CWA Retirees Challenge Lucent on Health Benefits

By Ben Klayman

CHICAGO, Feb 18 (Reuters) - Shareholders of Lucent Technologies Inc. (LU.N: Quote, Profile, Research) , one of the world's largest makers of telecommunications equipment, on Wednesday voted in favor of a nonbinding proposal to limit severance compensation for senior executives.

Company officials said they would consider the proposal, which they had opposed, although it is not required to adopt it. About 65 percent of the shares cast at the annual meeting in Wilmington, Delaware, favored the proposal, while 32 percent were opposed.

Shareholders across Corporate America have become increasingly concerned about executive compensation over the past couple of years. Many have tried to rein in some forms of compensation at various companies following the accounting scandals at such companies as Enron and WorldCom.

Also at the meeting, Lucent Chairman and Chief Executive Patricia Russo and other executives were criticized by several shareholders and retirees for the company's drastic cost cuts, which have included slashing 12,500 jobs in fiscal 2003 and reducing health-care benefits.

Russo said the moves were necessary to ensure Lucent's return to profitability, which occurred in the fiscal fourth quarter ended last September.

In response to criticism that executives were not sharing the pain experienced by workers and retirees, Russo said the company sets compensation to compete with its rivals, and that no bonuses to senior executives based on company performance had been paid in the three years prior to fiscal 2003.

Executives, including Russo, have received bonuses over the past several years as part of hiring and retention agreements.

Officials with the Communications Workers of America union, which represents about 3,600 Lucent hourly workers, warned company officials they would not allow future shifting of health-care costs to its active and retired members.

The proposal to limit severance, or "golden parachute," payments that exceed 2.99 times an executive's combined base salary and bonus was supported by corporate governance watchdog Institutional Shareholder Service (ISS). The ISS said earlier this month that such a move would "prevent excessive 'pay for failure' packages."

Lucent had said taking such an approach would hinder its ability to attract and retain executives, and added that its current policy already limits such payments to an executive's annual base salary plus his or her bonus. ISS said, nevertheless, that the proposal would ensure good future corporate governance.

Other proposals that shareholders supported at the Murray Hill, New Jersey-based company's annual meeting included allowing the election of the entire board in the same year and the removal of board members without cause, as well as extending for another year the board's ability to authorize a reverse stock split.

A shareholder proposal to stop awarding stock options and severance payments to the top five executives was opposed by 68 percent of the votes cast while about 28 percent supported it.

Lucent's Russo repeated that she is "cautiously optimistic" about the telecom sector stabilizing and showing signs of growth in certain areas. She reiterated that Lucent expects a profit, before one-time items, in fiscal 2004.

The votes are preliminary, and final results will be available in the next few days, the company said.

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