New York, NY – Shareholders led by Domini Social Investments sent a strong message to the Board of Directors of AT&T Corp. (NYSE symbol: T) at the company's annual meeting on Wednesday that the firm's handling of its 1997 pension plan conversion presents real risks to investors and should be reconsidered. According to a preliminary count released by AT&T, Domini's shareholder resolution, co-sponsored by NorthStar Asset Management and members of United for a Fair Economy, received approximately 10% support, representing 252 million shares.
The shareholders claim that AT&T should have offered its long-serving, vested employees a choice when it converted from its traditional defined benefit pension plan to a cash balance plan. The resolution asked AT&T's board of directors to offer vested employees a choice between the old defined benefit plan and the new cash balance plan. 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 (NASDAQ: DSEFX) invests.
"We are very pleased with these results. This vote demonstrates that a significant number of AT&T shareholders agree that what a company like AT&T does to its employees, it does to its investors. AT&T has exposed all of us - investors and employees alike - to financial risk by refusing to simply offer affected managers a choice of pension plans. " said Adam Kanzer, Director of Shareholder Activism at Domini Social Investments.
In response to the resolution, which was presented by a retired AT&T employee personally affected by the pension plan conversion, AT&T’s Chairman and CEO, C. Michael Armstrong indicated during the meeting that he would be willing to have the appropriate people sit down with the affected managers and look at the numbers. “We consider this an important victory. Bringing AT&T’s executives together with managers affected by this conversion was an important goal of our resolution. If these discussions don’t result in an amicable solution, this year’s vote is high enough to allow us to return next year with the same resolution,” Kanzer continued.
Domini's resolution did not challenge the merits of cash balance plans. The resolution argued that certain long-serving AT&T managers suffered as a result of the method AT&T chose to effect the conversion. "We believe that AT&T must maintain the loyalty and quality service of senior employees who have exceptional telecommunication skills and experience. AT&T needs their skills and expertise to manage its daily operations, improve its business, and ensure customer satisfaction. We need them to train the next generation of AT&T employees. These are exactly the employees that have suffered the most from this pension plan conversion. At the same time, executives have seen their pension plans grow, " Kanzer continued.
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 supported 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.
In 1997, AT&T converted its defined benefit pension plan to a cash balance plan. The shareholder resolution addressed 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 asked that AT&T's board of directors offer affected employees a choice between the old defined benefit plan and the new cash balance plan.
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.
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 (NASDAQ: DSEFX), 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.