Publish date:

Verizon Chief's Reign Ends, but Gravy Train Thunders On

Former co-CEO Chuck Lee raked in telecom's top pay last year -- and the cash won't stop coming any time soon.

Forget about the golden handshake. The time has come for the diamond-encrusted farewell.

With all the comings and goings lately in telecom, it's easy to be distracted by the gaudy paychecks being doled out to new executives. This past year, three of the industry's leading outfits --

Lucent

(LU)

,

Sprint

and

MCI

-- each handed incoming CEOs at least twice as much scratch as their handsomely compensated predecessors.

But as good as the new bosses have it, the old bosses haven't quite been forced out onto the street to raise spare change. No, quite the contrary. It seems the royal perks like those heaped on

GE's

(GE) - Get Report

retired CEO, Jack Welch, aren't so much the exception as they are the rule.

You may recall last year's revelation that Welch's retirement benefits included unfettered access to a corporate jet, a company-owned New York apartment, paid memberships to various country clubs and a few other things.

Now consider Charles "Chuck" Lee,

Verizon's

(VZ) - Get Report

former co-CEO. Thanks to a sweet severance deal he signed in 1999, coming up on the market's closest point to the sun, Lee almost makes Welch look second-rate.

Not only does Lee get all the nice stuff listed above, but he collects $3 million a year for his work as a consultant to Verizon. Lee quit his co-CEO job a year ago, giving Ivan Seidenberg sole control of the office. In addition to his consulting, Lee serves as non-executive chairman.

Lee also happens to have been the highest-paid telco executive last year, raking in $15.6 million in total compensation, according to federal filings and Multex. That dwarfs the paltry $9.5 million Seidenberg pulled down.

Verizon's Chuck Lee

"There's no justification to retain him as a consultant with this enormous fee," says critic Paul Hodgson of the Corporate Library. "From a corporate governance point of view, this is one of the worst contracts I've ever seen. It draws a picture of a board bending over backward to give a CEO anything they want."

What exactly does Lee do now for Verizon that's worth $3 million annually?

TheStreet Recommends

"In general, the answer is that this agreement accelerated Chuck's retirement, while giving Verizon and its shareholders the very important side benefit of his valuable expertise and counsel until June 30, 2004," Verizon spokesman Peter Thonis wrote in an emailed response. Lee didn't immediately reply to a request for comment.

Soaring

Of course, it's not like the current CEOs are having to reheat their leftovers either.

In fact, judging by the soaring executive and former executive pay packages, you'd never know the telecom market and, similarly, the stocks have been in a tailspin.

Take, for example, the newest chief in the phone business -- Sprint's Gary Forsee. Going in, Forsee, a former No. 2 manager at

BellSouth

(BLS)

, will get $4.4 million in salary and bonus, more than twice the pay his predecessor Bill Esrey got before he was pushed out over his participation in a tax shelter.

Even better, if Forsee gets canned or quits in the next couple years, he's guaranteed more than $12 million in salary and bonuses. Additionally, Forsee's options on some 1.4 million shares, or $25 million worth of Sprint Fon and

Sprint PCS

(PCS)

, would vest within two years.

Similarly, new MCI chief Michael Capellas got $14.5 million in severance and more than $1 million in personal loans forgiven when he left

Hewlett-Packard

(HPQ) - Get Report

. As his reward for accepting the top-manager job at MCI, Capellas will get $5 million in salary and bonuses this year. There's an additional $18 million in stock and bonuses in it for Capellas if he achieves his performance goals, including steering the company out of bankruptcy and keeping honest books.

Queen of Kings

With his lofty three-year compensation deal, pay experts dubbed Capellas the $50 million man, but he isn't the king of the hill. Lucent wanted Patricia Russo so badly, it was willing to go as high as $55 million to lure her back to Lucent after her seven months with

Kodak

(EK)

.

Russo's salary and bonus last year was $3 million, twice that of her predecessor Henry Schacht. But to compensate for the $35 million in stock options she left behind at Kodak, Lucent gave the executive new options worth as much as $40 million. She also got $11 million worth of restricted stock. The big hitch: Russo must stay until 2007 to claim these options.

Russo should have hired Chuck Lee's agent to get rid of that "must stay" clause.

On That Note

The true beauty of Lee's consulting contract is that if he decides to quit or is let go, he still gets his full two-year consultant salary, all of his long-term bonus, all unvested stock options immediately vested, airplane use for personal travel and car service.

According to his contract, if Lee manages to stick out the hardships of his two-year consulting gig, he's then entitled to another five years of company-provided perks. Among them: a New York apartment; $36,000 a year for club memberships and car payments; access to a company plane and a company car for personal use; free financial planning services; home security; office equipment; and a cell phone.

At the bottom of the employment agreement is a concluding personal note: "Chuck, we believe that this agreement provides you and your family with both financial security and great opportunity as our industry and the company evolve."

Yes, best of luck, Chuck.