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Activist Investors Push AT&T And Verizon To Issue Transparency Reports

Commentary Notes First Amendment
By Christopher A. Crawford – Edited by Abhilasha Nautiyal AT&T shareholder proposal, hosted by Verizon shareholder proposal, hosted by American Civil Liberties Union of Northern California Announcement [caption id="attachment_3968" align="alignleft" width="150"] Photo By: Razor512 - CC BY 2.0[/caption] Last month, the American Civil Liberties Union of Northern California (“ACLU”), in collaboration with other shareholders, filed shareholder proposals with Verizon and AT&T to persuade the telecommunications companies to issue transparency reports disclosing data about customer information that was passed on to the National Security Agency. This new tactic in the privacy fight is designed to highlight what activists say are serious costs associated with the telecom companies’ lack of transparency. The Wall Street Journal and Ars Technica, among others, have reported the filing of these shareholder proposals. Unlike some Silicon Valley firms, Verizon and AT&T have not voluntarily issued transparency reports to the public that disclose their interactions with intelligence-gathering federal agencies. Transparency reports are typically released biannually and disclose both how many government requests for user information a company receives and how often the company actually complies with the government request. Google, for instance, received 25,879 requests for user information in the first half of 2013 and complied with 65% of those requests. The shareholder proposals ask Verizon and AT&T to provide similar reports, with exceptions for proprietary information. The ACLU’s proposals put pressure on the telecom companies by directly comparing them with their Silicon Valley peers, including Google, Facebook and Yahoo, and by arguing that refusing to issue similar transparency reports will incur significant reputational and financial costs. For instance, the AT&T proposal, which is a joint effort between the ACLU, the New York State Common Retirement Fund, and Trillium Asset Management LLC, notes that AT&T’s interest in expanding its mobile network in Europe may face unexpected hurdles amid privacy concerns over its network. Although AT&T and Verizon’s Chief Privacy Officers have each stated that transparency is a goal, statements such as this one from Verizon’s CEO Lowell McAdam may more clearly reflect their concern: “We are the largest telecommunications provider to the United States government, and [we] have to do what the customer tells [us].” This rationale emphasizes that the telecom companies, unlike the Internet firms who have published transparency reports of their own accord, must satisfy a very important client that also happens to be their regulator. Indeed, telecom executives have indicated that they believe Silicon Valley firms have produced transparency reports and adopted other pro-privacy measures mostly to appease their customers. The telecom companies and Silicon Valley firms may be reacting to demands from dissimilar customers, leading to divergent results. The shareholder proposals appear to be an attempt to negate that line of reasoning by arguing that AT&T and Verizon’s customers, and their shareholders, are in fact demanding transparency reports. “While Verizon must comply with its legal obligations,” says the Verizon proposal, “failure to persuade customers of a genuine and long-term commitment to privacy could present Verizon with serious financial, legal and reputational risks.” As reported by Reuters, both proposals have been filed for the spring shareholder meetings of Verizon and AT&T. According to Christine Bader, a lecturer on human rights and business at Columbia University, “Often the utility of such resolutions is to generate conversation with and among management, particularly if the company has refused to engage in other ways.”