So apropos, Qwest ready to steal show
By Al Lewis, Denver Post Columnist
Tuesday, May 24, 2005
Live, from the Denver Performing Arts Complex, comes Qwest's annual shareholders meeting at 10 a.m. today. In the Seawell Grand Ballroom:
- Watch extravagantly paid chief executive Dick Notebaert fend off angry shareholders.
- See two Qwest board members who oversaw the company during its spectacular meltdown get re-elected.
- Feel the disappointment as three shareholder proposals aimed at holding Qwest's board more accountable go down in flames.
- Realize that Qwest's unlikely bid for MCI is over.
Many observers said Qwest needed the MCI deal to ensure its survival. But it appears MCI shareholders would rather merge with Verizon than accept an extra billion or so to merge with Qwest.
MCI officials repeatedly called Qwest a shaky company - which it is - but it sure must hurt to hear that from them. MCI, once WorldCom and run by a man now convicted of felonies, isn't even as big as the $11 billion accounting fraud that sent it reeling into bankruptcy.
Qwest offered $9.75 billion in cash and stock for MCI. But apparently, MCI executives would rather play it safe with an $8.44 billion bid from Verizon.
Had Qwest succeeded, it would have gutted the combined operations and slashed thousands of employees to achieve new efficiencies. This would have been bloody, but it would have given Qwest a chance to scale its business to match its enormous pile of debt.
Now it's time for Plan B.
"I am disgusted with the current board of directors and their failure to bring us out of the hole they put us into," said Gerald Armstrong, a Denver shareholder rights advocate, who expects to take the microphone at today's meeting.
Qwest stock was $4.15 over the June 2002 weekend when Qwest's board fired former CEO Joe Nacchio and installed Notebaert. Qwest stock closed Monday at $3.67. This and other measures of underperformance have two shareholder research firms squawking about the money Qwest pays its executives.
"Overall, the company paid more than its peers but performed worse than its peers," according to Glass Lewis & Co.
"We believe the company's compensation practices are significantly out of line," Proxy Governance Inc. said.
Qwest gave Notebaert compensation worth up to $12.5 million in 2004. The average pay for CEOs of large companies in 2004 was $9.97 million, according to an analysis by Pearl Meyer & Partners.
Of course, most of those CEOs don't have to dodge questions about fraud lawsuits while they advise their shareholders to vote down corporate governance reforms. This year, shareholders have proposed three such measures. And Qwest recommends in its annual proxy statement to vote down all of them.
One proposal would require a majority of independent directors on the board. (Qwest directors think they're independent enough, thank you very much.) A second would put executive retirement plans to a shareholder vote. (Qwest directors say they must remain competitive in putting together executive pay plans. It's as if Nacchio taught them nothing.)
A third would direct the company to "claw back" executive compensation that was based on financial reports that later had to be restated. (Qwest says it already has a plan in place that would do this. But neither plan would go after Nacchio.)
The reason why nothing has changed at Qwest is that too many of the same people are running its board of directors.
Up for re-election are Denver construction magnate Linda Alvarado, whose construction company received $1.3 million in Qwest business when she joined its board in 2000. Next in line is Cannon Harvey, adviser to Qwest's largest shareholder, Phil Anschutz, who rented a building to Qwest, among other side deals.
"We would note that the number of relationships between the company and Anschutz ... is unusual for a large public company," Proxy Governance said.
Alvarado, Harvey and Anschutz were on the board as Qwest fudged its books to the tune of $2.5 billion. I suspect Alvarado and Harvey will be re-elected anyway. And Notebaert will be delivering a similar performance at Qwest's shareholders meeting next year.
Al Lewis' column appears Sundays, Tuesdays and Fridays. Reach him at 303-820-1967 or email@example.com.