Lightreading Gives Ma Bell Both Barrels

R. Scott Raynovich, Editor in Chief of Lightreading, unloads both barrels into retiring AT&T (T ) CEO Ed Whitacre in a Lightreading editorial outlining the massive gap between his pay and performance.

Shareholder activism along the lines of Carl Icahn’s Motorola crusade is sadly absent in the Networking component, equipment, and carrier business that I follow. Companies such as Centillium (CTLM) and Sycamore (SCMR) are allowed to drift along in a zombie-like state at the expense of investors. Even Robert Chapman has abandoned his cause at Vitesse.

From Scott’s Editorial: 

What kind of risks and innovation has SBC/AT&T taken recently? It’s built a watered-down fiber-to-the-curb network that’s dwarfed by many fiber projects worldwide. You are now the largest telecom incumbent operator on the planet, yet you’re taking fewer risks than just about anybody. Less risk, higher pay. Not a bad deal if you can get it.

Perhaps the generous compensation package is in appreciation of all the fine lobbying efforts your team has conducted in Washington to preserve the incumbent footprint and defend yourself against innovation. If that is indeed the rationale for your pay package, then you deserve it. AT&T has shown true excellence in lobbying. Your team knows how to preserve the system.

Here’s what I really think of this pay package: It’s a farce. It’s a symbol that the pure arrogance and imperial management style of incumbent telcos is here to say. It’s proof that your company is focused more on maintaining the status quo and maximizing executive pay, than on innovation and the creation of shareholder value.

Read the whole thing here. I agree with Scott 100% on the Fiber to the Curb initiative. (see “AT&T Project Lightspeed and the Jedi Mind Trick“)

A couple of additional points of my own:

1. It’s hard to point the finger at Whitacre. The real problem is the board that allows this nonsense to happen. I suggest reading Warren Buffet’s letter to investors… one choice excerpt.
   

   I mentioned last year that in my service on 19 corporate boards (not counting Berkshire or other controlled companies), I have been the Typhoid Mary of compensation committees. At only one company was I assigned to comp committee duty, and then I was promptly outvoted on the most crucial decision that we faced. My ostracism has been peculiar, considering that I certainly haven’t lacked experience in setting CEO pay. At Berkshire, after all, I am a one-man compensation committee who determines the salaries and incentives for the CEOs of around 40 significant operating businesses.

   How much time does this aspect of my job take? Virtually none. How many CEOs have voluntarily left us for other jobs in our 42-year history? Precisely none.

2. As for taking risks- the investment community doesn’t expect AT&T to be anything other than a dumb cash generating machine. In a way Whitacre is carrying out the wishes of his shareholders by implementing a strategy devoid of risk. Whitacre’s job is to remove ALL risk to ensure the cash keeps flowing.

   Until of course, the flock of black swans land in the big reflecting pool outside HQ.

Is it just me or is Lightreading getting it’s mojo back? Less vendor pandering, more independent opinion. You go guys!