Executives face shareholder activism

Wednesday, April 21, 2004 | 10:43 a.m.

SUN STAFF AND WIRE REPORTS

KANSAS CITY, Mo. -- Shareholders at the annual meeting of Sprint Corp., the main local phone company in Las Vegas, on Tuesday rejected three corporate-governance measures.

Their most animated comments were on a shareholder proposal that would have asked Sprint's board to prepare a report about how outsourcing jobs to overseas vendors would affect the company's brand and image.

Rob Stitt, a shareholder who lives in Kansas City, said that if the policy, known as offshoring, resulted in better-qualified, lower-paid information technology workers, wouldn't the same apply to corporate executives?

"It is very likely that better-quality executives from overseas could be found for less money," Stitt said.

The comment was greeted with enthusiastic applause from shareholders at the meeting -- many of them union employees. But shareholders gave only tepid support to the proposal concerning offshoring.

The proposal, offered by the Communications Workers of America Pension Fund, was supported by only 10 percent of shareholders.

Three other shareholder proposals also were defeated.

One proposal asking the board to adopt an executive compensation policy requiring future stock option grants to senior executives to be performance-based received support from 33 percent of voting shareholders.

One asking the board to establish a cap on total annual CEO compensation of 50 times the average compensation paid to employees who are not exempt from coverage under the Fair Labor Standards Act got support from 10 percent of voting shareholders.

And a proposal asking the board to amend Sprint's bylaws to require that an independent director -- not the CEO -- serve as chairman of the board received 36 percent support.

Shareholders ratified the appointment of KPMG as the company's independent auditors in 2004. The firm replaces Ernst & Young, which had served as Sprint's outside auditor for almost four decades. The board replaced Ernst & Young after the firm became embroiled in a conflict involving Sprint's two former top executives.

Shareholders elected three new members to Sprint's board of directors. Gordon M. Bethune, chairman and chief executive of Continental Airlines; E. Linn Draper Jr., retired chairman of American Electric Power Co.; and Deborah Henretta, vice president of Procter & Gamble, each received 97 percent support from shareholders who cast votes.

But Linda Koch Lorimer, vice president and secretary of Yale University and the only returning board member up for election at the meeting, was re-elected with only 77 percent support.

Sprint Chief Executive Gary Forsee attributed Lorimer's relatively poor showing to what he called a misleading advisory from Institutional Shareholder Services, an organization that advises institutional shareholders about proxy votes.

The organization advised shareholders to withhold a vote for Lorimer because of concerns about the company's executive compensation policies. It said Forsee's pay package in 2003 was extravagant.

The group said it would have advised shareholders to withhold votes for other returning board members as well, had they been up for re-election.

Forsee defended Lorimer, the head of the board's nominating and corporate governance committee, saying she had spearheaded Sprint's corporate governance reforms last year.

"When we are wrong, we will take our lumps," Forsee told shareholders. "But when we're right, we will defend our brand, reputation and board."