UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
SBC Communications Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
PROXY STATEMENT
[SBC LOGO]
NOTICE OF 2002 ANNUAL MEETING AND PROXY STATEMENT
SBC COMMUNICATIONS INC.
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
TO BE HELD ON APRIL 26, 2002
TO THE HOLDERS OF COMMON STOCK OF SBC COMMUNICATIONS INC.:
The 2002 Annual Meeting of Shareowners of SBC Communications Inc. ("SBC"),
a Delaware corporation, will be held at 9:00 a.m. on Friday, April 26, 2002, at
the Alzafar Shrine Temple, 901 North Loop 1604 West, San Antonio, Texas. The
purposes of the meeting are to:
1. Elect seven Directors to serve three-year terms;
2. Ratify the appointment of Ernst & Young LLP as independent auditors
of SBC for 2002;
and to act upon such other matters as may properly come before the meeting.
Holders of SBC common stock of record at the close of business on February
28, 2002, are entitled to vote at the meeting and any adjournment of the
meeting. A list of these shareowners will be available for inspection during
business hours from April 12 through April 26, 2002, at 175 E. Houston, San
Antonio, Texas, and will also be available at the Annual Meeting.
By Order of the Board of Directors.
/s/ JOY RICK
Joy Rick
Vice President and Secretary
March 11, 2002
IMPORTANT NOTICE
IF YOU DO NOT PLAN TO ATTEND THE ANNUAL MEETING TO VOTE YOUR SHARES, PLEASE
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE RETURN
ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF IT IS MAILED IN THE UNITED STATES.
SHAREOWNERS OF RECORD MAY ALSO GIVE THEIR PROXY BY TELEPHONE OR THROUGH THE
INTERNET IN ACCORDANCE WITH THE INSTRUCTIONS ACCOMPANYING THE PROXY CARD. ANY
PERSON GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME, AND SHAREOWNERS
WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON.
PROXY STATEMENT
ANNUAL MEETING OF SHAREOWNERS
--------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SBC Communications Inc. ("SBC") for use at
the 2002 Annual Meeting of Shareowners of SBC. The meeting will be held at 9:00
a.m. on Friday, April 26, 2002, at the Alzafar Shrine Temple, 901 North Loop
1604 West, San Antonio, Texas. The purposes of the meeting are set forth in the
Notice of Annual Meeting of Shareowners. This Proxy Statement and the
accompanying proxy card are being mailed beginning March 11, 2002, to
shareowners of record of SBC's common stock, $1.00 par value per share, at the
close of business on February 28, 2002. Each share entitles the registered
holder to one vote. As of January 31, 2002, there were 3,352,019,685 shares of
SBC common stock outstanding.
All shares represented by proxies will be voted by one or more of the
persons designated on the enclosed proxy card in accordance with the
shareowners' directions. If the proxy card is signed and returned without
specific directions with respect to the matters to be acted upon, the shares
will be voted in accordance with the recommendations of the Board of Directors.
Any shareowner giving a proxy may revoke it at any time before such proxy is
voted at the meeting by giving written notice of revocation to the Vice
President and Secretary of SBC, by submitting a later-dated proxy, or by
attending the meeting and voting in person. The Chairman of the Board and Chief
Executive Officer will announce the closing of the polls during the Annual
Meeting. Proxies must be received prior to the closing of the polls in order to
be counted.
Instead of submitting a signed proxy card, shareowners may submit their
proxies by telephone or through the Internet using the control number and
instructions accompanying the proxy card. Telephone and Internet proxies must be
used in conjunction with, and will be subject to, the information and terms
contained on the proxy card. These procedures may also be available to
shareowners who hold their shares through a broker, nominee, fiduciary or other
custodian.
The proxy card, or a proxy submitted by telephone or through the Internet,
will also serve as voting instructions to the plan administrator or trustee for
any shares held on behalf of a participant under any of the following employee
benefit plans: the SBC Savings Plan, the SBC Savings and Security Plan, the
Ameritech Savings and Security Plan for
1
Non-Salaried Employees, the DonTech Profit Participation Plan, the Old Heritage
Advertising & Publishers, Inc. Profit Sharing Plan, the SBC PAYSOP, the Pacific
Telesis Group Employee Stock Ownership Plan, the Tax Reduction Act Stock
Ownership Plan (the "TRASOP") sponsored by The Southern New England Telephone
Company, the Cingular Wireless 401(k) Savings Plan, and the Cingular Wireless
401(k) Savings Plan for Bargained Employees. Shares in each of the foregoing
employee benefit plans (except the TRASOP and the Old Heritage plan) for which
voting instructions are not received, as well as shares which have not yet been
allocated to participants' accounts in the SBC Savings Plan, subject to the
trustees' fiduciary obligations, will be voted by the trustees in the same
proportion as the shares for which voting instructions are received from other
participants in each such plan. Similarly, the proxy card or a proxy submitted
by telephone or through the Internet will constitute voting instructions to the
plan administrator pursuant to the DirectSERVICE Investment Program offered by
Equiserve Trust Company, N.A. (SBC's transfer agent) for shares held on behalf
of plan participants.
If a shareowner participates in these plans and/or maintains shareowner
accounts under more than one name (including minor differences in registration,
such as with or without a middle initial), the shareowner may receive more than
one set of proxy materials. To ensure that all shares are voted, please sign and
return every proxy card received or submit a proxy by telephone or through the
Internet for each proxy card (the control numbers will differ on each card).
A shareowner may designate a person or persons other than those persons
designated on the proxy card to act as the shareowner's proxy. The shareowner
may use the proxy card to give another person authority by striking out the
names appearing on the enclosed proxy card, inserting the name(s) of another
person(s) and delivering the signed card to such person(s). The person(s)
designated by the shareowner must present the signed proxy card at the meeting
in order for the shares to be voted.
Where the shareowner is not the record holder, such as where the shares are
held through a broker, nominee, fiduciary or other custodian, the shareowner
must provide voting instructions to the record holder of the shares in
accordance with the record holder's requirements in order to ensure the shares
are properly voted.
The cost of soliciting proxies will be borne by SBC. Officers, agents and
employees of SBC and its subsidiaries and other solicitors retained
2
by SBC may, by letter, by telephone or in person, make additional requests for
the return of proxies and may receive proxies on behalf of SBC. Brokers,
nominees, fiduciaries and other custodians will be requested to forward
soliciting material to the beneficial owners of shares and will be reimbursed
for their expenses. SBC has retained D. F. King & Company, Inc. to aid in the
solicitation of proxies at a fee of $17,000, plus expenses.
Shareowners who represent 40% of the common stock outstanding and are
entitled to vote must be present or represented by proxy in order to constitute
a quorum to conduct business at the meeting. A list of eligible voters will be
available at the Annual Meeting.
If you plan to attend the meeting in person, please bring the admission
ticket (which is attached to the proxy card) to the Annual Meeting. If you do
not have an admission ticket, you will be admitted upon presentation of
identification at the door.
SBC's executive offices are located at 175 E. Houston, San Antonio, Texas
78205.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD OR
SUBMIT YOUR PROXY BY TELEPHONE OR THROUGH THE INTERNET PROMPTLY SO THAT A QUORUM
MAY BE REPRESENTED AT THE MEETING.
3
BOARD OF DIRECTORS
--------------------------------------------------------------------------------
The Board of Directors is responsible for the management and direction of
SBC and for establishing broad corporate policies. The Board of Directors and
various committees of the Board regularly meet to receive and discuss operating
and financial reports presented by the Chairman of the Board and Chief Executive
Officer as well as reports by experts and other advisors. The Board held nine
meetings in 2001.
Under SBC's Bylaws, the Board of Directors has the authority to determine
the size of the Board, not to exceed 25 Directors, and to fill vacancies. The
Board of Directors currently consists of 21 members, one of whom is an executive
officer of SBC. There are no vacancies on the Board.
SBC's Bylaws provide for a classified Board of Directors with three classes
of Directors. Each class is to consist of an equal number of Directors or, where
an equal number in each class is not possible, be as nearly equal as possible.
The class to which each Director has been assigned is designated as Group A,
Group B or Group C. The term of office of Group C Directors will expire at the
2002 Annual Meeting, Group A at the 2003 Annual Meeting, and Group B at the 2004
Annual Meeting.
The Board of Directors has nominated the seven persons listed as nominees
for Group C, all of whom are incumbent Directors, for election at the 2002
Annual Meeting to three-year terms of office expiring at the 2005 Annual
Meeting.
Biographical information about the Directors is provided on pages 7-12.
Except as otherwise noted, Directors who are shown as officers or partners of
other corporations, institutions or firms have held the positions indicated, or
have been officers of the organizations indicated, for more than five years.
During 2001, each Director attended at least 85% of all Board and Committee
meetings, except for Dr. Tyson, who attended 71% of the meetings.
Holdings of SBC common stock by SBC Directors are shown on the table on
page 15.
4
BOARD COMMITTEES
From time to time the Board establishes permanent standing committees and
temporary special committees to assist the Board in carrying out its
responsibilities. The Board has established six standing committees of
Directors, the principal responsibilities of which are described below. The
biographical information included later in this Proxy Statement identifies
committee memberships held by each Director.
AUDIT COMMITTEE--The Committee met four times in 2001. It consists of nine
non-employee Directors. The Audit Committee oversees the financial reporting
process, the systems of internal accounting and financial controls, the
performance and independence of the independent auditors and the internal
auditors, the annual independent audit of SBC's financial statements, and
related matters. The Audit Committee recommends to the Board the appointment
of a firm to serve as independent auditors, subject to ratification by the
shareowners at the Annual Meeting. The independent auditing firm examines
the accounting records of SBC and its subsidiaries for the coming year.
CORPORATE DEVELOPMENT COMMITTEE--The Committee met one time in 2001. It consists
of six non-employee Directors and one employee Director. The Corporate
Development Committee reviews proposed mergers, acquisitions, dispositions,
and similar transactions.
CORPORATE PUBLIC POLICY AND ENVIRONMENTAL AFFAIRS COMMITTEE--The Committee met
three times in 2001. It consists of 10 non-employee Directors. The Corporate
Public Policy and Environmental Affairs Committee examines corporate policy
and provides guidance and perspective to SBC management on major public
issues, including corporate governance, legislative and environmental
matters, and SBC's compliance program.
