Shareholders raise surveillance concerns at AT&T, Verizon

Reuters

By Ross Kerber and Sinead Carew

BOSTON/NEW YORK, Nov 20 (Reuters) - Shareholders of telecomgiants AT&T Inc and Verizon Communications Inc areseeking more details related to their sharing of customerinformation with governments, showing investors starting to pushback over the role of communications companies in spyingoperations.

Activists including Trillium Asset Management of Boston andthe $161 billion New York State Common Retirement Fund havefiled proposals for the spring shareholder meetings of AT&T andVerizon, representatives said.

Both resolutions call on the companies to reportsemi-annually on "metrics and discussion regarding requests forcustomer information by U.S. and foreign governments."

As carriers of massive amounts of voice and data traffic,the telecommunications companies have been at the center ofcontroversies over the use of their data by U.S. intelligenceagencies. Just on Monday the U.S. Supreme Court declined to heara challenge to a ruling that gave the government access toVerizon records of millions of telephone calls. [ ID: nL2N0J315X]

A worry is the close ties could hurt the companies'business, said Trillium Senior Vice President Jonas Kron.

"From an investor perspective, this is one of those issueswhere there's an overlap of interests" among privacy advocatesand business groups, Kron said. He cited surveys that spyingfears could cut tens of billions of dollars from the sales ofcloud computing services.

AT&T spokesman Mark Siegel said that "As standard practicewe look carefully at all shareholder proposals but at this pointin the process we do not expect to comment on them."

Verizon spokesman Bob Varettoni declined to comment on theshareholder proposal it received except to say the company isevaluating it.

Customers in growth markets like China have historically mistrusted U.S. technology corporations. Those fears have beenstoked by disclosures from former National Security Agencycontractor Edward Snowden.

For instance, Cisco Systems Inc last week blamedwhat some analysts call "the Snowden effect" in part for dismalquarterly revenue. Others have questioned the financial impactof the revelations, however. [ ID: nL2N0HA03X ]

In response many technology companies have pushed for -- orat least aimed to be seen pushing for -- transparency in theirdealings with U.S. intelligence agencies.

Companies including Google Inc, MicrosoftCorp, Twitter Inc, Facebook Inc, AppleInc and Yahoo! Inc have published "transparency reports" showing government data requests. Somehave in addition gone to court seeking to disclose more details.

But the two big telecommunications companies have notresponded as aggressively to the data requests, the shareholderactivists note in their resolutions.

Specifically, the resolutions cite press reports of theintelligence agencies' involvement with the companies, and theresulting criticism from figures like Brazil's president DilmaRousseff, who called U.S. monitoring activities "a breach ofinternational law."

The resolutions call on AT&T and Verizon to publishsemi-annual reports, subject to current laws, "providing metricsand discussion regarding requests for customer information byU.S. and foreign governments, at reasonable cost and omittingproprietary information."

Trillium has $1.3 billion under management and calls itselfthe oldest independent investment adviser focused on sustainableand responsible investing. Trillium and other activists haveused shareholder proposals in the past to air out arcane issuessuch as several "network neutrality" measures it brought at AT&Tand Verizon since 2012. One at Verizon in the spring won supportfrom 24 percent of shareholders.

Even when such measures don't pass, activists see them as away to call attention to issues.

"Often the utility of such resolutions is to generateconversation with and among management, particularly if thecompany has refused to engage in other ways," said ChristineBader, a lecturer on human rights and business at ColumbiaUniversity. She is also affiliated with the Global NetworkInitiative, a privacy-advocacy group that counts some of thetechnology companies as participants.

Filers of the AT&T proposal include the New York State fund,Trillium, the American Civil Liberties Union of NorthernCalifornia, and Arjuna Capital, according to a statement fromOpen MIC, a non-profit organization in New York that works withinvestors on media issues and helped organize the resolutions.

Filers of the Verizon proposal include Trillium, the ACLUchapter, the Park Foundation, and Clean Yield Asset Management,the activists said.

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