Meet America's new public enemy

Profile: Robert Allen: He's shedding 40,000 jobs as his pay package soars. But AT&T's chief, dubbed the 'executioner', is unrepentant, writes David Usborne
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The Independent Online
LIKE the subversive samizdat newspapers that used to circulate among opposition groups in the old Soviet Union, photocopied posters of a man's face began to surface in offices around the New Jersey headquarters of AT&T at around Christmas time last year. Under the handsome features were just two words: "The Grinch [the US version of Scrooge]".

Last month, the same man appeared - albeit alongside three others - on the cover of US editions of Newsweek magazine with the savage headline: "Corporate Killers". At about the same time a candidate for the Republican presidential nomination started to invoke this same person in his campaign speeches in New Hampshire. He referred to him repeatedly as the "executioner".

What kind of monster was it who was attracting such widespread venom? Surely a newly-exposed Nazi war criminal or a serial killer at the very least.

Actually, no. Instead, the unhappy victim was someone whose reputation until then had been as a person of integrity and mild manners, whose curriculum vitae listed his hobbies as jogging, swimming and reading.

We are talking, in fact, of the chief executive officer since 1988 of AT&T, the American telecommunications behemoth, Robert Allen. While never the most exciting or beloved of America's corporate chieftains - he was described by Fortune magazine recently as "charismatically impaired" - Mr Allen, 61, had never given cause to be the subject of general vilification. True, he is a bit stand-offish, even cold, perhaps, but certainly not evil or unkind.

Mr Allen's image problems date back to 22 September last year when he announced plans to break up AT&T into three separate entities; a strategy, he warned at once, that would mean the shedding of some jobs. It was the prospect of those job losses that prompted the posters at AT&T headquarters as well as a few sharp-tongued jokes. These included the jibe that AT&T was about to stand for Allen and Two Temps and the quip whenever something seemed to go awry: "That would never have happened if Bob Allen was still alive."

Then came the unhappy day in January when Mr Allen revealed that in fact he was stripping 40,000 positions from AT&T, most of them middle-management positions. In one stroke, the Missouri native had set himself up as the poster target of what has become a central theme of Mr Buchanan's run at the presidency and indeed of the political season as a whole: the rape and pillage of America's white-collar, middle class, workforce by corporate chieftains.

The Buchanan script, since echoed by the Republican front-runner, Bob Dole, and by President Clinton, runs like this: the managements of corporations such as AT&T, IBM, Digital and the former Scott Paper (these were the other companies whose bosses graced the Newsweek cover) are sacrificing their own workers to their obsessions with the bottom line and boosting share values.

And the insult is compounded in several ways: as they ravage their payrolls, many of the CEOs are drawing bigger salaries; Wall Street reacts by pushing the Dow Jones Index to more extravagant highs; and all the while the gap in earnings between the bosses and the footsoldiers yawns wider. Sounds a familiar refrain in the UK, too? Sure, but add a few noughts.

Mr Allen, who two weeks ago defended himself in a defiant but angst-ridden memo to his remaining employees, was not helped by the revelation that his own pay package was boosted from $6.7m (pounds 4.4) in 1994 to $16m last year. Although it was quite some pay rise, Mr Allen has pointed out that his actual salary was cut last year to $5.2m and that the bulk of the new riches derives from 750,000 new stock options that cannot be sold for another five years.

Raised in the small town of New Castle, Indiana, Mr Allen joined AT&T as chief financial officer in 1984 just as it was being forced by the government to break up for the first time and relinquish the local US telephone markets to the so-called "baby bells". The son of the owner of a clothing shop and a college football star, Mr Allen had before then held some 30 different jobs, including labouring on a pipeline. His career in the telephone business began on his graduation from Harvard Business School when he joined the Indiana Bell telephone company in 1957. He married his wife, Betty, in the same year. The couple have five children and nine grandchildren, photographs of whom are proudly displayed in his office.

Mr Allen is not, in fact, so new to the grisly task of shedding workers. As CFO he spearheaded an even more savage programme of lay-offs after the 1984 break-up, when 75,000 AT&T jobs were axed over three years. On becoming boss in 1988, after the sudden death of his predecessor, James Olson, Mr Allen made a vigorous assault on the still heavily bureaucratised telephone giant, splitting its five core business units into 19 different entities - each with an explicit responsibility to make a profit.