EXECUTIVE COMMITTEE--The Committee did not meet in 2001. It consists of two
non-employee Directors and one employee Director. The Executive Committee
assists the Board of Directors by acting upon matters when the Board is not
in session. The Committee has the full power and authority of the Board to
the extent permitted by law, including the power and authority to declare a
dividend or to authorize the issuance of common stock.
5
FINANCE/PENSION COMMITTEE--The Committee met four times in 2001. It consists of
nine non-employee Directors and one employee Director. The Finance/Pension
Committee makes recommendations to the Board of Directors with respect to
investment policy, dividends, methods of financing the operations of SBC and
its subsidiaries, and oversees the investments of SBC's employee benefit
plans.
HUMAN RESOURCES COMMITTEE--The Committee met seven times in 2001. It consists of
five non-employee Directors. The Human Resources Committee oversees the
management of human resources activities of SBC, including officer
compensation, and the design of employee benefit plans. The Committee
reviews and makes recommendations to the Board with respect to compensation
of Directors. The Committee also advises the Board with respect to the
nomination of members to the Board of Directors to be elected at the Annual
Meeting or to be appointed by the Board to fill vacancies that may occur
during the period between Annual Meetings.
In recommending Board candidates, the Committee seeks individuals of proven
judgment and competence who are outstanding in their chosen fields, and it
considers factors such as anticipated participation in Board activities,
education, geographic location and special talents or personal attributes.
Shareowners who wish to suggest qualified candidates should write to the
Vice President and Secretary, SBC Communications Inc., 175 E. Houston, San
Antonio, Texas 78205, stating in detail the qualifications of such persons
for consideration by the Committee.
6
SBC DIRECTORS TO BE ELECTED AT THE 2002 ANNUAL MEETING
(GROUP C)
--------------------------------------------------------------------------------
[BARNES PHOTO]
JAMES E. BARNES, age 68, retired. Mr. Barnes was Chairman of the Board,
President and Chief Executive Officer of MAPCO Inc., Tulsa, Oklahoma, from 1986
until 1998. Mr. Barnes has been a Director of SBC since November 1990. Mr.
Barnes is a Director of Parker Drilling Company and Stilwell Financial Inc. He
is a member of the Audit Committee and the Corporate Development Committee.
[BUSCH PHOTO]
AUGUST A. BUSCH III, age 64, is Chairman of the Board and President of
Anheuser-Busch Companies, Inc., St. Louis, Missouri. Mr. Busch has been a
Director of SBC since October 1983. He served as a Director of Southwestern Bell
Telephone Company from 1980 to 1983. Mr. Busch is a Director of Anheuser-Busch
Companies, Inc. and Emerson Electric Co.; and an Advisory Member of the Board of
Directors of Grupo Modelo, S.A. de C.V. He is a member of the Corporate
Development Committee, the Executive Committee and the Human Resources
Committee.
[CLARK PHOTO]
WILLIAM P. CLARK, age 70, is Senior Counsel to Clark, Cali and Negranti,
Attorneys at Law, Paso Robles, California. He is a retired California Supreme
Court Justice and former Secretary of the United States Department of the
Interior. Judge Clark has been a Director of SBC since April 1997. He served as
a Director of Pacific Telesis Group from 1985 to 1997. Judge Clark is a Director
of The New Ireland Fund, Inc. He is a member of the Corporate Development
Committee and the Corporate Public Policy and Environmental Affairs Committee.
[MARTIN PHOTO]
LYNN M. MARTIN, age 62, is Chair of the Council for the Advancement of Women and
Advisor to the firm of Deloitte & Touche LLP, Chicago, Illinois, and is a
professor at the J.L. Kellogg Graduate School of Management, Northwestern
University. Ms. Martin served as U.S. Secretary of Labor from 1991 to 1993, and
as a member of the U.S. House of Representatives from Illinois from 1981 to
1991. Ms. Martin has been a Director of SBC since October 1999. She served as a
Director of Ameritech Corporation from 1993 to 1999. She is a Director of
certain Dreyfus Funds; The Procter & Gamble Company; Ryder System, Inc.; and TRW
Inc. She is a member of the Corporate Public Policy and Environmental Affairs
Committee and the Finance/Pension Committee.
7
(GROUP C--CONTINUED)
--------------------------------------------------------------------------------
[METZ PHOTO]
MARY S. METZ, age 64, is President of S. H. Cowell Foundation, San Francisco,
California, and has served in this capacity since 1999. Dr. Metz was Dean of
University Extension of the University of California, Berkeley, from 1991 until
1998, and is President Emerita of Mills College. Dr. Metz has been a Director of
SBC since April 1997. She served as a Director of Pacific Telesis Group from
1986 to 1997. She is a Director of Longs Drug Stores Corporation; Pacific Gas
and Electric Company; and UnionBanCal Corporation. She is a member of the Audit
Committee and the Corporate Public Policy and Environmental Affairs Committee.
[TYSON PHOTO]
LAURA D'ANDREA TYSON, age 54, is Dean of the London Business School, London,
England, and has served in this capacity since January 2002. Dr. Tyson was Dean
of the Walter A. Haas School of Business at the University of California at
Berkeley from July 1998 to December 2001. Dr. Tyson served as Professor of
Economics and Business Administration at the University of California at
Berkeley from 1997 to 1998. She served as National Economic Adviser to the
President of the United States from 1995 to 1996 and as Chair of the White House
Council of Economic Advisers from 1993 to 1995. Dr. Tyson has been a Director of
SBC since October 1999. She served as a Director of Ameritech Corporation from
1997 to 1999. She is a Director of Eastman Kodak Company; Fox Entertainment
Group, Inc.; Human Genome Sciences, Inc., and Morgan Stanley Dean Witter & Co.
She is a member of the Audit Committee and the Finance/Pension Committee.
[WHITACRE PHOTO]
EDWARD E. WHITACRE, JR., age 60, is Chairman of the Board and Chief Executive
Officer of SBC and has served in this capacity since January 1990. Mr. Whitacre
has been a Director of SBC since October 1986. He is a Director of
Anheuser-Busch Companies, Inc.; Burlington Northern Santa Fe Corporation;
Emerson Electric Co.; and The May Department Stores Company. He is the Chairman
of the Executive Committee and a member of the Corporate Development Committee
and the Finance/Pension Committee.
8
SBC DIRECTORS SERVING UNTIL THE 2003 ANNUAL MEETING
(GROUP A)
--------------------------------------------------------------------------------
[AMELIO PHOTO]
GILBERT F. AMELIO, age 59, is Chairman and Chief Executive Officer of
Beneventure Capital, Irvine, California, and has held this position since March
2000. He has also been Senior Partner of Sienna Ventures, Sausalito, California,
since April 2001. Dr. Amelio is also Chairman and Chief Executive Officer of
each of AmTech, LLC and AmTech Capital, LP, San Francisco, California, and has
served as such since 1999. Dr. Amelio was Principal of Aircraft Ventures, LLC
from 1997 to 1999 and Partner and Director of The Parkside Group, LLC from 1998
to 1999. Dr. Amelio was Chairman of the Board and Chief Executive Officer of
Apple Computer, Inc. from 1996 to 1997. Dr. Amelio was elected a Director of SBC
in February 2001 and had previously served as an Advisory Director of SBC from
April 1997 to February 2001. He served as a Director of Pacific Telesis Group
from 1995 to 1997. He is a member of the Corporate Public Policy and
Environmental Affairs Committee and the Finance/Pension Committee.
[BARKSDALE PHOTO]
CLARENCE C. BARKSDALE, age 69, was Vice Chairman, Board of Trustees, Washington
University, St. Louis, Missouri, from July 1989 until 2001, except during the
period July 1999 to May 2000. He remains a member of the Board of Trustees of
Washington University. Mr. Barksdale was Chairman of the Board and Chief
Executive Officer of Centerre Bancorporation from 1978 to 1988 and Chairman of
the Board of Centerre Bank N.A. from 1976 to 1988. Mr. Barksdale was Vice
Chairman of Boatmen's Bancshares, Inc. from January through June 1989. He has
been a Director of SBC since October 1983. Mr. Barksdale served as a Director of
Southwestern Bell Telephone Company from 1982 to 1983. He is the Chairman of the
Audit Committee and a member of the Corporate Public Policy and Environmental
Affairs Committee.
[EBY PHOTO]
MARTIN K. EBY, JR., age 67, is Chairman of the Board and Chief Executive Officer
of The Eby Corporation, Wichita, Kansas. Mr. Eby has been a Director of SBC
since June 1992. He is a Director of Intrust Bank, N.A. and Intrust Financial
Corporation. He is a member of the Audit Committee and the Finance/ Pension
Committee.
9
(GROUP A--CONTINUED)
--------------------------------------------------------------------------------
[KNIGHT PHOTO]
CHARLES F. KNIGHT, age 66, is Chairman of the Board of Emerson Electric Co., St.
Louis, Missouri. Mr. Knight was Chief Executive Officer of Emerson Electric Co.
from 1973 to 2000. Mr. Knight has been a Director of SBC since October 1983. He
served as a Director of Southwestern Bell Telephone Company from 1974 to 1983.
Mr. Knight is a Director of Anheuser-Busch Companies, Inc.; BP p.l.c.; Emerson
Electric Co.; International Business Machines Corporation; and Morgan Stanley
Dean Witter & Co. He is the Chairman of the Corporate Development Committee and
a member of the Executive Committee and the Finance/Pension Committee.
[REMBE PHOTO]
TONI REMBE, age 65, is a partner in the law firm of Pillsbury Winthrop LLP, San
Francisco, California. Ms. Rembe was elected a Director of SBC in January 1998
and had previously served as an Advisory Director of SBC from April 1997 to
January 1998. She served as a Director of Pacific Telesis Group from 1991 to
1997. She is a Director of AEGON N.V. and Potlatch Corporation. She is a member
of the Corporate Development Committee and the Corporate Public Policy and
Environmental Affairs Committee.
