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. )
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AT&T Inc.
(Name of Registrant as Specified In Its Charter)
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Notice of At & T inc. 2019 Annual Meeting Of Stockholders and Proxy Statement.
To Our StockholdersTO OUR STOCKHOLDERS
 | Letter from the Chairman, CEO and President |
Dear Stockholders:
I’m pleasedIt’s a pleasure to invite you to join us for our 20182019 Annual Meeting of StockholdersStockholders. I hope you can join us on Friday, April 27, 2018,26, 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 strategycontinuing tocreate the best entertainmentgreat entertainment. Most important, we’ll discuss our plans to grow free cash flow and communications experiencespay down our debt – all while continuing to invest in the world.growth and maintain a solid, steady dividend for you, our owners.
Everything we’ve done is about executing that strategy: FromIn recent years, you have seen us transform our wildly popular DIRECTV NOW video streaming service to the successcompany in big and dramatic ways. But one thing has not – and will not – change. That’s our goal of our bundled video, wireless and broadband offerings, to being named by the U.S. First Responder Network Authority to build a best-in-class nationwide network for first responders and public safety officials. The next step in executing our strategy is our pending acquisition of Time Warner. Despite the U.S. Department of Justice’s decision to challenge the acquisition in court, we remain confident we will complete this merger, and we look forward to bringing its benefits to both our customers and investors.
Our goal is to deliverdelivering strong results for our stockholders while positioningyou and sustainable, long-term growth and success for AT&T for the long term.&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:
AsIn my second term as your company’s Independent Lead Independent Director, I’mI want you to know how proud of theI am to reaffirm AT&T’s lasting commitment to strong governance that is a hallmark of AT&T. thoughtful and effective governance.
The Board’s role is to keep our company focused on the long termlong-term and protect the interests of our stockholders. We dotake a disciplined,hands-on approach to discharging that by challenging conventional thinking andduty – questioning assumptions, offering differentalternative points of view while maintainingand assessing every decision through the lens of building stockholder value.
We have worked hard to recruit and maintain a sharp focus onBoard 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 stockholders.
As the marketplace around us has changed, so too has the composition of our Board. Since 2013, we have elected seven new directors, resulting in a Board with the rich diversity of knowledge, experience and perspectives across technology, finance, marketing and public policy that AT&T needs to continue creating value for you, our stockholders.you.
I hope you are able to join ussee you at our 2019 Annual Meeting. And as always,Until then, please accept the gratitude of our entire Board thanks you for your enduring confidence and support.in AT&T.
Sincerely,
Matthew Rose
| AT&T Inc. One AT&T Plaza Whitacre Tower 208 S. Akard Street Dallas, TX 75202 |
NOTICE OF 20182019 ANNUAL MEETING
OF STOCKHOLDERS AND PROXY STATEMENT
To the holders of Common Stock of AT&T Inc.:
The 20182019 Annual Meeting of Stockholders of AT&T Inc. will be held as follows:
When: | 9:00 a.m. local time, Friday, April | |
Where: | Moody Performance Hall 2520 Flora Street Dallas, Texas 75201 | |
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 27, 2018,2019, 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
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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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If you plan to attend the meeting in person, please bring the admission ticket (attached to the proxy card or the
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on April
The proxy statement and annual report to security holders are available at www.edocumentview.com/att |
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Stacey Maris
 | i |
Senior Vice President – Assistant General Counsel
GUIDE TO AT&T’S PROXY STATEMENT
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 2019 Annual Meeting of Stockholders of AT&T. The meeting will be held at 9:00 a.m. local time on Friday, April 26, 2019, at the Moody 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 Secretaryform of proxy are being sent or made available beginning March 11, 2019, to stockholders who were record holders of AT&T’s common stock, $1.00 par value per share, at the close of business on February 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, 2019, there were 7,290,236,907 shares of AT&T common stock outstanding.
March 12, 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 |
Acronyms Used
CAM
Career Average Minimum
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CCO
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 | Chief Compliance Officer
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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 |
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 |
| ii |  |
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
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If you plan to attend the meeting in person, please bring the admission ticket (attached to the proxy card or the Notice of Internet Availability of Proxy Materials) to the Annual Meeting. If you do not have an admission ticket or if you hold your shares in the name of a bank, broker, or other institution, you may obtain admission to the meeting by presenting proof of your ownership of AT&T stock.
Agenda and Voting Recommendations
| Item | Description | Board Recommendation | Page | Description
| Board Recommendation
| Page
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MANAGEMENT PROPOSALS: |
MANAGEMENT PROPOSALS: | |||||||||||
| 1 | FOR each nominee | 8 |
Election of Directors
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FOR each nominee
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5
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| 2 | FOR | 18 |
Ratification of Ernst & Young LLP as auditors for 2019
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FOR
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13
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| 3 | FOR | 19 |
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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STOCKHOLDER PROPOSAL:
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| 4 | Approve Stock Purchase and Deferral Plan | FOR | 20 |
Independent Chair
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AGAINST
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15
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| 5 | Approve 2018 Incentive Plan | FOR | 23 | |||||||||
| 6 | AGAINST | 25 | ||||||||||
| 7 | AGAINST | 27 | ||||||||||
| 8 | AGAINST | 29 | ||||||||||
| 9 | Stockholder Proposal: Reduce Vote Required for Written Consent | AGAINST | 30 | |||||||||
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 3216 describes our governance framework, which includes the following highlights:
Independent Lead Director | Proxy access | Stockholder right to call special meetings | ||||||
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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Director Nominees*
Current Directors*
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Our
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 |   |  | ||
| Name | Age | Director Since | Principal Occupation | |||
Randall L. Stephenson | 57 | 2005 | Chairman, CEO, and President, AT&T Inc. | |||
Samuel A. Di Piazza, Jr. | 67 | 2015 | Retired Global CEO, PricewaterhouseCoopers International Limited | |||
Richard W. Fisher | 68 | 2015 | Former President and CEO, Federal Reserve Bank of Dallas | |||
Scott T. Ford | 55 | 2012 | Member and CEO, Westrock Group, LLC | |||
Glenn H. Hutchins | 62 | 2014 | Co-Founder, North Island and Co-Founder, Silver Lake | |||
William E. Kennard | 61 | 2014 | Former United States Ambassador to the European Union and former Chairman of the Federal Communications Commission | |||
Michael B. McCallister | 65 | 2013 | Retired Chairman and CEO, Humana Inc. | |||
Beth E. Mooney | 63 | 2013 | Chairman and CEO, KeyCorp | |||
Joyce M. Roché | 70 | 1998 | Retired President and CEO, Girls Inc. | |||
Matthew K. Rose | 58 | 2010 | Chairman and CEO, Burlington Northern Santa Fe, LLC | |||
Cynthia B. Taylor | 56 | 2013 | President and CEO, Oil States International, Inc. | |||
Laura D’Andrea Tyson | 70 | 1999 | 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 at Berkley | |||
Geoffrey Y. Yang | 59 | 2016 | Founding Partner and Managing Director, Redpoint Ventures |
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 Director nomineesDirectors are independent, except for Mr. Stephenson
** Retiring effective April 26, 2019
 |
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Executive Compensation Highlights
Over2019 Program Enhancement
The Committee has approved the last few years, we have made several key enhancements touse 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 compensation programs to continue to improve the link betweenExecutive Officer compensation and benefits program using the Company’s business and talent strategies as wellCommittee’s guiding pay principles as the long-term interestspillars of our stockholders:
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2017
2018 Corporate Short Term AwardAwards
| Metric | Metric Weight | Attainment | Payout% | Type of Metric | Metric Weight | Attainment | Payout% | |||||||||||||
2017 Earnings per Share (EPS) | 70 | % | 94 | % | 84 | % | ||||||||||||||
2017 Free Cash Flow (FCF) | 30 | % | 103 | % | 106 | % | ||||||||||||||
2018 EPS | Quantitative | 60% | 92% | 81% | ||||||||||||||||
2018 FCF | Quantitative | 30% | 98% | 98% | ||||||||||||||||
Collaboration | Qualitative | 10% | n/a | 100% | ||||||||||||||||
Weighted Average Payout | 90 | % | 88% | |||||||||||||||||
| * | See performance adjustments beginning on page |
Long Term Award – Performance Share Component
2015-20172016-2018 Performance Period
| Metric | Metric Weight | Attainment | Payout% | Metric Weight | Attainment | Payout% | ||||||||||||
3-Year Return on Invested Capital (ROIC) | 75 | % | 7.75% | 104 | % | |||||||||||||
3-Year Relative Total Stockholder Return (TSR) | 25 | % | Level 3 | 100 | % | |||||||||||||
3-Year ROIC | 75% | 7.56% | 101% | |||||||||||||||
3-Year Relative TSR | 25% | Level 6 | 0% | |||||||||||||||
Weighted Average Payout | 103 | % | 76% | |||||||||||||||
What We Do | What We Don’t Do | |||||||||
| Multiple Performance Metrics and Time Horizons:Use multiple performance metrics and multi-year vesting timeframes to discourage unnecessary short-term risk taking. | |||||||||
| 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 end of performance period on earned | |||||||||
| Annual Compensation-Related Risk Review:Performed annually to confirm that our programs do not encourage excessive risk taking and are not reasonably likely to have a material adverse effect on the Company. | |||||||||
| Clawback Policy: | |||||||||
| Severance Policy:Limits payments to 2.99 times salary and target bonus. | |||||||||
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| No “Single Trigger” Change in Control Provisions:No accelerated vesting of equity awards upon change in control. | ||||||
| No TaxGross-Ups:No excise taxgross-up | |||||
| 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, | ||||||
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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 2018 Annual Meeting of Stockholders of AT&T. The meeting will be held at 9:00 a.m. local time on Friday, April 27, 2018, at the Moody 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 12, 2018, to stock-
holders who were record holders of AT&T’s common stock, $1.00 par value per share, at the close of business on February 27, 2018. These materials are also available at www.edocumentview.com/att. Each share entitles the registered holder to one vote. As of January 31, 2018, there were 6,495,231,088 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.
Voting
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
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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, 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 24, 2018.
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.
Attending the Meeting
Only AT&T stockholders 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 you to the meeting. 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 the name of a bank, broker, or other institution)
You may obtain admission to the meeting by presenting proof of your ownership of AT&T common stock 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 Results
The voting results 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
and Exchange Commission, which will be available in the investor relations area of our website at www.att.com.
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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 20182019 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:Compensation
The advisory vote on executive compensation isnon-binding, and the preference of the stockholders will be determined by the choice receiving the greatest number of votes.
Approval of Stock Purchase and Deferral Plan and 2018 Incentive Plan: NYSE listing standards require listed companies to seek stockholder approval of plans that provide for the distribution of company stock to employees. When such approval is sought, the standards require that abstentions count as votes against approval of the proposal. These NYSE listing standards apply only to approval of the Stock Purchase and Deferral Plan and the 2018 Incentive Plan at the Annual Meeting.
All Other Matters to be Voted Upon:Upon
All other matters at the 20182019 Annual Meeting will be determined by a majority of the votes cast.
Abstentions:Abstentions
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 20182019 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 20192020 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 9)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 | 57 | 2005 | Chairman, CEO, and President, AT&T Inc. | |||
Samuel A. Di Piazza, Jr. | 67 | 2015 | Retired Global CEO, PricewaterhouseCoopers International Limited | |||
Richard W. Fisher | 68 | 2015 | Former President and CEO, Federal Reserve Bank of Dallas | |||
Scott T. Ford | 55 | 2012 | Member and CEO, Westrock Group, LLC | |||
Glenn H. Hutchins | 62 | 2014 | Co-Founder, North Island and Co-Founder, Silver Lake | |||
William E. Kennard | 61 | 2014 | Former United States Ambassador to the European Union and former Chairman of the Federal Communications Commission | |||
Michael B. McCallister | 65 | 2013 | Retired Chairman and CEO, Humana Inc. | |||
Beth E. Mooney | 63 | 2013 | Chairman and CEO, KeyCorp | |||
Joyce M. Roché | 70 | 1998 | Retired President and CEO, Girls Inc. | |||
Matthew K. Rose | 58 | 2010 | Chairman and CEO, Burlington Northern Santa Fe, LLC | |||
Cynthia B. Taylor | 56 | 2013 | President and CEO, Oil States International, Inc. | |||
Laura D’Andrea Tyson | 70 | 1999 | 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 at Berkley | |||
Geoffrey Y. Yang | 59 | 2016 | Founding Partner and Managing Director, Redpoint Ventures |
All Director nominees are independent, except for Mr. Stephenson
|
Director Biographies
|
The Board recommends you voteFOR each of the following candidates: |
| ||
Name
| Age
|
Director Since
| Principal Occupation
| |||
Randall L. Stephenson
|
58
|
2005
|
Chairman, CEO, and President, AT&T Inc.
| |||
Samuel A. Di Piazza, Jr.
|
68
|
2015
|
Retired Global CEO, PricewaterhouseCoopers International Limited
| |||
Richard W. Fisher
|
69
|
2015
|
Former President and CEO, Federal Reserve Bank of Dallas
| |||
Scott T. Ford
|
56
|
2012
|
Member and CEO, Westrock Group, LLC
| |||
Glenn H. Hutchins
|
63
|
2014
|
Chairman, North Island andCo-Founder, Silver Lake
| |||
William E. Kennard
|
62
|
2014
|
Former United States Ambassador to the European Union and former Chairman of the Federal Communications Commission
| |||
Michael B. McCallister
|
66
|
2013
|
Retired Chairman and CEO, Humana Inc.
| |||
Beth E. Mooney
|
64
|
2013
|
Chairman and CEO, KeyCorp
| |||
Matthew K. Rose
|
59
|
2010
|
Chairman and CEO, Burlington Northern Santa Fe, LLC
| |||
Cynthia B. Taylor
|
57
|
2013
|
President and CEO, Oil States International, Inc.
| |||
Laura D’Andrea Tyson
|
71
|
1999
|
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
| |||
Geoffrey Y. Yang
|
60
|
2016
|
Founding Partner and Managing Director, Redpoint Ventures
| |||
All Director nominees are independent, except for Mr. Stephenson.
| 5 |
VOTING ITEMS
|
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.
| |||||||||||||||
AT&T Board Committees Executive (Chair)
Past Directorships The Boeing Company (2016-2017); Emerson Electric Co. (2006-2017) | Qualifications, Attributes, Skills, and Experience | |||||||||||||||
Mr. Stephenson’s qualifications to serve on the Board include his more than 35 years of experience in the telecommunications industry, his intimate knowledge of our Company and its history, his expertise in finance and operations management, and his years of executive leadership experience across various divisions of our organization, including serving as Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Senior Vice President of Finance, and Senior Vice President of Consumer Marketing.
| ||||||||||||||||
| 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
| |||||||||||||
|
Samuel A. Di Piazza, Jr.
|
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.
| |||||||||||||||
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.
| ||||||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Extensive Knowledge of the Company’s Business and/or Industry | |||||||||||||
|
High Level of Financial Experience
|
|
Global Business/Affairs Experience
| |||||||||||||
| 6 | |
VOTING ITEMS
Richard W. Fisher
|
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
| |||||||||||
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.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience |   | Government/Regulatory Expertise | |||||||||
| High Level of Financial Experience
|   | Global Business/Affairs Experience
| |||||||||
|
Scott T. Ford
|
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 fully integrated coffee company), which Mr. Ford founded in 2009, and where he has served as Chief Executive Officer since 2009. Westrock Group also operates Westrock Asset Management, LLC (a global alternative investment firm), which Mr. Ford founded in 2014, and where he has served as Chief Executive Officer and Chief Investment Officer since 2014. Mr. Ford previously served as President and Chief Executive Officer of Alltel Corporation (a provider of wireless voice and data communications services) from 2002 to 2009 and served as an executive member of Alltel Corporation’s board of directors from 1996 to 2009. He also served as Alltel Corporation’s President and Chief Operating Officer from 1998 to 2002. Mr. Ford led Alltel through several major business transformations, culminating with the sale of the company to Verizon Wireless in 2009. Mr. Ford received his B.S. in finance from the University of Arkansas, Fayetteville.
| |||||||||||
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
| |||||||||
|
VOTING ITEMS
|
Glenn H. Hutchins
|
Age | |||||||||||
| Mr. Hutchins is
| |||||||||||
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.
| ||||||||||||
| 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 asset management firm) where he led investments in the telecommunications and media sectors. Mr. Kennard served as Chairman of the U.S. Federal Communications Commission from 1997 to 2001. Before his appointment as FCC Chairman, he served as the FCC’s General Counsel from 1993 until 1997. Mr. Kennard joined the FCC from the law firm of Verner, Liipfert, Bernhard, McPherson and Hand (now DLA Piper) where he was a partner and member of the firm’s board of directors. Mr. Kennard received his B.A. in communications from Stanford University and earned his law degree from Yale Law School.
| |||||||||||
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.
| ||||||||||||
| Senior Leadership/Chief Executive Officer Experience | | Government/Regulatory Expertise | |||||||||
| Extensive Knowledge of the Company’s Business and/or Industry
|   | Legal Experience
| |||||||||
|
VOTING ITEMS
|
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
|
|
Age | |||||||||||
|
| |||||||||||
|
| |||||||||||
| ||||||||||||
| | |||||||||||
|
|
|
| |||||||||
|
| |||||||||||
| 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.
| |||||||||||
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
| |||||||||
|
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, Inc.
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,
| |||||||||||
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. Mr. Yang holds a B.S.E. in engineering from Princeton University and an M.B.A. from Stanford University.
| |||||||||||
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, 2018.2019. 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.
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 5140 through 90)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 55)
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.
|
Management Proposal
Item 4. Approve Stock Purchase and Deferral Plan
The Stock Purchase and Deferral Plan (thePlan) offers mid-level and above management employees the opportunity to defer income through the purchase of deferred shares of AT&T common stock (AT&T Stock) with payroll deductions. The shares are distributed in the years elected by the participants. Based on the number of shares purchased, participants also receive limited matching employer contributions in the form of additional deferred shares. The Plan is designed to encourage managers to invest in AT&T Stock and, thereby, give these managers an even greater interest in the continued success of the Company.
The Plan is administered by the Human Resources Committee of the Board of Directors (theCommittee), which is composed entirely of independent Directors. The Committee has authority to amend the Plan and adopt rules for its operation.
The Plan was initially approved by stockholders in 2005, replacing a similar program originally adopted in 1991. Stockholders approved a revised plan in 2013 that, among other things, increased the number of authorized shares (exclusive of shares from the exercise of options) from 21 million to 46 million.
Subject to stockholder approval of the Plan at the 2018 Annual Meeting, the Board has increased the number of shares that may be acquired under the Plan through employee contributions, matching contributions and reinvested dividend equivalents from 46 million to 76 million. The number of shares that may be issued pursuant to options remains unchanged at 34 million. Under New York Stock Exchange Listing Standards, material amendments to the Plan, including increases in the number of authorized shares must be submitted to stockholders for approval.
The terms of the Plan are summarized below. In addition, the full text of the Plan is set forth in Annex A to this Proxy Statement, and the following summary is qualified in its entirety by reference to the text of the Plan.
Plan Summary
The Plan is offered to mid-level and above management employees, which currently total approximately 6,500 managers.
Each year, a participant may elect to establish a Share Deferral Account to purchase share units through payroll deductions during an upcoming year. The purchase price of a share unit is equal to the price of a share of AT&T Stock at the time of purchase. Each share unit is converted into a share of AT&T Stock at distribution. Share units earn dividend equivalents at the same rate as common stock and are reinvested in additional share units. AT&T may refuse or terminate, in whole or in part, any election to participate in the Plan.
In the annual enrollment, a participant may elect to contribute from 6% to 30% of the participant’s annual Base Compensation, which includes base salary, lump sum payments in lieu of base salary increases, and annual bonus. The Committee has authority to add or subtract different types of compensation to or from the definition of “Base Compensation.”
Share units are credited to a participant’s account based upon the closing price of AT&T Stock as of the last day of the month in which the contributions are credited. The share units are distributed up to five calendar years after a Share Deferral Account commences, as elected by the participant. A distribution may be further deferred by an employee for additional five-year periods, so long as each election is made while the participant is still an employee. In the event of the death of a participant, all unpaid deferrals of the participant under the Plan are promptly distributed.
In order (1) to generally offset the loss of Company match in the 401(k) plan caused by participation in the Plan or by participation in the Company’s Cash Deferral Plan (described on page 88) and (2) to provide match on compensation that exceeds Federal compensation limits for 401(k) plans, the Company provides “Makeup” matching contributions in the form of additional deferred shares. The “Makeup Match” is an 80% match on contributions from the first 6% of base salary and annual bonus (the same rate as used in the 401(k) plan), reduced by the amount of matching contributions an employee would have been eligible to receive in the 401(k) plan (regardless of whether the employee actually participates or is eligible to participate in the 401(k) plan). Officer level employees do not receive a Makeup Match on the contribution of their short-term awards (discussed
| |||
below). For participants hired on or after January 1, 2015, the Makeup Match uses a 100% match instead of an 80% match to reflect the increased company match in the 401(k) plan for these participants.
