2000-2001 Shareholder Resolution Campaign

AT&T

Executive Compensation Review

WHEREAS, the financial success and long-term viability of AT&T hinges on committed and motivated employees who provide strong and consistent customer service;

AT&T has long been known for superior customer service. However, our company has seen accelerating customer losses in its core long distance business, while new customer additions to new businesses such as cable have materialized at a slower rate than management has forecast;

In addition, AT&T's business decisions, including investment by current management in the pornographic Hot Channel have created public relations controversies and the threat of consumer boycotts. The Hot Channel shows X-rated pornography and has no stated limits on the types programs it will show;

AT&T has been in a state of continual downsizing over much of the last decade. Most recently, the layoff of 10,000 employees was announced in 1998. Concerned employees have addressed stockholders at the last several annual meetings about the effect of job insecurity on employee morale. In addition, AT&T’s management employees have sued the company for age discrimination after AT&T unilaterally implemented a cash balance pension plan that reduces the potential pension benefits for 30,000 veteran AT&T employees;

Leading companies such as IBM, Bristol-Myers Squibb and Procter & Gamble all include various non-financial and social responsibility factors in the evaluation of corporate executives for the purposes of determining executive compensation;

As of November 10, 2000, AT&T's total return was -28.1% since October 17, 1997, when Michael Armstrong became AT&T's CEO. During that same period, the S&P 500 Index rose 50.7% and the S&P 500 Telecommunications Index fell 19.6%;

However, while tens of thousands of employees have lost their jobs and shareholders have been losing their money, AT&T's leaders have been making millions of dollars. According to Business Week, in 1999, CEO Armstrong's total compensation was $6.8 million. In 1998, he received $3.8 million in compensation. Business Week concluded that between 1997-99, Mr. Armstrong was among the lowest 30% of large company CEOs in terms of delivering corporate profits relative to the size of his pay package;

RESOLVED, that shareholders request that the Board conduct a special executive compensation review that studies the following questions:

1) How to link executive compensation more closely to financial performance of the company, including performance relative to industry peers;

2) How to link a portion of executive compensation directly to customer satisfaction;

3) How to utilize employee satisfaction surveys in determining a portion of executive compensation;

4) Whether executive compensation should be frozen during periods of large-scale layoffs;
A summary of this review, including any recommended changes to the current executive compensation policy, will be published in the report of the Compensation Committee to shareholders in next year's proxy.

SUPPORTING STATEMENT

AT&T's current executive compensation structure has failed to deliver the sort of performance that shareholders expect and deserve. It is time for a change. This resolution will focus management on improving customer satisfaction and employee morale, providing a foundation for renewed growth and vitality for AT&T.

Responsible Wealth, 29 Winter Street, 2nd Floor, Boston, MA 02108.
Voice: 617/423-2148 Fax: 617/423-0191.
© 1999, 2000 Responsible Wealth. All rights reserved.