The Association of U S West Retirees



Experts scrutinize Qwest exec pay
Reports advocate earnings linked to performance
By Jeff Smith
Rocky Mountain News
Friday, May 18, 2007

Two leading shareholder advisory firms support Qwest shareholder proposals that would more closely link stock awards and executive compensation to performance.

Institutional Shareholder Services and Glass Lewis & Co. released their proxy reports in advance of Qwest Communications' annual shareholders meeting Wednesday morning at the Grand Hyatt Hotel in downtown Denver.

Both also support separating the roles of chairman and chief executive, posts now held by Dick Notebaert.  ISS backs a proposal calling for shareholder approval of supplemental executive retirements benefits, but Glass Lewis sides with Qwest management in opposing the proposal.

Glass Lewis noted the Denver telco had a number of positive accomplishments in 2006, including a profit, albeit largely from cost-cutting, and a "significant" increase in the stock price. Qwest stock, at just under $10 a share, has been trading at five-year highs for months.

Glass Lewis said Qwest's improving business performance enabled the company, "despite its track record of rewarding executives excessively," to receive a "C" grade for 2006 based on pay for performance.  Two years ago, Glass Lewis gave Qwest an "F" and last year a "D."

In another section, Glass Lewis indicated Notebaert's 2006 salary and bonus of $5.4 million compared favorably with CEOs at similarly sized companies.  But Notebaert also made $18 million pretax from selling stock in 2006.

Glass Lewis said "some questions linger whether (the company's) compensation committee will ever truly link pay to performance."

Qwest spokeswoman Diane Reberger said the firm's "financial and stock performance over the past couple of years speaks for itself.  And all stockholders have benefited from the leadership of Dick Notebaert, his senior team and the board of directors."

Qwest opposes shareholder proposals linking executive pay to compensation, saying they would undermine the company's ability to attract and retain top talent.  The company maintains the positions of CEO and chairman shouldn't be separated because the CEO is in the best position to ensure key business issues are brought to the board's attention.

ISS noted a couple of "poor pay" practices, including giving Notebaert $757,913 worth of perks in 2006 and an additional 30 years of service for his pension based on his tenure with Ameritech.

Glass Lewis opposed the re-election of directors Peter Hellman, Linda Alvarado and David Hoover.  ISS opposed Hoover.

smithje@RockyMountain or 303-954-5155,2777,DRMN_23910_5543739,00.html