plan, the assumed retirement age is the date a participant is at least age 55 and meets the “modified
rule of 75,” which requires certain combinations of age and service that total at least 75. For the Mobility Program and the Management Cash Balance Program under the AT&T Pension Benefit Plan, the assumed retirement age for the cash balance formula is age 65. For the AT&T SRIP/SRIP and its successor, the 2005 SERP, the assumed retirement age
is the earlier of the date the participant reaches age 60 or has 30 years of service (the age at which an employee may retire without discounts for age). For the BellSouth SERP, the assumed retirement age is the date the participant reaches age 62. If a participant has already surpassed the earlier of these dates, then the assumed retirement age used for purposes of this table is determined as of December 31, 2016.
For each of the Named Executive Officers,The SRIP/SERP benefits in the table have beenare reduced for benefits available under the qualified plans and by a specified amount that approximates benefits available under other nonqualified plans included in the table. Mr. de la Vega’s SERP benefit was also reduced for distribution from the Southeast Program of the Pension Benefit Plan when he transferred to AT&T Mobility in 2003 (then known as Cingular) and began accruing benefits under what is now the Mobility Program. Mr. de la Vega’s BellSouth SERP has been frozen in the form of a fixed lump sum benefit.
|
|
EXECUTIVE COMPENSATION TABLES
Employment Contracts
There are no employment agreements with any of the Named Executive Officers, except for the following:QUALIFIED PENSION PLAN
Rafael de la Vega
Mr. de la Vega retired on December 31, 2016. In connection with his retirement, Mr. de la Vega and the Company entered in to an agreement on December 15, 2016 pursuant to which the Human Resources Committee of the Board of Directors approved the removal of the automatic proration at retirement for Mr. de la Vega’s outstanding grants of performance shares and waived the requirement that Mr. de la Vega repay benefits he received in connection with his February 1, 2016 job relocation because he left the company within one year of the move. Mr. de la Vega agreed to not compete with the company and not solicit the Company’s employees, customers, or vendors for 24 months, and to maintain the confidentiality of AT&T’s trade secrets and other
confidential information and to other terms customary for such agreements.
John Stankey
Following the acquisition of DIRECTV, AT&T has entered into an agreement with Mr. Stankey, whose responsibilities include the oversight of DIRECTV operations. The Company agreed to reimburse him for state and local income taxes that he incurs while on business travel outside of Texas (Texas is his primary work location and residence) as well as the income taxes owed on the reimbursement of such state and local income taxes. Amounts reimbursed will be reported annually in the Summary Compensation Table under All Other Compensation.
Qualified Pension Plan
We offer post-retirement benefits, in various forms, to nearly all our managers. The AT&T Pension Benefit Plan, a “qualified pension plan” under the Internal Revenue Code, covers nearly all of our employees hired before 2015, including each of the Named Executive Officers.NEOs. The applicable benefit accrual formula depends on the subsidiaries that have employed the participant. Effective January 1, 2015, no new management employees are eligible for a pension. However, they do receive an enhanced 401(k) benefit.
Nonbargained Program
Each of the Named Executive Officers, except for Mr. de la VegaStephenson, Mr. Stephens, and Mr. Donovan, isStankey are covered by the Nonbargained Program of the AT&T Pension Benefit Plan, which is offered to most of ourpre-2007 management employees. Participants in the Nonbargained Program receive the greater of the benefit determined under the Career Average Minimum (CAM) formula or the cash balance formula, each of which is described below. Eligible managers employed by AT&T Corp. or BellSouth prior to January 1, 2007, or AT&T Mobility prior to January 1, 2006, are covered by cash balance formulas determined under their legacy pension programs, and after those dates, by an age graded cash balance formula under the Management Cash Balance Program of the AT&T Pension Benefit Plan. Generally, managers hired or rehired on or after January 1, 2015, are not eligible for a pension under the plan but are eligible for an enhanced company match in the 401(k) plan.
CAM Formula
EachFor each of the Named Executive Officers, except for Mr. de la VegaStephenson, Mr. Stephens, and Mr. Donovan, are covered byStankey the greater benefit comes from the CAM formula.formula, which is reported in the Pension Benefits table. The CAM formula provides an annual benefit equal to 1.6% of the participant’s average pension-eligible compensation (generally, base pay, commissions, and annual bonuses, but not officer bonuses paid to individuals promoted to officer level before January 1, 2009) for the five years ended December 31, 1999, multiplied by the number of years of service through the end of the December 31, 1999, averaging period, plus 1.6% of the participant’s pension-eligible compensation thereafter. Employees who meet the “modified rule of 75” and are at least age 55 are eligible to retire without age or service discounts. The “modified rule of 75” establishes retirement eligibility when certain combinations of age and service total at least 75.
Cash Balance Formula
The cash balance formula was frozen, except for interest credits, on January 14, 2005. The cash balance formula provided an accrual equal to 5% of pension-eligible compensation plus monthly interest credits on the participant’s cash balance account. The interest rate is reset quarterly and is equal to the published average annual yield for the30-year Treasury Bond as of the middle month of the preceding quarter. The planprogram permits participants to take the benefit in various
|
actuarially equivalent forms, including various forms of life annuities or, for participants terminating on or after May 25, 2018 and receiving their benefit on or after June 1, 2018, this program permits participants to take the benefit in a regular annuity or, to a limited extent, afull lump sum calculated as the present value of the annuity.
MobilityManagement Cash Balance Program
Mr. de la Vega isDonovan and Mr. McAtee are covered by the Mobility Program, which is also part of thetax-qualified AT&T Pension Benefit Plan. This program covers employees of AT&T Mobility that were hired prior to 2006. The Mobility Program is the qualified pension plan previously offered by AT&T Mobility that was merged into the AT&T Pension Benefit Plan. Participants in the Mobility Program are generally entitled to receive a cash balance benefit equal to the monthly basic benefit credits of 5% of the participant’s pension-eligible compensation (generally, base pay, commissions, and group incentive awards, but not individual awards) plus monthly interest credits on the participant’s cash balance account. The interest rate for cash balance credits is reset quarterly and is equal to the published average annual yield for the30-year Treasury Bond as of the middle month of the preceding quarter. The plan permits participants to take the benefit in various
actuarially equivalent forms, including an annuity or a lump sum calculated as the greater of the cash balance account balance, or the present value of the grandfathered pension benefit annuity.
