2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 50 APPLIED MATERIALS, INC. APPROACH RESOURCES INC. ARTHUR J. GALLAGHER & CO. AT&T, INC. TABLE OF CONTENTS Page 2018ProxyStatementSummary i AnnualMeetingofShareholders i ProposalsandBoardRecommendations i DirectorNominees ii BoardPracticesandComposition ii CorporateGovernance iii ExecutiveCompensation iv SustainabilityandCorporateCitizenship ix Proposal1—ElectionofDirectors 1 Nominees 1 BoardandCorporateGovernancePractices 7 BoardCompositionandNomineeConsiderations 7 CorporateGovernance 9 BoardMeetingsandCommittees 13 DirectorCompensation 15 CompensationProgramforDirectors 15 DirectorCompensationforFiscal2017 16 StockOwnershipInformation 17 PrincipalShareholders 17 DirectorsandExecutiveOfficers 18 Proposal2—Approval,onanAdvisoryBasis,ofthe CompensationofOurNamedExecutiveOfficers 19 CompensationDiscussionandAnalysis 20 ExecutiveSummary 20 CompensationGovernanceandDecision-Making Framework 28 ComponentsofTotalDirectCompensation 29 AdditionalCompensationProgramsandPolicies 38 HumanResourcesand CompensationCommitteeReport 40 ExecutiveCompensation 41 SummaryCompensationTableforFiscal2017,2016 and2015 41 Page GrantsofPlan-BasedAwardsforFiscal2017 42 OutstandingEquityAwardsatFiscal2017Year-End 43 OptionExercisesandStockVestedforFiscal2017 44 Non-QualifiedDeferredCompensation 45 EmploymentAgreement 45 PotentialPaymentsUponTerminationorChangeof Control 46 CertainRelationshipsandRelatedTransactions 46 Proposal3—RatificationoftheAppointmentof IndependentRegisteredPublicAccountingFirm 48 FeesPaidtoKPMGLLP 48 PolicyonAuditCommittee’sPre-ApprovalofAudit andPermissibleNon-AuditServicesof IndependentRegisteredPublicAccountingFirm 49 AuditCommitteeReport 49 Proposal4—ShareholderProposaltoProvidefor RighttoActbyWrittenConsent 50 ShareholderProposal 50 BoardofDirectorsStatementinOpposition 50 Proposal5—ShareholderProposalforAnnual DisclosureofEEO-1Data 53 ShareholderProposal 53 BoardofDirectorsStatementinOpposition 54 QuestionsandAnswersabouttheProxyStatement andOur2018AnnualMeeting 56 OtherMatters 61 Section16(a)BeneficialOwnershipReporting Compliance 61 ShareholderProposalsorNominationsfor2019 AnnualMeeting 61 NoIncorporationbyReference 61 Appendix:UnauditedReconciliationofNon-GAAP AdjustedFinancialMeasures A-1 Reconciliation of non-GAAP adjusted financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosureoftargetlevels,canbefoundintheAppendix. Table of Contents GeneralMatters ...................................................................... 1 Proposal1–ElectionofDirectors ........................................................ 3 NominationandElectionofDirectors................................................................. 3 2017BoardIncreaseandRecapitalization ............................................................. 3 Directors ....................................................................................... 4 VoteRequired ................................................................................... 6 BoardRecommendation ........................................................................... 6 Proposal2–AdvisoryVotetoApproveExecutiveCompensation ................................ 7 VoteRequired ................................................................................... 8 BoardRecommendation ........................................................................... 8 Proposal3–Approvalofthe2018LongTermIncentivePlan .................................... 9 BackgroundandPurposeoftheProposal .............................................................. 9 ConsequencesofFailuretoApprovetheProposal ....................................................... 10 Summaryofthe2018Plan ......................................................................... 10 FederalIncomeTaxConsequences ................................................................... 14 NewPlanBenefits ................................................................................ 16 VoteRequired ................................................................................... 16 BoardRecommendation ........................................................................... 16 Proposal4–RatificationoftheAppointmentoftheIndependentRegisteredPublicAccountingFirm .... 17 VoteRequired ................................................................................... 17 BoardRecommendation ........................................................................... 18 BoardofDirectors,BoardMeetingsandCommittees ......................................... 19 BoardStructureandMeetings ....................................................................... 19 TheBoard’sRoleinRiskOversight .................................................................. 20 CommitteeCompositionandMeetings ................................................................ 21 AuditCommittee ................................................................................. 21 CompensationCommittee .......................................................................... 22 NominatingandCorporateGovernanceCommittee ...................................................... 