If there is one glaring blemish on Mr Allen's record it is surely AT&T's hostile takeover in 1990 of NCR, then America's third largest computer manufacturer. The idea was to give AT&T a footing in the expanding personal computer market, but by any reckoning the acquisition was a disaster. Producing respectable profits until Mr Allen swallowed it up, NCR subsequently nosedived and never gave AT&T a dime for its trouble.

The NCR fiasco, in particular, has ensured that Mr Allen's fan-club is not as full as he would like. Among those sniping at his performance has been Graef Crystal, an expert in corporate pay packages who teaches a business management course at the University of California at Berkeley. "Why do you want to retain him? He's an average performer," he remarked a week ago. "He's not even a face card; he's a seven in the deck."

The sceptical view of AT&T and Mr Allen's stewardship was lengthily rehearsed in a Fortune article last month: "AT&T Has No Clothes". Essentially a warning to investors not to overrate the company's prospects, it charged that it had "lurched from one strategy to another, made some terrible capital decisions, and specialised in huge write-offs tied to downsizings".

Mr Allen has proved impatient with criticism of his NCR gambit. Talking to the Newhouse News Service this month, he responded: "If you're asking me if I should be fired because of the NCR decision, the answer is 'Hell, no'." He went on: "Now ask me about the number of things that have gone right since I have been on the job." Among Mr Allen's decisions that have generally drawn praise was the purchase last year of McCaw Cellular Communications which ensured AT&T a place in the growing mobile telephone industry.

Never has Mr Allen been more indignant than in the memorandum that he sent to employees two weeks ago about the campaign unleashed against him by Mr Buchanan and the likes of Newsweek. "AT&T has always made news, but I can't remember when the coverage of our business has been as unfavourable and relentless as in the past few weeks. Media coverage often swings like a pendulum, and one-sided coverage of our business may continue for a while."

He attempted to explain the rationale behind the firing of some 40,000 of his employees. "The implications were clear: make the necessary - even painful - changes today or forfeit the future. It may appease the media for corporations to forestall difficult decisions until they're on the ropes. But I want us to tackle our future from a position of strength." As to the suffering of those who had been shown the door, he concluded: "Those are the painful results of our decisions and, believe me, I'm not immune to the emotions that they engender. I am deeply saddened by the pain and loss this is causing some of our people and their families."

Like the loyal spouse of a politician under fire, Betty Allen has spoken up in her husband's defence: "This has been very hard for him. I knew what he was going through and that he had to work through it himself."

Not surprisingly, feelings of betrayal persist among many of those who are losing their jobs. One employee of AT&T's tax department had this to say of Mr Allen: "I don't think he knows what's going on. People who used to treat him like a god think he's a bad guy now. They feel he's out of touch. I don't think he's out of touch. I think he's out of heart."

Defenders of Mr Allen point out, however, that AT&T had reasons beyond simple profits to restructure and shed jobs. Almost more than any other, the telecommunications industry is facing unprecedented turbulence forced on it by a sweeping deregulation bill passed by the US Congress last month. AT&T faces stiff rivalry from the regional bells in the long-distance market, which until now has essentially been shared by AT&T, MCI and Sprint. At the same time, AT&T faces the challenge of returning to the local and regional markets, an opportunity that it cannot pass up but which will require billions of dollars in new investment.

Nor, meanwhile, is AT&T the only company that has given its bosses generous pay deals while parts of its workforce are being dumped on the street. Apple Computer, which has announced 1,300 lay-offs, recently took on Gilbert Amelio as its new chief executive with a guaranteed minimum pay deal of $2.5m a year. Mr Amelio has argued that the figure was dictated by the "market place". Perhaps most stunning was the $100m pay-off delivered to Albert Dunlap, the former chief executive of Scott Paper, when he engineered its merger with Kimberly-Clark at a cost of 11,000 jobs.

Walter Shipley, chairman of New York's Chemical Bank and the best friend of Mr Allen, asks us to think of the man in the Grinch pictures as a person with feelings. "It's hard for someone who is not in one of these jobs like we have to understand what it's like to be in one of these jobs - the constant responsibility, the constant visibility, the tendency for people to treat you as 'Chairman' rather than as a guy, or a person".

But then Mr Shipley should know. Thanks to Chemical's impending merger with Chase Manhattan, about 12,000 staff in both banks will experience the wonders of redundancy.