Management Cash Balance Program
Mr. Donovan is covered by the Management Cash Balance (MCB) Program of the AT&T Pension Benefit Plan, which is offered to our management employees hired on or after January 1, 2007 (January 1, 2006 for AT&T Mobility). This program was closed to new hires or rehires on or after and before January 1, 2015. After completing one year of service, participants in the MCB Program are entitled to receive a cash balance benefit equal to the monthly credit of an age graded basic credit formula ranging from 1.75% to 4% of the participant’s pension-eligible compensation and a 2% supplemental credit for eligible compensation in excess of Social Security Wage Base plus monthly interest credit at an effective annual rate of 4.5% to the participant’s cash balance account. This program permits participants to take the benefit in various actuarially equivalent forms, including an annuity or a lump sum.
| 69 |
Nonqualified Pension Plans
EXECUTIVE COMPENSATION TABLES
NONQUALIFIED PENSION PLANS
To the extent the Internal Revenue Code places limits on the amounts that may be earned under a qualified pension plan, managers instead receive these amounts under the nonqualified Pension Benefit Make Up Plan but only for periods prior to the person becoming a participant in the SRIP/SERP, described below. The Pension Benefit Make Up Plan benefit is paid in the form of a10-year annuity or in a lump sum if the present value of the annuity is less than $50,000.
In addition, we offer our executive officersExecutive Officers and other officers (who became officers prior to 2005) supplemental retirement benefits under the Supplemental Retirement Income Plan (SRIP) and, for those serving as officers between 2005-2008, its successor, the 2005 Supplemental Employee Retirement Plan (SERP,), as additional retention tools. As a result of changes in the tax laws, beginning December 31, 2004, participants ceased accruing benefits under the SRIP, the original supplemental plan. After December 31, 2004, benefits are earned under the SERP. Participants make separate distribution elections (annuity or lump sum) for benefits earned and vested before 2005 (under the
SRIP) and for benefits accrued during and after 2005 (under the SERP). Elections for the portion of the pension that accrued in and after 2005, however, must have been made when the officer first participated in the SERP. Vesting in the SERP requires five years of service (including four years of participation in the SERP). Each of the Named Executive Officerseligible NEOs is vested in the SERP. Regardless of the payment form, no benefits under the SERP are payable until six months after termination of employment. An officer’s benefits under these nonqualified pension plans are reduced by: (1) benefits due under qualified AT&T pension plans and (2) a specific amount that approximates the value of the officer’s benefit under other nonqualified pension plans, determined generally as of December 31, 2008.These supplemental benefits are neither funded by nor are a part of the qualified pension plan.
Each of the Named Executive OfficersNEOs, except for Mr. McAtee, is eligible to receive theseSRIP/SERP benefits.However, the Committee Since January 1, 2009, no new officer hasdetermined to no longer allow new officers been permitted to participate in the SERP, but may do so if it deems it necessary to attract or retain key talent or for other appropriate business reasons.SERP.
|
Calculation of Benefit
Under the SRIP/SERP, the target annual retirement benefit is stated as a percentage of a participant’s annual salary and annual incentive bonus averaged over a specified period described below. The percentage is increased by 0.715% for each year of actual service in excess of, or decreased by 1.43% (0.715% formid-career hires) for each year of actual service below, 30 years of service. In the event the participant retires before reaching age 60, a discount of 0.5% for each month remaining until the participant attains age 60 is applied to reduce the amount payable under this plan, except
for officers who have 30 years or more of service at the time of retirement. Of the Named Executive OfficersNEOs currently employed by the Company, only Mr. Stephenson and Mr. Stankey are eligible to retire without either an age or service discount under this plan. In addition, Mr. de la Vega retired on December 31, 2016 without an age or service discount. These benefits are also reduced by any amounts participants receive under AT&T qualified pension plans and by a frozen, specific amount that approximates the amount they receive under our other nonqualified pension plans, calculated as if the benefits under these plans were paid in the form of an immediate annuity for life.
For all but Mr. Stephenson and Mr. de la Vega, (see below), theThe salary and bonus used to determine theirthe SRIP/SERP benefit amount is the average of the participant’s salary and actual annual incentive bonuses earned during the36-consecutive-month period that results in the highest average earnings that occurs during the 120 months preceding retirement. In some cases, the Committee may require the use of the target bonus, or a portion of the actual or target bonus, if it believes the actual bonus is not appropriate. Effective September 1, 2017, for Mr. Donovan and effective June 16, 2018, for Messrs. Stephens and Stankey, the annual earnings used in the SERP’s “highest average earnings” is fixed at $3.0 million.
The target annual retirement percentage for the Chief Executive Officer is 60%, and for other Named Executive OfficersNEOs the target percentage ranges from 50% to 60%. Beginning in 2006, the target percentage was limited to 50% for all new participants (see note above on limiting new participants after 2008). If a benefit payment under the plan is delayed by the Company to comply with Federal tax rules,law, the delayed amounts will earn interest at the rate the Company uses to accrue the present value of the liability, and the interest will be included in the appropriate column(s) in the “Pension Benefits” table.
Mr. Stephenson’s Benefit
Mr. Stephenson’s SERP benefit was modified in 2010. For purposes of calculating his SERP benefit, the Company froze his compensation as of June 30, 2010. He stopped accruing age and service credits as of December 31, 2012, at which time his benefit was determined as a lump sum amount, which thereafter earns interest. The discount rate for calculating the lump sum as well as the interest crediting rate is 5.8%.
Mr. de la Vega’s Benefit
In 2008, participants in the SERP nonqualified pension plan made elections to take their distributions either as an annuity or as a lump sum. In 2014, the Company permitted certain officers who had elected the lump sum option to freeze their benefit as if they had retired at the end of 2014. In exchange, the electing officers gave up credits under the plan for all future compensation, service, and if applicable, age. The frozen benefit will earn a fixed rate of interest equal to 4.3% which represents the discount rate used to determine lump sum benefits for participants who retired in 2014. This change will, for the electing officers, eliminate the impact of fluctuations in the interest rate used to calculate the value of their lump sum benefit. Of the Named Executive Officers, Mr. de la Vega elected this option, effective December 30, 2014.
While Mr. de la Vega participates in the AT&T SERP, he is also a participant in the BellSouth SERP, which acts as an offset to his AT&T SERP benefit. Because his BellSouth SERP benefit will never exceed the AT&T SERP benefit, his total benefit is determined using the AT&T SERP calculation. Mr. de la Vega’s SERP benefit was also reduced for distribution from the Southeast Program of the AT&T Pension Benefit Plan when he transferred to AT&T Mobility in 2003 (then known as Cingular) and began accruing benefits under what is now the Mobility Program.
