-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QnEte6zdui4FVDHTrOAC83MFEiGnN76RVn9+EOlX7fkhxmAH/9AxidxtF0byTjs4 kZB1QfGgkq58BIGqr3abkA== 0001138641-02-000002.txt : 20020509 0001138641-02-000002.hdr.sgml : 20020509 ACCESSION NUMBER: 0001138641-02-000002 CONFORMED SUBMISSION TYPE: PX14A6G PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20020509 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: QWEST COMMUNICATIONS INTERNATIONAL INC CENTRAL INDEX KEY: 0001037949 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 841339282 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PX14A6G SEC ACT: 1934 Act SEC FILE NUMBER: 001-15577 FILM NUMBER: 02638864 BUSINESS ADDRESS: STREET 1: 1801 CALIFORNIA ST CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3039921400 MAIL ADDRESS: STREET 1: 1801 CALIFORNIA ST CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: QUEST COMMUNICATIONS INTERNATIONAL INC DATE OF NAME CHANGE: 19970416 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ASSOCIATION OF US WEST RETIREES CENTRAL INDEX KEY: 0001138641 STATE OF INCORPORATION: CO FILING VALUES: FORM TYPE: PX14A6G BUSINESS ADDRESS: STREET 1: 1500 SOUTH MACON ST. CITY: AURORA STATE: CO ZIP: 80012 BUSINESS PHONE: 3037437928 PX14A6G 1 auswr.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 NOTICE OF EXEMPT SOLICITATION 1. Name of the Registrant: QWEST COMMUNICATIONS INTERNATIONAL, INC. 2. Name of person relying on exemption: ASSOCIATION OF US WEST RETIREES 3. Address of person relying on exemption: 1833 East Gary Street, Mesa, AZ 85203-4510 4. Written materials. Attach written materials required to be submitted pursuant to Rule 14a-6(g)(1) [sec. 240.14a-6(g)(1)] ASSOCIATION OF US WEST RETIREES 1833 E. Gary Street, Mesa, AZ 85203-4510 April 25, 2002 DEAR FELLOW QWEST SHAREOWNER: We urge you to VOTE FOR two very important shareholder resolutions relating to executive compensation on Qwest's proxy card for the June 4 annual meeting. PROPOSAL NO. 3 deserves your special attention and support. Although Qwest CEO Joseph Nacchio calls it "corporate McCarthyism,"/1/ controversy over the quality of Qwest's reported earnings pre-dates the SEC investigation initiated last month./2/ This proposal asks the Board of Directors not to include accounting-rule income - - particularly "pension credits" from projected increases in the employee pension plan surplus - - in formulas used to determine performance-based compensation for top executive officers. WE URGE YOU TO VOTE YOUR QWEST PROXY FOR PROPOSAL NO. 3 AND STRENGTHEN THE LINK BETWEEN EXECUTIVE PAY AND OPERATING PERFORMANCE. Since 1999, a large and growing portion of Qwest's reported operating income has not been cash flow from ordinary operations, but rather accounting rule "pension credits." Among S&P 500 firms, only two companies -- USX and McDermott International -- received a proportionately greater contribution to pretax income from pension credits in 2000 than did Qwest. (McDermott's board voluntarily adopted the policy proposed in our resolution in February.) Thanks to $319 million in pension credits, Qwest turned what would have been a $193 million pretax loss into a reported pretax gain of $126 million./3/. During the first nine months of 2001, the company boosted reported earnings with $253 million in pension credits, more than during the first three quarters of 2000. WE BELIEVE ACCOUNTING-RULE CREDITS FROM PENSION GAINS SHOULD NOT BE COUNTED IN SETTING PERFORMANCE-BASED PAY. To be sure, Generally Accepted Accounting Principles require companies to report expected increases in the pension surplus as income. We agree with Proponents that Qwest's Board should determine performance-based pay using a measure of earnings from operations that excludes non-cash accounting-rule credits. /1/ See The Wall Street Journal, "Qwest, WorldCom Face SEC Inquiries, Telecom Companies Say Regulator is Looking Into Their Accounting," March 12, 2002, p. A3. /2/ See Business Week, "Why Earnings Are Too Rosy," Aug. 13, 2001; Barron's, "Red-Handed?" July 9, 2001; and Business Week, "On the Firing Line at Qwest," Oct. 29, 2001. /3/ Credit Suisse First Boston, "A Pension Accounting Primer," June 13, 2001. We agree with Proponents that pension credits should NOT boost executive pay for the following additional reasons: - - - PENSION CREDITS DO NOT MEASURE OPERATING PERFORMANCE. Pension credits boost reported earnings, but have nothing to do with the current performance of management. "The 'earnings' created by pension plans will not inure to common stock investors," writes Jack Ciesielski, publisher of The Analyst's Accounting Observer." /4/ He notes that firms "cannot use this money to finance capital projects, buy stock, or pay dividends. It does nothing to increase cash flow."/5/ - - - PENSION CREDITS CAN BE "PHANTOM INCOME." Pension credits often do not even reflect actual investment gains or an increase in the pension surplus, since the credits are based entirely on "expected returns" using assumptions set by management. In Enron's wake Business Week launched its series "The Fine Print" by examining footnotes disclosing Qwest's pension credits, stating: "Even though Qwest booked income from its pension plan, the plan actually lost $78 million in 2000. That helped to reduce the plan's value to $13.6 billion."/6/ - - - TYING PAY TO PENSION CREDITS CAN CREATE PERVERSE INCENTIVES. If pension credits boost performance pay, we believe executives will have a short-term self-interest in policies that manipulate pension accounting assumptions, slash employee benefits, or skip cost-of-living adjustments for retirees - - practices that in our view could prove negative for shareholder value over the long-term. WE ALSO URGE YOU TO SUPPORT SHAREHOLDER PROPOSAL NO. 2 REQUESTING SHAREHOLDER APPROVAL FOR FUTURE "GOLDEN PARACHUTE" SEVERANCE AGREEMENTS with the Company's top executive officers. We agree with Proponents' view that multi-million dollar parachute agreements like those at Qwest - - and particularly the provisions pertaining to CEO Nacchio, who received total compensation of $96.2 million in 2000 - - are contrary to shareholder interests because they may be triggered even by voluntary departures in situations that do not involve a hostile change in control of the company. I hope you will join us in voting your shares in Qwest on behalf of these two Proposals. Sincerely, Philip M. Graham Hazel A. Floyd Qwest Shareholder and Qwest Shareholder and Treasurer, Colorado President, Association of US West Retirees Association of US West Retirees (TEXT BOX) PLEASE NOTE THAT THE COST OF THIS LETTER IS BEING BORNE ENTIRELY BY THE RETIREE ORGANIZATIONS AFFILIATED WITH THE ASSOCIATION OF US WEST RETIREES. THIS LETTER IS NOT A SOLICITATION. ***** PLEASE DO NOT SEND YOUR PROXY CARD TO THE ASSOCIATION.**** /4/ Jack Ciesielski, "Pondering Pensions: Addendum," The Analyst's Accounting Observer, June 11, 2001. /5/ See Laurie Kaplan Singh, "Feathering the Nest Egg," CFO Magazine, October 1, 2000. /6/ Anne Tergesen, "The Fine Print: How to Read Those Key Footnotes," Business Week, Feb. 4, 2002. -----END PRIVACY-ENHANCED MESSAGE-----