LRO Makes Presence Felt At Lucent Annual Meeting


            Nine LRO members who are Lucent shareowners attended the Lucent Annual Meeting on February 16 in Wilmington, Delaware.  Two of the LRO members and the wife of a third made presentations on why their proxy proposals should be supported.

            When the tabulation of the ballots was announced, the LRO-sponsored proxy proposals had not garnered enough votes to pass.

            Joanne Raschke, wife of LRO Vice President Ken Raschke, had submitted a proxy proposal that requested the Lucent Board of Directors to adopt a policy whereby at least 75% of future equity compensation (stock options and restricted stock) awarded to senior executives be performance-based, and the performance criteria be disclosed to shareholders.  The votes cast on this proxy proposal were 48.4% “For” and 51.6% “Against.”

            Jim Stickel, a Lucent retiree and shareowner, had sought to amend the company’s audit services pre-approval policy so that the public accounting firm retained to audit the corporate financial statements would perform only audit and audit-related work, and not perform services generating tax or consulting fees, including non-audit services related to Lucent’s pension and benefit trusts.  The votes cast on this proxy proposal were 32% “For” and 68% “Against.”

Walt Ehmer, the LRO’s Southeast Regional Director, had resubmitted his “golden parachute” proxy proposal that received support from 65% of the shares voted at Lucent’s Annual Meeting last February.  That resolution was considered “advisory” rather than “mandatory.”  To make a change in Lucent’s bylaws mandatory, a resolution must garner support from more than 50% of all outstanding Lucent shares, not merely those voting.  This time, the proxy proposal received support from 21% of all outstanding common shares.  Lucent did not announce what percent of total votes cast this 21% represented.

Although the LRO-sponsored proxy proposals did not pass, the LRO’s actions demonstrated the organization’s determination to utilize the proxy statement process as a means to attempt to set higher performance and accountability standards for Lucent.  The LRO also made its presence known at the Annual Meeting through every LRO member present asking a question of Lucent Chairman and CEO Pat Russo.  The questions heard by the attending Lucent Board Members were directed toward issues of importance to Lucent retirees and shareowners.

          The day before the Lucent Annual Meeting, the Chicago Daily Herald published an article about the LRO-sponsored proxy proposals.  Click here to read article articles about the Lucent Annual Meeting and the proxy proposals



Chicago Daily Herald - February 16, 2005


Lucent retirees seek OK on key proposals


Shareholders of Lucent Technologies today will vote on a half-dozen proposals, including three from retirees seeking to change policies on golden parachutes for departing executives, independent auditors and pay for performance.

The Lucent Retirees Organization has been angry because the struggling telecom has been slicing benefits during on-going streamlining. The Murray Hill, N.J.-based company, with operations in Naperville and Lisle, has been reporting profits and retirees now want more of the cost cutting done at the executive level.

A few hundred shareholders, including a contingent of 20 members of the retiree organization, are expected at Lucent's annual shareowners meeting in Wilmington, Del.

Retiree group spokesman Ed Beltram believes the proposals would benefit all shareholders.

"If these proposals pass, it would mean we're strengthening what we feel are important policies for Lucent, since they haven't done it on their own," Beltram said.

Lucent spokesman Bill Price said Lucent has written its policies according to the law. "We think these proposals are unnecessary," Price said.

Generally, it's hard to win shareholder approval of proposals that aren't endorsed by corporate management. But Institutional Shareholder Services, a provider of proxy voting guidance to institutional investors, supports the pay for performance and golden parachute proposals, said Beltram.

"Lucent has not been the most shareholder friendly company," said John Slack, an analyst with Chicago-based Morningstar Inc. "The board has been against progressive shareholder proposals in the past."

One retiree group proposal says it aims to reduce auditor conflicts of interest. It would have the firm retained to audit the financial statements perform only audit-related work and not perform services generating tax fees or other fees, including from pension and benefit plan consulting. This spins off last year's $25 million fine against Lucent on allegations of accounting fraud from the Securities and Exchange Commission, the retirees said. Price said Lucent has made changes to its auditing policies in line with the Sarbanes-Oxley Act on financial disclosures.

Another proposal seeks to require at least 75 percent of future equity compensation, including stock options and restricted stock, awarded to senior executives be performance-based with disclosures to shareholders. Retirees said CEO Patricia Russo received roughly $40 million in compensation during her first two years while Lucent's share price has dropped about 40 percent in the last three years.

Lucent said that so far the value of the stock options has proved to be much less. About $23 million of the $40 million is related to options that have an exercise price of $6.26 per share, but shares haven't reached that level. The total value of Russo's stock options, it they were exercised last Sept. 30, was about $4.3 million, of which only about $1 million related to vested options and the rest to unvested options.