In addition, the BellSouth SERP also provides a lump sum death benefit payable to the participant’s beneficiaries equal to his annual base pay rate as of December 31, 2005, plus two times his standard target bonus as of December 31, 2005. As a result, Mr. de la Vega’s death benefit will be paid in the amount of $1.86 million.
|
EXECUTIVE COMPENSATION TABLES
Forms of Payment
Annuity
Participants may receive benefits as an annuity payable for the greater of the life of the participant or ten years. If the participant dies within ten years after leaving the Company, then payments for the balance of the ten years will be paid to the participant’s beneficiary. Alternatively, the participant may elect to have the annuity payable for life with 100% or 50% payable upon his or her death to his or her beneficiary for the beneficiary’s life. The amounts paid under each alternative (and the lump sum alternative described below) are actuarially equivalent. As noted above, separate distribution elections are made forpre-2005 benefits and 2005 and later benefits.
Lump Sum
Participants may elect that upon retirement at age 55 or later to receive the actuarially determined net present value of the benefit as a lump sum, rather
than in the form of an annuity. To determine the net present value, we use the discount rate used for determining the projected benefit obligation at December 31 of the second calendar year prior to the year of retirement. Participants may also elect to take all or part of the net present value over a fixed period of years elected by the participant, not to exceed 20 years, earning interest at the same discount rate. A participant is not permitted to receive more than 30% of the net present value of the benefit before the third anniversary of the termination of employment, unless he or she is at least 60 years old at termination, in which case the participant may receive 100% of the net present value of the benefit as early as six months after the termination of employment. Eligible participants electing to receive more than 30% of the net present value of the benefit within 36 months of their termination must enter into a written noncompetition agreement with us and agree to forfeit and repay the lump sum if they breach that agreement.
Other Post-Retirement BenefitsOTHER POST-RETIREMENT BENEFITS
Named Executive OfficersThe NEOs who retire after age 55 with at least five years of service or who are retirement eligible under the “modified rule of 75” continue to receive the benefits shown in the following table after retirement, except that of the NEOs, only Mr. Stephenson is entitled to receive supplementalexecutive health benefitscoverage after retirement. Benefits that are available generally to managers are omitted from the table. All the NEOs except for Mr. de la Vega retired on December 31, 2016 and all other Named Executive OfficersMcAtee are currently retirement eligible.
Financial counseling benefits will be made available to the executive officersExecutive Officers for 36 months following retirement. We do not reimburse taxes on personal benefits for executive officers,Executive Officers, other than certainnon-deductible relocation costs, which along with the
tax reimbursement, we make available to nearly all management employees. The supplementalThrough December 31, 2017,
the executive health benefit is in addition tocoverage supplemented the group health planplan. Effective January 1, 2018, the executive health coverage is the primary and sole health coverage for eligible participants. The coverage is provided to Mr. Stephenson for lifepost-employment based on eligibility provisions that existed before he became CEO. During their employment, officers are subject to an annual deductible on health benefits,co-insurance, and must pay a portion of the premium. Officers who are eligible to receive the supplemental benefitexecutive health coverage in retirement have no annual deductible orco-insurance, but they must pay larger premiums. In addition, we also provide communications, broadband/TV and related services and products; however, to the extent the service is provided by AT&T, it is typically provided at little or no incremental cost. These benefits are subject to amendment.
|
Other Post-Retirement BenefitsOTHER POST-RETIREMENT BENEFITS
| Personal Benefit | Estimated Amount (valued at our incremental cost) | |
Financial counseling | Maximum of $14,000 per year for 36 months | |
Financial counseling provided in connection | ||
Estate planning | ||
Communication benefits | Average of | |
(Mr. Stephenson only) |
| 71 |
EXECUTIVE COMPENSATION TABLES
In the event of the officer’s termination of employment due to death, the officer’s unvested restricted stock unitsRestricted Stock Units and restricted stock,Restricted Stock, if any, will vest, and outstanding performance sharesPerformance Shares will pay out at 100% of target. As a result, if a Named Executive Officeran NEO had died at the end of 2016,2018, the amounts of performance shares, restricted stock units,Performance Shares, Restricted Stock Units, and/or restricted stock,Restricted Stock, as applicable, that would have vested and been distributed are: Mr. Stephenson—$18,793,241,18,560,732, Mr. Stephens—$6,114,666, Mr. de la Vega—$6,727,353,8,733,525, Mr. Donovan—$8,696,662,13,473,049, Mr. McAtee—$8,481,603 and Mr. Stankey—$6,832,104.7,634,536.
In the event of termination of employment due to disability, unvested restricted stock unitsRestricted Stock Units and restricted stock,Restricted Stock, if any, will vest; however, restricted stock unitsRestricted Stock Units will not pay out until their scheduled vesting distribution times. As a result, if such an event had occurred to a Named Executive Officeran NEO at the end of 2016, only2018, Mr. Donovan’s restricted stockRestricted Stock ($2,460,576) and Mr. McAtee’s Restricted Stock Units ($3,748,786) would have vested ($3,666,724).vested. Conversely, performance sharesPerformance Shares will not be accelerated in the event of a termination due to disability but will be paid without proration, based solely based on the achievement of thepre-determined performance goals.
We pay recoverable premiums on split-dollar life insurance that provides a specified death benefit to beneficiaries of each Named Executive Officer.NEO. The benefit is equal to one times salary during his or herthe officer’s employment, except for the Chief Executive OfficerCEO who receives two times salary. After retirement, for officers who first participated
beginning in 1998, the death benefit remains one times salary until he or she reaches age 66; the benefit is then reduced by 10% each year until age 70, when the benefit becomesone-half of his or her final salary. For officers who participated prior to 1998, including Messrs. Stephenson and Stephens, the post-retirement death benefit is one times salary. In addition, managers who were officers prior to 1998 are entitled to additional one times salary death benefit while employed and during retirement.
In addition to the foregoing, Mr. Stephenson, Mr. Stephens, Mr. Donovan, and Mr. Stankeyeach of the NEOs purchased optional additional split-dollar life insurance coverage equal to two times salary, which is subsidized by the Company. If the policies are not fully funded upon the retirement of the officer, we continue to pay our portion of the premiums until they are fully funded. The officer’s premium obligation ends at age 65.
Mr. Stephens elected to take his death benefits in the form of aten-year Company-paid annuity payable after death, using an 11% discount rate based on 185% of the value of the death benefits. The increase in the value of the death benefits is to offset the income taxes that will result from the Company-paid benefit that would not be applicable in the case of insurance payments. This alternative payment method was available only to officers who elected the annuity before 1998. If Mr. Stephens had passed away at the end of 2016,2018, his annual death benefit for ten years would have been $1,084,704.
Basic death benefits payable to Mr. de la Vega under the AT&T plan are reduced by $900,000, which represents the sum of death benefits provided by (1) a BellSouth policy with a face amount of $400,000 that was transferred to Mr. de la Vega in 2007, and (2) two BellSouth policies with a combined face amount of $500,000 owned by Mr. de la Vega. Under the latter policies, the Company and Mr. de la Vega shared the payment of premiums (the final payments were made in 2013), and the policies provide either a death benefit to Mr. de la Vega’s beneficiary(ies) or an accumulated cash value available to Mr. de la Vega. The Company does not recover any of its premium payments under Mr. de la Vega’s policies.
