Telecom Investors: Can You Hear Us Now?

At AT&T's(T Quote) annual shareholder meeting Friday, every stockholder proposal was narrowly defeated, but still showed that activism against excessive compensation may be gaining traction. Proposals for an advisory say-on-pay vote and to exclude pension investment gains from performance-based compensation both garnered more than 40% of the vote.

Two other shareholder-spearheaded proposals received less support, but perhaps enough to send a message to AT&T's board going forward, shareholder activists say.

AT&T shareholders have been fuming about executive pay for years, with their argument finding support from The Corporate Library's 2006 report "Pay For Failure: The Compensation Committee's Responsible." It cites AT&T as one of the most affected companies by the broken link between long-term value growth and long-term incentive awards.

According to the study, former AT&T CEO Ed Whitacre received $85.2 million in compensation from 2001 through 2005, as total shareholder return was negative 40.3%.

"The company hired Whitacre when telecoms were riding high and everyone was in demand," Hodgson says. "They basically threw money at him. When the industry took a nosedive, since so little of his bonus was performance related, they had to keep paying him. It was similar at Verizon when Seidenberg took over."

Initiatives against excessive pay are spreading from the wireless carriers like AT&T and Verizon to handset makers, such as Motorola (MOT Quote), who have say-on-pay proposals on their proxies this spring. One shareholder proposal on Motorola's statement argues that corporate governance arrangements "do not provide shareholders with enough mechanisms for providing input to boards on senior executive compensation."