Two Sprint executives gain $191 million from stock options

Friday, March 2, 2001 | 11:22 a.m.

SUN STAFF AND WIRE REPORTS

Sprint Corp. President and Chief Operating Officer Ronald LeMay, who negotiated a new contract promising a shot at the chief executive's job by May 2005, reaped $127.4 million of gains -- at least on paper -- by exercising stock options last year, according to a regulatory filing.

Chairman and Chief Executive William Esrey got $64 million of gains -- at least on paper -- from options exercises, according to a proxy filing with the Securities and Exchange Commission.

Sprint's filing said the gains represented the difference between the executives' purchase price of the stock and the market value of the stock when they bought it. The filing didn't say if the executives have sold the stock they bought at a discount, which would give them taxable cash gains.

Esrey still owned exercisable options with a potential value of $40.2 million as of Dec. 31, the filing said. LeMay's current options at that date were valued at $3.3 million.

The two executives signed new employment contracts Monday with the No. 3 U.S. long-distance company and the dominant local phone company in Las Vegas, the filing said.

LeMay's contract says the 55-year-old executive is entitled to 12 months of severance benefits and full vesting of his options if he doesn't become chief executive by May 1, 2005, or if Esrey, 61, retires before that date, the filing said.

"It's not a guarantee that LeMay is going to be next CEO," said Bill White, a spokesman for Kansas City-based Sprint. "This agreement doesn't guarantee that this board is going to choose Ron to succeed Bill, but it recognizes that we want to have him present" in the coming years.

LeMay resigned as president and chief operating officer of Sprint in July 1997 to become chairman and chief executive of Waste Management Inc., North America's largest trash-hauler. He left after less than four months on the job and returned to Sprint.

New contracts for Esrey and LeMay include new option grants and are designed to guarantee "their long-term employment" with the company, the proxy filing said.

Esrey saw his compensation drop 46 percent last year as WorldCom's $115 billion proposed takeover of Sprint failed to win government approval.

Sprint said it gave Esrey and LeMay 3 million stock options, which will pay off big if Sprint and Sprint PCS shares rebound.

Sprint's shares are down more than 67 percent from their 52-week high in June.

Options granted to Esrey and LeMay last year are underwater -- the stock is worth less than they would have to pay to exercise the options. The latest retention options also are underwater.

The executives' Sprint options have exercise prices ranging from $36.44 to $66.25 per share. The Sprint PCS options carry exercise prices of $51.16 to $63.50 per share. The options have expiration dates ranging from 2006 to 2010.

Sprint traded at $21.50 this morning, down 24 cents. Sprint PCS was at $22.73, down 47 cents.

Besides cashing in on his bonuses, Esrey was paid $1.36 million last year, including $1 million in salary and a $220,000 bonus. That was down from $2.52 million in 1999, including $1 million in salary and a $1.38 million bonus.