We also provide death benefits in connection with Mr. de la Vega’s BellSouth SERP (described on page 78).$1,398,839.
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EXECUTIVE COMPENSATION TABLES
Nonqualified Deferred Compensation
NONQUALIFIED DEFERRED COMPENSATION
| Name | Plan (1) | Executive in Last FY (2) ($) | Registrant in Last FY (2) ($) | Aggregate Last FY (2)(3) ($) | Aggregate Distributions ($) | Aggregate Last FYE (2) ($) | |||||||||||||||||||||
Stephenson | Stock Purchase and Deferral Plan | 5,761,875 | 1,225,555 | 3,164,982 | 807,889 | 16,084,514 | |||||||||||||||||||||
Cash Deferral Plan | 894,792 | — | 997,498 | — | 22,804,000 | ||||||||||||||||||||||
Stephens | Stock Purchase and Deferral Plan | 2,255,938 | 429,218 | 798,455 | 2,263,995 | 3,489,042 | |||||||||||||||||||||
de la Vega | Stock Purchase and Deferral Plan | 2,109,438 | 458,936 | 3,000,338 | — | 14,075,320 | |||||||||||||||||||||
Cash Deferral Plan | 482,396 | — | 266,565 | 93,922 | 6,196,398 | ||||||||||||||||||||||
BellSouth Nonqualified Deferred Income Plan | — | — | 65,662 | 33,685 | 445,886 | ||||||||||||||||||||||
AT&T Mobility Cash Deferral Plan | — | — | 35,489 | — | 808,677 | ||||||||||||||||||||||
AT&T Mobility 2005 Cash Deferral Plan | — | — | 459,176 | — | 10,463,018 | ||||||||||||||||||||||
Donovan | Stock Purchase and Deferral Plan | 257,000 | 79,800 | 70,086 | 365,226 | 368,208 | |||||||||||||||||||||
Cash Deferral Plan | 1,200,000 | — | 174,890 | 331,890 | 4,029,442 | ||||||||||||||||||||||
Stankey | Stock Purchase and Deferral Plan | 57,888 | 45,168 | 470,490 | 264,501 | 1,997,154 | |||||||||||||||||||||
Cash Deferral Plan | — | — | 9,632 | — | 215,905 | ||||||||||||||||||||||
| Name | Plan (1) | Executive Contributions in Last FY (2) ($) | | Registrant Contributions in Last FY (2) ($) |
| | Aggregate Earnings in Last FY (2)(3) ($) |
| | Aggregate Withdrawals/ Distributions ($) |
| | Aggregate Balance at Last FYE (2) ($) | |||||||
Stephenson |
Stock Purchase and Deferral Plan
|
5,584,500
|
|
1,190,100
|
|
|
(3,041,236)
|
|
|
6,785,671
|
|
|
11,491,345
|
| ||||||
Cash Deferral Plan
|
900,000
|
|
—
|
|
|
613,007
|
|
|
7,163,963
|
|
|
15,031,614
|
| |||||||
Stephens |
Stock Purchase and Deferral Plan
|
1,952,000
|
|
429,600
|
|
|
(538,956)
|
|
|
2,341,411
|
|
|
2,232,179
|
| ||||||
Donovan |
Stock Purchase and Deferral Plan
|
352,500
|
|
113,700
|
|
|
(63,581)
|
|
|
402,547
|
|
|
416,937
|
| ||||||
Cash Deferral Plan
|
1,375,500
|
|
—
|
|
|
234,522
|
|
|
—
|
|
|
6,331,583
|
| |||||||
McAtee |
Stock Purchase and Deferral Plan
|
493,438
|
|
135,388
|
|
|
(112,688)
|
|
|
544,345
|
|
|
535,499
|
| ||||||
Stankey |
Stock Purchase and Deferral Plan
|
118,750
|
|
105,550
|
|
|
(350,287)
|
|
|
105,888
|
|
|
1,358,666
|
| ||||||
Cash Deferral Plan
|
—
|
|
—
|
|
|
8,918
|
|
|
—
|
|
|
233,100
|
|
Note 1.
Amounts attributed to the Stock Purchase and Deferral Plan or to the Cash Deferral Plan also include amounts from their predecessor plans. No further contributions are permitted under the predecessor plans.
Note 2.
Of the amounts reported in the contributions and earnings columns and also included in the aggregate balance column in the table above, the following amounts are reported as compensation for 20162018 in the “Summary Compensation Table”: Mr. Stephenson—$2,978,586,2,761,243, Mr. Stephens—$690,156, Mr. de la Vega—$1,504,799,757,100, Mr. Donovan—$393,129,516,411, Mr. McAtee—$291,325, and
Mr. Stankey—$106,156. $226,210. Of the amounts reported in the aggregate balance column, the following aggregate amounts were previously reported in the “Summary Compensation Table” for 20152017 and 2014,2016, combined: Mr. Stephenson—$10,548,360,7,474,620, Mr. Stephens—$3,348,750, Mr. de la Vega—$5,743,951,1,624,500, Mr. Donovan—$1,224,505,2,656,808, Mr. McAtee—$337,500, and Mr. Stankey—$3,848.6,456.
Note 3.
Aggregate Earnings include interest, dividend equivalents, and stock price appreciation/depreciation. The “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the “Summary Compensation Table” includes only the interest that exceeds the SEC market rate, as shown in footnote 3 to the “Summary Compensation Table”.
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Stock Purchase and Deferral Plan
EXECUTIVE COMPENSATION TABLES
STOCK PURCHASEAND DEFERRAL PLAN (SPDP)
Under the SPDP and its predecessor plan,mid-level managers and above may annually elect to defer up to 30% of their salary and annual bonus. Officers, including the Named Executive Officers,NEOs, may defer up to 95% of their short-term award, which is similar to, and paid in lieu of, the annual bonus paid to other management employees. In addition, the Committee may approve other contributions to the plan. These contributionsContributions are made through payroll deductions and are used to purchase AT&T deferred share units (each representing the right to receive a share of AT&T
stock) at fair market value on atax-deferred basis. Participants receive a 20% match in the form of additional deferred share units; however, with respect to short-term awards, officer level participants receive the 20% match only on the purchase of deferred share units that represent no more than their target awards. In addition, the Company provides “makeup” matching contributions in the form of additional deferred share units in order to generally offset the loss of match in the 401(k) plan caused by participation in the SPDP and the CDP, and to provide match on compensation that exceeds Federal compensation limits for 401(k)
|
plans. The makeup match is an 80% match on contributions from the first 6% of salary and bonus (the same rate as used in the Company’s principal 401(k) plan),reduced by the amount of matching contributions the employee is eligible to receive (regardless of actual participation) in the Company’s 401(k) plan. (For managers hired after January 1, 2015, the 401(k) match and SPDP makeup match is 100% on contributions from the first 6% of salary.) Officer level
employees do not receive a makeup match on the contribution of their short-term awards. Deferrals are distributed in AT&T stock at times elected by the participant. For salary deferrals prior to 2011 and bonus deferrals prior to 2012, in lieu of the 20% match, participants received two stock options for each deferred share unit acquired. Each stock option had an exercise price equal to the fair market value of the stock on the date of grant.
