Given the rising backlash against poorly policed corporations, you would think companies and their boards of directors might be sensitive these days to potential conflicts of interest. After all, directors are tough watchdogs who represent shareholder interests and keep a leash on corporate executives. Right?
(Ladies and gentlemen. This column will take a brief intermission at this point so readers may laugh or snort in disbelief.)
On the bright side, a few directors are rediscovering their spines and demanding more accountability. On the dark side, it's still hard for most directors to be independent when they are so busy licking a CEO's boots.
Signs of polished tongues abound in this spring season of annual shareholder meetings.
One director already unlucky enough to catch the media spotlight is prominent Tallahassee lawyer DuBose "Duby" Ausley. From 1997 to 2001, his law firm received more than $2-million in legal fees from Sprint. Ausley, 65, sits on the telephone giant's clubby and calcified board of directors, one well known for wimpy oversight.
Sprint pays each of its directors $40,000 a year, plus meeting fees. And here's an unusual perk: Outside directors receive up to $6,000 a year in Sprint residential long distance service, plus Sprint cellular service of up to $2,000 per year. And they are reimbursed for income taxes associated with these benefits.
Along with Ausley, long-entrenched Floridians on the Sprint board include former Barnett Banks chairman Charles Rice (a board member for 28 years) and former Eckerd Corp. chairman Stewart Turley (a board member for 23 years).
You may recall last month that Sprint chairman and CEO William T. Esrey and president Ronald T. LeMay were tossed out after it was reported that they participated in a questionable tax shelter, set up by Sprint auditor Ernst & Young, to shield more than $100-million in stock option gains.
That scandal was the result of earlier actions by Sprint directors. The board flooded Esrey and LeMay with options, then accelerated the executives' vesting schedule after shareholders approved a merger with WorldCom Inc., a deal regulators later blocked. After exercising so many options, the two Sprint execs grabbed the recommended tax shelters.
Ausley, a longtime Sprint director, told the Tallahassee Democrat that his law firm's ties to Sprint are disclosed in the company's annual proxy statement, and he insists he acts as an independent director unbeholden to any company he oversees.
Which brings us closer to home, where Ausley is in his 11th year on the board of Tampa's financially challenged TECO Energy. Last year, TECO paid legal fees of $1.1-million to Ausley's law firm.
Are Ausley's cozy ties to these companies unusual? Not at all. Are they increasingly discouraged and frowned upon? You bet, but change is glacial.
TECO shareholders will gather April 22 at the power company's annual meeting. This year's gathering is unusual because there are three shareholder proposals to be considered and voted upon. All three recommend changes in how TECO picks its directors or how it accounts for stock options awarded to executives.
As for TECO, whose board, needless to say, uniformly opposes each of these shareholder proposals, its shares on Thursday fell to a 16-year low.
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STUMBLE AT HOPS?: Avado Brands, the Georgia restaurant operator of 66 Hops Restaurants and 115 Don Pablo's Mexican Kitchens, is so squeezed for cash that its auditors are questioning the company as a "going concern." The first Hops opened in Clearwater in 1989, and the chain now operates out of Tampa. Parent Avado says it has recurring operating losses and must reduce its debt by May 25. It doesn't help that Avado's 1998 federal income tax returns are being audited by the Internal Revenue Service. If Avado can't meet its spring credit deadlines, the interest rate on its loans skyrockets to 18.75 percent. . . .
CHICO'S DEFIES GRAVITY: Most retailers are suffering the economic downturn. But not Chico's FAS Inc., the women's apparel chain of 338 stores based in Fort Myers. Growth is so strong that the company is launching another chain called Pazo aimed at a younger clientele: women ages 25 to 35. Wall Street loves this company, for good reason. Chico's 90.7 percent, five-year compound average annual return makes it the best five-year performer in this year's Wall Street Journal shareholder scoreboard.
RUN, DILBERT, RUN: Corporations may promote the idea of employee loyalty, but some businesses obviously don't believe in it. Enter Florida's Humint Employment Services, a Boca Raton venture that advertises itself as a provider of undercover employees. Companies bring in the actors, introduced as the newest hires, to monitor employee behavior. Won't workers be angry when they learn of such spying? Not at all, says Humint, an espionage term short for "human intelligence." Most employees will never know. Gee, I feel so much better. . . .
_ Robert Trigaux can be reached at trigauxsptimes.com or (727) 893-8405.