The Association of U S West Retirees



Retirees criticize 'golden parachute' deal for Qwest CFO
By Jeff Smith
Rocky Mountain News
Tuesday, September 23, 2008

A potential multimillion-dollar "golden parachute" for Qwest's new chief financial officer is being criticized by a retirees group, which says shareholders should approve such packages.

But the Denver telco said the severance provision is appropriate and necessary to recruit top talent.  Qwest last week named Joseph Euteneuer, a former XM Radio and Comcast executive, its new CFO.

His contract includes a severance provision that would provide 2.99 times his annual salary and target bonus if he resigns or loses his job after a sale or merger.  That would be worth $4.9 million based on his current salary and target bonus.

In addition, Eutenauer's 1.06 million stock options and 489,000 restricted shares would vest immediately upon a change in control.  That potentially could be worth millions of dollars more.

The stock awards on top of the severance payment multiplier triggers a shareholder approval standard that received a majority vote at Qwest's annual meeting in May, according to Michael Calabrese, vice president of the think tank New America Foundation in Washington, D.C.

However, the proposal, made by Hazel Floyd of the Association of U S West Retirees and approved by 54 percent of the shareholders, was non-binding, and the Qwest board has yet to take action on it.

Floyd sent a letter to Qwest in August urging the proposal's confirmation but hasn't received a response, said Nelson Phelps, executive director of the retirees group.

"My view is that they've been quite frankly thumbing their nose at us from the standpoint of any response to the letter or following the recommendation," Phelps said.  He noted that the agreement comes at a time when Americans again are being hurt by corporate excess.

Said Qwest spokeswoman Diane Reberger: "Our board is carefully considering Qwest's severance policy, and will, of course, act in the best interests of our stockholders.  Our compensation committee believes that Mr. Euteneuer's employment agreement is appropriate, given today's market for executive talent, and in the best interests of the company and its stockholders."

No one is suggesting Qwest is primed for a merger or sale.  But there is some history to this issue.  Former U S West CEO Sol Trujillo received a golden parachute valued at $72 million after the merger with Qwest.

Former Qwest CEO Richard Notebaert received $8 million in severance pay, but could have received many times that if a takeover offer of MCI had gone through and he had left the company.  Current Qwest CEO Ed Mueller has a comparable golden parachute.

Calabrese, who brought the issue of Euteneuer's severance to the attention of the retirees group this week, said another explanation may be that Qwest's board does plan to adopt the stricter standard -- but didn't want Euteneuer's severance agreement to apply.

"It would be quite easy to adopt a policy that probably won't have teeth until the next crowd comes in," Calabrese said.