Cash Deferral Plan (CDP)
Managers who defer at least 6% of salary in the SPDP may also defer up to 50% (25% in the case ofmid-level managers) of salary into the CDP. Similarly, managers that defer 6% of bonuses in the SPDP may also defer bonuses in the CDP, subject to the same deferral limits as for salary; however, officer level managers may defer up to 95% of their short-term award into the CDP without a corresponding SPDP deferral. In addition, the Committee may approve other contributions to the plan. We pay interest at the Moody’s Long-Term Corporate Bond Yield Average for the preceding September (theMoody’s rate), a common index used by companies. Pursuant to the rules of the SEC, we include in the “Summary
Compensation Table” under “Change in Pension Value and Nonqualified Deferred Compensation Earnings” any earnings on deferred compensation that exceed a rate determined in accordance with SEC rules. Deferrals are distributed at times elected by the participant. Similarly, under its predecessor plan, managers could defer salary and incentive compensation to be paid at times selected by the participant. No deferrals were permitted under the prior plan after 2004. Account balances in the prior plan are credited with interest at a rate determined annually by the Company, which will be no less than the prior September Moody’s rate.
Other Nonqualified Deferred Compensation Plans
Certain of the Named Executive Officers also participated in deferred compensation plans that are now closed to additional contributions and are described below.
AT&T Mobility Cash Deferral Plan
Mr. de la Vega has a balance in the AT&T Mobility Cash Deferral Plan, a nonqualified, executive deferred compensation plan. The plan permitted officers and senior managers to defer between 6% and 50% of their base pay and between 6% and 75% of their annual bonus and long-term compensation awards into the plan. The Company provided a match equal to 80% of 6% of the salary and annual bonus deferred by the participant. The plan also provided an additional match when a participant’s salary and annual bonus exceeded Internal Revenue Code qualified plan limits. Benefits under the plan are unfunded. Account balances earn interest at a rate that is reset each calendar year based on the Moody’s rate for the prior September. Distributions occur according to employee elections. AT&T Mobility adopted a successor plan, known as the AT&T Mobility 2005 Cash Deferral Plan, having substantially the same terms as the original
plan except with respect to the timing of deferral and distribution elections. No new deferrals were permitted after 2008.
BellSouth Nonqualified Deferred Income Plan
Mr. de la Vega also made contributions from his BellSouth compensation to this nonqualified deferred compensation plan. Under Schedule A of the plan, senior managers were permitted to make up to two annual deferrals of up to 25% of their salary and bonus. Beginning with the 7th year after the deferral, the plan returned the original deferral to the participant in one to three annual installments, depending on the year of the deferral. Mr. de la Vega’s deferrals under Schedule A receive fixed rates of 17.0% and 17.5% for his 1991 and 1993 deferrals, respectively. The balance is paid in 15 annual installments beginning at age 65. Under Schedule B, participants were
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EXECUTIVE COMPENSATION TABLES
|
able to defer up to 10% of their salary and bonus; distributions are made at the election of the participant. Mr. de la Vega elected 5 annual installments beginning in 2012 and received his final installment in 2016.
Mr. de la Vega’s deferrals under Schedule B received fixed rates of 11.0% for his 1994 deferral and 10% for his 1995 deferral. No new deferrals were permitted under this plan after 1998.
AT&T Severance PolicySEVERANCE POLICY
The AT&T Severance Policy generally limits severance payments for executive officersExecutive Officers to 2.99 times salary and bonus. Under the AT&T Severance Policy, the Company will not provide severance benefits to an executive officerExecutive Officer that exceed 2.99 times the officer’s annual base
annual base salary, plus target bonus, unless the excess payment receives prior stockholder approval or is ratified by stockholders at a regularly scheduled annual meeting within the following 15 months.
Potential Payments Upon Change in ControlPOTENTIAL PAYMENTS UPON CHANGEIN CONTROL
Change in Control
An acquisition in our industry can take a year or more to complete, and during that time it is critical that the Company have continuity of its leadership. If we are in the process of being acquired, our officers may have concerns about their employment with the new company. Our Change in Control Severance Plan offers benefits so that our officers may focus on the Company’s business without the distraction of searching for new employment. The Change in Control Severance Plan covers our officers, including each of the Named Executive Officers. Mr. de la Vega retired on December 31, 2016.NEOs.
Description of Change in Control Severance Plan
The Change in Control Severance Plan provides an officer who is terminated or otherwise leaves our Company for “good reason” after a change in control a payment equal to 2.99 times the sum of the executive’s most recent salary and target bonus. The Company is not responsible for the payment of excise taxes (or taxes on such payments). In 2014, the Company eliminated health, life insurance and financial counseling benefits from the plan.
“Good reason” means, in general, assignment of duties inconsistent with the executive’s title or status; a substantial adverse change in the nature or status of the executive’s responsibilities; a reduction in pay; or failure to pay compensation or continue benefits. For the
CEO, we eliminated a provision that defined “good reason” to include a good faith determination by the executive within 90 days of the change in control that he or she is not able to discharge his or her duties effectively.
Under the plan, a change in control occurs: (a) if anyone (other than one of our employee benefit plans) acquires more than 20% of AT&T’s common stock, (b) if within a
two-year period, the Directors at the beginning of the period (together with any new Directors elected or nominated for election by atwo-thirds majority of Directors then in office who were Directors at the beginning of the period or whose election or nomination for election was previously so approved) cease to constitute a majority of the Board, (c) upon consummation of a merger where AT&T Inc. is one of the merging entities and where persons other than the AT&T stockholders immediately before the merger hold more than 50% of the voting power of the surviving entity, or (d) upon our stockholders’ approval of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.