Participants who, in lieu of an annual bonus, receive an annual award under the Short Term Incentive Plan or a successor plan and/or another cash award so designated by the Committee (collectively,STIP Award) may make a separate election to contribute up to 95% of their STIP Award to the Plan and purchase share units. A STIP Award is typically limited to officer level employees. The STIP Award is not considered Base Compensation and is not eligible for the Makeup Match. If an award under the Short Term Incentive Plan is designated as an annual bonus, which typically is limited to employees below officer level, it is treated as Base Compensation and not as a STIP Award.
In accordance with the terms of the Plan, beginning with 2010 contributions of salary and 2011 contributions of annual bonus, the Company contributes a “Bonus Match” (in addition to the Makeup Match) to participant accounts in the form of additional deferred shares. The Bonus Match equals 20% of the participant’s contributions. However, the Bonus Match is not paid on employee contributions of STIP Awards in excess of the target award.
Previously, instead of the Bonus Match, AT&T issued stock options based on participation in the Plan. The Plan permits the Company to issue two nonqualified stock options for each share unit purchased by a participant. The Committee may only offer the Bonus Match if it reduces the number of options issued for each share unit purchased. As noted above, beginning with 2010 salary and 2011 annual bonus contributions, the Company stopped offering stock options and replaced them with the 20% Bonus Match. At this time the Company does not intend to resume the issuance of options under the Plan but may do so in the future.
Each option permits the holder to purchase one share of AT&T Stock with an exercise price equal to the fair market value of AT&T Stock at the time of the issuance of the option. (Reinvestments of dividend equivalents derived from participant-purchased share units, where the reinvestments are made during the first 13 months of a Share Deferral Account, also earn stock options). Stock options issued under the Plan may not be re-priced. When offered, stock options are issued
twice a year and are exercisable no earlier than one year (or upon termination of employment, if earlier), and no later than 10 years, after issuance. Unless otherwise provided by the Committee, in the event the employee terminates employment, the options expire on the earlier of the regular expiration date or as follows: retirement–five years, death or disability–three years, other termination-one year. Stock options are not transferable except by will or the laws of descent and distribution and are exercisable during the optionee’s lifetime only by the optionee.
The Committee may permit an employee to purchase share units with amounts other than Base Compensation or STIP Awards from time to time; however, these purchases may not earn matching contributions or stock options.
Federal Income Tax Matters Relating to Stock Options.The following is a summary of the principal U.S. Federal income tax consequences under present law of the issuance and exercise of stock options granted under the Incentive Plan. This summary is not intended to be exhaustive and, among other things, does not describe state or local tax consequences.
A participant will not be deemed to have received any income subject to tax at the time a nonqualified stock option is granted, nor will AT&T be entitled to a tax deduction at that time. When a nonqualified stock option is exercised, the participant will be deemed to have received an amount of ordinary income equal to the excess of the fair market value of the shares of common stock purchased over the exercise price. AT&T will be allowed a tax deduction in the year the option is exercised in an amount equal to the ordinary income which the participant is deemed to have received.
Available Shares.As noted above, the Company has amended the Plan to increase the number of shares of AT&T Stock that may be distributed as a result of deferrals (including employee and matching employer contributions and reinvested dividend equivalents) from 46 million to 76 million shares, subject to stockholder approval of the Plan. Shares withheld for taxes in connection with a distribution are returned to authorized status and may be reissued. All matching contributions are immediately vested. As of December 31, 2017, the total number of shares issued under the Plan as a result of deferrals or represented by purchased but undistributed share units (including matching contributions) was 29,483,116, leaving 16,516,884 shares available before the increase in authorized shares.
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The Plan also provides for the issuance of up to 34 million shares that may be issued pursuant to the exercise of stock options, which was not modified by the Company. When an Option is exercised (including but not limited to a Stock-Settled exercise), the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised. In the event a stock option is canceled, expires or otherwise terminates, it is returned to authorized status and may be reissued. When offered, no participant may receive more than 400,000 stock options during a calendar year. As of December 31, 2017, 11,790,354 options had been exercised and 4,530,343 options were outstanding, leaving 17,679,303 shares available for the exercise of options. Since the Plan commenced in 2005, the following persons or groups have received the number of options set out below: Mr. Stephenson – 1,046,938; Mr. Stankey – 18,190; Mr. Stephens – 200,754; Mr. Donovan – 4,183; and all current executive officers as a group – 1,327,664.
In the event of a stock split, stock dividend, or other change in the corporate structure of the Company, as described in the Plan, affecting the shares that may be issued under the Plan, an adjustment shall be made in the number and class of shares which may be delivered under the Plan (including but not limited to individual limits) as may be determined by the Committee.
Other Information. The Plan contains certain “loyalty provisions”. In exchange for being permitted to participate in the Plan, officer level employees and senior managers agree that for two years after termination of employment they will refrain from engaging in certain activities that are competitive with or “disloyal” to AT&T, including, among other things, competing with AT&T, soliciting its customers or interfering in its relationships with vendors, or improperly disclosing certain confidential information.
The closing price of AT&T’s common stock reported on the New York Stock Exchange for February 15, 2018, was $37.00.
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VOTING ITEMS
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Management Proposal
Item 5. Approve 2018 Incentive PlanSTOCKHOLDER PROPOSALS
Your Board of Directors has adopted the 2018 Incentive Plan (Incentive Plan) for the purpose of replacing the 2016 Incentive Plan, previously approved by our stockholders in 2016. The Incentive Plan, like the prior plan, permits AT&T to compensate eligible managers with equity and cash awards. New awards will not be made under the Incentive Plan untilA stockholder approval is obtained for the Plan.
The Incentive Plan provides your Directors with the flexibility to compensate managers through a variety of possible awards. These awards may, for example, be tied to the financial or operational performance of the Company, to the performance of the stock, or other measures, in each case as determined by your Directors. Because of the key role the Incentive Plan plays in the compensation of your executives, your Directors urge you to vote for approval of the Incentive Plan.
The terms of the Incentive Plan are summarized below. In addition, the full text of the Incentive Plan is set forth in Annex B to this Proxy Statement. The following summary is qualified in its entirety by reference to the text of the Incentive Plan.
Plan Summary
Eligible for Participation. Management employees of AT&T or its subsidiaries are eligible to be selected to participate in the Incentive Plan. Currently, there are approximately 100,000 managers who are eligible to participate in the plan; however, the Company expects participation to be generally limited to approximately 6,500mid-level and above managers. Actual selection of any eligible manager to participate in the Incentive Plan is within the sole discretion of the Plan Committee.
Performance Awards. The Incentive Plan allows certain committees of your Directors (each, aPlan Committee) to issue “performance shares” and “performance units.” These are contingent incentive awards that are converted into stock and/or cash and paid out to the participant if specific performance goals are achieved over performance periods established by the Plan Committee. If the performance goals are not achieved, the awards are forfeited or reduced. Performance shares are each equivalent in value to a share of common stock (payable in cash and/or stock), while performance units are equal to a specific amount of cash. The terms and conditions of the Awards are determined by the Plan Committee in its sole discretion. Unless otherwise
provided by the Plan Committee, participants receive dividend equivalents on performance shares.
In establishing Performance Goals, the Plan Committee is authorized, in its sole discretion, to use any criteria it determines. The performance goals set by the Plan Committee may include payout tables, formulas or other standards to be used in determining the extent to which the performance goals are met and, if met, the number of performance shares and/or performance units that would be converted into stock and/or cash (or the rate of such conversion) and distributed to participants. The Plan Committee may modify the performance goals or other terms of any performance shares or performance units or reduce or cancel such Awards at any time prior to distribution of such Awards.
Restricted Stock. The Incentive Plan also permits the Plan Committee to grant restricted stock awards. Each share of restricted stock shall be subject to such terms, conditions, restrictions, and/or limitations, if any, as the Plan Committee deems appropriate, including, but not by way of limitation, restrictions on transferability and continued employment. Holders of shares of restricted stock may vote the shares and receive dividends on such shares. The vesting period for restricted stock shall be determined by the Committee, which may accelerate the vesting of any such award.
The Plan Committee may also grant restricted stock units, which have substantially the same terms as restricted stock, except that units have no voting rights, may or may not receive dividend equivalents, and may be paid in cash or stock. The Plan Committee may also grant unrestricted stock.
Annual Individual Limits.In a calendar year no participant may receive performance shares, restricted stock, restricted stock units, or any combination thereof which would, in the aggregate, have a potential payout equivalent to more than 5% of the shares authorized to be issued under the Incentive Plan.
Stock Options. The Incentive Plan permits the Plan Committee to issue nonqualified stock options to managers, which directly link their financial success to that of AT&T’s stockholders. Incentive Stock Options, which are more costly for a company to issue, are not permitted under the Incentive Plan. The Plan Committee shall determine the number of shares subject to options and all other terms and conditions of the
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options, including vesting requirements. In no event, however, may the exercise price of a stock option be less than 100% of the fair market value of AT&T common stock on the date of the stock option’s grant, nor may any option have a term of more than ten years. During any calendar year, no single employee may receive options on shares representing more than 2% of the shares authorized for issuance under the Incentive Plan. Except for adjustments based on changes in the corporate structure or as otherwise provided in the Incentive Plan, the terms of an Option may not be amended to reduce the exercise price nor may Options be cancelled or exchanged for cash, other awards or Options with an exercise price that is less than the exercise price of the original Options.
Available Shares. The Incentive Plan authorizes the issuance, over a10-year period, of up to 150 million shares of common stock to participants, net of lapsed awards. Shares shall not be deemed to have been issued with respect to any portion of an Award that is settled in cash, other than an Option. When an Option is exercised (including but not limited to a Stock-Settled exercise), the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised. In the event of a stock split, stock dividend, or other change in the corporate structure of the Company, as described in the Plan, affecting the shares that may be issued under the Plan, an adjustment shall be made in the number and class of shares which may be delivered under the Plan (including but not limited to individual grant limits) as may be determined by the Human Resources Committee.
After April 30, 2028, no further awards may be issued under the Incentive Plan.
Federal Income Tax Matters Relating to Stock Options. The following is a summary of the principal U.S. Federal income tax consequences under present law of the issuance and exercise of stock options granted under the Incentive Plan. This summary is not intended to be exhaustive and, among other things, does not describe state or local tax consequences.
A participant will not be deemed to have received any income subject to tax at the time a nonqualified stock option is granted, nor will AT&T be entitled to a tax deduction at that time. When a nonqualified stock option is exercised, the participant will be deemed to
have received an amount of ordinary income equal to the excess of the fair market value of the shares of common stock purchased over the exercise price. AT&T will be allowed a tax deduction in the year the option is exercised in an amount equal to the ordinary income which the participant is deemed to have received.
Other Information. The Incentive Plan may be amended in whole or in part by the Board of Directors or the Human Resources Committee. In the event of a Change in Control (as defined in the Incentive Plan), the payout of performance units and performance shares shall be determined exclusively by the attainment of the performance goals established by the Plan Committee, which may not be modified after the Change in Control, and AT&T shall not have the right to reduce the awards for any other reason unless the holder of the award is terminated for Cause.
The Incentive Plan contains certain “loyalty provisions”. In exchange for being permitted to participate in the Plan, officer level employees and senior managers agree that for two years after termination of employment they will refrain from engaging in certain activities that are competitive with or “disloyal” to AT&T, including, among other things, competing with AT&T, soliciting its customers or interfering in its relationships with vendors, or improperly disclosing certain confidential information.
A recipient of an award shall be required to repay the Company for any amount received under an award or an award may be cancelled, in each case to the extent required under any policy adopted by the Company at any time pursuant to any applicable stock exchange listing standards established under Section 10D of the Securities Exchange Act of 1934. This does not limit the Company’s right to seek recovery or cancellation of an award for any other reason including but not limited to misconduct.
This Incentive Plan does not limit the ability of AT&T to pay any form of compensation in lieu of or in addition to the Awards or other compensation provided by the Plan.
The closing price of AT&T’s common stock reported on the New York Stock Exchange for February 15, 2018, was $37.00 per share.
Certain stockholders havehas advised the Company that they intendhe intends to introduce at the 20182019 Annual Meeting the proposalsproposal set forth below. The namesname and addressesaddress of, and the number of shares owned by, each such stockholder will be provided upon request to the Senior Vice President and Secretary of AT&T at 208 S. Akard Street, 29th floor,Suite 2954, Dallas, Texas 75202.
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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 in the best interests of shareholders.
Resolved, the stockholders of AT&T request the preparation of a report, updated annually, disclosing:
For purposes of 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 the 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 $80.3 million between 2012 and 2016 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 $4.2 million lobbying in California in 2015 and 2016. (http://cal-access.ss.ca.gov/).
AT&T does not disclose its memberships in, or payments to trade associations, or the portions of such amounts used for lobbying. Company assets could be used for objectives contrary to AT& T’s longterm interests. AT&T sits on the board of the Chamber of Commerce, which has spent approximately $1.3 billion on lobbying since 1998. While AT&T recognizes climate change is a serious concern warranting meaningful action, the Chamber publicly attacked the EPA’s solutions addressing climate change.
AT&T is also actively involved in the Business Roundtable (BRT) which is lobbying and leading a campaign attacking investor’s righst to file shareholder resolutions. AT&T’s dues to the BRT help support questionable campaigns like the BRT’s.
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 has promoted legislation to repeal state renewable energy standards. More than 100 companies, including Emerson Electric, General Electric, Google, Sprint and T-Mobile, have publicly left ALEC because of their public policy advocacy
This resolution received over 35% vote in 2017.
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The Board recommends you voteAGAINST this proposal. | |||||
The Board believes that the reports it publishes on its website, along with the reports it files with the Federal government, provides 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 Company resources. AT&T received a nearly identical shareholder proposal for both its 2017 and 2016 Annual Meetings, and over 64% and 66%, respectively, 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 (at https://investors.att.com/~/media/Files/A/ATT-IR/governance-documents/ATT-PoliticalEngagementReport2017-1stHalf%20Final%20August%2018%202017.pdf) and currently covers January through June 2017. 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 https://investors.att.com/~/media/Files/A/ATT-IR/governance-documents/att-inc-political-contribution-statement.pdf).
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—Stockholder Proxy Access Amendments
RESOLVED: Stockholders of AT&T Inc. (the “Company”) ask the board of directors (the “Board”) to amend its proxy access bylaw provisions and any associated documents, to include the following changes for the purpose of (1) decreasing the average amount of Company common stock the average member of a nominating group would be required to hold for three years to satisfy the aggregate ownership requirements to form a nominating group, (2) decreasing the barriers for renomination, and (3) increasing the potential number of nominees:
Supporting Statement:
Under current provisions, even if the 20 largest public pension funds were able to aggregate their shares, they would not meet the 3% holding criteria at most of companies examined by the Council of Institutional Investors. Allowing an unlimited number of shareholders to aggregate shares would facilitate greater participation by individuals and institutional investors in meeting the stock ownership requirements, 3% of the outstanding common stock entitled to vote.
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, a cost-benefit analysis by CFA Institute,Proxy Access in the United States: Revisiting the Proposed SEC Rule (http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1), 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.
Proxy Access: Best Practices 2017(http://www.cii.org/files/publications/misc/Proxy_Access_2017 FINAL.pdf) by the Council of Institutional Investors (CII), notes that “while proxy access has gained broad acceptance, some adopting companies have included, or are considering including, provisions that could significantly impair shareholders’ ability to use it.” The report “highlights the best practices CII recommends for implementing proxy access.”
Although the Company’s Board adopted a proxy access bylaw, it contains troublesome provisions that significantly impair the ability of shareholders to participate because of the large average amount of common shares each is required to hold for three years given the current aggregation limit of 20, the ability of shareholder nominees to run again, and the ability of shareholder nominees to effectively serve if elected. Adoption of all the requested amendments would come closer to meeting best practices as described by CII. Last year dozens of funds voted FOR a similar proposal at our Company, including Wells Fargo Advisors, Invesco Advisors and PNC Capital Advisors.
Increase Stockholder Value
Vote for Stockholder Proxy Access Amendments—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 con-
sulting 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. In the following paragraphs, we address each change requested by this proposal.
Number of stockholder nominee Directors. The proposal requests an increase in the number of permitted stockholder nominees from 20% of the Board to 25% of the Board. In selecting Director nominees, the Corporate Governance and Nominating Committee of the Board seeks to achieve a mix of experience, qualifications and personal backgrounds relevant to the Company’s business, as well as attain independent representation and a reflection of the diversity of our stockholders, employees, customers and communities in which we do business. The limit of 20% of the Board or two Directors for stockholder nominees through the proxy access provision ensures that stockholders have a meaningful right without overly disrupting the balance of characteristics the Board seeks to achieve through the regular nomination process. The limit also helps address concerns that a stockholder could use the process to lay the groundwork for effecting a change of control that is not in the interest of all stockholders or to pursue other special interests that are not broadly supported by all stockholders.
Aggregation limit. The proposal requests removal of the limitation on the number of stockholders that can be aggregated to reach the 3% shareholding requirement. The 20 stockholder limit included in the Company’s proxy access bylaw is a reasonable limitation to control the administrative burden of confirming and monitoring share ownership within the group by the Company. The limitation also ensures that the proxy access mechanism is not driven by a large number of stockholders, no one of which has a substantial economic stake in the Company. Moreover, a general solicitation of stockholders to meet the 3% test could trigger the filing requirements that the proxy access bylaw was designed to avoid.
Limit on re-nomination. The Company’s proxy access bylaw prohibits re-nomination of a candidate who was nominated using proxy access provisions at either of the preceding two annual meetings and did not receive support of at least 25% of the shares voted in the prior election. The proposal requests that this limitation be removed. This reasonable limitation prevents the renomination of a candidate who failed to receive significant stockholder support, and it avoids putting the company and stockholders to the expense and disruption from unnecessarily invoking the proxy access process. The provision also prevents a stockholder or group of stockholders from using such a candidate to block other stockholders from nominating a candidate who may be able to receive a greater level of support in an election of Directors.
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
Proposal 8—Independent Board Chairman
Shareholders request our Board of Directors to adopt as policy, and amend our governing documents as necessary, to require henceforth that the Chair of the Board of Directors, whenever possible, to be an independent member of the Board. The Board would have the discretion to phase in this policy for the next CEO transition, implemented so it does not violate any existing agreement.
If the Board determines that a Chair who was independent when selected is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chairman. This proposal requests that all the necessary steps be taken to accomplish the above.
Caterpillar is an example of a company recently changing course and naming an independent board chairman. Caterpillar had strongly opposed a shareholder proposal for an independent board chairman as recently as its 2016 annual meeting. Wells Fargo also reversed itself and named an independent board chairman in 2016.
According to Institutional Shareholder Services 53% of the Standard & Poors 1,500 firms separate these 2 positions- “2015 Board Practices,” April 12, 2015. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%-support at Netflix.
Under the current AT&T structure Randall Stephenson, with the dual role of CEO and Chairman, received high negative votes in 2017 - 8% and running unopposed. Four AT&T directors proved it was possible to get less than 2% in negative votes in 2017.
Meanwhile Matthew Rose, our Lead Director, received 4% in negative votes. The AT&T Lead Director role may be weak because it does not appear that he can call a special meeting of shareholders according to our vague bylaws. It is not clear how many directors it would take to call a special shareholder meeting at AT&T.
An independent board chairman would have more time to devote to improving the qualifications of directors. Joyce Roché and Laura Tyson each had more than 18-years long-tenure. Longtenure can challenge the independence of any director no matter how qualified. Ms. Tyson was also tainted by her Kodak experience.
Cynthia Taylor received the highest 2017 negative votes — 11 %. William Kennard was potentially distracted by work on 6 Boards.
Please vote to enhance Chairman of the Board oversight:
Independent Board Chairman—Proposal 8
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Your Board of Directors believes that AT&T and its stockholders are best served by having Mr. Stephenson serve as both Chairman and CEO. The
At this juncture in our Company’s history, your Board has taken several steps to ensurebelieves that the Company can more effectively execute its strategy and business plans to maximize stockholder value if the Chairman of the Board effectively carries outis also responsible for the Company’s operations on a daily basis. At the same time, the Board believes that, as a matter of sound corporate governance, it is important to pair its Chairman with an independent Lead Director who is vested with substantial responsibility for theall Board matters, including its oversight of management. TheTo that end, the Board has again appointed aan independent Lead Director (currently, Matthew K. Rose, an independent member of the Board)Rose) who presides over regular executive sessions of the non-management members of the Board. 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 acting as the principal liaison between the Chairman and CEO and the nonmanagement Directors, among other things.Directors. For a complete description of the Lead Director’s responsibilities, please see page 36. In recognition18.