24 CorporateGovernance ................................................................. 25 CorporateGovernancePoliciesandPractices ........................................................... 25 CodeofConduct ................................................................................. 26 BoardIndependence .............................................................................. 26 IdentifyingandEvaluatingNomineesforDirector ....................................................... 26 DirectorRetirementPolicy ......................................................................... 27 CommunicationswiththeBoard ..................................................................... 27 DirectorAttendanceatAnnualMeetingsofStockholders ................................................. 27 StockOwnershipMatters ............................................................... 28 Section16(a)BeneficialOwnershipReportingCompliance ............................................... 28 SecurityOwnershipofManagementandCertainBeneficialOwners......................................... 28 ExecutiveOfficers ..................................................................... 30 CompensationDiscussionandAnalysis .................................................... 31 IntroductionandOverview ......................................................................... 31 ExecutiveSummary............................................................................... 31 i Total of 02 pages in section InformationAbouttheMeetingandVoting Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on April 27, 2018: The proxy statement and annual report to security holders are available at www.edocumentview.com/att. Table of Contents Proxy Statement Summary 2 Information About the Meeting and Voting 5 Voting Procedures 7 Voting Items 8 Management Proposals 1. ElectionofDirectors .......................................................................................... 8 2. RatificationoftheAppointmentofErnst&Young LLPasIndependentAuditors ................................. 18 3. Advisory ApprovalofExecutiveCompensation ................................................................. 19 4. ApproveStockPurchaseandDeferralPlan .................................................................... 20 5. Approve2018IncentivePlan.................................................................................. 23 Stockholder Proposals 6. PrepareLobbying Report ..................................................................................... 25 7. ModifyProxyAccessRequirements ............................................................................ 27 8. IndependentChair ............................................................................................ 29 9. ReduceVoteRequiredforWrittenConsent .................................................................... 30 Corporate Governance 32 BoardCommittees .............................................................................................. 37 RelatedPersonTransactions ..................................................................................... 41 DirectorCompensation .......................................................................................... 43 CommonStockOwnership ....................................................................................... 45 Audit Committee 48 Compensation 51 CompensationDiscussion andAnalysis ........................................................................... 51 ExecutiveCompensationTables .................................................................................. 78 Other Information 91 Annex A Stock Purchase and Deferral Plan A-1 Annex B 2018 Incentive Plan B-1 Your Vote is Important Please sign, date and return your proxy card or submit your proxy and/or voting instructions by telephone or through the Internet promptly so that a quorum may be represented at the meeting.Anypersongivingaproxyhasthepowertorevokeitat any time, and stockholders who are present at the meeting may withdrawtheirproxiesandvoteinperson. AT&T 2018 Proxy Statement | 1 | Proxy Statement Table of Contents IMPORTANTINFORMATIONABOUTTHEANNUALMEETING 1 CORPORATEGOVERNANCE Item1–ElectionofDirectors 2 BoardLeadershipStructure 8 DirectorIndependence 8 BoardCommittees 9 Board’sRoleinRiskOversight 10 OtherBoardMatters 10 DirectorCompensation 11 CertainRelationshipsandRelatedPersonTransactions 12 SecurityOwnershipbyCertainBeneficialOwnersandManagement 13 EquityCompensationPlanInformation 15 AUDITMATTERS Item2–RatificationofAppointmentofIndependentAuditor 16 AuditCommitteeReport 17 EXECUTIVECOMPENSATION CompensationDiscussionandAnalysis 18 OverviewofOurExecutiveCompensationProgram 18 2017Compensation 20 CompensationDecision-MakingProcess 24 ComparativeMarketAssessment 25 CompensationCommitteeReport 26 ExecutiveCompensationTables 27 Item3–AdvisoryVotetoApprovetheCompensationofOurNamedExecutiveOfficers 37 CEOPayRatio 37 QUESTIONSANDANSWERSABOUTTHEANNUALMEETING 38 EXHIBITS ExhibitA:InformationRegardingNon-GAAPMeasures A-1 ExhibitB:Resources B-1 2018PROXYSTATEMENT i