If a change in control and a subsequent termination of employment of the Named Executive OfficersNEOs had occurred at the end of 20162018 in accordance with the Change in Control Severance Plan, the following estimated severance payments would have been paid in a lump sum.
|
Potential Change in Control Severance Payments
as of DecemberASOF DECEMBER 31, 20162018
Name | Severance ($) | | ||
Stephenson | ||||
Stephens | ||||
| ||||
Donovan | ||||
McAtee | 9,493,250 | |||
Stankey |
None of the Named Executive OfficersNEOs hold stock awards that would be subject to automatic vesting in connection with a change in control.
|
Stockholders of Record
Stockholders whose shares are registered in their name on the Company records (also known as “stockholders of record”) will receive either a proxy card by which they may indicate their voting instructions or a notice on how they may obtain a proxy. Instead of submitting a signed proxy card, stockholders may submit their proxies by telephone or through the Internet. Telephone and Internet proxies must be used in conjunction with, and will be subject to, the information and terms contained on the form of proxy. Similar procedures may also be available to stockholders who hold their shares through a broker, nominee, fiduciary or other custodian.
All shares represented by proxies will be voted by one or more of the persons designated on the form of proxy in accordance with the stockholders’ directions. If the proxy card is signed and returned or the proxy is submitted by telephone or through the Internet without specific directions with respect to the matters to be acted upon, it will be treated as an instruction to vote such shares in accordance with the recommendations of the Board of Directors. Any stockholder giving a proxy may revoke it at any time before the proxy is voted at the meeting by giving written notice of revocation to the Secretary of AT&T, by submitting a later-dated proxy, or by attending the meeting and voting in person. The Chairman of the Board will announce the closing of the polls during the Annual Meeting. Proxies must be received before the closing of the polls in order to be counted.
A stockholder may designate a person or persons other than those persons designated on the form of proxy to act as the stockholder’s proxy by striking out the name(s) appearing on the proxy card, inserting the name(s) of another person(s), and delivering the signed card to that person(s). The person(s) designated by the stockholder must present the signed proxy card at the meeting in order for the shares to be voted.
Shares Held Through a Bank, Broker, or Other Custodian
Where the stockholder is not the record holder, such as where the shares are held through a broker, nominee, fiduciary or other custodian, the stockholder must provide voting instructions to the record holder of the shares in accordance with the record holder’s requirements in order to ensure the shares are properly voted.
Shares Held on Your Behalf under Company Benefit Plans or under The DirectSERVICE Investment Program
The proxy card, or a proxy submitted by telephone or through the Internet, will also serve as voting instructions to the plan administrator or trustee for any shares held on behalf of a participant under any of the following employee benefit plans: the AT&T Savings and Security Plan; the AT&T Puerto Rico Retirement Savings Plan; the AT&T Retirement Savings Plan; the BellSouth Savings and Security Plan and the Warner Media, LLC Savings Plan (WM Plan). Subject to the trustee’s fiduciary obligations, shares in each of the above employee benefit plans (other than the WM Plan) for which instructions are not received will not be voted. Shares in the WM Plan for which voting instructions are not received will be voted in the same proportion as shares for which voting instructions are received, except that if the WM Plan shares are attributable to accounts transferred from the Time Incorporated Payroll-Based Employee Stock Ownership Plan or the WCI Employee Stock Ownership Plan, then uninstructed shares will not be voted. To allow sufficient time for voting by the trustees and/or administrators of the plans, your voting instructions must be received by April 23, 2019.
In addition, the proxy card or a proxy submitted by telephone or through the Internet will constitute voting instructions to the plan administrator under The DirectSERVICE Investment Program sponsored and administered by Computershare Trust Company, N.A. (AT&T’s transfer agent) for shares held on behalf of plan participants.
If a stockholder participates in the plans listed above and/or maintains stockholder accounts under more than one name (including minor differences in registration, such as with or without a middle initial), the stockholder may receive more than one set of proxy materials. To ensure that all shares are voted, please submit proxies for all of the shares you own.
| 76 |
|
Other InformationOTHER INFORMATION
Section 16(a) Beneficial Ownership Reporting Compliance
AT&T’s executive officers and Directors are required under the Securities Exchange Act of 1934 to file reports of transactions and holdings in
Only AT&T common stockstockholders may attend the meeting.
Stockholders of Record (shares are registered in your name)
An admission ticket is attached to your proxy card or Annual Meeting Notice and Admission Ticket. If you plan to attend the Annual Meeting, please retain the admission ticket and bring it with the SEC and the NYSE. Based solely on a review of the filed reports made during or with respectyou to the preceding year, AT&T believes that all executive officers and Directors weremeeting. A stockholder of record who does not have an admission ticket will be admitted upon presentation of photo identification at the door.
Other Stockholders (shares are held in compliance with all filing requirements applicablethe name of a bank, broker, or other institution)
You may obtain admission to such executive officers and Directors, except for Mr. Rose for whom one report regarding the purchasemeeting by presenting proof of your ownership of AT&T common stock was inadvertently filed late.
Availability of Corporate Governance Documents
A copy of AT&T’s Annual Reportand photo identification. To be able to the SEC onForm 10-K for the year 2016 may be obtained without charge upon written request to AT&T Stockholder Services, 208 S. Akard, Room 1830, Dallas, Texas 75202. AT&T’s Corporate Governance Guidelines, Code of Ethics, and Committee Charters for the following committees may be viewed online at www.att.com and are also available in print to anyone who requests them (contact the Senior Vice President and Secretary of AT&Tvote at the address below): Audit Committee, Human Resources Committee, Corporate Governance and Nominating Committee, Corporate Development and Finance Committee, Public Policy and Corporate Reputation Committee, and Executive Committee.meeting, you will need the bank, broker, or record holder to give you a proxy.
Stockholder Proposals and Director NomineesHOUSEHOLDING INFORMATION
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.
Stockholders who intend to submit proposals at an Annual Meeting but whose proposals are not included in the proxy materials for the meeting and stockholders who intend to submit nominations for Directors at an Annual Meeting are required to notify the Senior Vice President and Secretary of AT&T (at the address above) of their proposal or nominations and to provide certain other information not less than 90 days, nor more than 120 days, before the anniversary of the prior Annual Meeting of Stockholders, in accordance with AT&T’s Bylaws. Special notice provisions apply under the Bylaws if the date of the Annual Meeting is more than 30 days before or 70 days after the anniversary date.
Householding Information
No more than one annual report and Proxy Statement will be sent to multiple stockholders sharing an address unless AT&T has received contrary instructions from one or more of the stockholders at that address. Stockholders may request a separate copy of the most recent annual report and/or the Proxy Statement by writing the transfer agent at: Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078, or by calling(800) 351-7221. Stockholders calling from outside the United States may call(781) 575-4729. Requests will be responded to promptly. Stockholders sharing an address who desire to receive multiple copies, or who wish to receive only a single copy, of the annual report and/or the Proxy Statement may write or call the transfer agent at the above address or phone numbers to request a change.
