Dan Hesse, CEO of Sprint Nextel Corp., has agreed to forgo $3.25 million in his 2012 compensation package after the company heard from unhappy shareholders.
Blame the iPhone.
Sprint has said its own finances will suffer this year because it is offering the Apple Inc. iPhone to customers at steep discount prices, made up out of Sprint’s own pocket.
Management, including Hesse, expects the iPhone to make up the difference and then some by attracting more customers who will pay more phone bills over the years. But for now, it hurts the bottom line.
Last year, Sprint told employees it wouldn’t count the iPhone’s effect when figuring their bonuses tied to the company’s performance. That meant eligible employees, including Hesse, made more last year than they would have otherwise.
Sprint has reported Hesse’s 2011 compensation as $11.88 million.
Hesse, in a letter to the company Friday, noted that Sprint “has received feedback from some shareholders” about the iPhone adjustment and that he would give his up. He went further to give even some additional compensation so other employees could keep their higher iPhone-adjusted pay.
“I do not want to penalize Sprint employees for the company’s investment with Apple, so I will forgo this adjustment to my compensation,” the letter said.
Hesse’s offer, accepted by the company, stands as a rare moment in which a sitting CEO returns pay he already has received and agrees to reduce how much he can earn during the current year.
His letter offered to let Sprint take $346,223 out of his remaining paychecks this year to return pay he received last year thanks to the iPhone adjustment.
He agreed to forfeit $544,607 he is scheduled to receive in 2013 and 2014 under long-term incentive pay plans that were based on how well Sprint did in 2011.
Hesse offered to lower by $2.36 million how much he could earn this year from meeting the board’s performance expectations.
Sprint Chairman Jim Hance issued a statement that said in part: “We applaud Dan for his willingness to sacrifice personal compensation in order to reduce any distraction that could negatively affect the morale and performance of the company.”
Hance also said Hesse “enjoys the full support of our board of directors, and we appreciate the leadership he has demonstrated.”
There have been unconfirmed reports that Hesse’s position with some shareholders and the board of directors had been weakened by a bid to buy smaller rival wireless phone company MetroPCS Communications Inc. The reports said the board rejected the bid.