State PSC commissioner upset over executive pay

By Mike Dennison

Independent Record, helenair.com

Wednesday, October 13, 2010

Public Service Commissioner Ken Toole, D-Helena, this week blasted the multimillion-dollar rewards Qwest executives will receive for a company buyout, saying it’s an outrageous use of company funds.

“It’s a heck of a payday for the top brass at Qwest,” he said, noting that Qwest’s board members and top seven executives will get payouts totaling $132 million if the company merges with Century Link Corp. “Imagine how many small towns in Montana could have better service if Qwest put that money to work on the ground.”

Century Link and Qwest need approval from 21 states for the merger, including Montana. Qwest serves about 300,000 telephone customers in Montana, whose commission has yet to rule on the merger.

Toole, who represents District 5 on the PSC, recently led the push for a new commission rule that says salaries of regulated utilities’ top three executives in Montana are public information, when filed with the PSC.

Toole said publicizing utility executive salaries is a step toward affecting unreasonably high pay, because companies will react to public outrage over high salaries.

“When top managers live in communities with their customers, it provides some accountability,” he said Monday.

The rule, endorsed by the PSC last month, has been challenged in court by Mountain Water Co., the utility providing municipal water to Missoula. The company argues that the rule unconstitutionally invades the privacy of its executives.

Bill Gallagher, the Republican challenging Toole for re-election this year, also has criticized the rule, saying it’s election-year grandstanding by Toole. The rule is clearly unconstitutional and defending it in court is a waste of taxpayer money, Gallagher has said.

Toole said he’s long been a critic of excessive executive salaries and has pursued the issue since he got on the commission in 2007. The Qwest salary information is public only because it’s filed with the U.S. Securities and Exchange Commission, he said.

Qwest plans to pay severance compensation to its top executives once the merger with Century Link is complete. It includes cash payments and “accelerated vesting” of stock bonuses, meaning the executives can cash in the stock for its full value upon leaving the company.

Qwest CEO Edward Mueller is scheduled to receive a compensation package worth nearly $32 million.

Diane Reberger, a Qwest spokeswoman in Denver, said all but one of the executives will be leaving the company after the merger is complete. Their compensation package is “within the standard practice” of companies similar to Qwest, to offer such packages of about three times the executives’ annual salary, she said.

“We’re competing for executive talent among our peers,” she said. “Our compensation plans need to be competitive with our peers.”

Toole said he’s not sympathetic.

“Qwest is just one rotten apple in a barrel of rotten apples,” he said. “Executive pay practices have gotten out of control. … The first step in getting control of this problem is to make sure the public knows what’s going on.”