CostVOTING RESULTS
The voting results of Proxy Solicitationthe Annual Meeting will be published no later than four business days after the annual meeting on a Form8-K filed with the Securities and Exchange Commission, which will be available in the investor relations area of our website at www.att.com.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
AT&T’s Executive Officers and Directors are required under the Securities Exchange Act of 1934 to file reports of transactions and holdings in AT&T common stock with the SEC and the NYSE. Based solely on a review of the filed reports made during or with respect to the preceding year, AT&T believes that all Executive Officers and Directors were in compliance with all filing requirements applicable to such Executive Officers and Directors.
COSTOF PROXY SOLICITATION
The cost of soliciting proxies will be borne by AT&T. Officers, agents and employees of AT&T and its subsidiaries and other solicitors retained by AT&T may, by letter, by telephone or in person, make additional requests for the return of proxies and may receive proxies on behalf of AT&T. Brokers, nominees, fiduciaries and other custodians will be requested to forward soliciting material to the beneficial owners of shares and will be reimbursed for their expenses. AT&T has retained D. F. King & Co., Inc. to aid in the solicitation of proxies at a fee of $23,500, plus expenses.
|
OTHER INFORMATION
We determined the pay ratio by dividing the total 2018 compensation of the CEO as disclosed in the Summary Compensation Table by the total 2018 compensation of the median employee, using the same components of compensation as used in the Summary Compensation Table for the CEO.
Our median employee for 2018 was determined using the compensation of employees who were actively employed on October 1, 2018 (theMeasurement Date). We used their cash compensation for the first three quarters of the year to determine the median employee.
Determination of Number of Employees for Selection of Median Employee
Step 1 - As of the Measurement Date, our total number of active global employees was 233,993, excluding the CEO and 31,618 employees of companies acquired during 2018 as follows: WarnerMedia (30,208), AppNexus (1,054), and AlienVault (356). | ||
Number of Employees: |
233,993 | |
Step 2 -
Of the above referenced 233,993 active global employees, 44,892 werenon-U.S. employees. We included in our calculation only the employees in the five foreign countries that held our largest foreign employee populations as follows: Mexico (20,214), Argentina (4,177), Slovakia (3,295), Colombia (3,064) and India (2,885). We excluded 11,257 employees in 56 other foreign countries as follows: Australia (266), Austria (12), Barbados (2), Belgium (125), Brazil (2,151), Bulgaria (101), Canada (440), Chile (467), China (78), Costa Rica (242), Curacao (17), Czech Republic (1,251), Denmark (58), Ecuador (379), El Salvador (1), Finland (19), France (183), Germany (289), Greece (3), Guatemala (2), Hong Kong (216), Hungary (2), Indonesia (2), Iraq (1), Ireland (31), Israel (308), Italy (137), Japan (124), Korea (28), Lithuania (1), Malaysia (694), Netherlands (219), New Zealand (16), Norway (11), Pakistan (2), Panama (3), Peru (272), Philippines (64), Poland (13), Portugal (2), Romania (2), Russian Federation (2), Singapore (314), Slovenia (2), South Africa (4), Spain (99), Sweden (43), Switzerland (52), Taiwan (20), Thailand (8), Trinidad (110), Turkey (3), United Arab Emirates (4), United Kingdom (1,066), Uruguay (199), and Venezuela (1,097).
Number of Employees: | (11,257) | |
After exclusions, we used 189,101 U.S. employees and 33,635non-U.S. employees for the determination of the median employee. | ||
Total Number of Employees | 222,736 | |
The total compensation of our median employee, $95,814, was determined using the same methodology we used for Mr. Stephenson in the Summary Compensation Table and we included the cost of group health and welfare benefits. The total compensation of the CEO Randall L. Stephenson was $29,118,118, which includes the value of Mr. Stephenson’s health benefits. The final pay ratio calculation is 304:1.
| 78 | |
The following tables reconcile our free cash flow(FCF) and earnings per share(EPS) metrics, discussed on page 52,38, to the most comparable GAAP metrics.
Free cash flow is defined as cash from operations minus capital expenditures. We believe these metrics providethis metric provides useful information to our investors because management views free cash flow as an important indicator of how much cash is generated by routine business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to stockholders.
Free Cash FlowFREE CASH FLOW
| Dollars in millions | Twelve Months Ended December 31, 2016 | ||||
Net cash provided by operating activities | $ | 39,344 | |||
Less: Capital expenditures | (22,408 | ) | |||
Free Cash Flow | 16,936 | ||||
| Dollars in millions | Twelve Months Ended December 31, 2018 | |
Net cash provided by operating activities | $43,602 | |
Less: Capital expenditures | (21,251) | |
Free Cash Flow | 22,351 |
Adjusted diluted EPS is calculated by excluding from operating revenues, operating expenses and income tax expense certain significant items that arenon-operational ornon-recurring in nature, including dispositions and merger integration and transaction costs (referred to as “Adjusting Items”). Management believes that these measures providethis measure provides relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends.
Adjusting items include revenues and costs we consider nonoperational in nature, such as items arising from asset acquisitions or dispositions. We also adjust for net actuarial gains or losses associated with our pension and postemployment benefit plans due to the often significant impact on our fourth-quarter results (we immediately recognize this gain or loss in the income statement, pursuant to our accounting policy for the recognition of actuarial gains and losses.) Consequently, our adjusted results reflect an expected return on plan assets rather than the actual return on plan assets, as included in the GAAP measure of income.plans.