[HELU PHOTO]
CARLOS SLIM HELU, age 62, is Chairman of the Board of Carso Global Telecom, S.A.
de C.V., Mexico City, Mexico, and Chairman of the Board of Telefonos de Mexico,
S.A. de C.V. He has also been Chairman of the Board of America Movil, S.A. de
C.V. since September 2000. He is Chairman Emeritus of Grupo Carso, S.A. de C.V.,
having served as Chairman of the Board of Grupo Carso from 1980 to 1998. Ing.
Slim has been a Director of SBC since September 1993. He is a Director of
America Movil, S.A. de C.V.; Carso Global Telecom, S.A. de C.V.; Grupo
Financiero Inbursa, S.A. de C.V.; Philip Morris Companies Inc.; and Telefonos de
Mexico, S.A. de C.V. He is a member of the Corporate Public Policy and
Environmental Affairs Committee and the Finance/Pension Committee.
[UPTON PHOTO]
PATRICIA P. UPTON, age 63, is President and Chief Executive Officer of
Aromatique, Inc., Heber Springs, Arkansas. Ms. Upton has been a Director of SBC
since June 1993. She is the Chairwoman of the Corporate Public Policy and
Environmental Affairs Committee.
10
SBC DIRECTORS SERVING UNTIL THE 2004 ANNUAL MEETING
(GROUP B)
--------------------------------------------------------------------------------
[GALLEGOS PHOTO]
HERMAN E. GALLEGOS, age 71, is an independent management consultant. Mr.
Gallegos was a Director of Gallegos Institutional Investors Corporation from
1990 to 1994. He served as an alternate U.S. Public Delegate to the 49th United
Nations General Assembly from 1994 to 1995. Mr. Gallegos has been a Director of
SBC since April 1997. He served as a Director of Pacific Telesis Group from 1983
to 1997. He is a member of the Audit Committee and the Corporate Public Policy
and Environmental Affairs Committee.
[HAY PHOTO]
JESS T. HAY, age 71, is Chairman of HCB Enterprises Inc, a private investment
firm, Dallas, Texas. He is also Chairman of the Texas Foundation for Higher
Education, Dallas, Texas. Mr. Hay was Chairman and Chief Executive Officer of
Lomas Financial Group from 1969 until his retirement in 1994. Mr. Hay has been a
Director of SBC since April 1986. He is a Director of Trinity Industries, Inc.
and Viad Corp. He is a member of the Audit Committee and Chairman of the Human
Resources Committee.
[HENDERSON PHOTO]
JAMES A. HENDERSON, age 67, retired. Mr. Henderson was Chairman of the Board
from 1995 and Chief Executive Officer from 1994 of Cummins Inc., Columbus,
Indiana, until his retirement in December 1999. Mr. Henderson has been a
Director of SBC since October 1999. He served as a Director of Ameritech
Corporation from 1983 to 1999. He is a Director of Championship Auto Racing
Teams, Inc.; International Paper Company; Nanophase Technologies Corporation;
Rohm and Haas Company; and Ryerson Tull, Inc. He is a member of the Audit
Committee and the Finance/Pension Committee.
[INMAN PHOTO]
BOBBY R. INMAN, age 70, Admiral, United States Navy, Retired. Admiral Inman has
been a professor since August 2001 and an adjunct professor since 1987 at the
University of Texas at Austin. Admiral Inman served as Vice Admiral, United
States Navy, and Director, National Security Agency, from 1977 to 1981, and as
Admiral, United States Navy, and Deputy Director, Central Intelligence Agency,
from 1981 to 1982. He has been a Director of SBC since March 1985. Admiral Inman
is a Director of Fluor Corporation; Massey Energy Company; Science Applications
International Corporation; and Temple-Inland Inc. He is the Chairman of the
Finance/Pension Committee and a member of the Human Resources Committee.
11
(GROUP B--CONTINUED)
--------------------------------------------------------------------------------
[MCCOY PHOTO]
JOHN B. MCCOY, age 58, retired. Mr. McCoy was Chairman from November 1999 and
Chief Executive Officer from October 1998 of BANK ONE CORPORATION until his
retirement in December 1999. Mr. McCoy served as Chairman and Chief Executive
Officer of BANC ONE CORPORATION from 1987 to 1998. Mr. McCoy has been a Director
of SBC since October 1999. He served as a Director of Ameritech Corporation from
1991 to 1999. He is a Director of Cardinal Health, Inc.; Corillian Corporation;
and Federal Home Loan Mortgage Corporation. He is a member of the Corporate
Development Committee and the Human Resources Committee.
[RITCHEY PHOTO]
S. DONLEY RITCHEY, age 68, is Managing Partner of Alpine Partners, Danville,
California. Mr. Ritchey was Chairman of the Board and Chief Executive Officer of
Lucky Stores, Inc. from 1981 to 1986. Mr. Ritchey has been a Director of SBC
since April 1997. He served as a Director of Pacific Telesis Group from 1984 to
1997. He is a Director of The McClatchy Company. He is a member of the
Finance/Pension Committee and the Human Resources Committee.
[ROCHE PHOTO]
JOYCE M. ROCHE, age 54, is President and Chief Executive Officer of Girls
Incorporated, New York, New York, and has held this position since September
2000. Ms. Roche was an independent marketing consultant from 1998 to 2000. Ms.
Roche was President and Chief Operating Officer of Carson, Inc. from 1996 to
1998, and Executive Vice President of Global Marketing of Carson, Inc. from 1995
to 1996. Ms. Roche has been a Director of SBC since October 1998. She served as
a Director of Southern New England Telecommunications Corporation from 1997 to
1998. She is a Director of Anheuser-Busch Companies, Inc. and Tupperware
Corporation. She is a member of the Audit Committee and the Corporate Public
Policy and Environmental Affairs Committee.
12
COMPENSATION OF DIRECTORS
Directors who are also employees of SBC or its subsidiaries receive no
separate compensation for serving as Directors or as members of Board
committees. Directors who are not employees of SBC or its subsidiaries receive a
$60,000 annual retainer, $2,000 for each Board meeting attended and $1,200 for
each committee meeting attended. Excluding employee Directors, the chairman of
each committee receives an additional annual retainer of $5,000.
Directors may elect to take their retainer in the form of SBC common stock
or cash. Directors may also elect to defer the receipt of their fees and all or
part of their retainers into either Stock Units or into a Cash Deferral Account.
Each Stock Unit is equivalent to a share of common stock and earns dividend
equivalents in the form of additional Stock Units. Stock Units are converted to
common stock and paid out as elected by the Director in up to 15 installments
after the Director ceases service with the Board. In addition to any deferrals
into Stock Units, on the date of each Annual Meeting of Shareowners each
continuing Director also receives an award of Stock Units equal in value to one
and one-half times the annual retainer. In addition, on the day of each Annual
Meeting each continuing non-employee Director who joined the Board after
November 21, 1997, receives a grant of Stock Units equal to $13,000, limited to
10 annual grants. Deferrals into the Cash Deferral Account earn interest during
the calendar year at a rate equal to the Moody's Corporate Bond Yield Averages-
Monthly Average Corporates for September of the preceding year ("Moody's").
Annually, Directors may elect to convert their Cash Deferral Accounts into Stock
Units at the fair market value of SBC stock at the time of the conversion.
SBC provides each non-employee Director with travel accident insurance
while the Director is on SBC business, along with $100,000 of group life
insurance. The total premiums during 2001 for these policies were $990 for
travel accident insurance and $9,408 for group life insurance. Directors also
receive certain telecommunications services and equipment from subsidiaries of
SBC and are reimbursed for such services and equipment provided by other
companies. The value of telecommunications services and equipment received, or
for which reimbursement was provided, together with amounts necessary to offset
the Directors' applicable tax liabilities resulting from such services and
benefits, computed at maximum marginal rates, including tax surcharges, averaged
$9,293 per non-employee Director in 2001. Employee Directors receive similar
services and equipment in connection with their service as officers of SBC.
Non-employee Directors who joined the Board prior to 1997 may receive
pension payments for life following their retirement from the Board. Eligible
non-employee Directors who serve for at least five years will receive, in
quarterly installments, annual amounts equal to 10% of the annual retainer in
effect at the time of termination of Board service, multiplied by the number of
years of service, not to exceed 10 years. If the Director dies prior to the
13
expiration of 10 years from his or her date of retirement, his or her
beneficiary will be entitled to receive the payments for the remainder of the
10-year period. If an eligible non-employee Director dies while still serving on
the Board, a pre-retirement death benefit will be paid as though the individual
had retired on the date of death. (Of the Directors eligible to receive a
pension, only three continue to accrue service credits.)
Directors who formerly served on the Board of Pacific Telesis Group ("PTG")
(which was acquired by SBC on April 1, 1997) do not receive pension benefits
from SBC. As part of their service with PTG, these Directors previously received
PTG Deferred Stock Units, each unit now representing the cash value of a share
of SBC common stock. The PTG Deferred Stock Units were issued in exchange for
the waiver by the Directors of certain retirement benefits. PTG Deferred Stock
Units earn dividend equivalents and are paid out in the form of cash after the
retirement of the Director. The units will vest pro rata each year until the
Director has completed seven years of service. For purposes of vesting and
payout of the PTG Deferred Stock Units and the period during which certain
options originally granted by PTG (which were converted into options to acquire
SBC common stock) may be exercised, service on the SBC Board of Directors will
be deemed to constitute service on the PTG Board. In addition, PTG Directors
were allowed to elect during 1997 to have their prior deferrals of PTG retainers
and fees continued until they leave the SBC Board. These deferrals earn a rate
of interest equal to Moody's plus 4% for deferrals from 1985 through 1992;
Moody's plus 2% for deferrals from 1993 through 1995; and for deferrals after
1995, the 10-year Treasury Note average for the month of September for the prior
year plus 2%.
One member of the immediate family of Mr. Gallegos was employed by certain
subsidiaries of SBC in 2001 and was paid a total of approximately $62,300.
Amounts paid to this employee were comparable to compensation paid to other
employees performing similar job functions.
In 2001, SBC and/or its subsidiaries obtained legal services from the law
firm of Pillsbury Winthrop LLP, of which Ms. Rembe is a partner, on terms which
SBC believes were as favorable as would have been obtained from unaffiliated
parties.
