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Call it a victory for the silent majority.
Before the shouting subsided at AT&Ts annual meeting in Cincinnati last week, holders of 96 percent of the companys shares voted to take a giant step toward breaking up AT&T.
Under the approved company resolution, simple majority approval — not two-thirds — is all that will be needed this summer “to authorize any merger, consolidation or dissolution of AT&T.”
To hear Chairman C. Michael Armstrong tell it, the breakup of AT&T into wireless, broadband, business and consumer units is one step necessary to keep the blue-chip stock from “going the way of Western Union.” The long-distance business handed to AT&T by a landmark 1984 court ruling is becoming as obsolete as the telegraph, according to most measures.
AT&T has struggled to transform itself into a new technology company, handling everything from data to entertainment.
“We believe our four businesses can better manage shareowner value and compete more effectively as publicly held businesses, each with the focus, speed and flexibility to win in its individual market,” Armstrong said, acknowledging that the fragments of AT&T could more easily vanish into mergers with rival companies.
With the $83 billion company dissolving right before their eyes, red-shirted union members and AT&T employees hooted and howled in disapproval.
“I say shame on you, shame on the board for taking a pay raise as you stand before us and eliminate jobs and cut the dividend,” said Marc Jones, president of Communications Workers of America Local 4630 in Wisconsin.
“My compensation was cut 39 percent,” Armstrong replied. “I want you to know that your chairman did not take a pay raise.”
While Armstrong and the board endured a parade of finger-wagging employees and institutional investors, the majority stood solidly behind Armstrong. Several shareholder proposals designed to rein in Armstrongs power and income were soundly defeated.
Moreover, the sea of investors and former employees either did not try to speak or were silenced by a procession of union members and investors concerned not only about their jobs, but about pornography on the cable channel The Hot Network or benefits for gay and lesbian employees.
For Ralph V. Maly Jr., the CWAs vice president of communications and technology, the latest bust-up appears to be another in a series of failed strategies by top executives.
“We warned the company about the purchase of TCI [Tele-Communications Inc.],” Maly said. “We knew it would cost millions to do the necessary upgrades, but the company led us to believe that what would surface was a greater future, and our members are paying for that, too.”
Was Armstrong, who acknowledged a morale problem during the meeting, concerned that the strong employee opposition could derail the breakup?
“No,” Armstrong said. “I understand their concerns. And after we sit down with them, I think this will go along fine with the union.”