Randall Stephenson, 60, will retire as CEO of AT&T effective July 1, 2020. Chief Operating Officer John Stankey has been elected by the company’s board of directors to replace Stephenson as CEO. Stankey will also join AT&T’s board. Meanwhile, Stephenson will serve as executive chairman of the board of directors until January 2021 to help with the leadership transition.
Stephenson served as AT&T’s chairman and CEO for 13 years. But the past several months have been rough for him since activist investor Elliott Management challenged his leadership in September 2019.
Elliott sent an open letter to AT&T’s board of directors, harshly criticizing numerous aspects of AT&T’s business, including its attempted, but failed, purchase of T-Mobile and its acquisition of DirecTV. Elliott also gave AT&T management a scathing review, which Stephenson has been attempting to defend ever since.
In its official announcement today, AT&T said its board chose Stankey, 57, after a five-month search process by an HR committee. So it appears that the board began a serious search for a replacement to Stephenson shortly after the Elliott letter.
Stephenson was caught between opposing forces. On the one hand, Elliott was demanding cost cuts and share buybacks. But on the other hand, the Communications Workers of America (CWA) was calling Stephenson out for layoffs, saying AT&T had broken its promise to add jobs after it received big tax breaks as part of the Tax Cuts and Jobs Act of 2017.
Stankey, who has served as president and COO since October 2019, will inherit these issues. He joined AT&T in 1985 and has served in a variety of roles, including CEO of WarnerMedia; CEO of AT&T Entertainment Group; Chief Strategy Officer; Chief Technology Officer; CEO of AT&T Operations; and CEO of AT&T Business Solutions.
In fact, one of Elliott’s gripes was that Stankey was responsible for too much.
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Not only does Stankey inherit a full plate of issues, but he'll take over during a difficult time for the country due to the coronavirus pandemic. In a statement today, Stephenson said, “I congratulate John, and I look forward to partnering with him as the leadership team moves forward on our strategic initiatives while navigating the difficult economic and health challenges currently facing our country and the world.”
AT&T reported its first quarter 2020 earnings this week. On the call with investors, Stankey said the carrier is “not backing off” its previously announced $6 billion cost and efficiency initiative. He said AT&T sees an opportunity to approach all of its businesses to better align with how the coronavirus has and will continue to reshape customer behavior and the economy.
Later this year, AT&T’s board will elect an independent director as chair when Stephenson retires as executive chairman in January 2021. This is a bit ironic because a group of shareholders has been clamoring for an independent director. And even at AT&T's annual meeting today, the board voted down a proposal to require an independent chairman.
Elliott’s own problems
After Elliott’s infamous letter to AT&T’s board, CWA began hammering Elliott for its own alleged failings. Elliott had claimed in September 2019 that it had taken a $3.4 billion stake in AT&T. But CWA said recently, “Despite making demands that have led to real job losses for AT&T employees, Elliott Management’s actual investment in the company appears to be much smaller than it claimed. In a mid-February filing with the SEC, Elliott showed that it is making only a very small financial outlay upfront as it owns just 5 million shares of AT&T stock, worth around $195 million. The remainder of Elliott’s holdings come in the form of derivatives, including 202,500 call options to purchase AT&T shares (bought for pennies on the dollar and worth $791 million as of December 31, if exercised).”
The Financial Times reported today that the French market regulator AMF has fined Elliott $21.6 million for obstructing an investigation into a takeover bid of a French company and for not adequately disclosing its positions.
“The investigation centred on Elliott’s then investment in Norbert Dentressangle, which was in the process of being taken over by US rival XPO," according to the Financial Times. "Elliott took a position in the target company in the hope of winning a higher price from the buyer. The AMF focused on whether Elliott correctly disclosed the size and nature of its positions to the regulator.”