The tax impact of adjusting items is calculated using the effective tax rate during the quarter except for (1) adjustments related to Mexico operations, which are taxed at the 30% marginal rate for Mexico and (2) adjustments that, given their magnitude can drive a change in the effective tax rate, reflect the actual tax expense or combined marginal rate of approximately 38%.ADJUSTED DILUTED EPS
December 31, 2018 | ||
Diluted EPS | $ 2.85 | |
Amortization of intangible assets | 0.81 | |
Merger integration and other items1 | 0.26 | |
(Gain) loss on sale of assets, impairments and other adjustments2 | 0.05 | |
Actuarial (gain) loss3 | (0.38) | |
Tax-related items | (0.07) | |
Adjusted EPS | $ 3.52 |
| 1. | Includes combined merger integration items and merger-related interest income and expense, and redemption premiums. |
| 2. | Includes gains on transactions, natural disaster adjustments and charges, and employee-related and other costs. |
| 3. | Includes adjustments for actuarial gains or losses associated with our postemployment benefit plans, which we immediately recognize in the income statement, pursuant to our accounting policy for the recognition of actuarial gains/losses. We recorded total net actuarial gains of $3.4 billion in 2018. As a result, adjusted EPS reflects an expected return on plan assets of $3.5 billion (based on an average expected return on plan assets of 7.00% for our pension trust and 5.75% for our VEBA trusts), rather than the actual return on plan assets of $1.2 billion loss (actual pension return of -1.4% and VEBA return of -4.2%), included in the GAAP measure of income. |
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AT&T Corporate Social Responsibility
Adjusted Diluted EPS2025 Goals
Our Network & Our Customers |
Our Supply Chain | |||
Our Communities | ||||
AT&T will enable carbon savings 10 times the footprint of our operations by enhancing the efficiency of our network and delivering sustainable customer solutions. | ||||
We will work with our industry peers to develop and promote adoption of that will transform the environmental and social impact of technology supply chains. | We will invest resources, develop initiatives, and collaborate with stakeholders to close the skills gap by increasing the number of Americans with high-quality, post-secondary degrees or credentials to 60%. |
Awards, Ratings, and Rankings
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For more information and for a complete list of external recognition, visitatt.com/csr
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J.D. Power Award Information
AT&T was ranked highest in the following J.D. Power studies:
AT&T received the highest numerical score among providers in the J.D. Power 2016 (Vol. 2) and 2017 (Vol. 1) U.S. Wireless Customer Care Full-Service Performance Studies. 2017 V1 study based on 8,135 total responses, 4 full-service carriers, and measures the experiences of current customers who contacted their carrier’s customer care department within the past three months, surveyed July – December 2016. Your experiences may vary. Visit jdpower.com
AT&T received the highest number among providers in the J.D. Power 2013 Vol. 2, 2014-2016 (V1 & V2), and 2017 Vol. 1 U.S. Wireless Purchase Experience Full-Service Performance Studies. 2017 V1 study based on 8,058 total responses, 4 full-service carriers, and measures the experiences of current wireless service customers who made a sales transaction with their current carrier within the past three months, surveyed July-December 2016. Your experiences may vary. Visit jdpower.com
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received before the polls close on April 26, 2019. | |||||||||
Go towww.envisionreports.com/att or scan the QR code the shaded bar below. | ||||||||||
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Call toll free 1-800-652-VOTE (8683) within the | |||||||||
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Sign up for electronic delivery at www.envisionreports.com/att | ||||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | ☒ | |||||
q To vote by using the proxy card below, fold along the perforation, detach and return the bottom portion in the enclosed envelope.IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
| A | Election of Directors | |||||||||||||||||||||||||||||||||||
| 1. | Nominees: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | + | |||||||||||||||
| 01 - Randall L. Stephenson |
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02 - Samuel A. Di Piazza, Jr. |
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| 03 - Richard W. Fisher | ☐ | ☐ | ☐ | 08 - Beth E. Mooney | ☐ | ☐ | ☐ |
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| 04 - Scott T. Ford | ☐ | ☐ | ☐ | 09 - | ☐ | ☐ | ☐ | |||||||||||||||||||
| 05 - Glenn H. Hutchins | ☐ | ☐ | ☐ | 10 - | ☐ | ☐ | ☐ | |||||||||||||||||||
| B | Management Proposals— The Board of Directors recommends a voteFORItems 2 and | |||||||||||||||||||||||||||||||||||
| For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||
| 2. | Ratification of appointment of independent auditors. | ☐ | ☐ | ☐ | 3. | Advisory approval of executive compensation. | ☐ | ☐ | ☐ | |||||||||||||||
| 3 Yrs | 2 Yrs | 1 Yr | Abstain | |||||||||||||||||||||
| 4. | Advisory approval of frequency of vote on executive compensation. | ☐ | ☐ | ☐ | ☐ | |||||||||||||||||||
| For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||
| 2. | Ratification of appointment of independent auditors. | ☐ | ☐ | ☐ | 3. | Advisory approval of executive compensation. | ☐ | ☐ | ☐ | |||||||||||||||
| C | Stockholder Proposals— The Board of Directors recommends a voteAGAINST Item 4. | |||||||||||||||||||||||||||||||||||
| For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||
| 5. | Prepare political spending report. | ☐ | ☐ | ☐ | 6. | Prepare lobbying report. | ☐ | ☐ | ☐ | 7. | Modify proxy access requirements. | ☐ | ☐ | ☐ | ||||||||||||||||
| 8. | Reduce vote required for written consent. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||
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| 4. | Independent Chair. | ☐ | ☐ | ☐ | ||||||||||||||||||||
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| AT&T Inc. | Admission Ticket | |
Friday, April | Upon arrival, please present this admission ticket and photo ID at the registration desk. | |
| Doors open at 7:30 a.m. local time | ||
| Meeting begins at 9:00 a.m. local time | ||
2520 Flora Street Dallas, TX 75201
Directions: Complimentary parking is available as indicated on the map.
Upon arrival, please present this admission ticket and a government-issued photo identification. All shareholders and guests are required to present a government-issued photo identification. For safety and security reasons, use of recording devices and still video cameras are not permitted. In addition, signs, placards, leaflets, computers, large bags, briefcases, packages, and weapons will not be permitted in the building. |   |
 | Small steps make an impact. |  | ||
| Help the environment by consenting to receive electronic | ||||
| delivery, sign up at www.envisionreports.com/att |
q To vote by using the proxy card below, fold along the perforation, detach and return the bottom portion in the enclosed envelope.IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE . q
| This proxy is solicited on behalf of the Board of Directors for the Annual Meeting on April | ||||||||
| The undersigned hereby appoints Randall L. Stephenson and John J. Stephens, and each of them, proxies, with full power of substitution, to vote all common shares of the undersigned in AT&T Inc. at the Annual Meeting of Stockholders to be held on April | ||||||||
| that may properly come before the meeting.If specific voting directions arenot given with respect to the matters to be acted upon and the signed card is returned, it will be treated as an instruction to vote such shares in accordance with the Directors’recommendations on the matters listed on the reverse side of this card and at the discretion of the proxies on any other matters that may properly come before the meeting. | + | |||||||
| The Board of Directors recommends a voteFORall nominees,FORItems 2 | ||||||||
Please sign below and return promptly in the enclosed envelope or, if you choose, you can submit your proxy by telephone, through the Internet or mail it to Computershare, PO Box 43115, Providence RI | ||||||||
| 02940. This proxy card, when signed and returned, or your telephone or Internet proxy, will also constitute voting instructions to the (a) plan administrator for shares held on your behalf pursuant to The DirectSERVICE Investment Program (dividend reinvestment plan) and (b) plan administrator or trustee for shares held on your behalf under any of the following employee benefit plans: the AT&T Savings and Security | ||||||||
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| Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | ||||
| Date (mm/dd/yyyy) | Signature 1 | Signature 2 | ||||||
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