As CEO, Mr. Stephenson is the only Director that is also a member of management. As a result, each committee of the significant role assigned toBoard other than the Lead Director, the Lead Director receives an additional annual retainerExecutive Committee is made up solely of $60,000.independent Directors. The
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appointment of a strongan independent Lead Director and the 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.
Your Board also notes that Mr. Stephenson is the only Director who is a member of management. In addition, each committee, other than the Executive Committee, is made up solely of independent Directors.
Your Board believes that a single person, acting in the capacities of Chairman and CEO, serves as a bridge
between the Board and management and provides critical leadership for carrying out your Company’s strategic initiatives and confronting its challenges. In short, the Board believes that the Company can more effectively execute its strategy and business plans to maximize stockholder value if the Chairman of the Board is also a member of the management team.
For these reasons, the Board believesdoes not support an inflexible policy that the adoption of a policy requiring thatCEO and Chairman roles should never be held by the Chairman ofsame person. Instead, the Board has established what it believes to be an independent Director is not inappropriate balance for AT&T based on the best interests of AT&T’s stockholders.
Stockholder Proposal
Item 9. Reduce Vote Required for Written Consent
Proposal 9—Right to Act by Written Consent
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 atstockholders and recommends 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 more than 40%-support at our 2014 annual meeting.
This vote would have been higher if small shareholders had the same access to corporate governance analytical information as large shareholders. Each shareholder proposal topic voted at our 2005 through 2017 annual meeting would have received a higher vote had our company printed the names of the proponents in the proxy. Shareholders appreciate knowing the specific proponent sponsoring each shareholder proposal.
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. More than 100 Fortune 500 companies provide for shareholders to call special meetings and to act by written consent.
Adoption of this proposal can give shareholders greater standing to engage AT&T management in regard to board refreshment after the 2018 annual meeting. For instance Joyce Roché and Laura Tyson each had more than 18-years long-tenure. Long-tenure can detract from the independence of a director no matter how well qualified.
Please vote to increase our options to ensure board refreshment:
Right to Act by Written Consent—Proposal 9
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This proposal would have AT&T submit a formal charter amendment to our stockholders to reduce the amount of shares necessary to take action by written consent. 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. Our
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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 have the opportunity to review and debate the merits of the proposals submitted to the meeting. In contrast, a written consent permits stockholders to act in secret. The heightened vote requirement for actions by written consent, in fact, encourages stockholders to act through open meetings, which ensures the opportunity for debate.
Moreover, as prior consideration of a similar stockholder proposal has shown, implementing the proposal would result in an unnecessary waste of corporate resources. Unlike other proposals submitted to stockholders, under Delaware law, a charter amendment to modify AT&T’s written consent requirement would require the affirmative vote of 2/3rds of all outstanding shares. Because not all stockholders attend the meeting or provide proxies to others to vote for them, it is very difficult to obtain a 2/3rds vote of all outstanding shares. After a similar stockholder pro-
posal passed at the 2011 Annual Meeting, your Board submitted a proposed charter amendment to stockholders the next year that would have permitted actions by written consent by a majority of the outstanding shares. The proposed amendment only received the vote of 50.9% of the outstanding shares, far short of thetwo-thirds vote required by Delaware law to pass the amendment.
Since that time, this proposal was voted down at the 2014 and 2017 Annual Meetings, with 60% and 57%, respectively, of the votes cast being against the proposal. Your Board believes further action on this proposal would cause an unnecessary waste of corporate funds. 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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THE ROLEOFTHE BOARD |
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ETHICSAND COMPLIANCE PROGRAM
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RISK OVERSIGHT |
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ANNUAL MULTI-STEP BOARD EVALUATION | |||
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BOARD STRUCTURE |
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COMMUNICATINGWITH YOUR BOARD | |||
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DIRECTOR NOMINATION PROCESS |
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AVAILABILITYOF CORPORATE GOVERNANCE DOCUMENTS | |||
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BOARD COMPOSITIONAND REFRESHMENT |
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HOWTO SUBMITA STOCKHOLDER PROPOSAL | |||
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DIRECTOR INDEPENDENCE |
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RELATED PERSON TRANSACTIONS | |||
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BOARD COMMITTEES |
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DIRECTOR COMPENSATION | |||
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PUBLIC POLICY ENGAGEMENT
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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.
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 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. A recent example is the Company’s proxy access bylaw, which was adopted on December 18, 2015, after discussions with stockholders. 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.
Key Responsibilities of the Board
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Strategy Oversight
| Risk Oversight | Succession Planning | ||||||||
Ö The Board oversees and monitors strategic 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 executing business strategy and provides regular performance updates to the Board. | Ö Company management is charged with managing risk, through robust internal processes and effective internal controls. | Ö The CEO is charged with preparing and reviewing with the Human Resources Committee talent development plans for senior executives and their potential successors. | ||||||||
The Role of the 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 busi-
nesses,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 10 meetings in 2017. All of the Directors attended at least 75% of the total number of meetings of the Board and Committees on which each served.2018. Directors are also expected to attend the Annual Meeting of Stockholders. All Directors were present at the 20172018 Annual Meeting.
Director Nomination Process
The Board In 2018, all Directors attended at least 75% of Directors believes that the Company benefits from having experienced Directors who bring a wide rangetotal number 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:
Although the Committee does not have a formal diversity policy, it believes that diversity is an important factor in determining the compositionmeetings of the Board and considers it in making nominee recommendations.
Stockholders who wish to suggest qualified candidates should write to the Senior Vice President - Assistant General Counsel and Secretary, AT&T Inc., 208 S. Akard Street, 29th floor, Dallas, Texas 75202, stating in detail the qualifications of the persons proposed for consideration by the Committee.Committees on which each served.
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Annual Multi-Step Board Evaluation
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.
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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:
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: 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 2017:
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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
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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
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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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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.
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Corporate Social Responsibility
AT&T’s Corporate Social Responsibility (CSR) approach is based on the foundational belief in the interconnection of our long-term business success and the strength of our communities and world.
Governance
AT&T’s commitment to CSR is embedded in every company level, and 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 deemed most material by our stakeholders. Our Code of Business Conduct puts our values in action and lays out expectations for employees, including our commitments to ethics, diversity, privacy, the environment and our communities. Our Principles of Conduct for Suppliers outlines expectations for working with AT&T, and covers topics including sustainable business practices, diversity, conflict minerals, ethics and labor rights, and we score and measure progress. Every new contract agreement with suppliers requires they acknowledge the principles.
Environment
Our technology plays a critical role in transitioning to a more resource-efficient world by addressing harmful effects of climate change, increasing business resiliency, and improving daily lives. Increased use of technology brings the challenge of greater energy consumption and carbon emissions, and need for greater reuse and recycling. These challenges drove us to establish a 2025 goal to enable carbon savings 10x the footprint of our operations. To meet the goal, we are enhancing the efficiency of our network, investing in renewable energy and delivering sustainable customer solutions. Additional noted progress:
Social
Safety:An increasingly mobile world brings with it new challenges. That’s why we were pioneers in raising awareness of distracted driving, and remain passionate about making our roads safer, having collected more than 21 million pledges to avoid distracted driving. We’re also educating consumers about online safety. Info at digitalyou.att.com, later-haters.att.com, itcanwait.com.
Education: Since 2008 we’ve committed more than $400M through our Aspire program to student success and career readiness. We’ve added more focus on tech education to help close the gap between job opportunity and needed skills. Signature efforts include affordable on-line masters, and nanodegrees, which offer new pathways to high-demand tech jobs. Internally, the focus is a massive reskilling program for employees who want to update technical capabilities as we transition to a software defined network. Our internal education was supported with $250 million in training and $34 million in tuition assistance.*
Inclusion and Diversity:Led by the Chairman’s Diversity Council and our Chief Diversity Officer, we are honored to be number 3 on DiversityInc’s Top 50 and are committed to continuing and growing our leadership. Relevant stats: Retention rates for women and people of color are 90% and 92%, respectively; More than 136,000 total memberships in our 12 Employee Resource Groups; our diversity supplier spend reached $14.2B. More at att.com/diversity.
Contributions: More than 5.4 million hours of time and talent donated by employees and retirees, and more than $139 million in community support via social innovation, employee and company donations.*
CSR progress validated through listings on Dow Jones Sustainability North America Index, Bloomberg Gender Equality Index, FTSE4Good Index, Euronext Vigeo Eiris World 120 and US 50 Indices, and Climate Change Leadership Tier of the Carbon Disclosure Project. Our sustainability report at about.att.com/csr/reporting contains comprehensive goals, metrics and issue briefs which align to Global Reporting Initiative guidelines. More information at about.att.com/csr.
* 2016 actuals, but largely representative of annual impact.
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Public Policy Engagement
We participate in public policy dialogues around the world related to our industry and business priorities, our more than 252,000 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 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.
Board’s Role in Risk Oversight
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.
Risk Assessment Responsibilities and Processes | ||||||||
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
TheEthicsnon-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 Compliance ProgramCEO: 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—Assistant General Counsel and Secretary, AT&T Inc., 208 S. Akard Street, Suite 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
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
Our Corporate Governance Guidelines require that a substantial majority of our Board of Directors consist of independent Directors. In addition, the 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: 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 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).
| 20 | |
CORPORATE GOVERNANCE
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 | ||||
Meetings in Fiscal 2018: 13 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. | |||
Corporate Governance and Nominating Committee | ||||
Meetings in Fiscal 2018: 4 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. | |||
* Retiring effective April 26, 2019
Human Resources Committee | ||||
Meetings in Fiscal 2018: 6 Joyce M. Roché, Chair* Scott T. Ford Michael B. McCallister Matthew K. Rose Geoffrey Y. Yang Consists of five independent Directors. | • 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 Executive Officers - establishing stock ownership guidelines for officers and developing a management succession plan. | |||
* Retiring effective April 26, 2019
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CORPORATE GOVERNANCE
Corporate Development and Finance Committee | ||||
Meetings in Fiscal 2018: 5 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. | |||
Public Policy and Corporate Reputation Committee | ||||
Meetings in Fiscal 2018: 6 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 | ||||
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 2018. • 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. | |||
* 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
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 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.
ETHICSAND 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.
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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.
One-on-One Director Peer Evaluations | 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 | |||
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CORPORATE GOVERNANCE
Availability of Corporate Governance Documents
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 20172018 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, 29th floor,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.
Related Person TransactionsNominations 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 overall financial position of the Director, executive officer or other related person, the direct or indirect
overall financial position of the Director, Executive Officer or other related person, the direct or indirect nature of the Director’s, |
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 2017,2018, asister-in-law of John Stankey, SeniorChief Executive Vice President – AT&T/TimeOfficer, Warner Merger Integration Planning, AT&T Services, Inc.,Media, LLC, was employed by a subsidiary with an approximate rate of pay, including commissions, of $126,000.$132,530. Also during 2017,2018, a brother of John Donovan, Chief Executive Officer, AT&T Communications, LLC, was employed by a subsidiary with an approximate rate of pay, including commissions, of $187,000.$197,376. In addition, during 2017,2018, a son of William Blase, Senior Executive Vice President – Human Resources, was employed by a subsidiary with an approximate rate of pay, including commissions, of $125,000.$127,943.
|
Stockholder Proposals and Director Nominees
If a stockholder wishes to present a proposal or nominate a person for election as a Director at the 2019 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, 29th floor, 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 27, 2018, written notice of any such proposal or nomination must be received by the Company no earlier than December 28, 2018 and no later than January 27, 2019. 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 2019 Annual Meeting must be received by November 12, 2018. 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, 29th floor, 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 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, 29th floor, Dallas, Texas 75202 not less than 120 days nor more than 150 days before the anniversary of the date that the corporation 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, 2018 and no later than November 12, 2018.
|
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, 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 |
| |||
Human Resources Committee |
|
25,000 |
|
| ||
Corporate Development and Finance Committee |
|
15,000 |
|
| ||
Corporate Governance and |
| 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 4428 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 $25,000 per year. All concession services must be provided by AT&T affiliates, except that the Director may use another provider for the Director’s primary residence if it is not served by an AT&T affiliate.
|
CORPORATE GOVERNANCE
|
2017 Director Compensation Table
2018 DIRECTOR COMPENSATION TABLE
The following table contains information regarding compensation provided to each person who served as a Director during 20172018 (excluding Mr. Stephenson, whose compensation is included in the Summary Compensation Table and related tables and disclosure).
Name
| Fees Earned ($) (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.
| $
| 165,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 25,000
|
| $
| 360,000
|
|
|
$ 165,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 15,000
|
|
$
|
350,000
|
| |||||||||||||||
Richard W. Fisher
| $
| 140,000
|
| $
| 170,000
|
| $
| 678
|
| $
| 15,000
|
| $
| 325,678
|
|
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 982
|
|
|
$ 0
|
|
$
|
310,982
|
| |||||||||||||||
Scott T. Ford
| $
| 155,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 0
|
| $
| 325,000
|
|
|
$ 155,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
325,000
|
| |||||||||||||||
Glenn H. Hutchins
| $
| 140,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 30,485
|
| $
| 340,485
|
|
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
310,000
|
| |||||||||||||||
William E. Kennard
| $
| 140,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 22,500
|
| $
| 332,500
|
|
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
310,000
|
| |||||||||||||||
Michael B. McCallister
| $
| 140,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 0
|
| $
| 310,000
|
|
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 14,655
|
|
$
|
324,655
|
| |||||||||||||||
Beth E. Mooney
| $
| 140,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 15,000
|
| $
| 325,000
|
|
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 0
|
|
$
|
310,000
|
| |||||||||||||||
Joyce M. Roché
| $
| 170,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 11,934
|
| $
| 351,934
|
|
|
$ 165,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 17,700
|
|
$
|
352,700
|
| |||||||||||||||
Matthew K. Rose
| $
| 210,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 28,558
|
| $
| 408,558
|
|
�� |
$ 215,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 14,113
|
|
$
|
399,113
|
| |||||||||||||||
Cynthia B. Taylor
| $
| 140,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 11,871
|
| $
| 321,871
|
|
|
$ 140,000
|
|
|
$ 170,000
|
|
|
$ 0
|
|
|
$ 23,145
|
|
$
|
333,145
|
| |||||||||||||||
Laura D’Andrea Tyson
| $
| 155,000
|
| $
| 170,000
|
| $
| 10,065
|
| $
| 0
|
| $
| 335,065
|
|
|
$ 155,000
|
|
|
$ 170,000
|
|
|
$ 5,153
|
|
|
$ 30,000
|
|
$
|
360,153
|
| |||||||||||||||
Geoffrey Y. Yang
| $
| 140,000
|
| $
| 170,000
|
| $
| 0
|
| $
| 11,537
|
| $
| 321,537
|
|
|
$ 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 20172018 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 | |||||
| 6,512 | ||||
In addition, the following table below shows the number of shares of AT&T common stock purchased in 20172018 by each Director with their retainers under theNon-Employee Director Stock Purchase Plan.
| Director | Shares Purchased in 2018 | ||||
Michael B. McCallister |
| ||||
| 2,119 | |||||
Geoffrey Y. Yang | 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 22%26.7%. The illiquidity discount was determined by taking the average expected remaining tenure of the Directors (9.0(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 $217,949.$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, 2017,2018, for each Director can be found in the “Common Stock Ownership” section beginning on page 45.29.
|
CORPORATE GOVERNANCE
|
Note (c). Nonqualified Deferred Compensation Earnings
Amounts shown represent the excess earnings, if any, based 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 20172018 consisted of communications equipment and services provided under the AT&T Board of Directors Communications Concession Program (described on page 43)27) and holiday gifts, as follows: Mr. HutchinsMcCallister ($15,03113,397 and $454,$1,258, respectively), Mr. Rose ($13,10413,305 and $454,$808, respectively), and Ms. Taylor ($11,41712,337 and $454, respectively) and Mr. Yang ($11,083 and $454,$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 | ||||
|
| ||||
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 |
Common Stock OwnershipCOMMON STOCK OWNERSHIP
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, 20172018 (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
| Percent of Class
| ||||||||
BlackRock, Inc. 55 East 52nd St., New York, NY 10055
|
|
376,827,658
|
(1)
|
|
6.10
|
%
| ||||
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355
|
|
439,421,300
|
(2)
|
|
7.15
|
%
| ||||
| 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 February |
| 2. | Based on a Schedule 13G/A filed by The Vanguard Group with the SEC on February |
|
CORPORATE GOVERNANCE
|
The following table lists the beneficial ownership of AT&T common stock andnon-voting stock units as of December 31, 2017,2018, held by each Director, nominee, and officer named in the “Summary Compensation Table” on page 78.62. 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
|
|
| 20,271
|
| ||
Richard W. Fisher
|
| 0
|
|
| 11,433
|
| ||
Scott T. Ford
|
| 66,319
|
|
| 38,263
|
| ||
Glenn H. Hutchins (3)
|
| 103,322
|
|
| 27,977
|
| ||
William E. Kennard
|
| 0
|
|
| 16,352
|
| ||
Michael B. McCallister
|
| 31,102
|
|
| 26,443
|
| ||
Beth E. Mooney
|
| 12,600
|
|
| 33,096
|
| ||
Joyce M. Roché
|
| 8,660
|
|
| 171,873
|
| ||
Matthew K. Rose
|
| 143,493
|
|
| 74,101
|
| ||
Cynthia B. Taylor
|
| 5,718
|
|
| 21,389
|
| ||
Laura D’Andrea Tyson
|
| 0
|
|
| 130,339
|
| ||
Name of BeneficialOwner
| Total AT&T Ownership options) (1)
| Non-Voting Units (2)
| ||||||
Geoffrey Y. Yang
|
| 119,552
|
|
| 5,649
|
| ||
Randall L. Stephenson
|
| 2,233,589
|
|
| 374,065
|
| ||
John J. Stephens
|
| 600,402
|
|
| 70,240
|
| ||
John Donovan
|
| 276,006
|
|
| 10,721
|
| ||
David R. McAtee II
|
| 19,919
|
|
| 14,498
|
| ||
John T. Stankey
|
| 544,291
|
|
| 40,908
|
| ||
All executive officers and Directors as a group (consisting of 22 persons, including those named above)
|
| 4,998,546
|
|
| 1,147,607
|
| ||
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 | ||||
John J. Stephens | 122,174 | ||||
John T. Stankey | 10,098 | ||||
All Executive Officers | 608,820 | ||||
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 | |||||
|
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 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. Stock units carry no voting rights.
Note 3.
Mr. Hutchins disclaims beneficial ownership of 3,322 shares held in trust for his siblings.
|
|
Audit CommitteeCORPORATE SOCIAL RESPONSIBILITY
|
 | 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 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
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.
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.
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.
|
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 20172018 and 20162017 are shown below.
Principal Accountant Fees (dollars in millions)
| ||||||||
Item
| 2017
| 2016
| ||||||
Audit Fees (a)
| $
| 37.3
|
| $
| 30.7
|
| ||
Audit Related Fees (b)
|
| 3.5
|
|
| 3.3
|
| ||
Tax Fees (c)
|
| 9.3
|
|
| 11.4
|
| ||
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,
and consultations 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 20172018 or 20162017 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.
|
|
Compensation Discussion and AnalysisAUDIT COMMITTEE
Compensation Committee Report
AUDIT COMMITTEE REPORT
The Based on
|
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
37 |
| |||
40 | ||||
40 | ||||
41 | ||||
41 | ||||
42 | ||||
43 | ||||
44 | ||||
44 | ||||
45 | ||||
Determination of Award Payouts for Performance Periods Ending December 31, | ||||
51 | ||||
56 | ||||
57 | ||||
57 | ||||
58 | ||||
60 | ||||
60 | ||||
Acronyms Used
| 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 |
| 36 | |
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 | ||||||||||
| 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 | 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 compensation information for our | Page | ||||||||
| 37 |
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 permitting the transaction to close promptly without any divestitures of assets. • 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 |
|
2017 Company Performance Highlights
COMPENSATION DISCUSSION AND ANALYSIS
SUMMARYOF INCENTIVE PAYOUTS
|
|
Highlights of Incentive Payouts
2017 Short Term Award2018 CORPORATE SHORT TERM AWARDS*
Metric
| Metric
| Attainment
| Payout%
| Type of Metric | Metric Weight | Attainment | Payout% | |||||||||||||||
2017 Earnings per Share (EPS)
|
|
70
|
%
|
|
94
|
%
|
|
84
|
%
| |||||||||||||
2017 Free Cash Flow (FCF)
|
|
30
|
%
|
|
103
|
%
|
|
106
|
%
| |||||||||||||
2018 EPS | Quantitative | 60% | 92% | 81% | ||||||||||||||||||
2018 FCF | Quantitative | 30% | 98% | 98% | ||||||||||||||||||
Collaboration | Qualitative | 10% | n/a | 100% | ||||||||||||||||||
Weighted Average Payout
|
|
90
|
%
| 88% | ||||||||||||||||||
Long Term* Mr. Donovan’s Award payout is based on a mix of corporate and business unit performance attainment. Please see page 45 for more information.
