Sprint Filings

A few days ago, when I touched upon Sprint's payments to former Executives, I promised to look at how the objectives of compensation and retention do not necessarily match the results. And I almost always sometimes keep my promises. So let's take a look, shall we?

One factor in compensation, eloquently titled "Retention Programs," is listed in the 2009 proxy. Here's the money quote (not to be confused with money shot; I hear that's slightly different...) from page 38: (bold is my emphasis)

The Compensation Committee periodically evaluates whether we are at risk of losing the services of any of our named executive officers and other key personnel who we believe are critical to the success of our business. To ensure that we retain the employment of our named executive officers and other key personnel who we believe may be at particular risk of voluntarily terminating employment, the Compensation Committee from time to time awards cash bonuses, RSUs or stock options to further our retention objectives and promote a commonality of interests with shareholders.

So, the goal of the retention program is to provide some type of bonus to "named executive officers and other key personnel who we believe may be at particular risk of voluntarily terminating employment" because, doing so, promotes "a commonality of interests with shareholders." Beautiful! Well stated too, I might add. These people are key personnel in the company, they are in high demand, they have amazing skills that cause other companies to viciously seek out their services, and losing them would just be disastrous to the shareholders. That makes perfect sense to me. Yet, let's keep reading (again, page 38 and bolding is mine):

During 2008, the Compensation Committee awarded Mr. Arendt 20,824 RSUs that were scheduled to vest on June 9, 2009. This award vested upon Mr. Arendt’s involuntary termination without cause on November 14, 2008 and is included in the Grants of Plan-Based Awards table. During 2008, the Compensation Committee also awarded Mr. Kennedy 29,462 RSUs that were scheduled to vest on June 9, 2009. This award vested upon Mr. Kennedy’s involuntary termination without cause on December 19, 2008, and is included in the Grants of Plan-Based Awards table.

Uh huh. So, umm, let me see if I understand this. Mr. Arendt was awarded 20,824 Restrictued Stock Units (essentially shares of stock, in this case) because he was at high-risk for voluntarily leaving Sprint. Yet, during the same year he received those RSUs, he is involuntary terminated. But he still gets to keep his bonus. A bonus in which the sole intent was to keep him from leaving! Not only that but his RSUs vest (i.e. they are convertible to common stock) on the day he was fired! Hahaha! Brilliant! Sprint paid out, if the stock were held through today, roughly a $90,000 bonus ($4.29 share x 20,824 shares) to an executive whom they terminated because they were afraid he voluntarily leave! You know, leave at a cost of $0 to Sprint and Sprint shareholders.

Mr. Kennedy's situation, of course, is no better. He received 29,462 RSUs (that's over $125,000 in today's prices if you're keeping track) as a retention bonus and then was subsequently terminated in December 2008. Tell me again how this lines up to shareholder value?

If I were one of these gentlemen and received such a payment, I'd be happier than Michael Jackson on Boy Scout Day at Disney World. Alas, I am not. So at this point, in order to dull the pain, I need to go take some Zoloft (for my depression), wash it down with some Valium (for my anxiety), and pop some OxyContin (they taste like candy).

As such, here are the official 2008 salaries of the named executives in the title of this post. Their "official" salaries are based on what the options were worth on the day each was involuntarily terminated. As of today, the stock price (of the RSUs that were granted) has gone down in Mr. Angelino's case but up for Mr. Kennedy and Mr. Arendt. As I mentioned in a prior post, if the stock had not tanked then their overall pay would have been significantly higher. That can be viewed in this table. Note, all tables shown come directly from the proxy.

• Mr. Angelino, former President of Sales and Distribution. Terminated on January 25, 2008 - $3,535,498

• Mr. Arendt, former Acting Chief Financial Officer. Terminated on November 14, 2008 - $1,742,366
  

• Mr. Kennedy, former General Counsel and Corporate Secretary. Terminated December 19, 2008 - $2,627,179