Sprint Nextel are the best over-payers in the business

US TELECOM Sprint Nextel tops the list of companies that overpaid their top executives in 2007, said a study released this week by an investors' advisory firm.

The cellphone service provider had the worst 2007 pay-for-performance ranking among all companies in the S&P 500 index of large US corporations, Glass Lewis and Company reported. Glass Lewis specialises in making recommendations to stock market investors about proxy votes.

Sprint Nextel achieved this dubious distinction largely by firing one CEO and then hiring another late last year. New CEO Dan Hesse was hired in December 2007 and immediately knocked down $28.3 million, replacing Gary Forsee who had departed in October with $22.4 million, according to Glass Lewis.

Severance and hiring costs incurred by lower level executive shuffles at Sprint Nextel boosted its total executive compensation to $74 million for the year.

The company lost $29 billion during 2007, mostly due to a massive accounting write-off of goodwill associated with its earlier acquisition of Nextel and a 30 per cent decline in its share price.

Other large US companies cited on the Glass Lewis "Overpaid 25" list include homebuilder KB Home, auto manufacturers Ford and General Motors and media company CBS. Share prices of all the companies on the high pay for non-performance list fell an average of 33 per cent during their 2007 fiscal years.

Glass Lewis pointed out that executive compensation remains high at many companies even when corporate performance is mediocre or dismal. Its study said pay packages for the highest paid corporate executives, "have been so over-the-top that they have skewed the standards for what's reasonable."

Executive pay has taken a high profile amidst the US financial train-wreck proceeding ahead of the presidential elections. Secondary mortgage market giants Fannie Mae and Freddie Mac, along with the banks Washington Mutual and Citig roup, as well as the failed Wall Street investment bank Lehman Brothers, all were labelled as "deficient" by the Glass Lewis report, although it didn't include them among the worst offenders in pay for performance, curiously enough.

Wounded Fannie Mae and Freddie Mac were recently taken into "conservatorship " by the US Federal Reserve, Washington Mutual was forced into a hurried shotgun marriage with JP Morgan bank, and Lehman Brothers abruptly fell into bankruptcy after it was refused a federal bailout.

That's likely a case of the Glass Lewis report having been overtaken by events, however. µ

L'Inq
Reuters