"I think we've done the job we're supposed to do. Qwest is unhappy and disappointed and frustrated. [But] I think the legal standard is your best business judgment," Katzenbach said of the board's initial decision.
The kind of choice MCI faces today isn't uncommon.
Qwest Communications International's $8 billion offer for MCI isn't the slam-dunk over Verizon Communications' $6.75 billion bid that it might initially appear to be.
(Charles Dharapak -- AP)
In 1997, MCI faced a similar predicament, with rival bids from GTE Corp. (now part of Verizon), which offered $28 billion in cash, and WorldCom Inc., which increased its bid to $37 billion in stock and won.
"GTE and WorldCom got into a lot of the same issues you're talking about now," said Andrew D. Lipman, a law partner at Swidler Berlin LLP, which represented WorldCom in those negotiations and has represented MCI in the past. Back then, both companies claimed their mergers would raise fewer regulatory flags, result in greater marketplace competition and operational efficiencies, he said. "Where the board thought the industry was heading, and what the best combination of assets would be in the new telecom-Internet environment" was as important in those negotiations as they are today, he said.
The MCI board has the right to evaluate both Verizon, which has deeper pockets, and Qwest, with regard to their respective abilities to pay for MCI, obtain regulatory approval from the Federal Communications Commission and close the deal. But ultimately, the fate of MCI rests not only with its board's decision, but also that of shareholders.
Patrick S. McGurn, special counsel of Institutional Shareholder Services, described the MCI shareholder base as unusually concentrated and very risk-oriented, since many of its shares are held by former debt holders of MCI or WorldCom, or in the hands of traders looking for the highest possible short-term return on their investment. He said the MCI board needs to spend time listening to its stockholders in the next few weeks before reaching a decision, unless it wants to risk having its decision rejected by shareholders.
Yesterday the company's biggest shareholder, Mexican telecom magnate Carlos Slim, said in a regulatory filing that he may contact the company and other shareholders and play an active role in pressuring MCI's board to pay attention to its major stockholders.
"The courts won't second-guess the final determination that the MCI board makes as long as they did it in good faith," McGurn said. "If anyone questions the judgment of the board here, it will be the shareholders of MCI. That is the real court they have to answer to."
Staff writer Ben White contributed to this report.