Qwest Cracks Open Checkbook for Chief

Qwest (Q) hasn't made it out of the woods, but chief Dick Notebaert is enjoying the ride in luxury.

Qwest's CEO received $9.15 million in total pay and stock option awards last year, according to a Tuesday filing with the Securities and Exchange Commission.

Notebaert's 2003 payday comprised $1.1 million in salary, a $2.9 million bonus, $630,000 in additional cash and $4.5 million worth of stock options. According to the filing, Qwest's compensation committee approved of the bonus because the company attained "key financial and customer service results."

Yet Qwest's stock price reflects the uncertainty surrounding the company more than any endorsement of Notebaert. Indeed, Qwest continues to struggle with a declining business, and faces a host of potential problems ranging from increasing shareholder unrest to an ongoing trial of midlevel former executives.

The stock was stagnant last year despite a furious tech rally, and has lost ground since Notebaert replaced Nacchio. On Tuesday the shares fetched $4.28, down from $5.07 when Notebaert arrived on June 17, 2002.

Fields of Green

Notebaert's generous wad of stock options aside, $4.6 million in cash pay isn't bad for a guy whose greatest apparent contribution has been to keep the Denver phone giant out of bankruptcy court. For his half year of work in 2002, Notebaert earned $1.7 million in cash compensation.

Among the most "touching" compensation details, says Kevin Cameron with proxy watchdog Glass Lewis & Co., are the undisclosed specifics of the board's pay and bonus triggers. "They must have some pretty low bars," says Cameron. "But compared to four years ago, they are a model of restraint, probity and reform."

Notebaert took over the top job in June 2002 after the rapid rise and subsequent exit of former chief Joe Nacchio. Since then, the company has restated $2.5 billion in sales booked during the Nacchio era. Qwest is also the subject of an SEC investigation and at least two criminal investigations by the Justice Department.

After three years of employee cuts and business liquidations, like the sale of its lucrative yellow-pages division to pay-off debts, Qwest is still fighting the undertow of a receding telecom industry.

During the fourth quarter, which ended in December, Qwest lost $307 million, or 17 cents a share, on revenue of $3.50 billion. The losses were double Wall Street's expectations.

Notebaert's payoff still pales in comparison to peers like Verizon ( VZ) chief Ivan Seidenberg, who landed $19.1 million in total compensation last year, and SBC chief Ed Whitacre, who collected a cool $19.5 million.

Grass Roots

The Qwest proxy also includes shareholder proposals that seek to limit severance payouts to executives. According to Notebaert's employment agreement, he stands to collect $12 million in pension payments if he retires at 65.

Another proposal -- this one drafted by the California State Teachers' Retirement System, or CalSTRS -- calls for the company to hire an independent chairman. Corporate governance leaders have urged companies like Qwest, where Notebaert holds both the chairman and CEO titles, to separate those duties.

Separately, the jury in a Denver U.S. District court says it has reached a partial verdict in a case against four former Qwest executives, according to Reuters. In a note to the judge in the case, the jury indicated that it had reached a decision on 24 of the 44 charges against the executives, and needed guidance on the remaining charges.

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