14
COMMON STOCK OWNERSHIP
OF DIRECTORS AND OFFICERS
--------------------------------------------------------------------------------
The following table sets forth the beneficial ownership of SBC common stock
as of December 31, 2001, held by each Director, nominee and officer named in the
Compensation Table on page 24. As of that date, each Director and officer listed
below, and all Directors and executive officers as a group, owned less than one
percent of the outstanding SBC common stock. Except as noted below, the persons
listed in the table have sole voting and investment power with respect to the
securities indicated.
--------------------------------------------------------------------------------
TOTAL SBC
BENEFICIAL
OWNERSHIP
NAME OF (INCLUDING
BENEFICIAL OWNER OPTIONS)(1)
------------------------------ -----------
Gilbert F. Amelio 5,394
Clarence C. Barksdale 10,977
James E. Barnes 6,602
August A. Busch III(2) 46,354
William P. Clark 16,097
Martin K. Eby, Jr. 26,856
Herman E. Gallegos 11,795
Jess T. Hay 12,002
James A. Henderson 23,476
Bobby R. Inman 4,820
Charles F. Knight 14,978
Lynn M. Martin 22,351
John B. McCoy 31,584
Mary S. Metz 15,645
Toni Rembe(3) 35,137
TOTAL SBC
BENEFICIAL
OWNERSHIP
NAME OF (INCLUDING
BENEFICIAL OWNER OPTIONS)(1)
------------------------------ -----------
S. Donley Ritchey 16,503
Joyce M. Roche 2,041
Carlos Slim Helu 2,002
Laura D'Andrea Tyson 11,648
Patricia P. Upton 9,076
Edward E. Whitacre, Jr. 3,765,327
Stanley T. Sigman 295,856
James D. Ellis 635,720
Edward A. Mueller 570,581
Rayford Wilkins, Jr. 265,557
All executive officers and
Directors as a group
(consisting of 33 persons,
including those named
above): 8,578,669
--------------------------------------------------------------------------------
(1) This table includes presently exercisable stock options and stock options
which will become exercisable within 60 days of the date of this table. The
following Directors and officers hold the number of options set forth
following their respective names: Dr. Amelio--2,924; Judge Clark--11,696;
Mr. Gallegos--11,696; Dr. Metz--11,696; Ms. Rembe--11,696; Mr.
Ritchey--8,772; Mr. Whitacre--3,228,648; Mr. Sigman--269,779; Mr.
Ellis--612,508; Mr. Mueller--565,624; Mr. Wilkins--242,925; and all
executive officers and Directors as a group--7,538,750.
This table also includes shares held in an employee benefit plan for the
following persons, who have sole voting power but no investment power with
respect to the number of shares set forth following their respective names:
Mr. Whitacre--1,154; Mr. Sigman--219; Mr. Ellis--1,210; Mr. Mueller--302;
and Mr. Wilkins--606. In addition, of the shares shown in the above table,
the following persons share voting and investment power with other persons
with respect to the number of shares set forth following their respective
names: Dr. Amelio--2,450; Mr. Barnes--6,601; Mr. Busch--6,600; Judge
Clark--2,826; Mr. Hay--2,000; Ms. Rembe--2,145; Mr. Ritchey--7,729; Dr.
Tyson--11,648; Ms. Upton--715; Mr. Whitacre--31,668; Mr. Sigman--400; Mr.
Ellis--14,132; and Mr. Wilkins--12,913.
(2) Mr. Busch disclaims beneficial ownership of 3,300 shares held in a trust for
a sister.
(3) Ms. Rembe disclaims beneficial ownership of 2,145 shares held in a trust for
her spouse.
15
VOTING
--------------------------------------------------------------------------------
Each share of SBC common stock represented at the Annual Meeting is
entitled to one vote on each matter properly brought before the meeting.
Directors are elected by a plurality of the votes cast. All other matters will
be determined by a majority of the votes cast. Shares represented by proxies
marked to withhold authority to vote with respect to the election of one or more
nominees as Directors, by proxies marked "abstain" on other proposals, and by
proxies marked to deny discretionary authority on other matters will not be
counted in determining the vote obtained on such matters. If no directions are
given and the signed card is returned, the person or persons designated on the
proxy card will vote the shares for the election of the Board of Directors'
nominees and in accordance with the recommendations of the Board of Directors on
the other subjects listed on the proxy card, and at their discretion on any
other matter that may properly come before the meeting.
Under the rules of the New York Stock Exchange, on certain routine matters,
brokers may, at their discretion, vote shares they hold in "street name" on
behalf of beneficial owners who have not returned voting instructions to the
brokers. Routine matters include the election of directors and the ratification
of the appointment of the independent auditors. In instances where brokers are
prohibited from exercising discretionary authority (so-called "broker non-
votes"), the shares they hold are not included in the vote totals and,
therefore, have no effect on the vote. Brokers will not be prohibited from
exercising discretionary authority on the matters to be voted upon at the 2002
Annual Meeting.
16
MATTERS TO BE VOTED UPON
ITEM 1 ON PROXY CARD--ELECTION OF DIRECTORS
-----------------------------------------------
The following Group C Directors have been nominated by the Board of Directors on
the recommendation of the Human Resources Committee for election to three-year
terms of office that will expire at the 2005 Annual Meeting:
James E. Barnes Mary S. Metz
August A. Busch III Laura D'Andrea Tyson
William P. Clark Edward E. Whitacre, Jr.
Lynn M. Martin
Shares represented by the accompanying form of proxy will be voted for the
election of the nominees unless other instructions are shown on the proxy card
or provided through the telephone or Internet proxy. If one or more of the
nominees should at the time of the meeting be unavailable or unable to serve as
a Director, the shares represented by the proxies will be voted to elect the
remaining nominees and any substitute nominee or nominees designated by the
Board. The Board knows of no reason why any of the nominees would be unavailable
or unable to serve.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ITS NOMINEES LISTED AS GROUP C DIRECTORS.
ITEM 2 ON PROXY CARD--RATIFICATION OF APPOINTMENT OF
----------------------------------------------------------
INDEPENDENT AUDITORS
-------------------------------------------------
Subject to shareowner ratification, the Board of Directors, upon
recommendation of the Audit Committee, has appointed the firm of Ernst & Young
LLP to serve as independent auditors of SBC for the fiscal year ending December
31, 2002. This firm has audited the accounts of SBC since 1983. If shareowners
do not ratify this appointment, the Board will consider other independent
auditors. One or more members of Ernst & Young LLP are expected to be present at
the Annual Meeting, will be able to make a statement if they so desire, and will
be available to respond to appropriate questions.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
17
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
ON THE FINANCIAL STATEMENTS
The Audit Committee oversees the financial reporting process, the systems
of internal accounting and financial controls, the performance and independence
of the independent auditors and the internal auditors, the annual audit of SBC's
financial statements, and related matters. The Board of Directors has adopted a
written charter for the Audit Committee. The Audit Committee is composed
entirely of independent Directors in accordance with the applicable independence
standards of the New York Stock Exchange.
The Audit Committee: (1) reviewed and discussed with management SBC's
audited financial statements for the year ended December 31, 2001; (2) discussed
with the independent auditors the matters required by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended by Statement
on Auditing Standards No. 90, Audit Committee Communications; (3) received the
written disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees; (4) considered whether the provision of non-audit services is
compatible with maintaining the auditors' independence; and (5) discussed with
the auditors the auditors' independence.
Based on the review and discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements for the year ended
December 31, 2001, be included in SBC's Annual Report on Form 10-K for filing
with the Securities and Exchange Commission.
The Audit Committee:
Clarence C. Barksdale, Chairman James A. Henderson
James E. Barnes Mary S. Metz
Martin K. Eby, Jr. Joyce M. Roche
Herman E. Gallegos Laura D'Andrea Tyson
Jess T. Hay
18
AUDIT AND CONSULTING FEES PAID TO PRINCIPAL AUDITOR
Ernst & Young LLP acts as the principal auditor for SBC and provides
certain other services. For the year 2001, Ernst & Young LLP charged the
following:
AUDIT FEES-- Fees incurred in the audit of SBC's annual financial
statements and the quarterly reviews of SBC's interim reports
were $3.0 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES-- $0.
ALL OTHER FEES-- Fees of $18.7 million related to matters not described
above, including:
- Other audit and audit-related services of $12.3 million, including
audits required by regulatory bodies and consultation on accounting
standards and proposed transactions
- Income tax services and advice of $3.8 million
- Other fees of $2.6 million.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
--------------------------------------------------------------------------------
The Human Resources Committee, composed entirely of independent, outside
Directors, is responsible for establishing and administering SBC's policies
involving the compensation of executive officers. No employee of SBC serves on
this committee. During the 2001 fiscal year, the members of the Human Resources
Committee were (and are currently): Jess T. Hay (Chairman), August A. Busch III,
Admiral Bobby R. Inman, John B. McCoy and S. Donley Ritchey. Mr. Busch is
Chairman of the Board and President of Anheuser-Busch Companies, Inc., where Mr.
Whitacre also serves as a member of the Board of Directors. In addition, Mr.
Whitacre serves as a Director and is on the Compensation and Human Resources
Committee of Emerson Electric Co., where Charles F. Knight, an SBC Director, is
Chairman of the Board.
19
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
REPORT OF THE HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION
Responsibilities of the Human Resources Committee (the "Committee") of the
Board of Directors include establishing policies governing the compensation of
officers of SBC and certain key executives of its subsidiaries. The Committee is
composed of five non-employee Directors.
The Committee's principal objective in establishing compensation policies
is to develop and administer a comprehensive program designed to attract and
retain outstanding managers who will enhance the profitability of SBC and create
value for our shareowners. The policies are designed to attract and retain
high-quality executives, to encourage them to make career commitments to SBC and
to accomplish SBC's short and long term objectives. To achieve these results,
the Committee, in consultation with a nationally recognized compensation and
benefits consulting firm, has developed a compensation program that combines
annual base salaries with annual and long term incentives principally tied to
the performance of SBC and SBC's common stock. The principles used by the
Committee in developing the program include the following:
- To align the financial interests of SBC's executives with those of SBC and
its shareowners, a significant portion of executive compensation should be
"at risk" and tied to the achievement of certain short and long term
performance objectives of SBC.
