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Mon, 07/08/2002 - 13:00 | by Wesley Furgiuele
July 8, 2002
DOMINI SOCIAL INVESTMENTS PRESSURES AT&T ON UNFAIR PENSION CHANGES
Socially Responsible Firm Says Pension Plan Conversion Discriminates Against Long-Term Employees and Undermines Critical Business Objectives
New York, NY – Domini Social Investments, manager of the Domini Social Equity Fund (NASDAQ: DSEFX), the nation's oldest and largest socially responsible index fund, announced today that it will press forward with a shareholder resolution at the July 10, 2002 annual meeting of AT&T Corp. (NYSE: T), calling on the company to restore certain pension benefits to long-serving employees. Domini is co-sponsoring this resolution with NorthStar Asset Management and members of United for a Fair Economy. Domini sponsored a similar resolution last year that gained 11.3% of the vote. Domini holds more than one million shares of AT&T stock in the Domini Social Index Portfolio, the portfolio in which the Domini Social Equity Fund invests.
In 1997, AT&T converted its defined benefit pension plan to a cash balance plan. The shareholder resolution seeks to address the method AT&T chose to effect this conversion, which has the potential to dramatically reduce the pensions of 30,000 AT&T employees whose pension benefits could be frozen with no growth for up to 13 years. Unlike many other companies (e.g., Kodak, Citibank, Aetna), AT&T failed to offer affected employees a choice between plans, thereby greatly reducing the pension benefits many long-term company employees were expecting to receive. Of the various conversion methods available, Domini argues that the method selected was the most injurious to its veteran employees. The shareholder proposal asks that AT&T's board of directors offer affected employees a choice between the old defined benefit plan and the new cash balance plan.
"We told AT&T that we would withdraw the proposal if company management would make a commitment to offer affected employees their choice of pensions," says Adam Kanzer, Director of Shareholder Advocacy at Domini. "To date, AT&T has been unwilling to do so, or to discuss these issues with us. Under the circumstances, we strongly believe that this proposal is in the best interests of AT&T, its employees and shareholders. We intend to press our case at the company's annual meeting."
Domini is not challenging AT&T's decision to convert to a cash balance plan, but argues that the company's conversion method was selected at the expense of its long-serving employees. Domini's proposal received support from the Communication Workers of America (CWA), America's largest communications and media union, representing over 740,000 members. "The CWA supports Proxy #9 and believes all employees should be able to make a choice between the traditional or cash balance plan," said CWA Representative Gerald Souder.
"Cash balance plans are not the problem," continues Kanzer. "The problem is that AT&T selected a conversion method that discriminates against and is financially devastating to long-term employees. This decision has impaired AT&T's ability to retain the most experienced members of its workforce, and has opened it up to potentially substantial legal liability. At the same time, AT&T executives continue to enjoy generous pension increases. We are simply asking that our company follow the lead of companies like IBM and Aetna by offering affected employees a choice between plans. This simple decision would not only rectify an unjust situation, it would also help restore AT&T's ability to compete."
"Long-serving company employees have seen their pension benefits frozen and expected retirement payments shrink. This is not only unfair, it is bad for business. Our understanding is that this decision has turned AT&T into a management farm team for its competitors. These types of decisions only exacerbate the crisis of confidence in corporate management that is sweeping the country post-Enron," said Kanzer.
Employees in AT&T's Management Pension Plan are pursuing a certified class action lawsuit, alleging that AT&T violated ERISA and The Age Discrimination in Employment Act in implementing the 1997 conversion to a cash balance pension plan.
Domini emphasizes that AT&T's actions undermine employee loyalty and morale, and that this in turn could compromise company performance. "We believe businesses have a responsibility to treat all workers fairly, and that doing so benefits their bottom line," says Kanzer. "Fair and generous benefit packages help companies retain experienced, talented employees, thereby increasing their competitive edge and promoting long-term shareholder value. AT&T's cash balance conversion undermines these critical business objectives."
Domini Social Investments manages more than $1.8 billion in assets for individual and institutional investors seeking to create positive change by integrating social and environmental values into their investment decisions. Its flagship fund, the Domini Social Equity Fund, was the first socially and environmentally screened index fund and is the nation's largest socially responsible index fund. The Fund includes companies with positive records in community involvement, the environment, diversity and employee relations, and excludes companies deriving significant revenues from alcohol, tobacco, gambling, nuclear power and weapons contracting. In addition to the Domini Social Equity Fund, the company also offers the Domini Social Bond Fund (NASDAQ: DSBFX) and an FDIC-insured money market account (in partnership with ShoreBank), both of which focus on community economic development.
Additional information on Domini's shareholder activism and proxy voting initiatives is available on the firm's web site, www.domini.com. Domini's 7th annual 44-page Proxy Voting Guidelines &
Shareholder Activism booklet is available free of charge by calling 800-225-3863.
The Domini Social Equity Fund and the Domini Social Bond Fund are subject to market risks and are not insured. You may lose money. Some of the Domini Social Bond Fund's community investments may be unrated and carry greater credit risks than the Fund's other investments. The Domini Social Equity Fund is not affiliated with any bank and is not insured. DSILD and ShoreBank are not affiliated. Domini Social Investments, NorthStar Asset Management and United For a Fair Economy are not affiliated.
As of 5/31/02, AT&T represented 0.79% of the Domini Social Index Portfolio. Portfolio holdings are subject to change. Please obtain a prospectus by calling 1-800-762-6814 or online at www.domini.com. Read it carefully before you invest or send money. DSIL Investment Services LLC (DSILD), Distributor.
Domini Social Investments, Domini Social Equity Fund, Domini Social Bond Fund, Domini Money Market Account and "The way you invest matters" are registered service marks of Domini Social Investments LLC. 06/02