Other proposals involve limiting the value of golden parachutes granted without shareholder approval, election of directors, a reverse stock split and publication of political action contributions - February 16, 2005

Fat-Cat Collar Fails at Lucent

By Scott Moritz

Senior Writer

The fat-cat set squeezed out a victory Wednesday at Lucent (LU:NYSE)  .

 Shareholders narrowly rejected a proposal to tie executive pay to performance. The company had opposed the measure, which was offered up by a Lucent investor as governance gadflies seethe over runaway CEO pay at big

 Preliminary numbers, tallied at Lucent's annual shareholder meeting in Wilmington, Del., show that 48% of
voting shareholders backed a plan to base executive stock compensation on objective criteria including stock appreciation and the company's operating performance.

The proposal fared much better than did a similar measure last year. Back then, only 27% of Lucent holders voted to terminate stock and severance agreements with the top five executives.

 Still, regardless of any apparent momentum for the reformers, the pay-for-performance measure still ended up losing. Some 52% of holders shot down the measure.

 The vote comes as executive pay has returned to the spotlight on Wall Street, with massive benefits being scored by departing CEOs like Hewlett-Packard's (HPQ:NYSE)  Carly Fiorina and Gillette's (G:NYSE)  Jim Kilts.

The Lucent vote was motivated as well in part by the grandiose $55 million package Lucent used in 2002 to lure CEO Pat Russo away from Kodak (EK:NYSE)  . Lucent valued the package at closer to $40 million, and a company spokesman says most of Russo's options are underwater. He adds that she hasn't gotten a raise from the $1.2 million
annual salary she started with.

 But shareholders contend that executives like Russo are paid handsomely even as the company's shares have been stuck for years in the low single digits. Meanwhile, Lucent has slashed jobs and retiree benefits in an effort to bring its costs under control.

 Lucent argued against this year's proposal, saying its executive pay program aligns its executives' interests with those of its shareholders.

 Also, for the third year running, Lucent shareholders gave the company the latitude to effect a reverse stock split if management sees the need. The proposal was originally crafted to help keep Lucent's share price above $1, enabling the company to keep its listing on the NYSE.

 Lucent urged approval of the measure so it could keep its
options open.

The Murray Hill, N.J., tech shop's shares fell 4 cents to $3.35 in midafternoon trading Wednesday.


REUTERS - February 16, 2005

Lucent Gets Holders' Nod for Reverse Share Split

Wed Feb 16, 2005 06:01 PM ET

 By Deborah Cohen

 CHICAGO (Reuters) - Lucent Technologies Inc. (LU.N: Quote, Profile, Research) said on Wednesday its shareholders gave the company the right to effect a reverse stock split, a protective measure its board could use to boost the price of the company's shares.

 It is the third year the telecommunications gear maker's holders have approved such a measure, but Lucent has not yet implemented a split. The first proposal was floated after the technology bubble burst nearly four years ago

 When Lucent's shares traded below $1.00 in October 2002, the stock was in danger of being delisted from the New York Stock Exchange

 Shares in Lucent are now trading in the $3 range, well off a high of nearly $85 in December 1999. The stock has a forward price-to-earnings ratio of 20, roughly in line with the Standard & Poors Communications Equipment Index.

 The shareholder vote on Wednesday gives the company the power "to return our share price to a level of share prices of other widely owned public companies," Lucent said in its proxy statement.

 Analysts would not predict whether Lucent would this time use the measure to prop up its stock price. But some said its renewal is a sign that management believes the stock still requires safeguarding in what remains a volatile and consolidating telecommunications industry.

 "I believe it reflects (Lucent's) view that you're not likely to see a lot of growth in the next couple of years," said Charter Equity Research analyst Ed Snyder.

 Pressure on suppliers such as Lucent was underscored on Monday when Verizon Communications Inc. (VZ.N: Quote, Profile, Research) announced its planned $6.75 billion takeover of MCI Inc. (MCIP.O: Quote, Profile, Research) , the latest in a string of deals by carriers looking to cut costs and leverage scale.

 Lucent spokesman Bill Price stressed that a reverse split "is not a foregone conclusion."

 "Clearly we have seen that the telecommunications market has stabilized and started growing," he said. He reiterated Lucent's expectations for top line growth in the mid-single digit percentage range for its fiscal 2005 year.

 Analysts said a reverse split could be attractive because it would propel the stock above the $5 range, the entry point for many institutional funds to buy.

 "You kind of want to be in that $10 to $20 (a share) trading range," said CIBC World Markets analyst Steve Kamman. "That's a good place to be -- that would make some sense."

 Lucent said it received approval for the move from about 75 percent of its shares outstanding; the vote was tallied at the company's annual meeting in Wilmington, Delaware.

 Lucent's board now has authority for a reverse split through February of 2006 under one of four ratios: 1-for-5, 1-for-10, 1-for-15, or 1-for-20.

 Shares in Lucent, which makes switching, wireless and optical gear, closed off 5 cents to $3.34 on the New York Stock Exchange.