LONG TERM AWARD– Performance Share ComponentPERFORMANCE SHARE COMPONENT
2015-2017 Performance Period2016-2018 PERFORMANCE PERIOD
Metric
| Metric
| Attainment
| Payout%
| Metric Weight | Attainment | Payout% | ||||||||||||||
3-Year Return on Invested Capital (ROIC)
|
|
75
|
%
|
|
7.75%
|
|
|
104
|
%
| |||||||||||
3-Year Relative Total Stockholder Return (TSR)
|
|
25
|
%
|
|
Level 3
|
|
|
100
|
%
| |||||||||||
3-Year ROIC | 75% | 7.56% | 101% | |||||||||||||||||
3-Year Relative TSR | 25% | Level 6 | 0% | |||||||||||||||||
Weighted Average Payout
|
|
103
|
%
| 76% | ||||||||||||||||
After the impact of change in stock price over the 20152016 – 20172018 performance period, our NEOs received approximately 122%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.
|
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. Yang. Our Committee is responsible for:
Compensation-related Tasks | Organizational Tasks | |
|
| |
| – 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.
| |
| |
| |
| |
|
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.
|
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.
û No TaxGross-Ups: No excise taxgross-up payments; no other taxgross-ups, except in extenuating circumstances.
û No Credit for Unvested Shares when determining compliance with stock ownership guidelines.
ûNo Repricing orBuy-Out of underwater stock options.
û No Hedging or Short Sales of AT&T stock.
ûNo Supplemental Executive Retirement Benefits for officers promoted/hired after 2008.
û No Guaranteed Bonuses.
ûNo 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 2016annual outreach to large stockholders when making the following enhancements toevaluating our program:
2017 Program Enhancements
| ||||
|
During 2017 and early 2018, we again met with large stockholders and stockholder advisory groups to discuss their perspectives on our compensation and benefits practices. The Committee considers these perspectives when making changes to our compensation program. Of the votes cast at the 20172018 Annual Meeting of Stockholders, 90.88%over 90% were in favor of the advisory vote on executive compensation.
| 41 |
COMPENSATION DISCUSSION AND ANALYSIS
Elements of 2017 CompensationELEMENTSOF 2018 COMPENSATION
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 (75% Performance Shares and 25% Restricted Stock Units) | Retirement, Deferral/Savings Plans, Benefits, and Personal Benefits |
|
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
|
Cash
| • | Provides compensation to |
|
7% |
|
|
11% |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Base Salary
|
A portion may be deferred into AT&T stock. | 7 | % | 10 | % | 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.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| • | 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.
|
Cash
| • | Aligns pay with the achievement of short-term objectives.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 61)
| Aligns pay with the achievement of short-term objectives.
| Short-Term Incentives (see page 45)
| Aligns pay with the achievement of short-term objectives.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. | 24 | % | 21 | % |
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. |
|
23% |
|
|
24% |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Incentives (see page 63) |
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.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 69 | % | 69 | % | • | Aligns executive and stockholder interests. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| • | Aligns executive and stockholder interests. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
COMPENSATION DISCUSSION AND ANALYSIS
|
Determining 2017 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 group selected by the Committee.surveys.
How the
|
The Committee’s compensation consultant developed the • • • • |
Following is the peer groupPeer Group our consultant used to assess market-based compensation for Executive Officers in 2017.2018.
| ||||||
• 21st Century Fox • Alphabet • Amazon • Apple • Boeing •
| • Charter • Chevron • Cisco • Comcast • Exxon Mobil • General Electric
| • Intel • IBM • Microsoft • Oracle • Sprint • T-Mobile US
| •
• • Wal-Mart • Walt Disney
| |||
Note: These same
| ||||||
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. After completing this review, the consultant presented the market data to the Committee.
The Committee reviewedused the market 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.
|
COMPENSATION DISCUSSION AND ANALYSIS
|
2017 Performance2018 PERFORMANCE
AT&T is a leading provider ofglobal leader in telecommunications, media, entertainment, and technology. We are transforming into a truly modern media company that will work to create the best entertainment and communications and digital entertainment services in the United States andexperiences in the world. During 2017,2018 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 2022 compensation benchmark companies (as shown on page 59)43), below is a comparison of Market Cap, Revenues,market cap, revenues, and Net Income:net income:
Comparison of Scope and Scale
AT&T and Peer CompaniesGroup21($M)
For more information on our financial and operational performance, please see our Annual Report at www.att.com.
|
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.
35 —Years— Consecutive Increase in Quarterly Dividend | 2.0 —Percent— Increase in Quarterly Dividend in 2018 |
| 44 | |
COMPENSATION DISCUSSION AND ANALYSIS
Determination of Award Payouts for Performance Periods Ending DecemberDETERMINATIONOF AWARD PAYOUTSFOR PERFORMANCE PERIODS ENDING DECEMBER 31, 20172018
20172018 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 2017:2018:
2018 SHORT-TERM INCENTIVE PLAN METRICS
| 2017 Short-Term Incentive Performance Metrics | Relevance of Metric | Metric Weight | Threshold Performance Payout% | Target Performance Payout% | Maximum Performance Payout% | |||||
| Earnings per Share | Indicator of profitability and a window into our long-term sustainability | 70% | • Performance achievement of 80% of target results in a 50% payout
• No payout for
| 100%
| Performance achievement of 130% of target results in a 150% payout
| |||||
| Free Cash Flow | Important 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). |
|
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
| |
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
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):
|
In accordanceOur 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 90%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.
|
COMPENSATION DISCUSSION AND ANALYSIS
|
Long-Term Incentive Plan Metrics and Performance Attainment – Performance/–Performance/Restriction Periods Ending in 20172018
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 | 50% | 4-year restriction period
Payout value based on stock price performance. | We structure RSUs to be paid in stock at the end of the restriction period, regardless of whether they vest earlier. RSUs vest 100% after four years or upon retirement eligibility, whichever occurs earlier. | |||||
ROIC Payout Table and Actual Performance Attainment – 2015-20172016-2018 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 137% or more of the performance target range is achieved. Achievement above the target range provides for higher levels of award payout, up to the maximum payout. | ||||
Actual Performance | ||||
After conclusion of the performance period, the Committee determined (using the ROIC payout table) that we achieved | ||||
|
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 – 2015-20172016-2018 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:
As a resultTSR Performance metric (2015-2017 performance period) AT&T Return vs. S&P 100 Index Payout %* If AT&T is top company 200% Level 1 (82-99.99%) 150% Level 2 (63-81.99%) 125% Level 3 (44-62.99%) 100% Level 4 (25-43.99%) 50% Level 5 (<25%) 0% * Payouts are capped at 90% of the performance attainment achieved fortarget award if absolute AT&T 3-year TSR is negative, regardless of relative performance. Our 3-year TSR of 35.15% ranks us at the TSR performance metric, the Committee directed that 100%54th percentile of the related performance shares be distributed.S&P 100 Index
|
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 – 2015 Performance Share Grant (2015-2017 Performance Period)2016 PERFORMANCE SHARE GRANT (2016-2018 PERFORMANCE PERIOD)
As a result of the combined ROIC and TSR performance attainment, each NEO received 103%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 $6.20 change$5.47 decrease in our stock price from $32.96$35.53 at grant to $39.16$30.06 at payout, the value of the shares actually payable increased 18.8%decreased 15.4% over the3-year performance period.
Ending Stock Price of $ | - | Beginning Stock Price of $ | ÷ | Beginning Stock Price of $ | = |
Price | ||||||||||||||||||||||||
As a result of both ROIC and relative TSR performance and the absolute change in our stock price, our NEOs realized approximately 122%64% of their original performance share grant value.
NEOs Received
Grant Value |
Percent of Grant Value Realized
PERCENT OF GRANT VALUE REALIZED – 2014 Restricted Stock Units2015 RSUs
Our 2014 restricted stock units2015 RSUs had a4-year vesting period and were paid in early 2018.2019. The final value delivered from these awards was based on our stock price. Over the4-year restriction period, the stock price increased $4.09decreased $2.26 per share, delivering 112%93% of the original grant value.
Ending Stock Price of $ | - | Beginning Stock Price of $ | ÷ | Beginning Stock Price of $ | = |
Price | ||||||||||||||||||||||||
NEOs Received
Grant Value |
* Stock price when award payout is approved for performance shares
| * | 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).
|
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 2017.2018. The long-term grant values below do not align to what is reported in the 20172018 Summary Compensation Table (SCT) because the SCT reflects long-term grant values for 2017,2018 whereas these tables show the values of the long-term distributions for awards with performance/restriction periods ending in 20172018 or early 2018.2019.
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 = $5,900,000
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 =
| |||
| ||||
| 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. | |||
| ||||
Target Award = $7,375,000
93% of grant value realized
| ||||
| The company’s stock price change over the4-year vesting period
| |||
Total Realized Compensation |
| |||
| ||||
|
COMPENSATION DISCUSSION AND ANALYSIS
|
John Stephens Senior Executive Vice President and Chief Financial Officer | ||||
| John Stephens has | |||
2018 Realized Compensation | ||||
| Element of Compensation | Compensation
| 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 base salary increase to $1,100,000 effective March 1, 2018. Effective June 16, 2018, Mr. Stephens received an increase to $1,125,000 to reflect the increased scope and complexity of his role following the merger with Time Warner. | ||||
2018 STIP | Target Award =
Final Award Paid = $2,057,917 88% of target award value realized | Mr. Stephens’ target STIP was increased to $2,000,000 effective January 1, 2018, and to $2,625,000 effective June 16, 2018. His award targets were applied to the associated time periods and the resulting weighted STIP target award for 2018 was $2,338,542. 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 =
| |||
| ||||
| 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) |
| |||
71,299 shares paid; valued at $2,188,879
| ||||
| The company’s stock price change over the4-year vesting period
| |||
Merger Completion Bonus | $2,000,000 |
| ||
Total Realized Compensation
| ||||
$8,999,383
| ||||
* Upon the completion of the Time Warner Inc. merger, the Committee intends to reevaluate Mr. Stephens’ compensation, as appropriate, to recognize new duties.
|
| 52 | |
COMPENSATION DISCUSSION AND ANALYSIS
John Donovan Chief Executive Officer, AT&T Communications, LLC | ||||
| John Donovan
| |||
2018 Realized Compensation | ||||
| Element of Compensation | Compensation Amount | Rationale | ||
2018 Base Salary |
$
| Mr. Donovan | ||
2018 STIP | Target Award =
Final Award Paid = $2,410,000 88% of target award value realized | Mr. Donovan’s target STIP
Mr. Donovan’s STIP payout was based on: • A • | ||
Performance Share Payout (2016-2018 Performance Period) | Target Award = $2,100,000
Final Award Paid =
| |||
| ||||
|
| 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. | ||
| ||||
| ||||
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
| |||
Total Realized Compensation |
| |||
| ||||
|
COMPENSATION DISCUSSION AND ANALYSIS
|
David McAtee Senior Executive Vice President and General Counsel | ||||
| David McAtee has served at AT&T’s General Counsel since 2015. He has responsibility for all legal matters affecting AT&T, including the Company’s litigation, regulatory, and compliance matters before various judicial and regulatory agencies, as well as all merger agreements, dispositions ofnon-strategic assets, commercial agreements, and labor contracts. In | |||
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 | $ | |||
Mr. McAtee received a base salary increase from $800,000 to $900,000 effective March 1, 2018. Effective July 1, 2018, Mr. McAtee’s base salary was increased from $900,000 to $1,250,000 to reflect the increased scope and complexity of his role following the merger with Time Warner. | ||||
2018 STIP | Target Award =
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 • | ||
Performance Share Payout (2016-2018 Performance Period) | Target Award = $1,625,000
Final Award Paid =
| |||
| ||||
| Mr. McAtee’s • 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) | 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
| ||||
| The company’s stock price change over the4-year vesting period
| |||
Merger Completion Bonus | $2,000,000 |
| ||
Total Realized Compensation
| ||||
| $12,737,107 |
| |||
* Upon the completion of the Time Warner Inc. merger, the Committee intends to reevaluate Mr. Stankey’s compensation, as appropriate, to recognize new duties.
|
COMPENSATION DISCUSSION AND ANALYSIS
|
2017 Long Term Grants2018 LONG TERM GRANTS
Our previous sections detailed compensation paid in 20172018 and/or compensation for grants with performance or restriction periods ending in 2017.2018 or early 2019. This section addresses the long-term grants we made in 2017.2018.
The forms of long-term compensation granted to NEOs in 20172018 were:
Forms of | Weight | Performance Metrics | Vesting Period | |||
Performance Shares | 75% | Performance Metrics - 100% Payout Modifier - Relative | ||||
| 3-year performance period | ||||||
| 25% | Payout value based on stock price performance only | ||||
| 4-year restriction period |
Grant values for these awards were as follows:
2017 Long Term Incentive Grant Values for NEOs2018 LONG TERM INCENTIVE TARGET GRANT VALUES FOR NEOS
| Name | Target Performance (amounts are rounded) | Target Restricted Stock Unit Grant Values ($) (amounts are rounded) | Performance Shares ($)(1) | RSUs ($)(1) | ||||||||||||||||
Randall Stephenson | 12,525,000 | 4,175,000 | 13,725,000 | 4,575,000 | ||||||||||||||||
John Stephens | 5,250,000 | 1,750,000 | 6,750,000 | 2,250,000 | ||||||||||||||||
John Donovan | 6,890,625 | 2,296,875 | 8,531,250 | 2,843,750 | ||||||||||||||||
David McAtee | 2,775,000 | 925,000 | 3,750,000 | 1,250,000 | ||||||||||||||||
John Stankey | 5,250,000 | 1,750,000 | 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.
20172018 Performance Share Grants
The performance sharesPerformance Shares granted in 20172018 are for the 2017-20192018-2020 performance period. The Committee determined that the Performance Shares would be tied to a ROIC performance metric with a payout modifier based on a comparison of AT&T’s TSR to our20-company22-company Peer Group.Group (as shown on page 43).
ROIC Performance Metric
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; 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 2017-20192018-2020 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 Modifier
This measure compares our TSR (stock appreciation plus reinvestment of dividends) relative to that of the 2022 companies in our 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 | 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 objective for ROIC, and modifying the award for relative TSR achievement, if applicable. Performance Shares, if earned, are paid 34% in stock, 66% in cash.
20172018 Restricted Stock Unit Grants
Restricted stock unitsRSUs granted in 20172018 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 our 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.
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 on page 88.74.
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 84,68, 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
|
| |||||
| 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 | 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 |
| |||||
|
| |||||
|
Provides 24/7 connectivity and | |||||
Automobile | Includes allowance, fuel, and maintenance.
| |||||
|
Recruiting and
| |||||
Executive Disability | Provides compensation during a leave of absence due to illness or injury.
| Provides security to executives’ family members. | ||||
Home Security | Residential security system and monitoring. | |||||
Executive Insurance |
See page
| |||||
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,
|
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 86.71.
|
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, 2017,2018, can be found in the “Common Stock Ownership” section beginning on page 45.29. As of December 31, 2017,2018, Randall Stephenson held 1,897,4532,175,574 vested shares of AT&T stock, a multiple of 4134 times his base salary, well exceeding his
6X requirement. In addition, Mr. Stephenson also holds 729,688633,226 shares of vested Restricted Stock Units,RSUs, which are still subject to a retention period, making his total vested shares a multiple of 56.744 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. Prior to the adoption of the Tax Cuts and Jobs Act (“Tax Act”), 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 was not included in the $1 million limit. As a result, the Committee strived
to make the awards under stockholder-approved plans. The Tax Act repealed this exemption, and now compensation paid to NEOs in excess of $1 million in 2018 and later will no longer be deductible, even if performance-based. The Committee intends to continue to use performance metrics in compensation when it is in the best interests of AT&T and its stockholders.stock.
Role of the Compensation Consultant
The Committee is authorized by its charter to employ independent compensation consultants and other advisors. The Committee has selected Frederic W. Cook & Co., Inc. (FW Cook) to serve as its independent consultant. The consultant reports directly to the Committee. Other than advising the Corporate Governance and Nominating Committee on director 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 2015.2016.
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 ($) | |||||||||||||||||||||||||
R. Stephenson Chairman, CEO and President | 2017 | 1,800,000 | 0 | 16,699,980 | 0 | 5,310,000 | 3,420,059 | 1,490,681 | 28,720,720 | |||||||||||||||||||||||||
| 2016 | 1,791,667 | 0 | 16,063,344 | 0 | 5,700,000 | 3,474,304 | 1,404,401 | 28,433,716 | ||||||||||||||||||||||||||
| 2015 | 1,741,667 | 0 | 14,623,014 | 0 | 5,500,000 | 2,728,138 | 553,095 | 25,145,914 | ||||||||||||||||||||||||||
J. Stephens Sr. Exec. Vice Pres. and CFO | 2017 | 979,167 | 0 | 6,999,984 | 0 | 1,710,000 | 3,574,285 | 629,371 | 13,892,807 | |||||||||||||||||||||||||
| 2016 | 870,833 | 0 | 5,337,167 | 0 | 1,840,000 | 2,942,086 | 591,854 | 11,581,940 | ||||||||||||||||||||||||||
| 2015 | 837,500 | 0 | 4,659,568 | 0 | 2,100,000 | 1,565,671 | 435,942 | 9,598,681 | ||||||||||||||||||||||||||
J. Donovan CEO- | 2017 | 1,035,833 | 0 | 9,202,738 | 0 | 1,965,000 | 2,666,182 | 323,947 | 15,193,700 | |||||||||||||||||||||||||
| 2016 | 858,333 | 0 | 4,352,640 | 0 | 1,650,000 | 2,388,147 | 259,190 | 9,508,310 | ||||||||||||||||||||||||||
| 2015 | 808,333 | 0 | 4,871,764 | 0 | 2,000,000 | 1,817,204 | 241,105 | 9,738,406 | ||||||||||||||||||||||||||
D. McAtee Sr. Exec. Vice Pres. and General | 2017 | 791,667 | 0 | 3,699,987 | 0 | 1,350,000 | 166,390 | 216,501 | 6,224,545 | |||||||||||||||||||||||||
J. Stankey Sr. Exec. Vice Pres. AT&T/Time | 2017 | 995,000 | 0 | 6,999,984 | 0 | 1,800,000 | 3,356 | 296,243 | 10,094,583 | |||||||||||||||||||||||||
| 2016 | 965,833 | 0 | 5,881,237 | 0 | 1,930,000 | 3,730,962 | 257,263 | 12,765,295 | ||||||||||||||||||||||||||
| 2015 | 941,667 | 0 | 5,279,175 | 0 | 2,100,000 | 1,501,718 | 218,250 | 10,040,810 | ||||||||||||||||||||||||||
Name and Principal Position | Year | Salary (1) ($) | 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 20172018 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—$5,584,500,5,472,400, Mr. Stephens—$1,916,688,2,282,521, Mr. Donovan—$306,875,352,500, Mr. McAtee—$455,938,579,438, and Mr. Stankey—$59,625.118,750. 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 on page 88.74.
Note 2.
Amounts in the Stock Awards column for 20172018 represent the grant date values of performance shares,Performance Shares and restricted stock units.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 sharesPerformance Shares included in the table for 20172018 were: Mr. Stephenson—$12,524,985,12,494,790, Mr. Stephens—$5,249,988,6,284,996, Mr. Donovan—$6,902,043,7,766,566, Mr. McAtee—$2,774,990,3,477,876, and Mr. Stankey—$5,249,988.5,045,456. 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 potential payouts range from 0% of the target number of performance sharesPerformance Shares to a
|
maximum payout of 160% of the target number of performance shares.Performance Shares. The value of the awards (performance shares(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.
