Chief of AT&T; to retire with big package
Edward E. Whitacre Jr., who transformed the smallest regional Bell phone company into the nation’s largest carrier, said Friday that he would retire from AT&T; Inc. on June 3, his 44-year anniversary date.
Though the company’s stock has not fared as well as the shares of industry rivals, Whitacre will depart with one of corporate America’s biggest exit packages, valued at $158.5 million. Nearly half of that is deferred compensation from his years of service.
Replacing Whitacre, 65, as chairman and chief executive will be his longtime heir apparent, Randall L. Stephenson, 47, the company’s chief operating officer and former chief financial officer.
“Ed Whitacre is one of the great executives of modern American business,” said Reed Hundt, the former chairman of the Federal Communications Commission and now a consultant with McKinsey & Co.
A blunt-spoken Texan, Whitacre is perhaps best known for reassembling through a series of acquisitions much of the old Ma Bell monopoly, which was broken up by a federal court ruling in 1984. He built up the company for competitive battle, expanding AT&T; and its predecessor, SBC Communications Inc., into the wireless communications, Internet access and pay television arenas.
He revived the revered AT&T; moniker 18 months ago.
AT&T;’s $85-billion acquisition of BellSouth Corp. at the end of last year left the nation with only three of the original seven regional Bells. The deal also gave AT&T; complete ownership of Cingular Wireless, the nation’s largest cellular phone service company, which had been a joint venture with BellSouth.
Whitacre is the telecommunications industry’s longest-serving chief executive, with 17 years at the helm of AT&T; and SBC. His retirement had been expected since his contract was extended last year for two more years.
Whitacre chose the company’s annual meeting Friday to announce his retirement. After listing AT&T;’s accomplishments of the last year, he suggested he had done about all he had set out to do.
“I can stand before you and say with great confidence that no other company in our industry is better positioned to win than AT&T; for this year, next year and many more years ahead,” he said.
Whitacre left soon after the meeting for his 4,000-acre ranch an hour south of the company’s headquarters in San Antonio. He could not be reached for further comment.
Southwestern Bell Co. was the tiniest of seven regional Bell companies formed as a result of the breakup of the old AT&T; Corp., which became a long-distance carrier.
Whitacre, who rose through Southwestern’s ranks to take the reins in 1990, changed the corporate name to the more worldly SBC. He began plotting takeovers as Congress passed the Telecommunications Act of 1996, a deregulation program that spurred local phone competition by allowing competitors to lease use of local lines from network owners such as SBC.
SBC quickly announced plans to buy Pacific Bell’s parent, Pacific Telesis, becoming California’s dominant local phone company.
After that 1997 acquisition, SBC took over Ameritech in the Midwest and Southern New England Telecommunications.
The blockbuster deals occurred in the last three years: Cingular’s purchase of AT&T; Wireless in 2004, SBC’s acquisition of the old AT&T; Corp. in 2005 and the newly named AT&T; Inc.’s purchase of BellSouth.
Those in the industry who did battle with Whitacre were mindful of his hardball tactics and the political influence he wielded because of his company’s dominance in telecom.
“Ed Whitacre has been the beneficiary of incredibly lax antitrust enforcement and incredibly stupid management at [other] companies,” said Mark Cooper, research director at the Consumer Federation of America, an advocacy organization. “And his reward is a $158-million retirement package. That’s America at the beginning of the 21st century.”
The Corporate Library, which tracks executive pay as part of its corporate-governance research, said Whitacre’s exit pay was the second-highest this year, behind the $202-million package for Richard B. Handler, chief executive of Jeffries Group Inc., an investment bank.
Whitacre’s deal consists of $84.7 million in cash over a number of years and $73.8 million in deferred compensation.
“Given the company’s total stock return, this amount is very excessive,” said Alexandra Higgins, the Corporate Library’s compensation analyst. “In our opinion, there’s no need for this waste of shareholder money.”
AT&T;’s stock has shot up nearly 53% in the last 12 months, closing Friday at $38.64, down 32 cents. But its return for the last five years was only 7.4%, while others in the industry gained an average of 108% in the period. Over the last three years, AT&T; closed the gap but still trailed with 52%, compared with an industry average of 66.7%, the analyst said.
“Other companies are seeing this and are going to try to match it,” Higgins said. “And that just increases the levels of executive compensation. When does it end?”
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