The Association of U S West Retirees



Notebaert to give stock profits to charity
Qwest CEO nets options income of $18.4 million
By Jeff Smith
Rocky Mountain News
Friday, November 10, 2006

Qwest Chief Executive Dick Notebaert netted $18.4 million from exercising stock options this week -- and he plans to give all his after-tax profits to charities.  The stock sales by Notebaert come on the heels of the Denver telco's third consecutive quarterly profit, with stock prices at four-year highs.

The move to give the after-tax profits to charities emerges at a time when Notebaert has angered thousands of telephone company retirees with plans to cut health care and life-insurance benefits.

Notebaert's plan to give his proceeds to charities led Curtis Kennedy, the retirees group's attorney, to quip Thursday: "How about giving it to the Association of U S West Retirees, which is nonprofit and serving the interests of tens of thousands of soon-to-be-impoverished retirees?"

Qwest spokesman Bob Toevs said Notebaert views his charitable contributions as a personal decision.

In addition, Qwest Chief Financial Officer Oren Shaffer made $18.5 million pretax from option sales this week, and Qwest Chief Legal Officer Rich Baer netted $6.4 million.  Neither Shaffer nor Baer have said how they plan to use their money.

Toevs said he's not aware of any executives who plan to leave the company.

An option grants an individual a right during a specified time in the future to buy a certain number of shares at a fixed price.  If share prices go up, the individual can pocket the difference between the market price and the cost to exercise the options.

In general, the retirees group has bristled at the stock sales and the timing, and has criticized Qwest's executive compensation as excessive.

Group members have written hundreds of letters and e-mails to Notebaert complaining about the plan to cut retiree benefits.  Nelson Phelps, executive director of the retirees' group, said this week he thinks Notebaert should take cutbacks as well.

Toevs noted the company still is paying the monthly health care premiums for those who retired before 1991, which he said are most of the retirees.  Qwest is legally obligated to do so.

He further noted that the executive team led by Notebaert has turned the company around financially, averting a possible bankrupty in 2002, and that stockholders overall have been rewarded by that turnaround.

Qwest recently announced a plan to buy back as much as $2 billion of stock, which will increase shareholder values by as much as 12 percent.

Notebaert made enough money to retire when he was chief executive of Ameritech, now part of SBC Communications.  He could net an additional $30 million if he exercised his options remaining after this week's exercise.

Notebaert also has restricted stock worth $22.5 million at Thursday's closing price of $8.45.  Notebaert made a salary of $1.1 million last year and a bonus of $3.15 million.

Shaffer could make an additional $8.5 million in option profits after this week's transactions and has restricted stock worth $13.3 million.

Toevs said the options are granted as part of an executive's overall compensation package.  The board of directors deemed the packages reasonable given company performance and the compensation packages provided by similar companies in the market.

Notebaert's option sales

Sold:  3.875 million shares at $8.55 for a gross of $33.1 million.

  Exercise cost:  $14.7 million (at prices of $3.44 to $4.70 a share).

  Pretax profit:  $18.4 million

  After-tax profit:  Plans to give all to charities.

Shaffer's option sales

  Sold:  3.287 million shares at $8.55 for a gross of $28.1 million

  Exercise cost:  $9.6 million.

  Pretax profit:  $18.5 million

  After-tax profit:  Hasn't said how he will use the money.


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