Description of Business
AT&T is a telecommunications provider. In their 2013 Form 10-K, they describe their business as being "wireless communications, local exchange services, long distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking, and wholesale services. The company has three operating groups under its organizational structure: Wireless, Wireline and Other. The scope of its business is primarily in the United States, largely due to stringent telecommunications restrictions in most countries that discourage reliance on foreign providers. There are a couple of foreign subsidiaries but as yet these are not a critical component of the company's business. In total, 54% of revenues are provided by wireless and 46% by wireline (2013 Form 10-K).
There are several key issues that are critical for success. The first is technological investment. AT&T is engaged in competition in wireless that requires constant upgrading of infrastructure to meet market demands. This requires massive investments in both infrastructure buildout and in R&D. The second key success factor is marketing, because of the intense competition. AT&T is a major advertising spender, and the company runs its own retail stores in order to improve distribution. Relationships with regulators matter in this business as well. Deregulation, for example, has dramatically increased competition in telecommunication. Regulators also portion out the limited bandwidth, and being able to successfully bid on bandwidth is something that provides the capacity to expand for a company like AT&T. An example of this is that for competition reasons, AT&T and Verizon have both been limited by the FCC in their 2015 bandwidth auction purchases (No author, 2014).
Code of Ethics
AT&T has a corporate-wide code of ethics. The company has adopted its code of ethics in order to encourage honest and ethical conduct, to encourage accurate disclosure, to encourage compliance with the applicable laws, to ensure protection of the company's interests and to deter wrongdoing. Every member of the company is expected to adhere to the Code of Ethics (AT&T, 2014). The code is divided into nine further sections covering different aspects of its business.
The first section is "honest and ethical conduct," and highlights the need to act with integrity and obey laws. The second is with respect to conflict of interest, setting out the company's view on that issue. The third outlines policies and procedures for dealing with disclosure. Other sections cover compliance, reporting and accountability, corporate opportunities, confidentiality, fair dealing, and the protection and proper use of company assets (AT&T, 2014).
Any of these issues can serve as a benchmark, but three to be examined are with respect to conflict of interest, disclosure, and corporate opportunities. Sprint's code of conduct (2014) covers these in a single section. The Sprint code of conduct with respect to conflict of interest is mostly the same as AT&T's. The disclosure section is quite limited scope, and would need further training to be effective. Simply stating "we will disclose any relationships…" is not helpful guidance for employees when such relationships are not defined and there is no guidance as to what "disclosure" actually means in the real world context. The corporate opportunity section reads pretty much like the one from AT&T.
Verizon also has a code of conduct (2014). The section on disclosure is more comprehensive than either that of Sprint or AT&T, and provides more specific guidance with respect to defining disclosure and the types of scenarios to which this guidance applies. The section on conflicts of interest is similarly more detailed than those of the competitors. The section on corporate opportunities is not -- there is no section on corporate opportunities and this issue is basically rolled into a brief statement on proper use of Verizon property, which is a distinct section for both AT&T and Sprint.
In these instances, the companies are bound to some extent with their ability to outline all of the different potential scenarios. In that regard, the best course of action is probably to provide specific guidance as...
The statements for Sprint and AT&T in particular end up being a little bit vague -- kind of like telling people to "be good," whereas Verizon is more specific in its definitions and gives examples, drawing on common scenarios. While all three could be more comprehensive, Verizon has definitely provided the most comprehensive explanation of all.
In all three cases, the positive outcomes for the company are basically defensive. The codes of ethics reflect a desire to maintain the status quo -- "Don't screw this up" is pretty much the tone of these codes of ethics. There is no real positive guidance, and these codes will mostly just lead to enhanced avoidance of bad things -- take your pick from the list: fraud, conflict of interest, theft of company property, improper disclosure, and more.
If the company fails to adequately address these issues, again, there are a lot of negative consequences that will occur, from the above list. Failure to obey the laws can lead to criminal actions taken against individuals, but they can also harm the company's business going forward, up to and including leading it to bankruptcy, should the fraud be big enough. Conflict of interest is usually damaging more to the company's interests, reducing shareholder wealth. The perception of conflict of interest alone can be detrimental in this regard.
AT&T has sought for its code of ethics to remain relevant by keeping it fairly generic. This allows the code to be adaptable in interpretation, therefore making it useful in a number of contexts. It is important to strike a balance -- there needs to be enough specificity that people understand the practical applications of the code, but the company also needs to leave is open enough that it can apply to a broad range of situations. A statement that is too specific will be interpreted as only being relevant to those specific scenarios that have been outlined. The other thing that AT&T can do to ensure that its code of ethics remains relevant is to support it with training. Training allows for greater understanding, and that is important. The code of ethics cannot, as noted, cover all scenarios with any level of specificity, so it is important that training is used to ensure that the concepts are well understood. When the concepts are ingrained in the corporate culture, they will be stronger, and that will lend additional relevance to the code, because employees will only need to be refer back to the code to reinforce what they already know. Training is also something that can be used when the code is updated, to ensure that employees are always up-to-date on the latest.
AT&T has long recognized that technology is a point of competitive advantage. Thus, they have put a lot of money into innovation in the past decade or so as part of the wireless revolution. AT&T invested $1.488 billion in R&D expenses in 2013 and has maintained a high level over $1 billion for several years (Form 10-K). In addition to pouring money into innovation, AT&T has a centralized innovation incubator, AT&T Labs, and another called AT&T Services, and these two work on new product and service development to maintain technological competitive advantage for the company (Form 10-K). There are a lot of technological challenges that the company could face: obsolescence, leapfrogging or a shift that threatens the very nature of the business. The same strategy is used to manage these threats -- the strategy the company already uses of having departments responsible for R&D and pumping money into it.
AT&T relies on lobbying efforts to help it compete in the highly-regulated telecommunications market. Influencing government decisions is a critical success factor, as noted earlier in this report. The Federal Communications Commission and leaders at AT&T are in frequent communication, and there are surely lobbying efforts where the people who are appointed to run the FCC are concerned. For example, the FCC is limited AT&T's ability to bid in the 2015 bandwidth auction, so the company is almost assuredly lobbying to have the FCC head Tom Wheeler removed and replaced with someone who is less apt to place such restrictions on AT&T's ability to increase capacity (Chandrashekar, 2014). The appropriateness of lobbying is a rather deep philosophical question, so without getting into that, lobbying is legal practice in the U.S. It is of course a form of corruption, but as long as it is legal, it is something AT&T has a right to engage in, therefore such lobbying efforts with regards to bandwidth spectrum are fair game.
AT&T actually has a pretty good reputation for corporate citizenship. This is not global in nature -- the company mostly operates in the U.S. so it wouldn't be global. The company was ranked #1 in America for corporate citizenship by Corporate Responsibility Magazine in 2013 (Smith, 2013). One of the company's actions is pledging millions of dollars to a campaign…
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