Included in this column is a supplemental grant of 42,317 performance shares and 14,106 restricted stock units made to Mr. Donovan to acknowledge significant changes in the scope, complexity, and responsibility level of his role upon promotion to CEO- AT&T Communications, LLC effective September 1, 2017. The grant date value of the supplemental award value is $2,202,754.
| 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 2017:2018: Mr. Stephenson—$313,964,131,143, Mr. Stephens—$0, Mr. Donovan—$69,979,50,211, Mr. McAtee—$0, and Mr. Stankey—$3,356.1,910. 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). AT&T does not provide other tax reimbursements to executive officersExecutive Officers except for state and local income taxes resulting from duties performed 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. 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. Mr.Messrs. Donovan, Stankey, and Stephens are also reimbursedrequired to reimburse the Company for the incremental cost of a portionthe personal usage of hiscorporate aircraft, other than for travel to outside board meetings. Other Executive Officers may be required by the CEO to reimburse the incremental cost of their personal use of Company aircraft in 2017.usage on acase-by-case basis. Reimbursements will not be made where prohibited by law.
| Stephenson | Stephens | Donovan | McAtee | Stankey | Stephenson | Stephens | Donovan | McAtee | Stankey | |||||||||||||||||||||||||||||||
Personal Benefits | ||||||||||||||||||||||||||||||||||||||||
Financial counseling (includes tax preparation and estate planning) | 14,000 | 11,500 | 14,000 | 14,000 | 14,000 |
| 22,074 |
|
| 11,500 |
|
| 14,000 |
|
| 12,318 |
|
| 14,000 |
| ||||||||||||||||||||
Auto benefits | 26,763 | 15,221 | 14,569 | 15,281 | 13,880 |
| 27,213 |
|
| 16,176 |
|
| 14,261 |
|
| 16,562 |
|
| 13,736 |
| ||||||||||||||||||||
Personal use of Company aircraft | 0 | 4,710 | 42,500 | 2,556 | 8,389 |
| 0 |
|
| 0 |
|
| 31,233 |
|
| 0 |
|
| 13,223 |
| ||||||||||||||||||||
Executive Health | 26,244 | 25,200 | 25,200 | 0 | 25,200 | |||||||||||||||||||||||||||||||||||
Executive Physical Program | 0 | 0 | 0 | 9,000 | 0 | |||||||||||||||||||||||||||||||||||
Health coverage |
| 52,152 |
|
| 50,064 |
|
| 50,064 |
|
| 50,064 |
|
| 50,064 |
| |||||||||||||||||||||||||
Club membership | 2,877 | 0 | 0 | 2,793 | 2,793 |
| 2,877 |
|
| 0 |
|
| 0 |
|
| 2,793 |
|
| 2,793 |
| ||||||||||||||||||||
Communications | 5,670 | 2,682 | 3,665 | 2,535 | 3,508 |
| 6,037 |
|
| 3,149 |
|
| 4,427 |
|
| 8,007 |
|
| 7,245 |
| ||||||||||||||||||||
Home security | 5,739 | 0 | 344 | 0 | 1,049 |
| 7,866 |
|
| 50 |
|
| 344 |
|
| 50 |
|
| 1,453 |
| ||||||||||||||||||||
Total Personal Benefits | 81,293 | 59,313 | 100,278 | 46,165 | 68,819 |
| 118,219 |
|
| 80,939 |
|
| 114,330 |
|
| 89,794 |
|
| 102,514 |
| ||||||||||||||||||||
Company matching contributions to deferral plans | 1,276,800 | 454,788 | 109,973 | 129,088 | 59,625 |
| 1,202,860 |
|
| 442,800 |
|
| 126,581 |
|
| 148,588 |
|
| 118,750 |
| ||||||||||||||||||||
Life insurance premiums applicable to the employees’ death benefit | 132,588 | 115,270 | 113,696 | 41,248 | 86,584 |
| 217,459 |
|
| 96,935 |
|
| 99,419 |
|
| 26,985 |
|
| 365,790 |
| ||||||||||||||||||||
Tax reimbursements in connection with travel | 0 | 0 | 0 | 0 | 81,215 | |||||||||||||||||||||||||||||||||||
State and Local Income tax reimbursements in connection with business travel |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 68,642 |
| |||||||||||||||||||||||||
Total | 1,490,681 | 629,371 | 323,947 | 216,501 | 296,243 |
| 1,538,538 |
|
| 620,674 |
|
| 340,330 |
|
| 265,367 |
|
| 655,696 |
| ||||||||||||||||||||
|
EXECUTIVE COMPENSATION TABLES
|
CEO Pay Ratio
The Dodd-Frank Reform and Consumer Protection Act includes a mandate that public companies disclose the ratio of the compensation of their CEO to their median employee. OurCEO-median employee pay ratio calculation for 2017 is 366:1. For information on how we calculated this ratio, see pages 92-93.
Grants of Plan-Based AwardsGRANTSOF 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 ($) | |||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||
Stephenson | 1/26/17 | 2,950,000 | 5,900,000 | 11,800,000 | 119,942 | 299,856 | 479,770 | 99,952 | 16,699,980 | |||||||||||||||||||||||||||||||||||
Stephens | 1/26/17 | 950,000 | 1,900,000 | 3,800,000 | 50,275 | 125,688 | 201,101 | 41,896 | 6,999,984 | |||||||||||||||||||||||||||||||||||
Donovan | 1/26/17 | 1,091,667 | 2,183,333 | 4,366,666 | 50,275 | 125,688 | 201,101 | 41,896 | 6,999,984 | |||||||||||||||||||||||||||||||||||
| 9/28/17 | 16,927 | 42,317 | 67,707 | 14,106 | 2,202,754 | |||||||||||||||||||||||||||||||||||||||
McAtee | 1/26/17 | 750,000 | 1,500,000 | 3,000,000 | 26,574 | 66,435 | 106,296 | 22,145 | 3,699,987 | |||||||||||||||||||||||||||||||||||
Stankey | 1/26/17 | 1,000,000 | 2,000,000 | 4,000,000 | 50,275 | 125,688 | 201,101 | 41,896 | 6,999,984 | |||||||||||||||||||||||||||||||||||
| Name | 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 (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephenson
|
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
|
3/29/18
|
|
2/1/18
|
|
|
900,000
|
|
|
2,000,000
|
|
|
2,500,000
|
|
|
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
|
|
| 152,344
|
|
|
338,542
|
|
| 423,178
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
6/28/18
|
|
6/28/18
|
|
|
16,588
|
|
|
41,469
|
|
|
66,350
|
|
|
13,823
|
|
|
1,779,849
|
| ||||||||||||||||||||||||||||||||||||||||||
Donovan
|
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
|
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 71.56.
Note 2.
Represents restricted stock unitRestricted Stock Unit grants, discussed on page 72.57. The units granted in 20172018 are scheduled to vest and distribute in January 2021.2022. 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.
| 64 | |
Employment Contracts
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 sharesPerformance Shares will be prorated based on the number of months worked during the performance period. AT&T has provided that performance sharesPerformance 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 sharesPerformance 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.
JohnMr. 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. This agreement endedUpon Mr. Stankey being reassigned to oversee merger integration planning for compensation awarded afterour acquisition of WarnerMedia on August 1, 2017, concurrent withthis 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 assignmentnew position, he is expected to Senior Executive Vice President –engage in extensive business travel, which will require him to file state and local income tax returns in a number of jurisdictions. AT&T/Time Warner Merger Integration Planning.&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 AWARDSAT DECEMBER 31, 2018
| 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
|
| ||||||||||||||||||||
| 66 |
|
Outstanding Equity Awards at December 31, 2017
| 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 | — | — | 274,839 | 10,685,740 | ||||||||||||||||||||||||||||||||||||
2017-2019 Perf. Shares | — | — | 419,798 | 16,321,746 | ||||||||||||||||||||||||||||||||||||
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 | — | — | 91,317 | 3,550,405 | ||||||||||||||||||||||||||||||||||||
2017-2019 Perf. Shares | — | — | 175,963 | 6,841,441 | ||||||||||||||||||||||||||||||||||||
Donovan | ||||||||||||||||||||||||||||||||||||||||
2014 Restricted Stock | 56,673 | 2,203,446 | — | — | ||||||||||||||||||||||||||||||||||||
2015 Restricted Stock | 29,542 | 1,148,593 | — | — | ||||||||||||||||||||||||||||||||||||
2016-2018 Perf. Shares | — | — | 74,472 | 2,895,471 | ||||||||||||||||||||||||||||||||||||
2017-2019 Perf. Shares | — | — | 175,963 | 6,841,441 | ||||||||||||||||||||||||||||||||||||
2017-2019 Perf. Shares – Supplemental Grant | — | — | 59,244 | 2,303,407 | ||||||||||||||||||||||||||||||||||||
McAtee | ||||||||||||||||||||||||||||||||||||||||
2014 Restricted Stock Units | 7,871 | 306,024 | — | — | ||||||||||||||||||||||||||||||||||||
2015 Restricted Stock Units | 8,343 | 324,376 | — | — | ||||||||||||||||||||||||||||||||||||
2015 Restricted Stock Units – Supplemental Grant | 21,996 | 855,204 | — | — | ||||||||||||||||||||||||||||||||||||
2016 Restricted Stock Units | 45,736 | 1,778,216 | — | — | ||||||||||||||||||||||||||||||||||||
2017 Restricted Stock Units | 22,145 | 860,998 | — | — | ||||||||||||||||||||||||||||||||||||
2016-2018 Perf. Shares | — | — | 57,627 | 2,240,538 | ||||||||||||||||||||||||||||||||||||
2017-2019 Perf. Shares | — | — | 93,009 | 3,616,190 | ||||||||||||||||||||||||||||||||||||
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 | — | — | 100,626 | 3,912,339 | ||||||||||||||||||||||||||||||||||||
2017-2019 Perf. Shares | — | — | 175,963 | 6,841,441 | ||||||||||||||||||||||||||||||||||||
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 on page 88.74. 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, 2017.2018. In calculating the number of performance sharesPerformance Shares and their value, we are
required by SEC rules to compare the Company’s performance through 20172018 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 the 2017-2019 performance period2017 and 2018 grants is ROIC with a payout adjustment for relative TSR achievement. As of the end of 2017,2018, the ROIC achievement for each of the 2017 grantand 2018 grants was aboveat target while the TSR performance was in the bottom quartile of the peer group. As a result, the grant wasgrants were reported at the maximumtarget for ROIC reduced for TSR performance. For the 2016-2018 performance period, the performance metric for 75% of the shares is ROIC, and for the remaining 25%, the performance measure is relative TSR. As of the end of 2017, the ROIC achievement for the 2016 grant was above target and the TSR achievement was below threshold, requiring the ROIC portion of the grant to be reported at its maximum award value and the TSR portion of the grant to be reported at its threshold award value.
Option Exercises and Stock Vested During 2017OPTION 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 ($) | ||||||||||||||||
Stephenson | 0 | 0 | 330,421 | 13,200,149 | ||||||||||||||||
Stephens | 0 | 0 | 115,334 | 4,625,827 | ||||||||||||||||
Donovan | 0 | 0 | 116,940 | 4,687,022 | ||||||||||||||||
McAtee | 0 | 0 | 38,878 | 1,545,082 | ||||||||||||||||
Stankey | 0 | 0 | 125,099 | 5,008,241 | ||||||||||||||||
Option Awards | Stock Awards (1) | |||||||||||||||||||
Name | | Number of Shares Acquired on Exercise (#) |
| | Value Realized on Exercise ($) |
| | Number of Shares Acquired on Vesting (#) |
| | Value Realized on Vesting ($) | |||||||||
Stephenson |
| 0 |
|
| 0 |
|
| 282,604 |
| 9,558,204 | ||||||||||
Stephens |
| 0 |
|
| 0 |
|
| 115,187 |
| 3,913,156 |
| |||||||||
Donovan |
| 0 |
|
| 0 |
|
| 117,539 |
| 4,194,049 |
| |||||||||
McAtee |
| 0 |
|
| 0 |
|
| 42,630 |
| 1,339,557 |
| |||||||||
Stankey |
| 2,307 |
|
| 4,910 |
|
| 107,966 |
| 3,668,748 |
| |||||||||
Note 1.
ReportedIncluded in the above amounts are restricted stock unitsRestricted Stock Units that vested in 2017.2018. Restricted stock unitsStock Units vest at the earlier of the scheduled vesting date or upon the employee becoming retirement eligible. If the units vest because of retirement eligibility, they are not distributed until the scheduled vesting date.
Restricted stock unitsStock Units granted in 20172018 to the following Named Executive OfficersNEOs vested at grant because of their retirement eligibility but will not be distributed until 2021:2022: Mr. Stephenson—99,952,116,828, Mr. Stephens—41,896,60,107, Mr. Donovan—56,002,72,619, and Mr. Stankey—41,896.47,271. Mr. McAtee is not retirement eligible and his 2013 restricted stock units (7,545)2014 Restricted Stock Units (7,871) vested and were distributed on the scheduled distribution date in 2017.2018.
|
EXECUTIVE COMPENSATION TABLES
|
Pension Benefits (Estimated for December
PENSION BENEFITS (ESTIMATEDFOR DECEMBER 31, 2017)2018)
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits (1) ($) | Payments During Last Fiscal Year ($) | |||||||||||||||||||||||
Stephenson | Pension Benefit Plan—Nonbargained Program | 35 | 1,692,562 | 0 | |||||||||||||||||||||||
Pension Benefit Make Up Plan | 15 | 7,100 | 0 | ||||||||||||||||||||||||
SRIP | 22 | 2,406,397 | 0 | ||||||||||||||||||||||||
SERP | 30 | 53,031,253 | 0 | ||||||||||||||||||||||||
Stephens | Pension Benefit Plan—Nonbargained Program | 25 | 1,337,416 | 0 | |||||||||||||||||||||||
Pension Benefit Make Up Plan | 8 | 63,124 | 0 | ||||||||||||||||||||||||
SRIP | 12 | 411,442 | 0 | ||||||||||||||||||||||||
SERP | 25 | 19,187,943 | 0 | ||||||||||||||||||||||||
Donovan | Pension Benefit Plan—MCB Program | 8 | 168,622 | 0 | |||||||||||||||||||||||
SERP | 9 | 13,946,730 | 0 | ||||||||||||||||||||||||
McAtee | Pension Benefit Plan—MCB Program | 5 | 72,125 | 0 | |||||||||||||||||||||||
Pension Benefit Make Up Plan | 5 | 309,078 | 0 | ||||||||||||||||||||||||
Stankey | Pension Benefit Plan—Nonbargained Program | 32 | 1,699,065 | 0 | |||||||||||||||||||||||
SRIP | 19 | 435,226 | 0 | ||||||||||||||||||||||||
SERP | 32 | 26,870,043 | 0 | ||||||||||||||||||||||||
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits (1) ($) | 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 20172018 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 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 Supplemental Retirement Income Plan (SRIP) and its successor, the 2005 Supplemental Employee Retirement Plan (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).
The SRIP/SERP benefits are 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.
|
EXECUTIVE COMPENSATION TABLES QUALIFIED PENSION PLAN
|
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
Mr. Stephenson, Mr. Stephens, and Mr. Stankey isare 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.
CAM Formula
For each of Mr. Stephenson, Mr. Stephens, and Mr. Stankey the greater benefit comes from the CAM 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.
Management Cash Balance Program
Mr. Donovan and Mr. McAtee are 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) 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 eligible Named Executive OfficersNEOs 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 Officers,NEOs, except for Mr. McAtee, is eligible to receive SRIP/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 maydo 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. 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.
The salary and bonus used to determine the 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” for Mr. Donovan is fixed at $3.0 million. The benefit will also be modified in the same manner for Mr. Stephens and Mr. Stankey following the close of the Time Warner merger.
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 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%.
| 70 | |
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
The Named Executive OfficersNEOs 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 Named Executive OfficersNEOs except for Mr. McAtee 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. Through December 31, 2017,
the executive health plan benefitcoverage supplemented the group health plan. Effective January 1, 2018, the executive health plancoverage is the primary and sole health plancoverage for eligible participants. The plancoverage 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 executive health plan benefitcoverage 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 Benefits
OTHER 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 2017,2018, 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—$20,139,140,18,560,732, Mr. Stephens—$7,704,539,8,733,525, Mr. Donovan—$12,182,076,13,473,049, Mr. McAtee—$8,486,027,8,481,603 and Mr. Stankey—$7,991,784.7,634,536.
|
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 2017,2018, Mr. Donovan’s restricted stockRestricted Stock ($3,352,039)2,460,576) and Mr. McAtee’s restricted stock unitsRestricted Stock Units ($4,124,818)3,748,786) would have vested. Conversely, performance sharesPerformance Shares will not be accelerated in the event of a termination due to disability but will be paid without proration, and based solely 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 the 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, each of the Named Executive OfficersNEOs 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 2017,2018, his annual death benefit for ten years would have been $1,241,771.$1,398,839.
| 72 | |
Nonqualified Deferred Compensation
EXECUTIVE COMPENSATION TABLES
| Name | Plan (1) | Executive in Last FY (2) ($) | Registrant in Last FY (2) ($) | Aggregate Last FY (2)(3) ($) | Aggregate Distributions ($) | Aggregate Balance at Last FYE (2) ($) | |||||||||||||||||||||||||||||||||||||||||
Stephenson | Stock Purchase and Deferral Plan | 5,955,000 | 1,264,440 | (510,864 | ) | 8,249,438 | 14,543,652 | ||||||||||||||||||||||||||||||||||||||||
| Cash Deferral Plan | 900,000 | — | 774,531 | 3,795,961 | 20,682,569 | ||||||||||||||||||||||||||||||||||||||||||
Stephens | Stock Purchase and Deferral Plan | 2,040,188 | 441,828 | (77,137 | ) | 3,162,976 | 2,730,945 | ||||||||||||||||||||||||||||||||||||||||
Donovan | Stock Purchase and Deferral Plan | 306,875 | 97,515 | 11,587 | 367,321 | 416,865 | |||||||||||||||||||||||||||||||||||||||||
| Cash Deferral Plan | 1,155,000 | — | 172,661 | 635,542 | 4,721,562 | ||||||||||||||||||||||||||||||||||||||||||
McAtee | Stock Purchase and Deferral Plan | 455,938 | 116,128 | (8,947 | ) | 242,598 | 563,705 | ||||||||||||||||||||||||||||||||||||||||
Stankey | Stock Purchase and Deferral Plan | 59,625 | 46,665 | (56,549 | ) | 456,354 | 1,590,541 | ||||||||||||||||||||||||||||||||||||||||
| Cash Deferral Plan | — | — | 8,278 | — | 224,182 | ||||||||||||||||||||||||||||||||||||||||||
NONQUALIFIED DEFERRED COMPENSATION
| 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 20172018 in the “Summary Compensation Table”: Mr. Stephenson—$3,018,404,2,761,243, Mr. Stephens—$734,016,757,100, Mr. Donovan—$474,369,516,411, Mr. McAtee—$234,566,291,325, and Mr. Stankey—$109,646. $226,210. Of the amounts reported in the aggregate
|
balance column, the following aggregate amounts were previously reported in the “Summary Compensation Table” for 20162017 and 2015,2016, combined: Mr. Stephenson—$7,671,217,7,474,620, Mr. Stephens—$1,748,000,1,624,500, Mr. Donovan—$2,435,834,2,656,808, Mr. McAtee—$0,337,500, and Mr. Stankey—$4,869.6,456.
Note 3.
Aggregate Earnings include interest, dividend equivalents, and stock price appreciation/depreciation. The
“Change “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”.
| 73 |
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.
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EXECUTIVE COMPENSATION TABLES
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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.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 20172018 in accordance with the Change in Control Severance Plan, the following estimated severance payments would have been paid in a lump sum.
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Potential Change in Control Severance Payments
as of DecemberASOF DECEMBER 31, 20172018
Name | Severance ($) | | ||
Stephenson | 23,023,000 | |||
Stephens | ||||
Donovan | ||||
McAtee | ||||
Stankey |
None of the Named Executive OfficersNEOs hold stock awards that would be subject to automatic vesting in connection with a change in control.
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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.
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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. Yang for whom two reports regarding the purchasemeeting by presenting proof of your ownership of AT&T common stock was inadvertently filed late.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.
Householding InformationHOUSEHOLDING 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.
Equity Compensation Plan Information
The following table provides information as of December 31, 2017, concerning shares of AT&T common stock authorized for issuance under AT&T’s existing equity compensation plans.
Equity Compensation Plan Information
| Plan Category | Number of securities to outstanding options, (a) | Weighted average (b) | Number of securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by security holders | 39,161,190 | (1) | $ | 28.34 | 119,036,310 | (2) | ||||||
Equity compensation plans not approved by security holders | 0 | 0 | 0 | |||||||||
Total | 39,161,190 | (3) | $ | 28.34 | 119,036,310 | (2) | ||||||
Note 1.
Includes the issuance of stock in connection with the following stockholder approved plans: (a) 4,530,343 stock options under the Stock Purchase and Deferral
Plan (SPDP), (b) 2,171,385 phantom stock units under the Stock Savings Plan (SSP), 11,160,068 phantom stock units under the SPDP, 4,646,070 restricted stock units under the 2011 Incentive Plan, and 774,769 restricted stock units under the 2016 Incentive Plan
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OTHER INFORMATION
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and (c) 8,835,192 target number of stock-settled performance shares under the 2011 Incentive Plan and 4,839,272 target number of stock-settled performance shares under the 2016 Incentive Plan. At payout, the target number of performance shares may be reduced to zero or increased by up to 150%. Each phantom stock unit and performance share is settleable in stock on a 1-to-1 basis. The weighted-average exercise price in the table does not include outstanding performance shares or phantom stock units.
