Lucent Technologies shareholders won two victories Wednesday, passing two proposals that urge the board of directors to link top brass compensation more closely to the company's performance. Anger over pension benefit cuts and the company's lackluster stock price fueled dissatisfaction that led to the shareholder proposals. They were approved at the company's annual meeting in Delaware.
By MARTHA McKAY STAFF WRITER
Thursday, February 16, 2006
One proposal, which received 54 percent of the vote, urges the board to adopt a policy that states that at least 75 percent of stock options and restricted stock awarded to senior executives be performance-based. The performance criteria adopted by the Lucent board would be disclosed to shareowners.
The second proposal, which received 53 percent of the vote, would require Lucent's board to exclude so-called pension credits when they calculate performance-based bonuses for Lucent officers. The proposals are not binding.
Lucent spokesman William Price said the board would consider the proposals. He said that since 2003, Lucent has excluded pension credits when calculating performance-based bonuses and therefore the proposal is unnecessary. "It's something we already do," he said.
Lucent shareholders also approved a proposal to reauthorize the board to enact a reverse stock split if it wants to. A reverse split would boost the sagging share price. Shares closed Wednesday at $2.85, up two cents.
Lucent has struggled through years of turmoil that included billions in losses, massive layoffs and a restructuring of the business.
The company recovered and has been profitable for the past two years, although last month it predicted annual revenues would be flat for fiscal 2006. Shares have traded below $3 since October.
About 110 shareholders showed up at the meeting and about 440 viewed the proceedings via a webcast, the company said.
Members of the Lucent Retirees Organization showed up to voice their displeasure at the company's executive pay package, and numerous shareholders stood up to blast the company management.
CEO Patricia Russo's salary last year was $1.2 million, with a $1.95 million bonus. She received $8.7 million in stock options and restricted stock. About $5.32 million of those options are below the exercise price.
Ralph Maly, vice president of the Communications Workers of America and a former employee of Western Electric (which became Lucent Technologies), called on the company to "stop the obscene excessive executive bonuses."
Russo fielded many questions about Lucent pension funds, and at one point became testy when asked whether the management pension fund had adequate cash.
"Under current law, our pensions are adequately funded, period. That's it," Russo said.
The company is also increasing the amount paid to its directors from $125,000 to $165,000 a year, a move criticized by one shareholder, who asked how Lucent could justify the increases. Russo replied that directors' pay needs to be comparable to that of other companies, that it hasn't been raised in four years, and that raises are a way to keep top directors and compensate them for their time.
E-mail:
LUCENT SHAREHOLDERS MEETING
Ralph V. Maly, Jr. Vice President CWA Communications & Technologies
February 15, 2006
Good Morning, Pat & shareholders, my name is Ralph Maly. I am a shareholder and the Vice President of the Communications Workers of America representing employees of Lucent, AT&T & Avaya. I come to you today along with many CWA members and retirees to first tell the Board of Directors that for once they made a good decision in promoting Frank D’Amelio to the Chief Operating Officer. Frank, in our mind is the main reason Lucent is still in business today. The second reason I am here today is to voice our concerns over the continued excessive bonuses paid to the senior leadership of Lucent Technologies.
As I said last year at the Shareholders meeting, in a time when everyone is being asked to make major sacrifices to help keep Lucent from going under we find the Board of Directors doling out huge bonuses for senior officers in order to keep them from jumping ship - huge bonuses that do not meet any standard of business success. An example being services, where we bargained a new low wage title to help grow the business, but over a year later we still have little or no growth, revenues are still flat and bonuses far exceed performance. Everyone understands pay raises and/or bonuses. The bargained for workforce received such this year. However, at a time when thousands of Lucent employees have lost their jobs and others have made sacrifices to help the business we find these bonuses of 30 to 50% above salary to the senior leadership to be outrageous and highly insensitive to the pain your workforce and retirees are experiencing. It is a question of leadership. The board of directors must be held responsible for the misuse of their authority. It is a total lack of respect to all those former employees who helped make this company a success over the years. Again as I stated last year, we were told this was the only way Lucent could keep the talent they have from leaving. Then I must again ask you the question what are they being paid for? Isn’t salary enough? Where is their allegiance to Lucent? Certainly, the thousands of Lucent retirees have proven their allegiance. I would ask the Board of Directors to do the right thing, as they did with Frank, and stop this obscene excessive executive bonuses.
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