Stock buybacks point AT&T in the wrong direction
Something disturbing is happening at AT&T, and it affects all Americans who rely on having access to reliable telecommunications services.
Under pressure from vulture hedge fund manager Paul Singer, the company recently committed to spending 70 percent of its free cash flow – a massive $30 billion – on buying back its own stock to boost share prices.
While this worrying trend is becoming more common across corporate America, AT&T’s example is particularly troubling because of its proud tradition of connecting all Americans by providing universal service. AT&T employs more than 200,000 people in communities all across the country, creating and sustaining family-supporting jobs. Using profits to enrich wealthy shareholders and corporate executives through stock buybacks puts that tradition in jeopardy.
Although AT&T CEO Randall Stephenson promised to invest in the company’s network and create at least 7,000 new jobs with the billions the company received from the Tax Cut and Jobs Act, AT&T has cut more than 30,000 jobs since the bill went into effect in January 2018.
At a hearing earlier this year that Sen. Baldwin hosted to highlight the effects of these harmful stock buybacks, we heard from Joe Olson, a CWA leader from Wisconsin, who has worked at AT&T for 20 years. The week he testified at the hearing, AT&T was closing a call center in Appleton, Wis., that once employed almost 400 people, devastating that small community.
As a member of the Business Roundtable, AT&T’s CEO Stephenson recently signed a pledge to stop putting the interests of large shareholders above all else, describing a vision of “inclusive prosperity.” AT&T’s broken promises on jobs and its quick capitulation to Paul Singer’s demand for increased stock buybacks show how hollow the promises of these corporations really are.
AT&T isn’t the only company that used false promises to secure enormous tax breaks that went right into the pockets of its largest shareholders. As the New York Times recently reported, since the Tax Cut and Jobs Act passed, American companies have spent nearly three times as much on additional dividends and stock buybacks than on increased investment.
We can’t rely on promises. To ensure that the profits that large corporations are making in our communities are reinvested in those communities, we need legislation to rein in corporate stock buybacks and empower workers to have a say in how their company’s profits are spent.
That’s what the Reward Work Act, which Sen. Baldwin introduced, and CWA members support, does. It bans open-market stock buybacks that overwhelmingly benefit executives and activist hedge funds at the expense of workers and retirement savers. In order to keep profits in communities and empower workers, the legislation also requires that one-third of the corporate board be elected by employees, which a National Bureau of Economic Research report recently found raises investment, increases workers’ skills, reduces outsourcing, increases gender diversity in boardrooms, and lowers companies’ debt payments.
Imagine if workers at AT&T had the power to re-direct spending from stock buybacks to productive investments. AT&T could build next generation fiber and broadband networks, not just in the big cities and wealthy suburbs, but also in underserved rural areas of our country. In these areas, reliable, high-speed communications infrastructure is necessary to deliver critical services for businesses, residents, and first responders and would jump-start new business development. This new power could end the looting of public companies and create shared economic prosperity in America.
It’s time to stop listening to what AT&T says about its relationship with working people and time to start watching what it’s actually doing to our communities. Behind their rhetoric, this company is playing with thousands of people’s lives to maximize profits for wealthy shareholders, and every American should be paying attention.
Chris Shelton is president of the Communications Workers of America. Tammy Baldwin is a member of the Commerce Committee.
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