The SSP was approved by stockholders in 1994 and then was amended by the Board of Directors in 2000 to increase the number of shares available for purchase under the plan (including shares from the Company match and reinvested dividend equivalents). Stockholder approval was not required for the amendment. To the extent applicable, the amount shown for approved plans in column (a), in addition to the above amounts, includes 2,204,091 phantom stock units (computed on a first-in-first-out basis) that were approved by the Board in 2000. Under the SSP, shares could be purchased with payroll deductions and reinvested dividend equivalents by mid-level and above managers and limited Company partial matching contributions. No new contributions may be made to the plan.
Note 2.
Includes 16,516,884 shares that may be issued under the SPDP, 81,998,570 shares that may be issued under the 2016 Incentive Plan, and up to 2,841,553 shares that may be purchased through reinvestment of dividends on phantom shares held in the SSP.
Note 3.
Does not include certain stock options issued by companies acquired by AT&T that were converted into options to acquire AT&T stock. As of December 31, 2017 there were 311,190 shares of AT&T common stock subject to the converted options, having a weighted-average exercise price of $19.95. Also, does not include 1,389,716 outstanding phantom stock units that were issued by companies acquired by AT&T that are convertible into stock on a 1-to-1 basis, along with an estimated 117,361 shares that may be purchased with reinvested dividend equivalents paid on the outstanding phantom stock units. No further phantom stock units, other than reinvested dividends, may be issued under the assumed plans. The weighted-average exercise price in the table does not include outstanding performance shares or phantom stock units.
CEO Pay Ratio
We determined the pay ratio by dividing the total 20172018 compensation of the CEO as disclosed in the Summary Compensation Table by the total 20172018 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 20172018 was determined using the compensation of employees who were actively employed on October 1, 20172018 (theMeasurement Date). We used their cash compensation for the first 3three quarters of the year to determine the median employee. We substituted the median employee with an employee who had similar compensation characteristics because the median employee had an anomalous pension value. By choosing an alternate employee, our pay ratio increased.
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Determination of Number of Employees for Selection of Median Employee
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Step 1 - As of the Measurement Date, our total number of active global employees was 233,993, excluding the CEO | ||||||
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) | |||||
Result - | ||||||
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Total Number of Employees |
| 222,736 | ||||
The total compensation of our median employee, $95,814, was determined using the same methodology we useused for Mr. Stephenson’sStephenson in the Summary Compensation Table compensation, is $78,437.and we included the cost of group health and welfare benefits. The total compensation of the CEO Randall L. Stephenson is $28,720,720.was $29,118,118, which includes the value of Mr. Stephenson’s health benefits. The final pay ratio calculation is 366:304:1.
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The following tables reconcile our free cash flow(FCF) and earnings per share(EPS) metrics, discussed on page 38, to the most comparable GAAP metrics.
Free cash flow is defined as cash from operations minus capital expenditures. We believe this 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 FLOW
| 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 are non-operational or non-recurring in nature, including dispositions and merger integration and transaction costs (referred to as “Adjusting Items”). Management believes that this 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.
ADJUSTED DILUTED EPS
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AT&T INC.
STOCK PURCHASE AND DEFERRAL PLAN
Adopted November 19, 2004
As amended through April 27,Twelve Months Ended
December 31, 2018
Article 1—Statement of Purpose
The purpose of the Stock Purchase and Deferral Plan (“Plan”) is to increase stock ownership by, and to provide savings opportunities to, a select group of management employees of AT&T Inc. (“AT&T”) and its Subsidiaries.
Article 2—Definitions
For the purpose of this Plan, the following words and phrases shall have the meanings indicated, unless the context indicates otherwise:
Annual Bonus. The award designated the “Annual Bonus” by AT&T (including but not limited to an award that may be paid in more frequent installments than annually), together with any individual discretionary award made in connection therewith, or comparable awards, if any, determined by AT&T to be used in lieu of these awards.
Base Compensation. The following types of cash-based compensation paid by an Employer (but not including payments made by anon-Employer, such as state disability payments), before reduction due to any contribution pursuant to this Plan or reduction pursuant to any deferral plan of an Employer, including but not limited to a plan that includes a qualified cash or deferral arrangement under Section 401(k) of the Code:
Payments by an Employer under a disability plan made in lieu of any compensation described above shall be deemed to be a part of the respective form of compensation it replaces for purposes of this definition. Base Compensation does not include zone allowances or any other geographical differential and shall not include payments made in lieu of unused vacation or other paid days off, and such payments shall not be contributed to this Plan.
Determinations by AT&T (the Committee with respect to Officer Level Employees) of the items that make up Base Compensation shall be final. The Committee may, from time to time, add or subtract types of compensation to or from the definition of “Base Compensation” provided, however, any such addition or subtraction shall be effective only with respect to the next period in which a Participant may make an election to establish a Share Deferral Account. Base Compensation that was payable in a prior Plan Year but paid in a later Plan Year shall not be used to determine Employee Contributions or Matching Contributions in such later Plan Year.
Business Day. Any day during regular business hours that AT&T is open for business.
Change in Control. With respect to AT&T’s direct and indirect ownership of an Employer, a “Change in the effective control of a Corporation,” as defined in Treasury RegulationSection 1.409A-3(i)(5)(vi)(A)(1), regardless of whether the Employer is a corporation or non corporate entity as permitted by the regulation, and using “50 percent” in lieu of “30 percent” in such regulation. A Change in Control will not apply to AT&T itself.
Chief Executive Officer. The Chief Executive Officer of AT&T Inc.
Diluted EPS |
Code.References to the Code shall be to provisions of the Internal Revenue Code of 1986, as amended, including regulations promulgated thereunder and successor provisions. Similarly, references to regulations shall include amendments and successor provisions.
Committee. The Human Resources Committee of the Board of Directors of AT&T Inc.
Disability.Absence of an Employee from work with an Employer under the relevant Employer’s disability plan.
Eligible Employee.An Employee who:
(a) is a full or part time, salaried Employee of AT&T or an Employer in which AT&T has a direct or indirect 100% ownership interest and who is on active duty or Leave of Absence (but only while such Employee is deemed by the Employer to be an Employee of such Employer);
(b) is, as determined by AT&T, a member of Employer’s “select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder (“ERISA”), which is deemed to include each Officer Level Employee; and
(c) has an employment status which has been approved by AT&T to be eligible to participate in this Plan or is an Officer Level Employee.
Notwithstanding the foregoing, AT&T (the Committee with respect to Officer Level Employees) may, from time to time, exclude any Employee or group of Employees from being deemed an “Eligible Employee” under this Plan.
In the event a court or other governmental authority determines that an individual was improperly excluded from the class of persons who would be permitted to make Employee Contributions during a particular time for any reason, that individual shall not be permitted to make such contributions for purposes of the Plan for the period of time prior to such determination.
Employee. Any person employed by an Employer and paid on an Employer’s payroll system, excluding persons hired for a fixed maximum term and excluding persons who are neither citizens nor permanent residents of the United States, all as determined by AT&T.For purposes of this Plan, a person on Leave of Absence who otherwise would be an Employee shall be deemed to be an Employee.
Employee Contributions. Amounts credited to a Share Deferral Account pursuant to Section 4.1 (Election to Make Contributions) of the Plan.
Employer. AT&T Inc. or any of its Subsidiaries.
Exercise Price. The price per share of Stock purchasable under an Option.
Fair Market Value or FMV. In valuing Stock or any other item subject to valuation under this Plan, the Committee may use such index or measurement as the Committee may reasonably determine from time to time, and such index or measurement shall be the FMV of such Stock or other item, provided that for purposes of determining the Exercise Price of Stock Options, the Committee shall use a value consistent with the requirements of Section 409A. In the absence of such action by the Committee, FMV means, with respect to Stock, the closing price on the New York Stock Exchange (“NYSE”) of the Stock on the relevant date, or if on such date the Stock is not traded on the NYSE, then the closing price on the immediately preceding date such Stock is so traded.
Leave of Absence. Where a person is absent from employment with an Employer on a leave of absence, military leave, sick leave, or Disability where the leave is given in order to prevent a break in the continuity of term of employment, and permission for such leave is granted (and not revoked) in conformity with the rules of the Employer that employs the individual, as adopted from time to time, and the Employee is reasonably expected to return to service. Except as set forth below, the leave shall not exceed six (6) months for purposes of this Plan, and the Employee shall Terminate Employment upon termination of such leave if the Employee does not return to
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work prior to or upon expiration of such six (6) month period, unless the individual retains a right to reemployment under law or by contract. A twenty-nine (29) month limitation shall apply in lieu of such six (6) month limitation if the leave is due to the Employee being “disabled” (within the meaning of Treasury Regulation§1.409A-3(i)(4)). A Leave of Absence shall not commence or shall be deemed to cease under the Plan where the Employee has incurred a Termination of Employment.
Officer Level Employee. Any executive officer of AT&T, as that term is used under the Securities Exchange Act of 1934, as amended, and any Employee that is an “officer level” Employee for compensation purposes as shown on the records of AT&T.
Options or Stock Options. Options to purchase Stock issued pursuant to this Plan.
Participant. An Employee or former Employee who participates in this Plan.
Plan Year. Each of the following shall be a Plan Year: the period January 1, 2005, through January 15, 2006; the period January 16, 2006, through December 31, 2006; and, for all later Plan Years, it is defined as the period from January 1 through December 31.
Retirement or Retire. Termination of Employment on or after the earlier of the following dates, unless otherwise provided by the Committee: (a) for Officer Level Employees, the date the Participant is at least age 55 and has five (5) years of Net Credited Service; or (b) the date the Participant has attained one of the following combinations of age and Net Credited Service:
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For purposes of this Plan only, Net Credited Service shall be calculated in the same manner as “Pension Eligibility Service” under the AT&T Pension Benefit Plan—Nonbargained Program (“Pension Plan”), as amended from time to time, except that service with an Employer shall be counted as though the Employer were a “Participating Company” under the Pension Plan and the Employee was a participant in the Pension Plan.
Senior Manager. Any Employee who is a “senior manager” for compensation purposes as shown on the records of AT&T.
Shares or Share Units. An accounting entry representing the right to receive an equivalent number of shares of Stock.
Share Deferral Accountor Account.The Account or Accounts established annually by an election by a Participant to make Employee Contributions to the Plan, with each Account relating to a Plan Year. For each Plan Year after 2008, there shall be (1) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Base Compensation (excluding Annual Bonus) and related Matching Share Units and (2) a separate Share Deferral Account for Share Units purchased with Employee Contributions of Short Term Incentive Award and/or Annual Bonus and any related Matching Share Units. Earnings on Share Units and Matching Share Units shall accrue to the respective Share Deferral Accounts where they are earned.
Short Term Incentive Award. A cash award paid by an Employer (and not by anon-Employer, such as state disability payments) under the Short Term Incentive Plan or any successor plan, together with any individual discretionary award made in connection therewith; an award under a similar plan intended by the Committee to be in lieu of an award under such Short Term Incentive Plan, including, but not limited to, Performance Units granted under the 2006 Incentive Plan or any successor plan. It shall also include any other award that the Committee designates as a Short Term Incentive Award specifically for purposes of this Plan (regardless of the purpose of the award) provided the deferral election is made in accordance with Section 409A.
Amortization of intangible assets |
Specified Employee. Any Participant who is a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by AT&T in accordance with its uniform policy with respect to all arrangements subject to Code Section 409A, based upon the12-month period ending on each December 31st (such12-month period is referred to below as the “identification period”). All Participants who are determined to be Key Employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as Key Employees for purposes of the Plan during the12-month period that begins on the first day of the 4th month following the close of such identification period.
Stock. The common stock of AT&T Inc.
Subsidiary. Any corporation, partnership, venture or other entity or business with which AT&T would be considered a single employer under Sections 414(a) and (c) of the Code, using 50% as the ownership threshold as provided under Section 409A of the Code.
Termination of Employment. References herein to “Termination of Employment,” “Terminate Employment” or a similar reference, shall mean the event where the Employee has a “separation from service,” as defined under Section 409A, with all Employers. For purposes of this Plan, a Termination of Employment with respect to an Employer shall be deemed to also occur when such Employer incurs a Change in Control.
Article 3—Administration of the Plan
3.1 The Committee.
Except as delegated by this Plan or by the Committee, the Committee shall be the administrator of the Plan and will administer the Plan, interpret, construe and apply its provisions and determine all questions of administration, interpretation and application of the Plan, including, without limitation, questions and determinations of eligibility, entitlement to benefits and payment of benefits, all in its sole and absolute discretion. The Committee may further establish, adopt or revise such rules and regulations and such additional terms and conditions regarding participation in the Plan as it may deem necessary or advisable for the administration of the Plan. References in this Plan to determinations or other actions by AT&T, herein, shall mean actions authorized by the Committee, the Chief Executive Officer, the Senior Executive Vice President of AT&T in charge of Human Resources, or their respective successors or duly authorized delegates, in each case in the discretion of such person. All decisions by the Committee, its delegate or AT&T, as applicable, shall be final and binding.
3.2 Authorized Shares of Stock.
(a) Except as provided below, the number of shares of Stock which may be distributed pursuant to the Plan, exclusive of Article 8—Options, is 76,000,000. The number of shares of Stock which may be issued pursuant to the exercise of Stock Options is 34,000,000 (together with an equal number of Stock Options). In determining the number of authorized shares remaining available for issuance, shares withheld for taxes in a distribution shall not be considered issued and shall not reduce the number of authorized shares. When an Option is exercised, the authorized shares of Stock that may be issued pursuant to an Option exercise shall be reduced by the number of Options so exercised. To the extent an Option issued under this Plan is canceled, terminates, expires, or lapses for any reason, such Option shall again be available for issuance under the Plan. Conversions of Stock awards into Share Units and their eventual distribution (excluding the effects of any dividends on such Share Units) shall count only against the limits of the plans from which they originated and shall not be applied against the limits in this Plan. To the extent Share Units are credited through deferrals of Stock or Employee Contributions where the distribution of which would be deductible by AT&T under Section 162(m) of the Code without regard to the size of the distribution, and such deductible Share Units are available for distribution, such Share Units shall be distributed first.
(b) In the event the Committee determines that continuing the issuance of Share Units under the Plan or Stock Options under the Plan may cause the number of shares of Stock that are to be distributed under this Plan or the
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number of Stock Options (as determined pursuant to subsection (a), above) to exceed the number of authorized shares of Stock, then in lieu of distributing Stock, the Committee may provide after such determination and only with respect to Share Units that have not theretofore been credited to a Share Deferral Account, that such Share Units may be settled in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the date of the distribution of such Share Unit. The Committee may also provide after such determination and only with respect to Stock Options that have not theretofore been issued that such Stock Options may only be settled on aNet-Settled basis in cash equal to the value of the Stock that would otherwise be distributed based on the FMV of the Stock on the day of exercise.
(c) In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, stock split, share combination, or other change in the corporate structure of AT&T affecting the shares of Stock (including a conversion of Stock into cash or other property), such adjustment shall be made to the number and class of the shares of Stock which may be delivered under the Plan (including but not limited to individual limits), and in the number and class of and/or price of shares of Stock subject to outstanding Options granted under the Plan, and/or in the number of outstanding Options and Share Units, or such other adjustment determined by the Committee, in each case as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights.
3.3 Claims and Appeals.
(a) Claims. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Executive Compensation Administration Department, setting forth his or her claim. The request must be addressed to the AT&T Executive Compensation Administration Department at its then principal place of business.
(b) Claim Decision. Upon receipt of a claim, the AT&T Executive Compensation Administration Department shall review the claim and provide the Claimant with a written notice of its decision within a reasonable period of time, not to exceed ninety (90) days, after the claim is received. If the AT&T Executive Compensation Administration Department determines that special circumstances require an extension of time beyond the initial ninety (90)- day claim review period, the AT&T Executive Compensation Administration Department shall notify the Claimant in writing within the initial ninety(90)-day period and explain the special circumstances that require the extension and state the date by which the AT&T Executive Compensation Administration Department expects to render its decision on the claim. If this notice is provided, the AT&T Executive Compensation Administration Department may take up to an additional ninety (90) days (for a total of one hundred eighty (180) days after receipt of the claim) to render its decision on the claim.
If the claim is denied by the AT&T Executive Compensation Administration Department, in whole or in part, the AT&T Executive Compensation Administration Department shall provide a written decision using language calculated to be understood by the Claimant and setting forth: (i) the specific reason or reasons for such denial; (ii) specific references to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (iv) a description of the Plan’s procedures for review of denied claims and the steps to be taken if the Claimant wishes to submit the claim for review; (v) the time limits for requesting a review of a denied claim under this section and for conducting the review under this section; and (vi) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if the claim is denied following review under this section.
(c) Request for Review. Within sixty (60) days after the receipt by the Claimant of the written decision on the claim provided for in this section, the Claimant may request in writing that the Committee review the determination of the AT&T Executive Compensation Administration Department. Such request must be addressed to the Committee at the address for giving notice in this Plan. To assist the Claimant in deciding whether to request a review of a denied claim or in preparing a request for review of a denied claim, a Claimant shall be provided, upon written request to the Committee and free of charge, reasonable access to, and copies of, all documents, records and
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Merger integration and other items1 |
other information relevant to the claim. The Claimant or his or her duly authorized representative may, but need not, submit a statement of the issues and comments in writing, as well as other documents, records or other information relating to the claim for consideration by the Committee. If the Claimant does not request a review by the Committee of the AT&T Executive Compensation Administration Department’s decision within such sixty(60)-day period, the Claimant shall be barred and stopped from challenging the determination of the AT&T Executive Compensation Administration Department.
(d) Review of Decision. Within sixty (60) days after the Committee’s receipt of a request for review, the Administrator will review the decision of the AT&T Executive Compensation Administration Department. If the Committee determines that special circumstances require an extension of time beyond the initial sixty(60)-day review period, the Committee shall notify the Claimant in writing within the initial sixty(60)-day period and explain the special circumstances that require the extension and state the date by which the Committee expects to render its decision on the review of the claim. If this notice is provided, the Committee may take up to an additional sixty (60) days (for a total of one hundred twenty (120) days after receipt of the request for review) to render its decision on the review of the claim.
During its review of the claim, the Committee shall:
(1) Take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim conducted pursuant to this section;
(2) Follow reasonable procedures to verify that its benefit determination is made in accordance with the applicable Plan documents; and
(3) Follow reasonable procedures to ensure that the applicable Plan provisions are applied to the Participant to whom the claim relates in a manner consistent with how such provisions have been applied to other similarly-situated Participants.
After considering all materials presented by the Claimant, the Committee will render a decision, written in a manner designed to be understood by the Claimant. If the Committee denies the claim on review, the written decision will include (i) the specific reasons for the decision; (ii) specific references to the pertinent provisions of this Plan on which the decision is based; (iii) a statement that the Claimant is entitled to receive, upon request to the Committee and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim; and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
The Committee shall serve as the final review committee under the Plan and shall have sole and complete discretionary authority to administer, interpret, construe and apply the Plan provisions, and determine all questions of administration, interpretation, construction, and application of the Plan, including questions and determinations of eligibility, entitlement to benefits and the type, form and amount of any payment of benefits, all in its sole and absolute discretion. The Committee shall further have the authority to determine all relevant facts and related issues, and all documents, records and other information relevant to a claim conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Plan. Decisions by the Committee shall be conclusive and binding on all parties and not subject to further review.
In any case, a Participant or Beneficiary may have further rights under ERISA. The Plan provisions require that Participants or Beneficiary pursue all claim and appeal rights described in this section before they seek any other legal recourse regarding claims for benefits.
Article 4—Contributions
4.1 Election to Make Contributions.
(a) The Committee shall establish dates and other conditions for participation in the Plan and making contributions as it deems appropriate. Except as otherwise provided by the Committee, each year an Employee who is an Eligible
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Employee as of September 30 may thereafter make an election on or prior to the last Business Day of the immediately following November (such election shall be cancelled if the Employee is not an Eligible Employee on the last day such an election may be made) to contribute on apre-tax basis, through payroll deductions, any combination of the following:
(1) From 6% to 30% (in whole percentage increments) of the Participant’s monthly Base Compensation, other than Annual Bonus, during the calendar year (the Plan Year for such contributions) following the calendar year of such election. The Employee Contributions shall be used to acquire Share Units to be credited to the Share Deferral Account for that Plan Year.
