Exec pay stirs telco shareholders

“Golden coffins,” other perks outrage stockholders of Networx parent firms

The hot topic at this year’s annual meetings of Networx vendors’ parent companies has already made headlines: executive compensation.

Even a casual perusal of voting agendas for this spring’s stockholder meetings shows broad objections to so-called “golden coffin” provisions; that is, compensation bestowed on executives should they die while employed by the company. For example, Ivan Seidenberg of Verizon, according to the Wall Street Journal, would get $43.4 million in such a case.

A shareholder proposal slated for consideration at Verizon’s May 7 annual meeting calls for the board to get shareholder approval for after-death payments to senior executives. “Companies claim that these agreements are designed to retain executives,” the proposal states. “In our opinion, death defeats this argument.” Further, the proposal states, “Senior executives have ample opportunities to provide for their estate [through services often] subsidized by the company.”

Severance and retirement packages also are at issue. At Qwest Communications’ annual meeting, the board will recommend approval of a policy that states that executives’ severance benefits of more than 2.99 times salary and bonus must be approved by stockholders.

A Qwest stockholder has proposed a more stringent policy change barring payment for years the departing executive has not worked. When former chairman and chief executive Richard Notebaert left Qwest in August 2008, he received $848,000 in benefits for the 5.2 years he worked and an additional $10.99 million based on 30.3 years of credited service, the proposal points out.

At a time when Qwest is cutting retiree benefits, “such gross disparities between the retirement security offered to senior executives and other employees can create morale problems and increase turnover,” the proposal states.

AT&T stockholders also want a greater voice in all executive compensation and propose that they should be allowed to vote for or against compensation for executive officers, “just as shareholders do at public companies in the U.K., Australia and the Netherlands.”

The proposal cites a study that showed “over the five fiscal years through 2005, then-CEO Edward Whitacre received $85.2 million in compensation, while total shareholder return was negative 40.3 percent.” When Whitacre retired in 2007, he “received a $158.4 million pension package,” the proposal notes.

Although no votes are scheduled at Sprint Nextel’s May 12 meeting, the company included in its proxy statement a more than 40-page detailed discussion of executive compensation.

In 2007, Sprint’s board implemented a “clawback” policy, providing an additional way to recover “any bonus, incentive payment, commission, equity-based award or other compensation received by…executive officers,” should an executive commit “knowing or intentional fraudulent or illegal conduct” and the board decide to invoke the policy.

And, the company wrote, “In light of the current economic conditions, in February 2009, the Compensation Committee decided that participants, including our senior management, should have at least a 15 percent reduction in their [long-term incentive] awards for 2009.” Long-term incentives are paid in stock, while short-term incentives are paid in cash, according to the company.

No votes on executive compensation are scheduled for Level 3’s annual meeting, but the company addresses the issue at length in its proxy statement. Executive officers participate in health, welfare and paid time off benefits, which “ensure that we have a productive and focused workforce,” the statement sets forth.

As for post-employment benefits, “we do not provide pension arrangements or post-retirement health coverage for our named executive officers,” the company said.

Like the other telecommunications companies, Level 3’s executive compensation package includes stock awards, including restricted stock units, tied to time at the company, and more unusually, “outperform stock options.” The value of these OSOs is indexed against the performance of the Standard & Poor 500. Unless Level 3’s stock outperforms the S&P 500, the options are worthless. On the other hand, their value rises, depending on how much it outperforms the S&P 500.

Other perks also incur the ire of stockholders. When Qwest CEO Ed Mueller joined the company in September 2007 and relocated to Denver, his daughter got personal use of corporate jets (value: $281,000 in 2007) to continue to attend high school in California. 

Use of corporate aircraft are also a perk at Level 3, but execs must reimburse the company at the rate of $2,000 per hour. CEO Crowe paid $178,993 for the “perk” in 2008.

About the Author

Sami Lais is a special contributor to Washington Technology.

Reader Comments

Tue, Apr 14, 2009 tscevari Sao Paolo

110 Millions USD!? MOST execs are riding a tame pony, offering little or nothing in terms of company innovation or leadership. I find it hard to believe that they would be worth more than $5millions -- and that includes salary AND stock.

Tue, Apr 14, 2009 Karl Norco, California

Executive compensation needs to be tied to their value added performance as approved by the common share holders. If their performance is lacking, the companies performance is lacking, and a reduction in their compensation package must follow. Thier also needs to be a cap on executive salaries. Reflection on today's economy I don't see an executive out their worth 110 million in salary with a 40 million dollar bonus package. It's all about performance. If they don't perform, they should get paid like a regular employee.

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here


contracts DB

Washington Technology Daily

Sign up for our newsletter.

Terms and Privacy Policy consent

I agree to this site's Privacy Policy.