Complacency Wins the Day at Qwest - TheStreet

Complacency Wins the Day at Qwest

Shareholders vote down proposals tightening the link between exec pay and performance.
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The reform bug doesn't seem to have bitten

Qwest

(Q)

shareholders just yet.

The troubled Denver telco's shareholders re-elected three directors at their annual meeting Tuesday, an event at which some governance gadflies were

calling for a clean sweep. Investors also passed three corporate governance resolutions while rejecting four more aimed at improving board independence and strengthening the pay-performance link for executives.

The vote comes as CEO Dick Notebaert seeks to pilot the company beyond its troubled past. In a year and a half at the helm the executive has managed to steer Qwest back from the brink of bankruptcy, but the stock has still fallen 27% this year despite a stirring tech rally. As Wall Street knows all too well, the slimmed-down company

continues to face steep challenges. On Tuesday Qwest added 9 cents to $3.52.

At Tuesday's meeting, investors re-elected Notebaert, Chairman Phil Anschutz and director Richard Popoff, the company said. They also supported measures to modify executive compensation terms, eliminate board classes and cap executive severance packages.

But Qwest shareholders voted down a proposal calling for the board to be made up mostly of independent candidates. Qwest says its own rules already call for this, though some observers have questioned the independence of the current board. Critics say seven of Qwest's 12 directors have substantial business ties to the company, and some holders appeared to agree, judging by the 36% tally this measure attracted.

Two other plans voted down would have linked executive stock compensation to an industrywide performance benchmark; those concepts garnered 17% and 45% of votes. Another rejected plan, which drew the support of 40% of shareholders, called on Qwest to expense stock options, as many companies in the tech sector have begun doing over the last year or so.

As

TheStreet.com

detailed earlier this month, Qwest says it adheres to director-independence guidelines proposed by the

New York Stock Exchange

. "Good corporate governance and the NYSE's rules focus on independence from management," CEO Notebaert said then. "It is clear that our outside directors are wholly independent from management. Claims to the contrary are wrong."

Still, there are those who see conflict. At the center of Qwest's web is founder Anschutz, who owns 17% of the company. Qwest's filings detail three pages of financial arrangements between Qwest and Anschutz, like property rental fees and business investments worth millions of dollars. Two other Qwest directors also serve as executives with one of Anschutz's businesses.

For now, though, Qwest investors seem to be content with the status quo.