(2) Up to 95% (in whole percentage increments or limited to the target amount) of a Short Term Incentive Award, or from 6% to 30% (in whole percentage increments) of Annual Bonus, in each case such contributions shall be made during the second calendar year (which is the Plan Year for such contributions) following the year of such election, except that in 2008 a separate election may be made with respect to contributions to be made in 2009. An Employee may make such an election with respect to the type of Award (Short Term Incentive Award or Annual Bonus) that the Employee is under as of the time the Employee’s eligibility to make such election is determined. If because of a promotion or otherwise, the Employee receives a different type of Award instead of, or in partial or full replacement for, the type of Award subject to the Employee’s election for the relevant Plan Year, the election will apply to the other Award as well, including but not limited to any individual discretionary award related thereto.
(b) The Committee may permit an Eligible Employee to make an election to purchase Share Units under this Plan with compensation other than Base Compensation or Short Term Incentive Awards on such terms and conditions as such Committee may permit from time to time, provided that any such election is made in accordance with Section 409A of the Code. In no event shall an acquisition of Share Units pursuant to this paragraph (b) or pursuant to the conversion of a right to receive Stock into Share Units (such as through a distribution of Stock under the 2001 Incentive Plan) result in the crediting of an AT&T Matching Contribution or Options.
(c) Notwithstanding anything to the contrary in this Plan, no election shall be effective to the extent it would permit an Employee Contribution or distribution to be made that is not in compliance with Section 409A of the Code. To the extent such election related to Employee Contributions that complied with such statute and regulations thereunder, that portion of the election shall remain valid, except as otherwise provided under this Plan.
(d) To the extent permitted by Section 409A of the Code, AT&T may refuse or terminate, in whole or in part, any election to purchase Share Units in the Plan at any time; provided, however, that only the Committee may take such action with respect to persons who are Officer Level Employees.
(e) In the event the Participant takes a hardship withdrawal pursuant to Treasury Regulation§1.401(k)-1 from a benefit plan qualified under the Code and sponsored by an Employer, any election to make Employee Contributions by such Participant shall be cancelled on a prospective basis, and the Participant shall not be permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.
4.2 Purchase of Share Units.
(a) Employee Contributions (as well as any corresponding AT&T Matching Contributions) shall be made pursuant to a proper election, only during the Participant’s lifetime; provided, however, with respect to Employee Contribution elections made prior to 2007, the Employee must remain an Eligible Employee while making any such contributions. In the event of a Change in Control of an Employer, subsequent compensation from the Employer may not be contributed to the Plan. The Employer may continue the then current elections of the participants under a subsequent plan in order to comply with applicable tax laws.
(b) The number of Share Units purchased by a Participant during a calendar month shall be found by dividing the Participant’s Employee Contributions during the month by the FMV of a share of Stock on the last day of such month.
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(Gain) loss on sale of assets, impairments and other adjustments2 |
(c) A contribution to the Plan shall be made when the compensation—from which the contribution is to be deducted—is to be paid (“paid,” as used in this Plan, includes amounts contributed to the Plan that would have been paid were it not for an election under this Plan), as determined by the relevant Employer. The Committee may modify or change this paragraph (c) from time to time.
4.3 Reinvestment of Dividends.
In the month containing a record date for a cash dividend on Stock, each Share Deferral Account shall be credited with that number of Share Units equal to the declared dividend per share of Stock, multiplied by the number of Share Units held in such Share Deferral Account as of such record date, and dividing the product by the FMV of a share of Stock on the last day of such month.
Article 5—AT&T Matching Contributions
5.1 AT&T Match.
(a) Each month AT&T shall credit the Participant’s relevant Share Deferral Account with the number of “Matching Share Units” found by taking eighty percent (80%) of the Participant’s Employee Contributions from Base Compensation made to this Plan and to the Cash Deferral Plan during the month with respect to the first six percent (6%) of the Participant’s monthly Match Eligible Compensation (as defined below) and dividing the resulting figure by the FMV of the Stock on the last day of such month (such resulting amount shall be the “Matching Contribution”). The monthly “Match Eligible Compensation” shall be the sum of:
(1) the monthly Employee Contributions from Base Compensation to this Plan and the Cash Deferral Plan (in the aggregate, “Deferred BC”), plus
(2) the amount of the Participant’s monthly Base Compensation in excess of the Deferred BC(“Non-Deferred BC”) but only to the extent such monthlyNon-Deferred BC, when aggregated with the Participant’s totalNon-Deferred BC for prior months in such Plan Year, as determined by the relevant Employer, exceeds the limit in effect under Section 401(a)(17) of the Code applicable with respect to such Plan Year.
The foregoing formula shall apply regardless of whether or not the Participant makes contributions to a 401(k) plan.
A Participant may receive Matching Share Units in a Share Deferral Account for a particular form of compensation only if the Participant is then making contributions to the same Share Deferral Account; provided, however, this condition shall not apply for purposes of determining under Section 5.1(a)(2) whether the limit described therein has been reached.
As provided in the definition of Share Deferral Account, Matching Share Units shall be credited to the respective Share Deferral Account that is related to the same form of Employee Contributions (either (1) Base Compensation excluding Annual Bonus or (2) Annual Bonus).
(b) In the event the Participant is not eligible to earn pension accruals under a pension plan offered by AT&T or a Subsidiary and either (1) first becomes an Employee on or after January 1, 2015, or (2) the Participant Terminates Employment on or after January 1, 2015, and the Participant is subsequently rehired as an Employee, then the “eighty percent (80%)” reference in section 5.1(a) shall be replaced with “one hundred percent (100%)” for purposes of determining the number of Matching Share Units to which the Participant would be entitled pursuant to contribution elections made after such hiring or rehiring.
(c) In the sole discretion of the Committee, in the event the Committee reduces the number of Options that AT&T issues for each Share Unit purchased, the Committee may provide for the contribution of a Bonus Matching Contribution on such terms as the Committee determines. Such Bonus Matching Contribution may not exceed 20% of the Participant’s Employee Contributions for the month. The Bonus Matching Contribution shall be subject to such
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terms and conditions as required by the Committee and, unless otherwise provided by the Committee, to the same distribution requirements as Matching Contributions. Pursuant to the foregoing authority and until otherwise provided by the Committee, effective for Share Accounts created pursuant to Employee Contribution elections where such elections are made after January 1, 2010, AT&T shall make Bonus Matching Contributions equal to 20% of the Participant’s monthly Employee Contributions from each of Base Compensation and Short Term Incentive Award (not to exceed the target amount of such award, which limit shall be pro rated for any partial year award). Such Bonus Matching Contribution shall be used to purchase that number of Matching Share Units found by dividing the relevant Bonus Matching Contribution for the month by the FMV of the Stock on the last day of such month.
5.2 Distribution of Share Units Acquired with Matching Contributions.
A Participant’s Matching Share Units shall be distributed in a lump sum, in accordance with the Plan’s distribution provisions, in the earlier of: (a) the calendar year following the calendar year of the Termination of Employment of the Participant, or (b) the calendar year in which the Participant reaches age 55, in each case only with respect to Matching Share Units relating to Share Deferral Accounts for Plan Years before such distribution calendar year.
Matching Share Units acquired as part of a Share Deferral Account that commences in or after the calendar year the Employee reaches age 55 or after the calendar year in which the Employee Terminates Employment will be distributed in the same manner and time as other Share Units in such Share Deferral Account.
Notwithstanding anything to the contrary in this section, Matching Share Units acquired in 2008 and later shall be distributed at the same time as other Share Units (including those acquired with Employee Contributions) in the same Share Deferral Account.
Article 6—Distributions
6.1 Distributions of Share Units.
(a) Initial Election with Respect to a Share Deferral Account. At the time the Participant makes an election to make Employee Contributions with respect to a Share Deferral Account, the Participant shall also elect the calendar year the Share Deferral Account shall be distributed, which may be from the first through fifth calendar years after the Plan Year the Account commenced (except as otherwise provided in this Plan with respect to Matching Share Units). For example, if an Account commenced in 2005, the Participant may elect to commence the distribution in any calendar year from and including 2006 to and including 2010. If no timely distribution election is made by the Participant, then the Participant will be deemed to have made an election to have the Share Deferral Account distributed in a single installment in the first calendar year after the calendar year the Account commenced.
(b) Election to Delay a Scheduled Distribution. A Participant may elect to defer a scheduled distribution of a Share Deferral Account for five (5) additional calendar years beyond that previously elected (except as otherwise provided in this Plan with respect to Matching Share Units). Unless otherwise provided by the Committee, the election to defer the distribution must be made on or after October 1, and on or before the last Business Day of the next following December, of the calendar year that is the second calendar year preceding the calendar year of the relevant scheduled distribution. To make this election, the Participant must be an Eligible Employee both on the September 30 immediately preceding such election and on the last day such an election may be made. For example, an election to defer a scheduled distribution in 2010 must be made during the period from October 1, 2008, through the last business day of December 2008, and the Participant must be an Eligible Employee both on September 30, 2008, and the last business day of December 2008. An election to defer the distribution of a Share Deferral Account may not be made in the same calendar year that the election to establish the Share Deferral Account is made. Notwithstanding anything to the contrary in this Plan, (1) an election to defer the distribution of a Share Deferral Account must be made at least 12 months prior to the date of the first scheduled payment under the prior distribution election and (2) the election shall not take effect until at least 12 months after the date on which the election is made.
| 0.05 | ||
Actuarial (gain) loss3 |
(c) A Participant’s Share Deferral Account shall be distributed to the Participant on March 10 (or as soon thereafter as administratively practicable as determined by AT&T) of the calendar year elected by the Participant for that Account. In the event the distribution is to be made to a “Specified Employee” as a result of the Participant’s Termination of Employment (other than as a result of a Change in Control), the distribution shall not occur until the later of such March 10 or six (6) months after the Termination of Employment, except it shall be distributed upon the Participant’s earlier death in accordance with this Plan.
6.2 Death of the Participant.
In the event of the death of a Participant, notwithstanding anything to the contrary in this Plan, all undistributed Share Deferral Accounts shall be distributed to the Participant’s beneficiary in accordance with the AT&T Rules for Employee Beneficiary Designations, as the same may be amended from time to time, within the later of 90 days following such determination or the end of the calendar year in which determination was made.
6.3 Unforeseeable Emergency Distribution.
If a Participant experiences an “Unforeseeable Emergency,” the Participant may submit a written petition to AT&T (the Committee in the case of Officer Level Employees), to receive a partial or full distribution of his Share Deferral Account(s). In the event that AT&T (the Committee in the case of Officer Level Employees), upon review of the written petition of the Participant, determines in its sole discretion that the Participant has suffered an “Unforeseeable Emergency,” AT&T shall make a distribution to the Participant from the Participant’s Share Deferral Accounts (other than Matching Share Units), on apro-rata basis, within the later of 90 days following such determination or the end of the calendar year in which determination was made, subject to the following:
(a) “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s legal spouse, the Participant’s beneficiary, or the Participant’s dependent (as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. Whether a Participant is faced with an Unforeseeable Emergency permitting a distribution is to be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency shall not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan.
(b) The amount of a distribution to be made because of an Unforeseeable Emergency shall not exceed the lesser of (i) the FMV of the Participant’s vested Share Deferral Account, calculated as the date on which the amount becomes payable, as determined by AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, and (ii) the amount reasonably necessary, as determined by the AT&T (the Committee in the case of Officer Level Employees) in its sole discretion, to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution). Determinations of the amount reasonably necessary to satisfy the emergency need shall take into account any additional compensation that is available if the plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency. The determination of amounts reasonably necessary to satisfy the Unforeseeable Emergency need is not required to, but may, take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available due to the Unforeseeable Emergency under another plan that would provide for deferred compensation except due to the application of the effective date provisions under Treasury Regulation§1.409A-6.
(c) Upon such distribution on account of an Unforeseeable Emergency under this Plan, any election to make Employee Contributions by such Participant shall be immediately cancelled, and the Participant shall not be
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permitted to make a new election with respect to Employee Contributions that would be contributed during the then current and immediately following calendar year.
6.4 Ineligible Participant.
Notwithstanding any other provisions of this Plan to the contrary, if AT&T receives an opinion from counsel selected by AT&T, or a final determination is made by a Federal, state or local government or agency, acting within its scope of authority, to the effect that an individual’s continued participation in the Plan would violate applicable law, then such person shall not make further contributions to the Plan to the extent permitted by Section 409A of the Code.
6.5 Conflict of Interest Distribution.
AT&T may in its sole discretion accelerate a distribution(s) to the Participant, provided he or she is no longer actively employed by AT&T: (a) to the extent necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government or (b) to the extent reasonably necessary to avoid the violation of an applicable Federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the service provider to participate in activities in the normal course of his or her position in which the service provider would otherwise not be able to participate under an applicable rule). Any such distribution may only be made in accordance with Section 409A of the Code and the regulations thereunder.
6.6 Distribution Process.
A Share Deferral Account shall be distributed under this Plan by taking the number of Share Units comprising the Account to be distributed and converting them into an equal number of shares of Stock. (Once distributed, a Share Unit shall be canceled.)
Article 7—Transition Provisions
7.1 Stockholder Approval
The Plan was approved by Stockholders at the 2005 Annual Meeting of Stockholders.
7.2 2005 Share Deferral Accounts.
Notwithstanding Article 4 to the contrary, if an Employee is an Eligible Employee on September 30, 2004, the Employee may make an election under Article 4 on or prior to December 15, 2004, with respect to the establishment of a Share Deferral Account for the (i) contribution of Base Compensation and/or Short Term Incentive Awards paid during the period from January 1, 2005, through January 15, 2006, which shall be the Plan Year for such Share Deferral Account; and/or (ii) the conversion of a distribution of Stock that would be made during the same Plan Year pursuant to the 2001 Incentive Plan into an equal number of Share Units, so long as such conversion would not cause the recognition of income for Federal income tax purposes in respect of such distribution of Stock prior to distribution of Share Units under this Plan.
7.3 2007 Amendments.
(a) Amendments made to the Plan on November 15, 2007, shall be effective January 1, 2008. except for amendments to this Article 7, which shall be effective upon adoption. Any Participants electing prior to November 15, 2007, to make Employee Contributions in 2008 shall have their elections canceled if they do not consent by December 14, 2007, to all prior amendments to this Plan and to the Cash Deferral Plan. Subject to the foregoing
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Tax-related items |
consent requirements, all Employee Contribution elections made prior to 2008, including but not limited to elections to contribute Stock that would be distributed under the 2001 Incentive Plan or a successor plan, shall remain in force, subject to all other terms of the amended Plan. In addition, all unvested but not forfeited Matching Share Units shall vest on November 15, 2007. Matching Shares that have been forfeited shall not be reinstated, and no amendment to this Plan shall be interpreted as reinstating such forfeitures.
(b) Not withstanding anything to the contrary in this Plan, a Participant who as of December 29, 2006, was eligible for an additional payment pursuant to Section 4A of the BellSouth Corporation Executive Incentive Award Deferral Plan shall not, with respect to the 2008 Plan Year, receive Matching Share Units on Base Compensation that exceeds $230,000.
7.4 2008 Amendments.
For Plan Years prior to 2009, Participants who, at the time of the determination of their eligibility to participate in an Account, are paid through a “sales plan” involving the use of commissions may elect to contribute up to 40% of Base Compensation. For the 2008 Plan Year, only Salary and Short Term Incentive Awards paid after Termination of Employment may be contributed to the Plan.
Article 8—Options
8.1 Grants.
Options may be issued in definitive form or recorded on the books and records of AT&T for the account of the Participant, at the discretion of AT&T. If AT&T elects not to issue the Options in definitive form, they shall be deemed issued, and the Participants shall have all rights incident thereto as if they were issued on the dates provided herein, without further action on the part of AT&T or the Participant. In addition to the terms herein, all Options shall be subject to such additional provisions and limitations as provided in any Administrative Procedures adopted by the Committee prior to the issuance of such Options. The number of Options issued to a Participant shall be reflected on the Participant’s annual statement of account.
8.2 Term of Options.
The Options may only be exercised: (a) after the earlier of (i) the expiration of one (1) year from date of issue or (ii) the Participant’s Termination of Employment, and (b) no later than the tenth (10th) anniversary of their issue; and Options shall be subject to earlier termination as provided herein.
8.3 Exercise Price.
The Exercise Price of an Option shall be the FMV of the Stock on the date of issuance of the Option, and an Option may not be repriced.
8.4 Issuance of Options.
(a) For each Share Deferral Account established by a Participant pursuant to an Employee Contribution election where such election was made prior to January 1, 2010:
(1) on June 15 of the Plan Year for the Share Deferral Account, the Participant shall receive two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding January through May period with Employee Contributions of Base Compensation and/or Short Term Incentive Award. A fractional number of Options shall be rounded up to the next whole number.
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(2) on the February 15 immediately following the Plan Year for the Share Deferral Account, a Participant shall receive:
(i) two (2) Options for each Share Unit acquired by the Participant as part of such Share Deferral Account during the immediately preceding June through the remainder of the relevant Plan Year with Employee Contributions of Base Compensation and/or Short Term Incentive Award; and
(ii) two (2) Options for each Share Unit acquired prior to such date by the Participant with dividend equivalents that were derived, directly or indirectly (such as dividend equivalents paid on Share Units acquired with dividend equivalents), from Share Units acquired with Employee Contributions as part of such Share Deferral Account.
(b) A fractional number of Options shall be rounded up to the next whole number.
(c) If Stock is not traded on the NYSE on any of the foregoing Option issuance dates, then the Options shall not be issued until the next such day on which Stock is so traded.
(d) If a Participant Terminates Employment other than (i) while Retirement eligible or (ii) because of death or Disability, no further Options shall be issued to or with respect to such Participant. In the event ofre-Employment following a Termination of Employment, the preceding sentence shall not apply to those Options resulting from participation in the Plan after suchre-Employment until a subsequent Termination of Employment.
(e) No more than 400,000 Options shall be issued to any individual under this Plan during a calendar year. No Share Unit may be counted more than once for the issuance of Options.
(f) The Committee may, in its sole discretion, at any time, increase or lower the number of Options that are to be issued for each Share Unit acquired, not to exceed two (2) Options per Share Unit purchased. However, if the Committee lowers the number of Options, then such change shall only be effective with respect to the next Share Deferral Account a Participant may elect to establish.
(g) The Committee may also, at any time and in any manner, limit the number of Options which may be acquired as a result of the Short Term Incentive Award being contributed to the Plan. Further, except as otherwise provided by the Committee, in determining the number of Options to be issued to a Participant with respect to a Participant’s contribution of a Short Term Incentive Award to the Plan and subsequent crediting of Share Units, Options may be issued only with respect to an amount which does not exceed the target amount of such award (or such other portion of the award as may be determined by the Committee). Where a Participant’s election to contribute a Short Term Incentive Award to the Plan becomes applicable to Annual Bonus, the above limitation on options shall apply to the contribution of Annual Bonus as though it were a Short Term Incentive Award.
(h) No options shall be issued to or in respect of a Participant for a particular issuance, unless at least ten (10) Options will be issued to that Participant.
8.5 Exercise and Payment of Options.
Options shall be exercised by providing notice to the designated agent selected by AT&T (if no such agent has been designated, then to AT&T), in the manner and form determined by AT&T, which notice shall be irrevocable, setting forth the exact number of shares of Stock with respect to which the Option is being exercised and including with such notice payment of the Exercise Price. When Options have been transferred, AT&T or its designated agent may require appropriate documentation that the person or persons exercising the Option, if other than the Participant, has the right to exercise the Option. No Option may be exercised with respect to a fraction of a share of Stock.
Exercises of Options may be effected only on days and during the hours that the New York Stock Exchange is open for regular trading or as otherwise provided or limited by AT&T. If an Option expires on a day or at a time when exercises are not permitted, then the Options may be exercised no later than the immediately preceding date and time that the Options were exercisable.
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Adjusted EPS | $ 3.52 |
The Exercise Price shall be paid in full at the time of exercise. No Stock shall be issued or transferred until full payment has been received therefore.
Payment may be made:
(a) in cash, or
(b) unless otherwise provided by the Committee at any time, and subject to such additional terms and conditions and/or modifications as AT&T may impose from time to time, and further subject to suspension or termination of this provision by AT&T at any time, by:
(i) electing a Stock-Settled Exercise on or after February 1, 2013. Upon exercise of Options through a Stock-Settled Exercise, the Participant shall receive that number of shares of Stock found by (1) subtracting the Exercise Price of an Option being exercised (on a per share basis) from the FMV of the Stock as of the immediately preceding day that the Stock was traded on the NYSE, (2) multiplying the difference by the number of Options being exercised, and (3) dividing the result by the same FMV. For example, a Participant exercises 1,000 Options with an Exercise Price of $30 (exercises may only occur on a day when the NYSE is open for regular trading) and the FMV for the immediately preceding trading day was $40. In that case, the Participant would receive his $10,000 profit in the form of 250 shares of Stock, subject to tax withholding and any other costs provided under this Plan.
or;
(ii) if AT&T has designated a stockbroker to act as AT&T’s agent to process Option exercises, issuance of an exercise notice to such stockbroker together with instructions irrevocably instructing the stockbroker: (A) to immediately sell (which shall include an exercise notice that becomes effective upon execution of a sell order) a sufficient portion of the Stock to pay the Exercise Price of the Options being exercised and the required tax withholding, and (B) to deliver on the settlement date the portion of the proceeds of the sale equal to the Exercise Price and tax withholding to AT&T. In the event the stockbroker sells any Stock on behalf of a Participant, the stockbroker shall be acting solely as the agent of the Participant, and AT&T disclaims any responsibility for the actions of the stockbroker in making any such sales. No Stock shall be issued until the settlement date and until the proceeds (equal to the Exercise Price and tax withholding) are paid to AT&T.
