AT&T Annual meeting: April 28, 2017

AT&T recently reported 2016 total disclosed compensation for Chairman and CEO Randall Stephenson: $28.4 million. The company appeared on our overpaid list for last and compensation has increased this year.

I want to quickly highlight an issue from the footnotes. Stephenson received $1.2 million in matching contributions to his 401k and “certain ‘makeup’ matching contributions” in the Stock Purchase and Deferral Plan.

For the 401(k) AT&T offers “substantially all” of its employees the opportunity to defer income. AT&T matches 80% of employee contributions, limited to the first 6% of cash compensation. Executive officers only receive a match on base salary. Stephenson’s base salary is $1,791,667.

The chart on “Nonqualified deferred compensation,” page 81 of company proxy statement filed on March 10 shows that Stephenson “deferred” almost $6 million of his pay in 2015. Executive officers at AT&T can defer 30% of their salary and up to 95% of their short term awards.

Deferred pay offers those executive who make more money than they spend in a year, the option to receive the money at some point in the future. In addition to providing a guaranteed rate of return, deferring compensation saves executives’ on their taxes.

Here’s how it works according to the proxy:

“Participants receive a 20% match in the form of additional deferred share units; however, with respect to short-term awards, officer level participants receive the 20% match only on the purchase of deferred share units that represent no more than their target awards. In addition, the Company provides “makeup” matching contributions in the form of additional deferred share units in order to generally offset the loss of match in the 401(k) plan caused by participation in the SPDP and the CDP, and to provide match on compensation that exceeds Federal compensation limits for 401(k)”

Bottom line: the aggregate balance of Stephenson’s deferred compensation at FYE was $42 million. The present value of his accumulated pension benefits is $54 million. This clearly goes beyond helping a CEO plan for his retirement; it is a wealth transfer to future generations.

Nice match if you can get it. But is it something shareholders really need to pay for?