Telecom Investors: Can You Hear Us Now?

Editor's note: This is the fourth story in an occasional series exploring the rise in shareholder activism and its impact on U.S. corporations amid the economic downturn. The first explored reasons behind the trend. The second detailed efforts by investors to rein in soaring executive compensation. The third looked at the battle being waged to get shareholder proposals on company ballots.

Shares of Sprint-NextelS have tumbled more than 70% since 2005, as the third-largest U.S. wireless operator has seen customers flee to rival carriers.

For his effort overseeing such performance, then-Chairman and CEO Gary Forsee lost his job -- but gained a small fortune. He saw his 2007 salary nearly double to $40 million, including stock and option awards, from the year before. In addition, he will receive nearly $84,000 a month for the rest of his life thanks to a separate pension he negotiated when he was hired according to the company.

While much of the shareholder outrage this season has focused on banks and financial companies like CitigroupC and Merrill LynchMER decimated by the housing and credit crunch, telecom CEOs are among the most notorious for the widening gap between pay and performance year after year. And while financial executives have enjoyed a long run of prosperity, CEOs and directors at telecom companies have largely presided over flagging business while raking in increasingly generous pay in the wake of the 2001 tech bubble and WorldCom scandal.

"The telecom industry has had more chances to put itself back together, while this problem has just surfaced in the financial industry," says Paul Hodgson, senior research analyst with The Corporate Library, an independent group focused on corporate governance and executive pay.

Boards explain the widening gap between pay and performance by arguing that they need to attract and hold onto key talent. They point out shareholders don't need an advisory vote to communicate their problems directly to the board.

Boards Have 'Failed'