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The 'Sheriff' of MCI
"I tried to be the honest broker, to be there to tell it straight," Richard C. Breeden said.
(By Yoni Brook For The Washington Post)
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In contrast, MCI has three times agreed to reopen talks with Qwest even after recommending a merger with Verizon and has held ongoing discussions with major shareholders and customers.
Breeden, 55, designed the MCI board to encourage just that sort of deliberation. His position was created a month after WorldCom admitted it had inflated its earnings. Breeden's initial powers were wide-ranging. He could attend any meeting, read any document and meet with any employee. He wielded that authority not only to reshape MCI's governance, but to place the company in the broader discussion about corporate reform.
In August 2003, Breeden's report on MCI, "Restoring Trust," served as both an indictment of WorldCom's shoddy corporate governance and a prescription for the remedy. Ebbers, the former WorldCom chief executive, wielded "nearly imperial" control of the company, staffed his board with cronies and left the company without checks or balances to protect shareholders' interests, Breeden wrote.
The report detailed 78 recommendations, including specifications about eligibility of board members, how often and where a board should meet, and guidelines limiting executive and board member compensation. It made the board accessible to town-hall style meetings for large shareholders to talk to the board.
"[T]he recommendations of Restoring Trust will be a set of policies and procedures that go beyond what any major public company has in place today," he wrote.
Still, some MCI shareholders disagree about the outcome, angry that the board was ready to accept an initial offer of about $20.75 a share from Verizon that in retrospect seems low. Qwest's latest offer is equal to $30 a share.
"Richard Breeden wasn't there to protect my shareholder value," said Jeff Kavy, an individual investor with more than 100,000 shares of MCI. "I think Breeden and [the board] did everything against this process, and if Qwest hadn't been so tenacious, those guys would have let Verizon steal the company."
Breeden denies any favoritism toward either of MCI's suitors, noting that he acts as trustee for nearly 10 million MCI shares held in a victims' trust fund to compensate former WorldCom investors. He said he wants the best deal for those shares.
"[The board is] not going to do what I tell them to do, or what [MCI chief executive Michael] Capellas tells them to do," Breeden said.
Moreover, Breeden's high-profile presence at MCI could hurt a shareholder's case in court, some say. "With Mr. Breeden's presence, any court will look at that and say that his being there must mean that they did everything [by the books], and we would lose our case," said David Ahl, a consultant to four major MCI shareholders.
"I think their conduct has been exemplary," said Nell Minow, editor for the Corporate Library, a corporate governance research group. "I keep expecting them to say, 'Okay, it's enough,' and shutting out every additional offer. But they keep saying, 'Yes, we're going to look at it, yes we're going to look at it.' "