- Ownership of SBC's common stock by executives should be encouraged through
SBC's compensation program.
- Sustained superior performance by individual officers that enhances the
profitability of SBC should be recognized and appropriately rewarded. As
measured by the Committee, such performance may include increasing revenues,
reducing expenses, efficiently deploying capital, developing management, and
improving service and product quality, while always complying with the high
ethical standards established by SBC for the conduct of its officers and
employees.
The Committee is responsible for approving the compensation of officers of
SBC, including the Named Officers (defined on page 24), and certain officers of
subsidiaries. The following is a summary of the policies underlying compensation
reported for 2001.
ANNUAL BASE SALARY--The Committee has established a policy that annual base
salaries for officers will be market-based. The Committee determined in 2001
that salaries should relate reasonably to salaries for similar positions in the
50th to 75th percentile of companies similar in size and complexity. In making
this
20
comparison, the Committee used a group of companies in the telecommunications
business, as well as a group of successful companies in diverse businesses (each
a "Comparator Group"). In each case, the Comparator Group was developed in
consultation with the Committee's outside compensation consultant.
INCENTIVES--To create incentives for superior efforts on behalf of SBC and to
allow employees to share in the very success for which they are responsible, the
Committee has determined that a significant portion of each officer's total
compensation shall be dependent upon the annual and long term performance of
SBC.
ANNUAL INCENTIVES. During 2001, officers and other key executives of SBC
and certain subsidiaries received annual incentives under either the Short
Term Incentive Plan or the 1996 Stock and Incentive Plan. The latter plan
allows certain compensation paid to Named Officers to be deductible under
Section 162(m) of the Internal Revenue Code (discussed below). Under each
plan, the Committee awards an annual bonus contingent upon the yearly
performance of the SBC business to which the officer is assigned.
Under each plan, a target award for each officer and the specific
performance objectives applicable to the officer are established at the
beginning of the year. If performance objectives are achieved and the
target awards paid, the resulting awards typically would place the total of
the respective officer's annual salary and short term award between the
50th and 75th percentile of the Comparator Groups. If less than the
financial objectives are achieved, the target awards may be forfeited or,
at a minimum, reduced in increasing proportions. In each case, the payment
of any part of the award is at the discretion of the Committee. The 2001
financial targets for the Chief Executive Officer and certain other
executive officers were based on the net income of SBC; targets for other
executive officers were based on earnings before interest, taxes,
depreciation and amortization of a division or business or earnings on
international investments. The Committee reviewed the performance
objectives and corresponding results for 2001 and determined that as a
result of general economic conditions, the internal targets set at the
beginning of the year by the Committee for the executive officers,
including all of the Named Officers, had not been attained (except for one
non-Named Officer). The Committee notes, however, that notwithstanding the
unfavorable economic and regulatory environment, SBC nonetheless achieved
commendable financial results in 2001. In recognition of this performance,
the Committee paid discretionary awards with respect to the year 2001 to
most participants in the 1996 Stock and Incentive Plan, including all of
the Named Officers. These discretionary awards were significantly below the
targets for the respective participants.
21
LONG TERM INCENTIVES. Since its inception, SBC has provided stock-based
long term incentives to officers and other key executives of SBC and
certain subsidiaries in the form of performance shares and stock options.
Performance shares are designed to tie the executive's financial
interests to those of our shareowners through the establishment of long
term performance awards and the payment of awards in common stock and/or in
cash based upon the price of common stock. Performance shares are granted
under the 1996 Stock and Incentive Plan or its successor, the 2001
Incentive Plan, which was approved by shareowners last year. Performance
shares are designed to provide rewards for the achievement of SBC's
financial goals. The financial objectives are designed to encourage
employees to focus on exceeding a specified level of return. Each officer,
including each of the Named Officers, is granted a specific number of
performance shares, each equivalent in value to a share of common stock. At
the end of the performance period, a percentage of the performance shares,
not to exceed 100% of the performance shares granted (up to 200% for awards
granted in 2001 and later), is paid out (i.e., converted into common stock
and/or cash), based on the annual achievement of SBC's financial goals
averaged over a three-year period. (Occasionally one- or two-year periods
are used.) The Committee used value-added goals (after-tax cash operating
profit less depreciation and less capital charge) in 1998, and began using
net income goals in 1999. (If SBC fails to achieve certain minimum
financial targets, no award may be paid). The Committee also recognizes the
importance of stock options as a means to further tie the executive's
financial interests directly to those of our shareowners. During 2001, the
Committee granted stock options to managers at all levels, including all of
the Named Officers. The target value of the regular long term grants
(combined value of the target performance shares and stock options) made in
2001 was designed to relate reasonably to the value of all long term type
awards made to the 50th to 75th percentile of employees holding similar
positions with companies in the relevant Comparator Groups. The Chief
Executive Officer was targeted to the 75th percentile of the Comparator
Groups. As a result of a reduction in the workforce, SBC was calling on its
managers to exert additional efforts towards SBC's success. To send a
positive message to SBC's managers, the Committee decided to make an
additional grant of options in November generally similar in size to the
January grant. Because of the option grant made to Mr. Whitacre in
conjunction with his employment agreement (described under "Contracts with
Management," page 29), Mr. Whitacre did not participate in this additional
grant.
In 2001, SBC's officers received the payout of their performance share
awards for the 1998-2000 and, if applicable, 1999-2000 performance periods.
The Committee determined that during these performance cycles, SBC exceeded
the performance goals set by the Committee. In accordance
22
with a predetermined formula, 100% of the target performance shares granted
to the officers were distributed.
SBC also provides several alternatives for its managers to invest a
portion of their salaries and annual incentive awards in SBC common stock,
thereby giving these managers an even greater stake in the performance of
SBC. One such opportunity is the Stock Savings Plan, under which a middle
level or above manager may receive stock options based upon the number of
shares purchased by the manager under the program through payroll
deductions.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER--The foregoing principles and
policies were applied by the Committee in determining the compensation for the
Chairman of the Board and Chief Executive Officer, Mr. Whitacre, for the last
fiscal year. The Committee targeted Mr. Whitacre's 2001 annual salary and target
bonus to the 75th percentile paid by companies in the Comparator Groups. Mr.
Whitacre's total cash compensation in 2001 reflects the Committee's view of Mr.
Whitacre as one of the leading Chief Executive Officers in the United States.
Again in 2001, he and his skilled employee team produced solid financial results
under extraordinarily challenging economic and regulatory conditions. As a
result of Mr. Whitacre's leadership, SBC ended 2001 with the strongest balance
sheet, cash flows and credit ratings in the telecommunications industry. Mr.
Whitacre, along with other Named Officers, received stock options and
performance shares, as described above under "Long Term Incentives."
LIMIT ON DEDUCTIBILITY OF CERTAIN COMPENSATION--Federal income tax law prohibits
publicly held companies, such as SBC, from deducting certain compensation paid
to a Named Officer that exceeds one million dollars during the tax year. To the
extent that compensation is based upon the attainment of performance goals set
by the Committee pursuant to plans approved by the shareowners, the compensation
is not included in the computation of the limit. Although the Committee intends,
to the extent feasible and where it believes it is in the best interests of SBC
and its shareowners, to attempt to qualify executive compensation as tax
deductible, it does not intend to permit this arbitrary tax provision to distort
the Committee's development and execution of effective compensation plans. Thus,
the Committee will continue to exercise discretion in those instances where the
mechanistic approaches necessary under tax law considerations could compromise
the interests of shareholders.
The Human Resources Committee:
Jess T. Hay, Chairman John B. McCoy
August A. Busch III S. Donley Ritchey
Admiral Bobby R. Inman
23
SUMMARY The table below contains information concerning annual and
COMPENSATION TABLE long term compensation provided to the Chairman of the Board
and Chief Executive Officer and the other most highly
compensated executive officers of SBC (the "Named
Officers").
--------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
--------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------------------------------------------------------------------------------------
EDWARD E. WHITACRE, JR. 2001 $2,066,667 $3,800,000 $527,924
Chairman of the Board and 2000 $1,886,667 $4,500,000 $566,388
Chief Executive Officer 1999 $1,429,167 $6,000,000 $601,334
STANLEY T. SIGMAN 2001 $ 842,833 $ 718,959 $184,572
Group President and 2000 $ 595,333 $ 500,000 $159,414
Chief Operating Officer 1999 $ 380,750 $ 550,000 $134,850
JAMES D. ELLIS 2001 $ 722,000 $ 560,000 $150,719
Senior Executive Vice President 2000 $ 691,167 $ 475,000 $162,007
and General Counsel 1999 $ 519,292 $ 625,000 $160,646
EDWARD A. MUELLER 2001 $ 687,000 $ 595,000 $111,881
President and CEO 2000 $ 574,500 $ 575,000 $ 90,614
(Ameritech Corporation) 1999 $ 416,792 $ 395,000 $100,048
RAYFORD WILKINS, JR. 2001 $ 687,000 $ 595,000 $ 42,255
President and CEO 2000 $ 503,733 $ 350,000 $ 31,924
(Pacific Bell and Nevada Bell) 1999 $ 312,850 $ 245,275 $ 30,815
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------- -------------------------------------------------------
LONG TERM COMPENSATION
-------------------------------------
AWARDS PAYOUTS
------------------------ ----------
NUMBER OF
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION AWARD(S)(1) OPTIONS PAYOUTS COMPENSATION(2)
--------------------------------------------------------- -------------------------------------------------------
EDWARD E. WHITACRE, JR. $0 3,605,814 $4,202,277 $10,615,883
Chairman of the Board and $0 795,488 $3,723,352 $ 5,356,594
Chief Executive Officer $0 412,983 $3,547,529 $ 5,296,586
STANLEY T. SIGMAN $0 368,771 $ 343,475 $ 1,091,319
Group President and $0 71,914 $ 194,759 $ 554,977
Chief Operating Officer $0 16,749 $ 221,459 $ 544,088
JAMES D. ELLIS $0 289,683 $ 375,244 $ 2,412,368
Senior Executive Vice President $0 144,851 $ 476,775 $ 1,224,355
and General Counsel $0 76,742 $ 542,263 $ 1,202,466
EDWARD A. MUELLER $0 226,783 $ 343,475 $ 512,540
President and CEO $0 101,804 $ 402,904 $ 269,727
(Ameritech Corporation) $0 47,278 $ 458,276 $ 261,568
RAYFORD WILKINS, JR. $0 229,083 $ 145,327 $ 457,849
President and CEO $0 71,914 $ 161,129 $ 237,669
(Pacific Bell and Nevada Bell) $0 16,749 $ 183,332 $ 227,912
--------------------------------------------------------------------------------------------------------
(1) SBC issued restricted stock and phantom stock units to certain Named
Officers in 1997. Messrs. Whitacre's and Ellis' unvested awards will vest on
June 3, 2002, and Messrs. Mueller's and Sigman's unvested awards will vest
on June 6, 2002. The number of restricted shares and units and their values
(dollars in thousands) as of December 31, 2001, are as follows: Mr. Whitacre
has 66,666 restricted shares valued at $2,611 and 33,334 phantom stock units
valued at $1,306; Messrs. Sigman and Mueller each have 16,666 restricted
shares valued at $653; and Mr. Ellis has 33,333 restricted shares valued at
$1,306. Dividends or dividend equivalents are paid on all SBC restricted
stock and SBC phantom stock units.