8.6 Restrictions on Exercise and Transfer.
No Option shall be transferable except: (a) upon the death of a Participant in accordance with AT&T’s Rules for Employee Beneficiary Designations, as the same may be amended from time to time; and (b) in the case of any holder after the Participant’s death, only by will or by the laws of descent and distribution. During the Participant’s lifetime, the Participant’s Options shall be exercisable only by the Participant or by the Participant’s guardian or legal representative. After the death of the Participant, an Option shall only be exercised by the holder thereof (including but not limited to an executor or administrator of a decedent’s estate) or his or her guardian or legal representative. In each such case the Option holder shall be considered a Participant for the limited purpose of exercising such Options.
8.7 Termination of Employment.
(a)Not Retirement Eligible.Unless otherwise provided by the Committee, if a Participant Terminates Employment while not Retirement eligible, a Participant’s Options may be exercised, to the extent then exercisable:
(i) if such Termination of Employment is by reason of death or Disability, then for a period of three (3) years from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter; or
(ii) if such Termination of Employment is for any other reason, then for a period of one (1) year from the date of such Termination of Employment or until the expiration of the stated term of such Option, whichever period is shorter.
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(b)Retirement Eligible.Unless otherwise provided by the Committee, if a Participant Terminates Employment while Retirement eligible, the Participant’s Option may be exercised, to the extent then exercisable: (i) for a period of five (5) years from the date of Retirement or (ii) until the expiration of the stated term of such Option, whichever period is shorter.
(c)Re-Employment of a Participant after a Termination of Employment shall have no effect on the periods during which Options resulting from the prior Employment may be exercised. For example, if the Option exercise period has been shortened because of the prior Termination of Employment, it shall not be extended because of there-Employment.
(d) Notwithstanding any other definition of Termination of Employment under this Plan, for purposes of this Article 8—Options only, a Termination of Employment shall mean the cessation of the Employee being employed by any corporation, partnership, venture or other entity in which AT&T holds, directly or indirectly, a 50% or greater ownership interest, including but not limited to where AT&T ceases to hold such interest in the employing company. In addition, the definition of Retirement for purposes of this Article 8 shall use the immediately foregoing definition of Termination of Employment in lieu of any other definition.
Article 9—Discontinuation, Termination, Amendment.
9.1 AT&T’s Right to Discontinue Offering Share Units.
The Committee may at any time discontinue offerings of Share Units under the Plan. Any such discontinuance shall have no effect upon existing Share Units or the terms or provisions of this Plan as applicable to such Share Units.
9.2 AT&T’s Right to Terminate Plan.
The Committee may terminate the Plan at any time. Upon termination of the Plan, contributions shall no longer be made under the Plan.
After termination of the Plan, Participants shall continue to earn dividend equivalents in the form of Share Units on undistributed Share Units and shall continue to receive all distributions under this Plan at such time as provided in and pursuant to the terms and conditions of Participant’s elections and this Plan. Notwithstanding the foregoing, the termination of the Plan shall be made solely in accordance with Section 409A of the Code and in no event shall cause the accelerated distribution of any Account unless such termination is effected in accordance with Section 409A of the Code.
9.3 Amendment.
The Committee may at any time amend the Plan in whole or in part including but not limited to changing the formulas for determining the amount of AT&T Matching Contributions under Article 5 or decreasing the number of Options to be issued under Article 8; provided, however, that no amendment, including but not limited to an amendment to this section, shall be effective, without the consent of a Participant, to alter, to the material detriment of such Participant, a Share Deferral Account of the Participant, other than as provided elsewhere in this section. For purposes of this section, an alteration to the material detriment of a Participant shall include, but not be limited to, a material reduction in the period of time over which Stock may be distributed to a Participant, any reduction in the Participant’s number of vested Share Units or Options, or an increase in the Exercise Price or decrease in the term of an Option. Any such consent may be in a writing, telecopy, ore-mail or in another electronic format. An election to acquire Share Units with Employee Contributions shall be conclusively deemed to be the consent of the Participant to any and all amendments to the Plan prior to such election, and such consent shall be a condition to making any election with respect to Employee Contributions.
Notwithstanding anything to the contrary contained in this section of the Plan, the Committee may modify this Plan with respect to any person subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as
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amended (“Exchange Act”) to place additional restrictions on the exercise of any Option or the transfer of any Stock not yet issued under the Plan.
The Plan is established in order to provide deferred compensation to a select group of management and highly compensated employees with in the meaning of Sections 201(2) and 301(a)(3) of ERISA. To the extent legally required, the Code and ERISA shall govern the Plan, and if any provision hereof is in violation of an applicable requirement thereof, the Company reserves the right to retroactively amend the Plan to comply therewith to the extent permitted under the Code and ERISA. The Company also reserves the right to make such other changes as may facilitate implementation of Section 409A of the Code. Provided, however, that in no event shall any such amendments be made in violation of the requirements of Section 409A of the Code.
Article 10—Miscellaneous.
10.1 Tax Withholding.
Upon distribution of Stock, including but not limited to, shares of Stock issued upon the exercise of an Option, AT&T shall withhold shares of Stock sufficient in value, using the FMV on the date determined by AT&T to be used to value the Stock for tax purposes, to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such distribution. Employment taxes incurred by a Participant on Employee Contributions and on Matching Contributions shall be withheld from the Participant’s regular wages or paid in cash by the Participant as they become due.
Any fractional share of Stock payable to a Participant shall be withheld as additional Federal withholding, or, at the option of AT&T, paid in cash to the Participant.
Unless otherwise determined by the Committee, when the method of payment for the Exercise Price is from the sale by a stockbroker pursuant to Section 8.5, hereof, of the Stock acquired through the Option exercise, then the tax withholding shall be satisfied out of the proceeds. For administrative purposes in determining the amount of taxes due, the sale price of such Stock shall be deemed to be the FMV of the Stock.
10.2 Elections and Notices.
Notwithstanding anything to the contrary contained in this Plan, all elections and notices of every kind under this Plan shall be made on forms prepared by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates or shall be made in such other manner as permitted or required by AT&T or the General Counsel, Secretary or Assistant Secretary, or their respective delegates, including through electronic means, over the Internet or otherwise. An election shall be deemed made when received by AT&T (or its designated agent, but only in cases where the designated agent has been appointed for the purpose of receiving such election), which may waive any defects in form. Unless made irrevocable by the electing person, each election with regard to making Employee Contributions or distributions of Share Deferral Accounts shall become irrevocable at the close of business on the last day to make such election. AT&T may limit the time an election may be made in advance of any deadline.
If not otherwise specified by this Plan or AT&T, any notice or filing required or permitted to be given to AT&T under the Plan shall be delivered to the principal office of AT&T, directed to the attention of the Senior Executive Vice President in charge of Human Resources for AT&T or his or her successor. Such notice shall be deemed given on the date of delivery.
Notice to the Participant shall be deemed given when mailed (or sent by telecopy) to the Participant’s work or home address as shown on the records of AT&T or, at the option of AT&T, to the Participant’se-mail address as shown on the records of AT&T. It is the Participant’s responsibility to ensure that the Participant’s addresses are kept up to date on the records of AT&T. In the case of notices affecting multiple Participants, the notices may be given by general distribution at the Participants’ work locations.
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By participating in the Plan, each Participant agrees that AT&T may provide any documents required or permitted under the Federal or state securities laws, including but not limited to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, bye-mail, bye-mail attachment, or by notice bye-mail of electronic delivery through AT&T’s Internet Web site or by other electronic means.
10.3 Unsecured General Creditor.
Participants and their beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, interest, or claims in any property or assets of any Employer. No assets of any Employer shall be held under any trust for the benefit of Participants, their beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of any Employer under this Plan. Any and all of each Employer’s assets shall be, and remain, the general, unpledged, unrestricted assets of such Employer. The only obligation of an Employer under the Plan shall be merely that of an unfunded and unsecured promise of AT&T to distribute shares of Stock corresponding to Share Units and Options, under the Plan.
10.4Non-Assignability.
Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, shares of Stock corresponding to Share Units under the Plan, if any, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable andnon-transferable. No part of the Stock distributable shall, prior to actual distribution, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.
10.5 Employment Not Guaranteed.
Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any employee any right to be retained in the employ of an Employer or to serve as a director.
10.6 Errors.
At any time AT&T or an Employer may correct any error made under the Plan without prejudice to AT&T or any Employer. Neither AT&T nor any Employer shall be liable for any damages resulting from failure to timely allow any contribution to be made to the Plan or for any damages resulting from the correction of, or a delay in correcting, any error made under the Plan. In no event shall AT&T or any Employer be liable for consequential or incidental damages arising out of a failure to comply with the terms of the Plan.
10.7 Captions.
The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control nor affect the meaning or construction of any of its provisions.
10.8 Governing Law.
To the extent not preempted by Federal law, the Plan, and all benefits and agreements hereunder, and any and all disputes in connection therewith, shall be governed by and construed in accordance with the substantive laws of the State of Texas, without regard to conflict or choice of law principles which might otherwise refer the construction, interpretation or enforceability of this Plan to the substantive law of another jurisdiction.
Because benefits under the Plan are granted in Texas, records relating to the Plan and benefits thereunder are located in Texas, and the Plan and benefits thereunder are administered in Texas, AT&T and the Participant under
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this Plan, for themselves and their successors and assigns, irrevocably submit to the exclusive and sole jurisdiction and venue of the state or Federal courts of Texas with respect to any and all disputes arising out of or relating to this Plan, the subject matter of this Plan or any benefits under this Plan, including but not limited to any disputes arising out of or relating to the interpretation and enforceability of any benefits or the terms and conditions of this Plan. To achieve certainty regarding the appropriate forum in which to prosecute and defend actions arising out of or relating to this Plan, and to ensure consistency in application and interpretation of the Governing Law to the Plan, the parties agree that (a) sole and exclusive appropriate venue for any such action shall be an appropriate Federal or state court in Dallas County, Texas, and no other, (b) all claims with respect to any such action shall be heard and determined exclusively in such Texas court, and no other, (c) such Texas court shall have sole and exclusive jurisdiction over the person of such parties and over the subject matter of any dispute relating hereto and (d) that the parties waive any and all objections and defenses to bringing any such action before such Texas court, including but not limited to those relating to lack of personal jurisdiction, improper venue orforum non conveniens.
10.9 Plan to Comply with Section 409A.
In the event any provision of this Plan is held invalid, void, or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan. Notwithstanding any provision to the contrary in this Plan, each provision in this Plan shall be interpreted to permit the deferral of compensation in accordance with Section 409A of the Code and any provision that would conflict with such requirements shall not be valid or enforceable.
10.10 Successors and Assigns.
This Plan shall be binding upon AT&T and its successors and assigns.
10.11 Loyalty Conditions for Officer Level Employees and Senior Managers
Each Officer Level Employee or a Senior Manager who elects to make Employee Contributions under Section 4.1 of this Plan shall be subject to the agreements and conditions of this section.
(a) By making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, a Participant acknowledges that AT&T would be unwilling to provide for such an election but for the loyalty conditions and covenants set forth in this section, and that the conditions and covenants herein are a material inducement to AT&T’s willingness to sponsor the Plan and to offer Plan benefits for the Participants. Accordingly, as a condition to making an Employee Contribution election under Section 4.1 of this Plan after September 1, 2009, each such electing Participant is deemed to agree that he shall not, without obtaining the written consent of the Committee in advance, participate in activities that constitute engaging in competition with AT&T or engaging in conduct disloyal to AT&T, as those terms are defined in this section.
(b) Definitions. For purposes of this section and of the Plan generally:
(i) an “Employer Business” shall mean AT&T Inc. and any of its Subsidiaries, or any business in which they or any affiliate of theirs has a substantial ownership or joint venture interest;
(ii) “engaging in competition with AT&T” shall mean, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, engaging by the Participant in any business or activity in all or any portion of the same geographical market where the same or substantially similar business or activity is being carried on by an Employer Business. “Engaging in competition with AT&T” shall not include owning anon-substantial publicly traded interest as a shareholder in a business that competes with an Employer Business. “Engaging in competition with AT&T” shall include representing or providing consulting services to, or being an employee of, any person or entity that is engaged in competition with any Employer Business or that takes a position adverse to any Employer Business.
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(iii) “engaging in conduct disloyal to AT&T” means, while employed by AT&T or any of its Subsidiaries, or within two (2) years after Participant’s Termination of Employment, (i) soliciting for employment or hire, whether as an employee or as an independent contractor, for any business in competition with an Employer Business, any person employed by AT&T or any of its Subsidiaries during the one (1) year prior to the Participant’s Termination of Employment, whether or not acceptance of such position would constitute a breach of such person’s contractual obligations to AT&T or any of its Subsidiaries; (ii) soliciting, encouraging, or inducing any vendor or supplier with which Participant had business contact on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination) to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with AT&T or any of its Subsidiaries; or (iii) soliciting, encouraging, or inducing any customer or active prospective customer with whom Participant had business contact, whether in person or by other media (“Customer”), on behalf of any Employer Business during the two (2) years prior to the Participant’s Termination of Employment (regardless of the reason for that termination), to terminate, discontinue, renegotiate, reduce, or otherwise cease or modify its relationship with any Employer Business, or to purchase competing goods or services from a business competing with any Employer Business, or accepting or servicing business from such Customer on behalf of himself or any other business. “Engaging in conduct disloyal to AT&T” shall also mean, disclosing Confidential Information to any third party or using Confidential Information, other than for an Employer Business, or failing to return any Confidential Information to the Employer Business following termination of employment.
(iv) “Confidential Information” shall mean all information belonging to, or otherwise relating to, an Employer Business, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Employer Business has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure. Confidential Information includes trade secrets as well as other proprietary knowledge, information,know-how, andnon-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant. For example, Confidential Information includes, but is not limited to, information concerning the Employer Business’ business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Employer Business, or any of the products or services made, developed or sold by the Employer Business. Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Employer Business; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality ornon-use, including but not limited to the obligations and restrictions set forth in this Plan.
(c) Equitable Relief. The parties recognize that any Participant’s breach of any of the covenants in this section will cause irreparable injury to the AT&T, will represent a failure of the consideration under which AT&T (in its capacity as creator and sponsor of the Plan) agreed to provide the Participant with the opportunity to receive Plan benefits, and that monetary damages would not provide AT&T with an adequate or complete remedy that would warrant AT&T’s continued sponsorship of the Plan (including the accrual or granting of Share Units, Matching Share Units and Options) for all Participants. Accordingly, in the event of a Participant’s actual or threatened breach of the covenants in this section, the Committee, in addition to all other rights and acting as a fiduciary under ERISA on behalf of all Participants, shall have a fiduciary duty (in order to assure that AT&T receives fair and promised consideration for its continued Plan sponsorship and funding) to seek an injunction restraining the Participant from breaching the covenants in this Section. AT&T shall pay for any Plan expenses that the Committee incurs hereunder, and shall be entitled to recover from the Participant its reasonable attorneys’ fees and costs incurred in obtaining such injunctive remedies.
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(d) Uniform Enforcement. In recognition of AT&T’s need for nationally uniform standards for the Plan administration, it is an absolute condition in consideration of any Participant’s ability to make Employee Contribution elections under Section 4.1 of this Plan after September 1, 2009, that each and all of the following conditions apply to all such electing Participants:
(i) ERISA shall control all issues and controversies hereunder, and the Committee shall serve for purposes hereof as a “fiduciary” of the Plan and its “named fiduciary” within the meaning of ERISA.
(ii) All litigation between the parties relating to this section shall occur in federal court, which shall have exclusive jurisdiction; any such litigation shall be held in the United States District Court for the Northern District of Texas, and the only remedies available with respect to the Plan shall be those provided under ERISA.
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AT&T INC.
2018 Incentive Plan
Article 1. Establishment and Purpose.
Article 2. Definitions.
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AT&T Corporate Social Responsibility
2025 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. |
industry peers to develop and promote adoption of sustainability metrics 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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For purposes of this Plan only, Term of Employment shall have the same meaning as in the AT&T Pension Benefit Plan—Nonbargained Program (“Pension Plan”), as that may be amended from time to time, except that service with a Participant’s employer shall be counted as though the employer were a “Participating Company” under the Pension Plan and the Employee was a participant in the Pension Plan.
Article 3. Administration.
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Article 4. Shares Subject to the Plan.
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Article 5. Eligibility and Participation.
Article 6. Stock Options.
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Article 7. Restricted Stock.
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Article 8. Performance Units and Performance Shares.
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For each Award of Performance Shares or Performance Units, the Committee shall establish (and may establish for other Awards) performance objectives (“Performance Goals”) for the Company, its Subsidiaries, and/or divisions of any of foregoing, using such criteria, exceptions and other terms and conditions as it shall determine.
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Article 9. Beneficiary Designation.
Article 10. Employee Matters.
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“Confidential Information” means all information belonging to, or otherwise relating to the business of the Company, which is not generally known, regardless of the manner in which it is stored or conveyed to Participant, and which the Company has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure. Confidential Information includes trade secrets as well as other proprietary knowledge, information,know-how, andnon-public intellectual property rights, including unpublished or pending patent applications and all related patent rights, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and data, whether or not patentable or copyrightable and whether or not it has been conceived, originated, discovered, or developed in whole or in part by Participant. For example, Confidential Information includes, but is not limited to, information concerning the Company’s business plans, budgets, operations, products, strategies, marketing, sales, inventions, designs, costs, legal strategies, finances, employees, customers, prospective customers, licensees, or licensors; information received from third parties under confidential conditions; or other valuable financial, commercial, business, technical or marketing information concerning the Company, or any of the products or services made, developed or sold by the Company. Confidential Information does not include information that (i) was generally known to the public at the time of disclosure; (ii) was lawfully received by Participant from a third party; (iii) was known to Participant prior to receipt from the Company; or (iv) was independently developed by Participant or independent third parties; in each of the foregoing circumstances, this exception applies only if such public knowledge or possession by an independent third party was without breach by Participant or any third party of any obligation of confidentiality ornon-use, including but not limited to the obligations and restrictions set forth in this Section.
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For purposes of this Section, the term “Restricted Business” means the business of providing communications or connectivity services, including both wireless and wire-lined telephone, messaging, Internet, data, and related services; the term “Restricted Territory” shall mean the state in which the Participant maintained his or her principal office with the Company on the date the Award was granted; and the term “Contact” means interaction between the Participant and the nonclerical employee during performance of Participant’s job responsibilities on behalf of the Company.
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Article 11. Amendment and Termination of Plan or Awards.
Article 12. Withholding.
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Article 13. Successors.
Article 14. Legal Construction.
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Your vote | ||||||||||
You may vote online or by phone instead of mailing | ||||||||||
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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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☐ | 06 - William E. Kennard |
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02 - Samuel A. Di Piazza, Jr. |
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07 - Michael B. McCallister |
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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 | |||||||||||||||||||||||||||||||||||
| For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||
| 2. | Ratification of appointment of independent auditors. | ☐ | ☐ | ☐ | 3. | Advisory approval of executive compensation. | ☐ | ☐ | ☐ | |||||||||||||||
| 4. | Approve Stock Purchase and Deferral Plan. | ☐ | ☐ | ☐ | 5. | Approve 2018 Incentive Plan. | ☐ | ☐ | ☐ | |||||||||||||||
| 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 | ||||||||||||||||||||||
| 6. | Prepare lobbying report. | ☐ | ☐ | ☐ | 7. | Modify proxy access requirements. | ☐ | ☐ | ☐ | 8. | Independent Chair. | ☐ | ☐ | ☐ | ||||||||||||||||
| 9. | Reduce vote required for written consent. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||
| For | Against | Abstain | ||||||||||||||||||||||
| 4. | Independent Chair. | ☐ | ☐ | ☐ | ||||||||||||||||||||
| ∎ | 1 U P X | + | ||||
| 001CSP00A8 | ||||||
| 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 | ||
Moody Performance Hall 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. |  |
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| 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 | + | |||||
| 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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| Change of Address | Comments – Please print your comments below | |||
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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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