Public Relations and Corporate Policy: Arthur Page and AT&T’s Financial Policy, 1927-1939

Public Relations and Corporate Policy: Arthur Page and AT&T’s Financial Policy, 1927-1939 Karen Miller Russell University of Georgia

PR as a management function
Page is frequently regarded as a textbook model for students and PR professionals
First U.S. PR executive to be a VP, board member
PR scholars suggest PR should be a management function with influence on policy, with the premise that PR in upper management is good for an organization
But is that good for an organization’s publics?

Thesis
AT&T was true to its word, upholding its public commitment to good service and reasonable profits, even during the Great Depression, and public relations played an important role in selling this policy to employees and the public
But the policy benefited shareholders far more than consumers or employees

Sources
Arthur W. Page papers
Madison, Wisconsin
AT&T corporate archives
Warren, New Jersey
Arthur W. Page society
New York City
Also provided research grant

Page and the Financial Policy
Page joined AT&T as vice president of information in January 1927
AT&T’s CEO, Walter Gifford, spoke before the National Association of Railroad Utilities Commissioners in October; evidently written by Page
“The Financial Policy”

Financial Policy
Conceded that AT&T was a monopoly
Consumers and shareholders depended on it
“Obviously, the only sound policy that will meet these obligations is to continue to furnish the best possible telephone service at the lowest cost consistent with financial safety.”
Placed a floor and a ceiling on profits

Information Department’s role
Distribute the policy to employees and management
Explain its provisions to shareholders, regulators, consumers, and legislators

The policy’s first challenge
Stock market crash: AT&T stock
More than $300 in September 1929
Just under $70 in early 1932
Great Depression: AT&T business
At first, the number of calls rose
But business steadily declined, 1931-1935

Management response
Continue to provide the same service at the same prices
Did not reduce long distance rates from 1930-1935
Maintain the traditional $9 dividend
$9 from 1927-1930, earnings more than $15/share
$9 from 1931-1935, earnings less than $6/share

Public response
Individual shareholders were happy
Institutional investors criticized the company’s decision because retained surplus fell from $234 million to $93 million (more than 60% drop)
Consumers paid little attention, even among people protesting the company’s rates
They simply did without: nearly 2.5 million of 15 million customers stopped service

AT&T’s service
Rates could be reduced only by improved technology
Emphasized research and development
Introduced the TWX (teletypewriter exchange)
Continued converting to dial phone
Installation, repairs, speed of service, completion on first attempt rate all improved

Effect on employees
Maintained wage rates but cut the size of the labor force by as much as a third
Share-the-work: half of employees worked part-time
Openings caused by death, resignation or retirement usually left unfilled
A decrease of just $1 per share dividend would have allowed AT&T to retain about 18,000 employees
But even at the lowest point there were more than 270,000 employees in the System

AT&T’s explanation of decisions
Large number of shareholders financed service for the entire nation
Shareholders were average citizens—many were employees and housewives
Cutting the dividend would encourage shareholders to sell, meaning even more employees would have to be let go

Company union reports
Reports from two company union meetings in January, July 1933
Angry about the dividend
“ Employees had recently been bearing a disproportionate share of the retrenchment measures… No further reductions in payroll should be made unless the revenue of the company suffers further drastic reduction and the dividend rate has been reduced”
Unanimous support for sharing work rather than laying more people off, even among long-term employees who were not in immediate danger of losing their jobs

PR executives’ explanation
Consumers complained about high rates, but “there is no serious public relations difficulty in the maintenance of the dividend” as long as employee wages and morale remained relatively high
The company was protected to some extent by the fact that struggling consumers could live without a telephone if need be, so they tended to focus their anger more on the costs of electricity and heating
“… people can get along without a telephone”
AT&T report (1932)

Conclusion
AT&T’s actions reveal a sincere commitment to the Financial Policy
Officials did what they said they would do: improve service, reduce costs, put money aside to be used in bad economic times
But employees and some consumers bore the burden

Public Relations and Corporate Policy: Arthur Page and AT&T’s Financial Policy, 1927-1939

by KarenRussell on Jul 19, 2007

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Public Relations and Corporate Policy: Arthur Page and AT&T’s Financial Policy, 1927-1939 — Presentation Transcript