(2) All Other Compensation for 2001 reflects the following Special Performance
and Retention Awards (dollars in thousands): Mr. Whitacre--$10,500, Mr.
Sigman--$1,050, Mr. Ellis--$2,375, Mr. Mueller--$482, and Mr. Wilkins--$425.
These awards are for achievements from 1996 through 1999. All Other
Compensation also includes benefits imputed to the Named Officers with
respect to premiums on SBC-owned life insurance, as determined in accordance
with IRS guidelines. For Messrs. Whitacre, Sigman, Ellis, and Wilkins these
amounts were (dollars not in thousands) $20,883, $3,239, $4,718, and $1,809,
respectively. All other amounts reported under this heading represent
employer matching contributions made to employee benefit plans.
24
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
--------------------------------------------------------------------------------
The purpose of the following table is to report exercises of stock options
and stock appreciation rights ("SARs") by the Named Officers during 2001 and the
value of their unexercised stock options and SARs as of December 31, 2001. SBC
has not issued any SARs to the Named Officers.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
ACQUIRED YEAR END YEAR END(1)
ON VALUE --------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------------------------------------------------------------------------------------------------
Edward E. Whitacre, Jr. 170,000 $3,835,625 2,904,622 3,938,833 $22,073,573 $100,000
Stanley T. Sigman 0 $ 0 215,409 435,888 $ 1,032,397 $ 0
James D. Ellis 0 $ 0 559,649 357,611 $ 4,258,828 $ 0
Edward A. Mueller 0 $ 0 495,976 304,555 $ 5,191,433 $ 0
Rayford Wilkins, Jr. 0 $ 0 184,073 276,398 $ 1,729,756 $ 0
(1) "Value of Unexercised In-the-Money Options" figures are based on the year
end, December 31, 2001, SBC common stock price of $39.17.
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------
The table below reports performance shares granted to the Named Officers
during the last fiscal year, applicable to the performance periods indicated.
PERFORMANCE ESTIMATED FUTURE PAYOUTS
NUMBER OF OR OTHER UNDER NON-STOCK
SHARES, UNITS PERIOD UNTIL PRICE-BASED PLANS
OR OTHER MATURATION -----------------------------
NAME RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
------------------------------------------------------------------------------------------------------
Edward E. Whitacre, Jr. 142,000 2001-2003 0 142,000 284,000
Stanley T. Sigman 23,692 2001-2003 0 23,692 47,384
11,436 2002-2003 0 11,436 22,872
James D. Ellis 23,692 2001-2003 0 23,692 47,384
Edward A. Mueller 23,692 2001-2003 0 23,692 47,384
Rayford Wilkins, Jr. 23,692 2001-2003 0 23,692 47,384
(1) Each performance share is equivalent in value to one share of SBC common
stock. At the end of a performance cycle, a percentage of the performance
shares is converted into cash and/or SBC common stock, based upon the
achievement of certain objectives. The performance objectives are set on a
yearly basis, and the extent to which a performance objective is met or
exceeded is expressed as a percentage. The annual percentages are then
averaged over the term of each performance period to determine the
percentage of performance shares that may be converted and paid out. The
maximum number of performance shares that may be converted at the end of a
performance cycle may not exceed 200% of the target number of performance
shares.
25
OPTION GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------
The table below contains the estimated present value of stock options
granted in 2001, as of their issue date. Option grants B and C were issued under
a stock purchase plan where middle level and above managers received options
based on the number of SBC shares they purchased.
PERCENT OF
NUMBER OF TOTAL OPTIONS GRANT
SECURITIES GRANTED TO EXERCISE DATE
UNDERLYING EMPLOYEES IN OR BASE PRESENT
OPTIONS FISCAL PRICE EXPIRATION VALUE
NAME GRANT GRANTED YEAR(1) ($/SHARE) DATE ($000S)
--------------------------------------------------------------------------------------------------
Edward E. Whitacre, Jr. A(2) 900,000 1.18% $46.69 01/26/2011 $15,885
B 13,173 0.02% $50.55 02/01/2011 $ 265
C 192,641 0.25% $42.05 06/01/2011 $ 3,100
E(3) 2,500,000 3.28% $39.13 11/16/2011 $24,425
Stanley T. Sigman A(2) 112,500 0.15% $46.69 01/26/2011 $ 1,986
B 3,975 0.01% $50.55 02/01/2011 $ 80
C 23,130 0.03% $42.05 06/01/2011 $ 372
D(2) 170,833 0.22% $39.89 11/19/2011 $ 2,380
F(2) 58,333 0.08% $41.90 04/27/2011 $ 908
James D. Ellis A(2) 112,500 0.15% $46.69 01/26/2011 $ 1,986
B 4,542 0.01% $50.55 02/01/2011 $ 91
C 22,641 0.03% $42.05 06/01/2011 $ 364
D(2) 150,000 0.20% $39,89 11/19/2011 $ 2,090
Edward A. Mueller A(2) 112,500 0.15% $46.69 01/26/2011 $ 1,986
B 1,265 0.00% $50.55 02/01/2011 $ 25
C 518 0.00% $42.05 06/01/2011 $ 8
D(2) 112,500 0.15% $39.89 11/19/2011 $ 1,567
Rayford Wilkins, Jr. A(2) 112,500 0.15% $46.69 01/26/2011 $ 1,986
B 2,358 0.00% $50.55 02/01/2011 $ 47
C 1,725 0.00% $42.05 06/01/2011 $ 28
D(2) 112,500 0.15% $39.89 11/19/2011 $ 1,567
--------------------------------------------------------------------------------
(1) Percentages are based on 76,224,511 options granted to employees in 2001
(including non-management employees).
(2) One-third of these options vest on each anniversary of the grant. These
options also vest at retirement. As of December 31, 2001, none of these
options had vested.
(3) Three-fifths of these options vest on the third anniversary of the grant.
The remaining two-fifths of these options vest on the fifth anniversary of
the grant. As of December 31, 2001, none of these options had vested.
The option values in the table represent the estimated present value of the
options as of their issue date. These values were determined by a nationally
recognized compensation and benefits consulting firm in accordance with a
modified Black-Scholes option valuation model. The significant assumptions
incorporated in the Black-Scholes model in estimating the value of the options
include the following:
- Options were issued with an exercise price equal to the fair market value of
stock on the date of issuance. The term of each option is 10 years (unless
otherwise shortened or forfeited due to termination of employment).
26
- The model assumed an interest rate of 5.16% in calculating the value of the
options in grant A, 5.10% for grant B, 5.28% for grant C, 4.65% for grant D,
4.65 % for grant E, and 5.14% for grant F. These interest rates represent the
interest rates on U.S. Treasury securities on the date of grant with a
maturity date corresponding to that of the option term. Volatility was
calculated using daily stock prices for the three-year period prior to the
grant date, resulting in volatility of 38.65% for grant A, 38.75% for grant
B, 39.44% for grant C, and 38.89% for grants D and E, and 39.80% for grant F.
The model reflected an annual dividend yield of 2.18% for grant A, 2.01% for
grant B, 2.44% for grant C, 2.57% for grant D, 2.62% for grant E, and 2.44%
for grant F.
- The present value of grant E was reduced 28.60% to reflect the probability of
forfeiture due to termination prior to vesting. To reflect the probability of
a shortened option term due to termination of employment prior to the option
expiration date, present values of the grants were reduced as follows: 12.83%
for grant A, 10.32% for grant B, 10.08% for grant C, 12.83% for grant D,
8.69% for grant E, and 12.47% for grant F.
The ultimate value of the options will depend on the future market price of
SBC's common stock, which cannot be forecast with reasonable accuracy. The
actual value, if any, that an optionee will realize upon exercise of an option
will depend on the excess of the market value of SBC's common stock over the
exercise price on the date the option is exercised.
27
PENSION PLANS
SBC has a noncontributory pension plan for employees known as the SBC
Pension Benefit Plan. Beginning June 1, 1997, management participants, including
executive officers, are entitled to receive the greater of two pension benefits,
the Cash Balance Benefit or the CAM Benefit, each of which is subject to
Internal Revenue Code limitations on pay used to calculate pensions. A
participant's Cash Balance Benefit is equal to the balance in the participant's
cash balance account, which is made up of (a) an opening account balance as of
June 1, 1997, which reflects the lump sum present value of the participant's
approximate age 65 accrued benefit under the old plan design, (b) subsequent
monthly basic benefit credits equal to 5% of the participant's compensation
(generally, base pay, commissions, and group incentive awards but not individual
awards), and (c) monthly interest credits on the participant's cash balance
account. The interest rate is equal to the published average annual yield for
the 30-year Treasury Bond, reset quarterly as of the middle of the preceding
quarter. In addition, over the period June 30, 1997, through May 31, 2002, the
participant's account receives a monthly pro rata share of the participant's
transition benefit, which is based on an estimate of what the participant's
account balance would have been if the cash balance design had been applied
throughout the participant's employment with SBC, plus additional credits for
those participants whose age plus service exceeded 25 on May 1, 1997. The CAM
Benefit is equal to the sum of 1.6% of a participant's average compensation
(generally, base pay, commissions, and other nondiscretionary bonuses such as
group incentive awards) for the five years ended December 31, 1999 (or any prior
five year averaging period if it would result in a higher benefit), multiplied
by the number of years of service through the end of the participant's averaging
period, plus 1.6% of the participant's pension compensation subsequent to the
averaging period.
