Severance Could Total $54 Million for Departed Sprint CEO
Wednesday, October 10, 2007
Former Sprint Nextel chief executive Gary D. Forsee could get a severance package worth more than $54 million after stepping down Monday from the top job at the nation's third-largest wireless carrier, according to company filings.
Forsee resigned under pressure from board members and investors dissatisfied with the company's performance following a $35 billion merger between Sprint and Nextel in 2005. The company's share price has dropped about 21 percent since the deal was struck, and Sprint has steadily lost customers to its larger rivals.
Sprint yesterday declined to discuss Forsee's severance but said it would be based on terms outlined in the company's latest proxy filing, in April. It could include the accelerated vesting of stock options worth about $42 million, based on Monday's closing price for Sprint shares.
Among Washington area executives, Forsee's potential exit package is one of the most lucrative. But what Sprint set aside for Forsee pales in comparison to exit deals offered to executives elsewhere. Robert L. Nardelli, former chief executive of Home Depot, left that job in January with $210 million, an amount that was criticized sharply by shareholders and corporate governance advocates.
Guarantees of lucrative severance benefits often have been used to lure executives to a company, said Jack Dolmat-Connell, president of DolmatConnell & Partners, a compensation consulting firm in Waltham, Mass. He said such deals were more common before executive pay became more tightly scrutinized.
"These days boards are so worried about negative scrutiny that they're playing things pretty hard and tight," Dolmat-Connell said. "They're not going to throw in things they don't have to."
Forsee received $21.3 million in compensation last year. Under the circumstances of his resignation, it is unclear whether he will receive a $2.5 million bonus for integrating Sprint and Nextel. According to Sprint's proxy, he could forfeit that bonus because he resigned before the end of the year.
It is also unclear whether he is eligible for a $2.5 million award for meeting performance targets. Sprint has lost more than 700,000 monthly subscribers this year and warned Monday that it expects to lose 370,000 more in the current quarter. The company also lowered its revenue forecast for the year.
Forsee's employment agreement allows him to continue to receive medical benefits and other perks, such as security services, for two more years. But, according to the proxy, he will no longer have access to the company airplane.