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
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.
TheStreet.com - February 16, 2005
Fat-Cat Collar Fails at Lucent
By Scott Moritz
Lucent Gets Holders' Nod for Reverse Share Split
Feb 16, 2005 06:01 PM ET