Pension amounts are not subject to reduction for Social Security benefits
or any other offset amounts. The Internal Revenue Code places certain
limitations on pensions that may be paid under Federal income tax qualified
plans. Benefits that are so limited are restored for officers and certain senior
managers from the general funds of SBC either under the Supplemental Retirement
Income Plan (see paragraph below) or another SBC nonqualified plan. If they
continue in their current positions at their current levels of compensation and
retire at the mandatory retirement age of 65, the total estimated annual pension
amounts from the Pension Benefit Plan and the estimated credited years of
service at retirement under the Plan for Messrs. Whitacre, Sigman, Ellis,
Mueller, and Wilkins would be $122,392 (44 years), $160,751 (47 years), $97,203
(36 years), $137,242 (43 years), and $147,539 (42 years), respectively.
The Supplemental Retirement Income Plan (which is not funded by, nor is it
a part of, the Pension Benefit Plan) establishes a target annual retirement
benefit for all officers and certain senior managers, stated as a percentage of
28
their annual salaries and annual incentive bonuses averaged over a specified
averaging period described below ("Average Annual Compensation"). The percentage
is increased by .71% for each year of actual service in excess of, or decreased
by 1.43% (.715% for mid-career hires) for each year of actual service below, 30
years of service for executive officers and certain other officers and 35 years
of service for certain other senior managers. Average Annual Compensation is
determined by averaging salaries and actual annual incentive bonus (or such
other portion of the target annual bonus amount as the Human Resources Committee
may determine) earned during the 36-consecutive-month period out of the last 120
months preceding retirement that generates the highest average earnings. The
target percentages of Average Annual Compensation are: Chairman of the Board and
Chief Executive Officer, 75%; executive officers, 60% to 70%; other officers,
55% to 60%; and certain other senior managers, 50%. This plan pays the
difference, if any, between the target amount and what would be payable under
the Pension Benefit Plan if the benefits under the Pension Benefit Plan were
paid in the form of an immediate annuity for life. In the event the participant
retires before reaching his or her 60th birthday, a discount of .5% for each
month remaining until the participant's 60th birthday is applied reducing the
amount payable under this plan, except for officers who have 30 years or more of
service at the time of retirement. If they continue in their current positions
at their current levels of salary and most recent bonuses, and if they retire at
the mandatory retirement age of 65, the estimated annual amounts that will be
paid in accordance with the Supplemental Retirement Income Plan for Messrs.
Whitacre, Sigman, Ellis, Mueller, and Wilkins would be $5,022,438, $1,084,067,
$891,125, $767,170 and $747,622, respectively.
CONTRACTS WITH MANAGEMENT
On November 21, 1997, the Board of Directors approved revised Change of
Control Severance Agreements (the "Agreements") for each of the Named Officers
in the "Summary Compensation Table" as well as certain other officers. The
purpose of the Agreements is to reinforce and encourage the officers to maintain
objectivity and a high level of attention to their duties without distraction
from the possibility of a change in control of SBC. These Agreements provide
that in the event of a change in control of SBC, as that term is defined in the
Agreements and summarized below, each officer is entitled to certain benefits
(the "Severance Benefits") upon the subsequent termination or constructive
termination of his or her employment, unless such termination is due to death or
disability, or the termination is by SBC for cause (as defined in the
Agreements); or is by the officer for other than good reason (as defined in the
Agreements).
The Severance Benefits include the payment of the officer's full base
salary through the date of termination plus all other amounts to which the
officer is entitled under any compensation plan of SBC in effect immediately
prior to the change in control. Also, each officer is entitled to a lump sum
payment equal to
29
three (in the case of Messrs. Whitacre and Ellis) or two (in the case of Messrs.
Sigman, Mueller, and Wilkins) times the sum of (a) the officer's annual base
salary in effect immediately prior to termination, (b) the most recently paid
amount under the Short Term Incentive Plan or as a Key Executive Officer Short
Term Award under the 1996 Stock and Incentive Plan, and (c) the cash value of
the target award of performance shares granted under the 2001 Incentive Plan
applicable to each officer for the most current performance cycle. Additionally,
each officer will be provided with life and health benefits, including
supplemental medical, vision and dental benefits, for three years from the date
of termination, if the officer is not otherwise entitled to the same.
In the event any payment or benefit received or to be received by an
officer in connection with a change in control or the termination of his or her
employment, whether pursuant to his or her Agreement and/or under a benefit plan
(the "Total Payments"), is determined to be an excess parachute payment as
defined in the Internal Revenue Code and thus subject to the 20% Federal excise
tax, SBC will pay the officer an amount equal to the excise tax and all Federal
and applicable state taxes resulting from the payment of the excise tax or from
payment of such Federal and state taxes.
Under the Agreements, in general, change in control is deemed to occur if:
(a) anyone (other than an employee benefit plan of SBC) acquires more than 20%
of SBC's common stock, (b) within a two-year period, the Directors at the
beginning of such period (together with any new Directors elected or nominated
for election by a two-thirds majority of Directors then in office who were
Directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease to constitute a majority of the
Board, or (c) SBC's shareowners either approve a merger or consolidation that
results in someone other than the shareowners immediately prior thereto holding
more than 35% of the voting power of the surviving entity or approve the
complete liquidation of SBC or the disposition of substantially all of SBC's
assets.
SBC has entered into an employment agreement with William M. Daley to act
as President of SBC, beginning December 1, 2001. Under the agreement, he will
receive an annual salary of not less than $600,000, a bonus of $60,000 for 2001,
and a bonus of not less than $600,000 for 2002. Thereafter, a target annual
bonus will be set annually, and the target will not be less than his annual
salary; however, the bonus will be reduced or eliminated if performance
objectives set by the Human Resources Committee are not met. He also received a
one-time signing bonus of $1,100,000 to recognize the loss of benefits from his
prior employer. Each year, he will receive long term Performance Shares and
stock options that in the aggregate have a value of not less than 350% of Mr.
Daley's base salary. He received 7,009 Performance Shares for the 2002
performance cycle and 14,018 Performance Shares for the 2002-2003 performance
cycle. In each case, the payout of the Performance Shares is subject to the
attainment of performance objectives set by the Human Resources Committee. The
payouts are reduced or eliminated if the objectives are not met, and, for the
2002-
30
2003 Performance Shares, may be increased by up to 200% if the objectives are
exceeded. Pursuant to the agreement, Mr. Daley was granted options on December
1, 2001, to acquire 90,000 shares of SBC stock at $37.38 per share, which expire
in 2011. Mr. Daley will be permitted to participate in the Supplemental
Retirement Income Plan ("SRIP") (described under "Pension Plans") with a target
percentage of 60%. In computing Mr. Daley's SRIP payments, his "Average Annual
Compensation" shall not be less than $1,200,000. The employment agreement
terminates when he reaches age 65. If SBC terminates Mr. Daley's employment
before expiration of the agreement without cause, he will receive a payment
equal to his base salary and the greater of his target bonus or his bonus for
the prior year (which shall not be less than $600,000).
SBC entered into an employment agreement with Mr. Whitacre to act as
Chairman of the Board and Chief Executive Officer for a five-year term ending
November 15, 2006. The agreement may be terminated by either party at the end of
the third year of the contract. During the term of the contract, his base
salary, the target for his bonus, and long term (Performance Shares) target
award shall not be less than that in effect for calendar year 2001. The bonus
and long term award are not guaranteed, but are subject to attainment of
performance objectives. Pursuant to the agreement, SBC granted Mr. Whitacre
options that expire in 2011 to acquire 2,500,000 shares of SBC at $39.13 per
share. Three-fifths of the options vest on the third anniversary of the
agreement and the remaining options vest on the fifth anniversary; the options
also vest if his employment is terminated without cause. SBC will provide Mr.
Whitacre with limited access to SBC's aircraft, office facilities and support
staff, automobile benefits, and health care for the rest of his life. If the
company terminates his employment without cause before the end of the term or if
he is unable to perform his duties because of disability or accident, he shall
be entitled to continue to receive his salary and other benefits through the end
of the term.
Upon retirement, provided that he has completed three years of the
employment term, Mr. Whitacre has agreed to provide consulting services and
advice to SBC for three years after his termination of employment in exchange
for an annual fee equal to 50% of his annual salary at retirement. In the event
Mr. Whitacre receives a change in control payment under the Change of Control
Severance Agreements (described above), his employment term shall immediately
expire, and the consulting term shall be extended by the remaining portion of
the employment term.
In connection with the retirement of Donald E. Kiernan, former Senior
Executive Vice President and Chief Financial Officer, in July 2001, the Human
Resources Committee vested 93,055 options with an expiration date of July 31,
2006, and a weighted average exercise price of $44.00. In accordance with the
terms of a restricted stock grant, he was vested in 33,333 shares of SBC common
stock. SBC also provided certain incidental benefits at a cost of $12,500. Mr.
Kiernan has agreed to provide consulting services to SBC and its
31
subsidiaries from August 1, 2001, to March 31, 2002, for $1,000,000. Because he
left in midyear his SRIP payments will be based on his target bonus, but his
SRIP payments will be reduced to reflect only the period of time he actually
worked. In connection with the retirement of Charles E. Foster, former Group
President, in June 2001, the Human Resources Committee vested 83,555 options
with an expiration date of June 29, 2006, and a weighted average exercise price
of $41.20. In accordance with the terms of a restricted stock grant, Mr. Foster
was vested in 33,333 shares of SBC common stock.
One member of the immediate family of James W. Callaway, Group President,
as well as two members of the immediate family of each of Mr. Whitacre, Mr.
Mueller, and Randall L. Stephenson, Senior Executive Vice President and Chief
Financial Officer, were employed by subsidiaries of SBC and were paid a total of
approximately $466,000 in 2001. Amounts paid to these employees include salary,
bonus, option exercises, and relocation costs, and are comparable to
compensation paid to other employees performing similar job functions.
