Three large pension funds filed a lawsuit in New York state Supreme Court last week that could throw a wrench in AT&T Corp.'s plan to split into four different companies.
The Amalgamated Bank's Longview Investment Fund and the pension funds of the AFL-CIO and the Communications Workers of America filed suit to block AT&T's proposal to amend its corporate charter so that a majority shareholder vote would be needed to authorize a major restructuring. Currently, a two-thirds majority vote is required.
In its annual proxy statement, AT&T said the charter amendment is needed to bring AT&T more in line with other modern major corporations.
In the proxy, AT&T proposed the charter be amended to allow a majority to "authorize any merger, consolidation, or dissolution of AT&T, or any sale, lease, exchange, or other disposition of all or substantially all of the assets of AT&T."
In the lawsuit, filed in New York County, the pension-fund leaders contend AT&T is only moving to change the charter because it doesn't believe it can get the two-thirds vote currently needed to approve the restructuring. They call the proposed change in the charter an "end run around shareholders."
The group has been equally vocal in its opposition to the restructuring, calling it an abandonment of AT&T's bundling strategy at a time when its competitors are making moves toward offering integrated services.
That majority vote could be key in AT&T's plans to split into four separate units-consumer long distance, broadband, business services and wireless-which would come to a vote at AT&T's annual shareholder's meeting in Cincinnati on May 23.
Amalgamated spokeswoman Dale St. Clair said she hoped AT&T and the pension funds could come to an agreement before then.
"Our goal as Amalgamated, which represents thousands of AT&T retirees, is to protect shareholder value," St. Clair said. "This [restructuring] will have a negative impact on shareholder value. There's no question that we are looking for a response from AT&T. We're hoping to have a possible settlement," she continued.
AT&T said in the proxy statement that because of its broad shareholder base-it has 1.8 million shareholders, 1.5 million of whom own less than 500 shares-AT&T usually has a lower percentage of shares voted than other companies of similar size for annual and special meetings. That, in turn, makes it difficult to achieve the two-thirds majority required by the current charter.
AT&T also stated in the proxy statement that New York business corporation law allows for a majority vote, unless otherwise specified in a company's charter, and has allowed other companies to reduce the percentage of votes required.
The three pension funds own about $30 million of AT&T stock, or roughly 1.3 million shares. While that is a relatively minuscule percentage of AT&T's 3.8 billion shares outstanding (0.03 percent), the funds claim that individual shareholders own about 60 percent of the company.
Institutional investors, including some larger pension funds, own about 47 percent of AT&T stock. Directors and officers of AT&T collectively own about 2.4 percent of AT&T shares, with non-executive chairman Amos Hostetter holding the largest chunk: 53 million shares, or 1.4 percent.
The CWA represents about 35,000 AT&T employees. This is not the first time the CWA and AFL-CIO have come out against the breakup. In February, the two unions held a conference call to urge investors to vote against the restructuring.