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AT&T cuts executive's pay for failed T-Mobile takeover

Broward County residents who are subject to an employment contract with a South Florida employer may find the following story interesting. The CEO of AT&T recently had his compensation package cut by more than $2 million, leaving him with $22 million in compensation for 2011. While this pay scale is certainly astronomical, the issues surrounding the cut in this employee's salary are important, especially for employees who may have been in a similar situation.

AT&T had attempted to purchase T-Mobile for $38 billion. The deal was risky because all sides were aware that it may not pass regulatory examination. In order to entice T-Mobile to enter into the agreement with AT&T, the CEO of AT&T offered T-Mobile $3 billion if the deal failed.

The Federal Trade Communications Commission and the Department of Justice, in fact, blocked the deal. T-Mobile collected on the huge breakup fees it was owed under the terms of the acquisition agreement.

AT&T's board believed that this costly gamble was a direct result of the poor judgment of its CEO. The compensation committee decided to cut his pay package by more than $2 million. Despite this pay cut, his total employee pay amounted to $22 million in compensation. Though this is a very large number, it is 20 percent less than what he earned in 2010.

The CEO's 2011 compensation was based on the company's strong performance, despite the debacle over the failed T-Mobile deal. Bonuses and performance incentives can be addressed in employment contracts, along with the failure to meet certain goals or expectations, and this is most likely the case with the CEO of AT&T.

Could the CEO see his massive pay cut coming after the T-Mobile deal fell through? Possibly.

If not, then he may consider a dispute regarding the compensation he received under his employment contract.

Source: CNNMoney, "AT&T CEO pay docked $2 million for T-Mobile debacle," Stacy Cowley, Feb. 22, 2012

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