32
STOCK PERFORMANCE GRAPH
--------------------------------------------------------------------------------
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SBC, S&P 500 AND PEER GROUP
[GRAPH]
SBC PEER GROUP S&P
--- ---------- ---
12/31/96 100 100 100
12/31/97 146 145 133
12/31/98 218 220 171
12/31/99 202 229 208
12/31/00 203 198 189
12/31/01 171 191 166
Assumes $100 invested on December 31, 1996, in SBC common stock, Standard &
Poor's 500 Index ("S&P 500") and a Peer Group of other large U.S.
telecommunications companies (BellSouth Corporation and Verizon, Inc.). The
index of telecommunications companies ("Peer Group") is weighted according to
the market capitalization of its component companies at the beginning of each
period. Total return equals stock price appreciation plus reinvestment of
dividends on a quarterly basis.
33
OTHER BUSINESS
--------------------------------------------------------------------------------
SBC has been informed that a shareholder intends to submit a proposal that
would require SBC's subsidiaries use the bell symbol as part of their logos.
Because the proposal was not submitted in compliance with Rule 14a-8 of the
Securities and Exchange Commission, the proposal has not been included in this
proxy statement or on the proxy card. The SBC proxies listed on the proxy cards
intend to use the discretionary authority granted under the proxy cards to vote
against any such proposal.
A COPY OF SBC'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON
FORM 10-K FOR THE YEAR 2001 MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST
TO THE DIRECTOR-EXTERNAL REPORTING, 175 E. HOUSTON, 9TH FLOOR, SAN ANTONIO,
TEXAS 78205.
SHAREOWNER PROPOSALS
Proposals of shareowners intended for presentation at the 2003 Annual
Meeting must be received by SBC for inclusion in its Proxy Statement and form of
proxy relating to that meeting by November 11, 2002. Such proposals should be
sent in writing by certified mail to the Vice President and Secretary of SBC at
175 E. Houston, San Antonio, Texas 78205.
Shareowners whose proposals are not included in the Proxy Statement but who
still intend to submit a proposal at an Annual Meeting and shareowners who
intend to submit nominations for Directors at an Annual Meeting are required to
notify the Vice President and Secretary of SBC of their proposal or nominations
and to provide certain other information not less than 120 days, nor more than
150 days, before the meeting, in accordance with SBC's Bylaws.
By Order of the Board of Directors.
/s/ JOY RICK
Joy Rick
Vice President and Secretary
March 11, 2002
34
(RECYCLE LOGO)
Printed entirely on recycled paper
meeting or exceeding the Environmental
Protection Agency minimum requirements
for recycled paper stock.
[SBC LOGO] PROXY CARD/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON APRIL 26, 2002.
The undersigned hereby appoints Edward E. Whitacre, Jr. and Randall L.
Stephenson, and each of them, proxies, with full power of substitution, to vote
all common shares of the undersigned in SBC Communications Inc. at the Annual
Meeting of Shareowners to be held on April 26, 2002, and at any adjournment
thereof, upon all subjects that may properly come before the meeting, including
the matters described in the proxy statement furnished herewith, in accordance
with the directions indicated on the reverse side of this card or provided
through the telephone or Internet proxy procedures, and at the discretion of the
proxies on any other matters that may properly come before the meeting. IF
SPECIFIC VOTING DIRECTIONS ARE NOT GIVEN WITH RESPECT TO THE MATTERS TO BE ACTED
UPON AND THE SIGNED CARD IS RETURNED, THE PROXIES WILL VOTE SUCH SHARES IN
ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS ON THE MATTERS LISTED ON THE
REVERSE SIDE OF THIS CARD AND AT THE DISCRETION OF THE PROXIES ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
The Board of Directors recommends a vote FOR each of the two Director proposals
(Items 1 and 2) listed on the reverse side of this card (each of which is
described in the proxy statement).
The nominees for the Board of Directors are:
01 - James E. Barnes 04 - Lynn M. Martin 06 - Laura D'Andrea Tyson
02 - August A. Busch III 05 - Mary S. Metz 07 - Edward E. Whitacre, Jr.
03 - William P. Clark
PLEASE SIGN ON THE REVERSE SIDE OF THIS CARD AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE OR, IF YOU CHOOSE, YOU CAN SUBMIT YOUR PROXY THROUGH THE INTERNET OR BY
TELEPHONE.
This proxy card, when signed and returned, or your telephone or Internet proxy,
will also constitute voting instructions to the plan administrator or trustee
for any shares held on your behalf under any of the following employee benefit
plans: the SBC Savings Plan, the SBC Savings and Security Plan, the Ameritech
Savings and Security Plan for Non-Salaried Employees, the DonTech Profit
Participation Plan, the Old Heritage Advertising & Publishers, Inc. Profit
Sharing Plan, the SBC PAYSOP, the Pacific Telesis Group Employee Stock Ownership
Plan, the Tax Reduction Act Stock Ownership Plan (the "TRASOP") sponsored by The
Southern New England Telephone Company. the Cingular Wireless 401(k) Savings
Plan and the Cingular Wireless 401(k) Savings Plan for Bargained Employees.
Shares in each of the foregoing employee benefit plans (except the TRASOP and
the Old Heritage plan) for which voting instructions are not received, as well
as shares which have not yet been allocated to participants' accounts in the SBC
Savings Plan, subject to the trustees' fiduciary obligations, will be voted by
the trustees in the same proportion as the shares for which voting instructions
are received from other participants in each such plan. Similarly the proxy card
or telephone or Internet proxy will constitute voting instructions to the plan
administrator for any shares held on your behalf pursuant to the DirectSERVICE
Investment Program (dividend reinvestment plan).
(PLEASE MARK YOUR PROXY AND SIGN ON THE REVERSE SIDE.)
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
ADMISSION TICKET
[map] [map]
The Alzafar Shrine Temple is located in San Antonio on the west-bound frontage
road of North Loop 1604 between the Stone Oak Parkway and Blanco Road exits.
SBC COMMUNICATIONS INC.
Annual Meeting of Shareowners
Friday, April 26, 2002
Alzafar Shrine Temple
901 North Loop 1604 West
San Antonio, Texas 78216
Doors open at 8:00 a.m.
Meeting begins at 9:00 a.m.
[X] Please mark your votes as in this example.
SBC COMMUNICATIONS INC. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
YOUR DIRECTORS RECOMMEND A VOTE FOR ITEMS 1 AND 2.
For All Withhold All Exception*
1. Election of Directors. (see reverse) [ ] [ ] [ ]
* For all, except withhold vote from the
following nominee(s):
--------------------
For Against Abstain
2. Appointment of Independent Auditors. [ ] [ ] [ ]
Discontinue mailing Annual Report for this account because I already receive
multiple copies at this address.
Comments:
Daytime Phone Number:
------------------------------------------------
--------------------------------- ---------------------------- --------
Signature Signature (joint owner) Date
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, corporate officer, trustee,
guardian, or custodian, please give full title.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
[SBC logo]
YOUR VOTE IS IMPORTANT!
You can submit your proxy by mail, by telephone, or through the Internet (see
instructions below).
IF YOU SUBMIT YOUR PROXY BY TELEPHONE OR THROUGH THE INTERNET, THERE IS NO NEED
FOR YOU TO MAIL BACK YOUR PROXY CARD.
--------------------------------------------------------------------------------
BY MAIL BY TELEPHONE THROUGH THE INTERNET
www.eproxyvote.com/sbc
Mark, sign Call Toll Free 1-877-779-8683 Access the above website
and date your on any touch-tone telephone to to authorize the voting of your
proxy card authorize the voting of your shares as if you marked and
and return it in shares as if you marked and returned your proxy card. You
the enclosed returned your proxy card. You may access the site 24 hours a
envelope. may call 24 hours a day, 7 days day, 7 days a week. You will be
a week. You will be prompted to prompted to enter the CONTROL
enter the CONTROL NUMBER IN NUMBER IN THE BOX ABOVE; then
THE BOX ABOVE; then just follow just follow the simple instructions.
the simple instructions.
THANK YOU FOR VOTING!
(Broker Card)
PROXY CARD
[SBC logo]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON APRIL 26, 2002.
The undersigned hereby appoints Edward E. Whitacre, Jr. and Randall L.
Stephenson, and each of them, proxies, with full power of substitution, to vote
all common shares of the undersigned in SBC Communications Inc. at the Annual
Meeting of Shareowners to be held on April 26, 2002, and at any adjournment
thereof, upon all subjects that may properly come before the meeting, including
the matters described in the proxy statement furnished herewith, in accordance
with the directions indicated on the reverse side of this card or provided
through the telephone or Internet proxy procedures, and at the discretion of the
proxies on any other matters that may properly come before the meeting. IF
SPECIFIC VOTING DIRECTIONS ARE NOT GIVEN WITH RESPECT TO THE MATTERS TO BE ACTED
UPON AND THE SIGNED CARD IS RETURNED, THE PROXIES WILL VOTE SUCH SHARES IN
ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS ON THE MATTERS LISTED ON THE
REVERSE SIDE OF THIS CARD AND AT THE DISCRETION OF THE PROXIES ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
The Board of Directors recommends a vote FOR each of the two Director proposals
(Items 1 and 2) listed on the reverse side of this card (each of which is
described in the proxy statement).
The nominees for the Board of Directors are:
01 - James E. Barnes 04 - Lynn M. Martin 06 - Laura D'Andrea Tyson
02 - August A. Busch III 05 - Mary S. Metz 07 - Edward E. Whitacre, Jr.
03 - William P. Clark
PLEASE SIGN ON THE REVERSE SIDE OF THIS CARD AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE OR, IF YOU CHOOSE, YOU CAN SUBMIT YOUR PROXY THROUGH THE INTERNET OR BY
TELEPHONE.
--------------------------------------------------------------------------------
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
SBC COMMUNICATIONS INC.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
YOUR DIRECTORS RECOMMEND A VOTE FOR ITEMS 1 AND 2.
1. Election of Directors. (SEE REVERSE) For All [ ] Withhold All [ ]
For all, except withhold vote from the following nominee(s):
--------------------
2. Appointment of Independent Auditors. For [ ] Against [ ] Abstain [ ]
Signature Date