This is not the first go-round for the Association of US West Retirees in their attempt to limit severance pay at the Denver-based Qwest. Retirees put the plan on the Qwest annual meeting ballot in 2001 and again last year, but shareholders rejected it both times, according to a Denver Post report.
However, this year may be different, as the board of directors at the company is now going to throw its weight behind two of the proposals after rejecting the proposals the previous two years. The first would require Qwest to seek shareholder approval for any executive severance deal paying more than three times the executive’s salary and bonus. The second would halt the company from using growth in its pension fund to calculate executive bonuses.
Not being backed by the board is the association’s third proposal: that Qwest require most of its board members to be free of any commercial ties to the company.
Backing by the board certainly bodes well for the two proposals given the head of steam the two referendums have gained in successive proxy elections. The proposal excluding the pension plan’s growth from bonus calculation posted 39% approval in 2002 after only 17% supported it in 2001, while the proposal to limit severance pay gained 27% approval in 2002 and 28% a year earlier. Further, Qwest founder and director Phil Anschutz – who holds 17% of Qwest’s shares – could sway the vote to the affirmative since he has previously announced intentions to vote along with the board’s recommendation.
Nelson Phelps, executive director of the retiree group, said the Qwest board’s support of the proposal has as much to do with the influence of new chief executive Richard Notebaert as with the tenor of the times. The proposals cover topics that have surfaced at other big companies, including Verizon and GE’s decision earlier this year to exclud changes in their pension-fund value from influencing executive bonuses (See Verizon Changes Exec Comp Policy , GE Reworks Executive Compensation Structure).
However, the passage of the deals may be moot given the current contracts of Qwest’s top executives do not provide for severance pay above the level the proposal seeks to ban. Further, Qwest’s pension fund ended last year with a deficit rather than a surplus, which means it would not benefit the calculation of executive bonuses anyway.