StarTribune.com
He's smiling. They're not.
Disconnect: The Qwest CEO's pay package highlights a gulf between executive and employee compensation.
By H.J. Cummins, Star Tribune
5/20/07
When Qwest Communications went looking for a new CEO in 2002, Richard Notebaert could play hard to get. The beleaguered telephone company had just forced out its former CEO amid an insider trading scandal. Notebaert, who'd been CEO at two other telecommunications firms, drove a hard bargain. He negotiated a contract that, among other things, pays for his personal financial planning (plus some extra to cover the income tax he'll owe on that perk) and 5 million stock options. It credited him with 30.4 years worth of service toward his pension on his first day on the job. That gave him a $9 million head start toward retirement. In 2006 alone, Notebaert's total compensation was about $33 million.
Last year was not so kind to Qwest retirees Mary Ann Neuman and Nancy Meister. Neuman, a 61-year-old New Hope resident, saw her monthly health insurance premium jump 79 percent, from $124 to $222. Meister, 57, of Plymouth, got word her former employer was cutting her company life insurance policy to about 15 percent of the payout she'd been promised. Qwest says the reduced benefits for retirees have been made necessary by the increased costs it faces. But the contrast between the treatment afforded the CEO and the rank and file isn't limited to Qwest.
Top executives are being paid 262 times the average worker's wage, up from a multiple of 24 about 40 years ago, according to the Economic Policy Institute's most recent analysis in 2005. The gap widened significantly in the 1990s, in part because of the generous use of stock options in executive pay packages... Institutional Shareholder Services, a Wall Street research firm, calculated that for every $100 in 2006 net income at the 38,000-employee Qwest, $4.16 went to its CEO. Meanwhile, Qwest call center workers have complained in federal court that the company has been forcing them to work overtime without pay.
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Extraordinary CEO pay these days turns another core capitalist principle on its head -- that great rewards go to those who take great risks -- said Stephen Young, executive director of the Caux Round Table in St. Paul, an international network of business leaders that looks at business standards. Working Americans are bearing the risks of layoffs, outsourcing and lost retirement benefits, Young said. At the same time, top CEOs increase their multiples of pay and lock in their own retirement benefits.
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Qwest spokeswoman Diane Reberger said changes to workers' and retirees' benefits were a prudent response to changes in the costs of providing such compensation... She added that Notebaert has earned his pay. Qwest stock now trades at about $10 a share, up from $5.16 on the last day of May 2002. Total return to Qwest shareholders for the period is about 88 percent, compared with about 54 percent for the Standard & Poor's 500 index... However, the company also credited decreases in operating and benefit expenses in announcing its first-quarter gains this year.
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