US telecoms group AT&T paid its executives $9m for finishing its 2018 acquisition of Time Warner, an $85bn deal that was unpicked this month after delivering negligible returns for traders.
After profitable a expensive battle with the US justice division, which had sued to dam the Time Warner deal, AT&T paid John Stankey, now chief govt, a $2m merger completion bonus, in keeping with 2019 regulatory filings.
Then-chief monetary officer John Stephens was additionally paid a $2m bonus, and David McAtee, the corporate’s normal counsel, was given a $5m reward for closing the deal.
Stankey, Stephens and McAtee were additionally given bigger, annual bonus alternatives on account of the Time Warner merger, in keeping with Glass Lewis, a shareholder advisory agency.
Concerns over AT&T’s govt bonuses got here to a head on the firm’s annual assembly in April when a majority of shareholders voted against the corporate’s remuneration report.
“AT&T for a long time has had over-the-top compensation,” mentioned David Yermack, a professor on the New York University Stern School of Business. “It is surprising that it took shareholders this long to get upset.”
Merger completion bonuses have fallen out of favour as a result of they seem like rewarding executives for doing work that’s already a part of their job, Yermack mentioned.
But the bonuses do happen in merger and acquisition offers to encourage executives to get tough transactions finalised, mentioned Anh Tran, a finance professor on the City University of London. Termination charges and different bills ensuing from a failure of the deal would sometimes be a lot greater than the price of completion bonuses, he mentioned.
AT&T declined to touch upon the bonuses however mentioned: “We see the WarnerMedia/Discovery transaction generating substantial incremental shareholder value above what we paid for Time Warner, potentially as much as 30 per cent or more, and that’s separate from the benefits of the deal to the telecommunications company and its shareholders.”
Investors of AT&T will personal 71 per cent of the mixed WarnerMedia/Discovery.
Shareholder advisers have expressed a number of considerations about govt pay at AT&T. After the Time Warner acquisition, Stankey was appointed AT&T’s chief working officer in October 2019 and his complete pay jumped by a 3rd to $22.5m, an quantity that exceeded the median CEO pay of the corporate’s friends, in keeping with Institutional Shareholder Services. In 2020 Stankey was named AT&T’s chief govt.
The firm attracted additional criticism this 12 months by revealing, simply weeks earlier than the spin-off, that WarnerMedia’s recently-hired chief govt Jason Kilar had been supplied a bonus of $48m over 4 years with none efficiency standards, in keeping with ISS.
“Investors may question the lack of performance conditions on sizeable awards granted to non-CEO executives for the year in review,” ISS mentioned.
Kilar’s future was left unclear when the Discovery deal was introduced.
AT&T additionally gave McAtee a $9m “career retention” bonus this 12 months.
BlackRock, AT&T’s second-largest shareholder, voted towards the corporate’s 5 compensation committee board members partially due to the chief bonuses.
The funds — in addition to consulting charges AT&T paid to former chief govt Randall Stephenson — “all have occurred amid ongoing underperformance relative to peers and the broader market”, BlackRock mentioned.