U.S. telecommunications group AT&T has paid its executives $ 9 million to complete the 2018 acquisition of Time Warner, a $ 85 billion deal that was hanged this month after providing insignificant returns for investors.
After winning a costly battle with the U.S. Department of Justice, which had sued to block the Time Warner deal, AT&T paid John Stankey, now chief executive, a $ 2 million merger completion bonus. of dollars, according to 2019 regulatory presentations.
Later, chief financial officer John Stephens was also paid a $ 2 million bonus, and David McAtee, the company’s attorney general, received a $ 5 million reward for closing the deal.
Stankey, Stephens and McAtee have been given even greater annual bonus opportunities as a result of the Time Warner merger, according to Glass Lewis, a stock consulting firm.
Concerns about AT & T’s executive bonuses came to a head at the company’s annual meeting in April when the majority of shareholders voted against the company’s remuneration ratio.
“AT&T has for a long time been overcompensated,” said David Yermack, a professor at New York University’s Stern School of Business. “It’s surprising that shareholders have taken so long to get angry.”
Merger completion bonuses have fallen out of favor because they seem to be rewarding executives for doing a job that is already part of their job, Yermack said.
But the bonuses lie in merger and acquisition agreements to motivate executives to get difficult transactions completed, said Anh Tran, a professor of finance at the University of London. Termination fees and other costs resulting from a failure of the agreement will typically be much higher than the cost of completion bonuses, he said.
AT&T declined to comment on the bonuses, but said, “We see that the WarnerMedia / Discovery transaction generates a substantial incremental shareholder value above what we paid for Time Warner, potentially up to 30 percent or more, and this is separate from the benefits of the agreement to the telecommunications company and its shareholders ”.
AT&T investors own 71 percent of the stock WarnerMedia / Discovery.
Shareholders have expressed several concerns about executive pay at AT&T. Following the acquisition of Time Warner, Stankey was appointed chief operating officer of AT&T in October 2019 and his total salary jumped by a third to $ 22.5 million, an amount that exceeded the median salary of the CEO of the company’s peers, according to the Institutional Shareholders Services. In 2020 Stankey was named chief executive of AT&T.
The company attracted further criticism this year by revealing, just weeks before the spin-off, that the CEO of WarnerMedia was recently hired. Jason Kilar he had been offered a $ 48 million bonus for four years with no performance criteria, according to the ISS.
“Investors may complain about the lack of performance conditions on the important awards granted to executives who are not CEOs for the year under review,” the ISS said.
Kilar’s future is unclear when the Discovery announcement will be announced.
AT&T also gave McAtee a $ 9m “career retention” bonus this year.
BlackRock, AT & T’s second largest shareholder, voted against all five members of the compensation committee in part because of the executive bonuses.
The payments – as well as the consulting fees that AT&T paid to former chief executive Randall Stephenson – “all happened amid ongoing peer performance relative to peers and the broader market,” BlackRock said.