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AT&T president quits
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July 16, 1997: 8:09 p.m. ET
Walter resigns after board declines to elevate him to chief executive officer
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NEW YORK (CNNfn) - John R. Walter, AT&T Corp.'s president and chief operating officer and the heir apparent to Chairman and Chief Executive Officer Robert Allen, has resigned after less than one year on the job, the company's board of directors said Wednesday.
The announcement came just before the close of trading Wednesday, sending AT&T shares up 1-1/2 to close at 36-3/8.
In a statement, AT&T said Walter's resignation followed discussions with the board of directors that made it clear it was not ready to elevate him to the top spot on the schedule the group originally discussed.
"John Walter is an energetic leader who made important contributions to AT&T in a relatively short period," said AT&T director and Springs Industries chairman and chief executive officer Walter Elisha. "But the board has decided it will not elect him CEO by next January as originally foreseen.
"Therefore, John has decided to leave the company, exercising rights under his employment contract, and we wish him well," he said.
Under the terms of his contract, Walter, 50, will receive separation payments totaling about $3.8 million, AT&T said. This is in addition to the $22 million provided to replace salary, pension and bonuses Walter forfeited when he left R.R. Donnelley & Co. last October after nine years as the publishing company's CEO.
The outgoing Walter said he believed he was "perfectly qualified" to be AT&T's CEO.
"I have worked tirelessly on behalf of the shareholders of AT&T. I am proud of the accomplishments I was able to achieve in my tenure here. I will miss the people of AT&T and will always respect their commitment and dedication to serving customers. I wish the company well and look forward to my next challenge," Walter said in a statement.
After board meetings Tuesday and Wednesday, the company's eight independent directors voted unanimously not to give Walter the CEO job in January 1998 as promised in his contract. Allen reportedly echoed that recommendation.
Just one month ago, Allen said AT&T was more certain then ever that Walter was the person that would succeed him.
Asked what went wrong in one month, an AT&T director said: "As we watched him respond in board meetings, we became increasingly concerned about whether he could provide the intellectual leadership for this company."
AT&T's board of directors has formed a committee of independent directors to conduct a CEO search and recommend Allen's successor to the board. The committee consists of Kenneth Durr, chairman and CEO of Chevron Corp.; Elisha; Donald Henry, president of IRC Group;. Ralph Larsen, chairman and CEO of Johnson & Johnson Co.; and Thomas Wyman, senior advisor of SBC Warburg Inc.
Vice Chairman John Zeglis will lead the company's operations and serve as chairman of its six-member operations team. The company's operating heads will all report to Zeglis.
Dan Somers, senior executive vice president and chief financial officer and John Petrillo, executive vice president, will also take on additional supervisory duties.
The company's law, government affairs, human resources and public relations departments, which now report to Zeglis, will report directly to Allen.
The appointment of Walter surprised many on Wall Street since he had no telecommunications experience.
At the time, AT&T said Walter's success in carrying an old, established printer like Donnelley into the digital age convinced them he was the right person for the job.
Scott Cleland, telecommunications analyst at Legg Mason's Precursor Group, said AT&T officials probably decided some time ago that Walter was not their man for the top spot. (137K WAV) and (137K AIFF)
AT&T insisted hiring Walter was not a mistake, saying a person doesn't have to wire phones to be the senior executive in the company.
--Cyrus Afzali
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