KCB Central Biz Blog

We can’t let this one go by. So here are the details. As CEO of Sprint Nextel, Gary Forsee was Kansas City’s highest paid executive, pulling in some $21.3 million a year in compensation and benefits. Now that he’s parting ways with the telecom giant, his severance package could be worth roughly $54 million. Here’s the breakdown of Forsee’s severance package:

Compensation:
Base Salary—$2,900,000
Short Term Incentive, 2006—$414,120
Short Term Incentive, Target—$4,930,000
Long Term Incentive, Accelerated Vesting (1)—$43,240,921
Integration Overachievement Plan (2)—$1,250,000
Benefits:
Present Value of Additional Retirement Benefit—$2,702,699
Health and Welfare Benefits—$34,205
Outplacement Services—$45,000
Security Equipment and Services,
Communications Services and Insurance—$9,658
Excise Tax Reimbursement—$0
Grand total: $55,486,103

(1) The value of accelerated options is based on the intrinsic value of the options, and the value of accelerated RSUs is based on the market value of our stock, on December 29, 2006.

(2) Table gives effect to the Integration Overachievement Plan. This plan provides for a pro-rata payout only for involuntary terminations without cause, or in the case of death or disability, that occur on or after December 31, 2006.

—R. Scott Macintosh

Perhaps it was the jealousy of being scooped on the biggest news story of the year… or, at least, the past month or so. Last Thursday, The Wall Street Journal, citing shadowy unnamed sources while chastising Sprint customers who are unable to pay their bills, reported that KC’s biggest public company was going to replace CEO Gary Forsee. Turned out those sources were right. And at least one local publication didn’t want to face the facts. Indeed, every media organization in town was scooped by the Journal. And that might be the saddest thing about Forsee’s overthrow, other than Sprint’s flabby stock price. That’s because Forsee will be laughing as he sails on his golden parachute to the bank. As the KCB Biz Blog reported Friday, Forsee’s contract calls for a severance package worth as much as $55 million should he be deposed by an angry mob—aka Sprint’s board of directors—or killed. Nothing is so soothing as a giant paycheck.

According to a Sprint news release, “the decision to seek a new CEO was based on the Board’s belief that it is the right time to put in place new leadership to move the company forward in improving its performance and realizing corporate objectives.”

The company reported a jaw dropping loss of approximately 337,000 post-paid Sprint subscribers in the third quarter alone. It also expects operating revenue for 2007 to be slightly below its prior targeted range. Sprint’s churn rate—the pace by which the company has been losing customers—and the risk of building the company’s multi-billion WiMax network have failed to impress Wall Street. So sayonara Gary.

“On behalf of the entire board and the Sprint Nextel employees, we want to thank Gary for his dedication and leadership and all of the contributions he has made since becoming chief executive of Sprint in 2003,” said board member Irv Hockaday in the statement.

Sprint’s CFO Paul Saleh will serve as acting CEO until a replacement is named.

—R. Scott Macintosh

If a Wall Street Journal story is true about Sprint Nextel’s board members quietly trying to replace CEO Gary Forsee, the beleaguered executive will never have to work again. Forsee’s contract calls for as much as $54 million in compensation and benefits should he be forced from the company. Nevertheless, Forsee might be wishing for a buyout instead. Deposition by a change of control calls for a severance package worth as much as $90 million, and a means of preserving his pride.

According to the Journal’s story, citing unnamed sources and activist investor Ralph Whitworth, the board has been dissatisfied with Sprint’s churn rate—the steady clip by which the telecom company has been losing customers—and the risk involved with creating its multi-billion-dollar WiMax technology.

The authors of the story state, perhaps rather broadly and bluntly, that “many of Sprint’s troubles stem from its reliance on customers with poor credit, the cellphone industry’s version of the subprime market. The same kinds of people who have trouble paying their mortgages on time also have trouble paying cellphone bills.”

The story also states that the board hopes to announce a replacement by early December.

—R. Scott Macintosh