UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a party other than the Registrant ¨
Check appropriate box:
¨ | Preliminary Proxy Statement | |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
x | Definitive Proxy Statement | |
¨ | Definitive Additional Materials | |
¨ | Soliciting Material under § 240.14a-12 |
SPRINT CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
x | No fee required. | |||
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies:
| |||
(2) | Aggregate number of securities to which transaction applies:
| |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
(4) | Proposed maximum aggregate value of transaction:
| |||
(5) | Total fee paid:
| |||
¨ | Fee paid previously with preliminary materials: | |||
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | |||
(1) | Amount Previously Paid:
| |||
(2) | Form, Schedule or Registration Statement No.:
| |||
(3) | Filing Party:
| |||
(4) | Date Filed:
|
|
| |
Notice of Annual Meeting of Stockholders and Proxy Statement
| ||
To be held August 6, 2014
|
Notice of Annual Meeting and Proxy Statement
It is my pleasure to invite you to attend our 2014 Annual Meeting of Stockholders on Wednesday, August 6, 2014 at 1:00 p.m. Pacific. We are very pleased that this years annual meeting will be a completely virtual meeting of stockholders, which will be conducted via live webcast. You will be able to attend the 2014 Annual Meeting online, vote your shares electronically and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/SprintCorp14.
The purpose of the annual meeting is to consider and take action on the following:
1. | Election of the nine directors named in the proxy statement; |
2. | Ratification of the selection of the independent registered public accounting firm; |
3. | Advisory approval of the Companys named executive officer compensation; |
4. | Vote on two stockholder proposals, if presented at the meeting; and |
5. | Any other business that properly comes before the meeting as well as any adjournment or postponement of the meeting. |
We are taking advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to you via the Internet. Unless you have already requested to receive a printed set of proxy materials, you will receive a Notice Regarding the Availability of Proxy Material, or Notice. The Notice contains instructions on how to access proxy materials and vote your shares via the Internet or, if you prefer, to request a printed set of proxy materials at no additional cost to you. We believe that this approach provides a convenient way for you to access your proxy materials and vote your shares, while lowering our printing and delivery costs and reducing the environmental impact associated with our annual meeting.
Stockholders of record as of June 9, 2014 are eligible to vote at the annual meeting. On or about June 27, 2014, we mailed the Notice or, for stockholders who have already requested to receive a printed set of proxy materials, this proxy statement, the accompanying proxy card and the Transition Report on Form 10-K for the three month transition period ended March 31, 2014.
By order of the Board of Directors,
Charles R. Wunsch Senior Vice President, General Counsel and Corporate Secretary |
REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:
| ||||||
VIA THE INTERNET Visit the website listed on your proxy card |
BY MAIL Sign, date and return your proxy card in the enclosed envelope | |||||
BY TELEPHONE Call the telephone number on your proxy card |
IN PERSON Attend our virtual stockholder meeting on August 6, 2014 |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 6, 2014. The Notice of Annual Meeting, Proxy Statement and Transition Report on Form 10-K are available at
www.proxyvote.com.
Table of Contents
2 | Notice of Annual Meeting and Proxy Statement |
Proposal 1 Election of Directors
|
Notice of Annual Meeting and Proxy Statement | 3 |
Proposal 1 Election of Directors
4 | Notice of Annual Meeting and Proxy Statement |
Proposal 1 Election of Directors
ROBERT R. BENNETT, 56, Sprint director since 2006; Managing Director of Hilltop Investments, LLC, a private investment company. | ||||||
Status: Independent, Continuity Director |
Committees: Audit (Chair) and Finance | |||||
Public Company Board Directorships: Hewlett-Packard Company, Discovery Communications, Inc., and Liberty Media Corporation
Former Directorships Held During the Past Five Years: Liberty Interactive Corporation, Demand Media, Inc., and Discovery Holding Company
Biography: Mr. Bennett served as President of Discovery Holding Company from March 2005 until September 2008, when the company merged with Discovery Communications, Inc., creating a new public company. Mr. Bennett also served as President and CEO of Liberty Media Corporation (now Liberty Interactive Corporation) from April 1997 until August 2005 and continued as President until February 2006. He was with Liberty Media from its inception, serving as its principal financial officer and in various other capacities. Prior to his tenure at Liberty Media, Mr. Bennett worked with Tele-Communications, Inc. and the Bank of New York.
Qualifications: Mr. Bennett has extensive knowledge of the capital markets and other financial and operational issues from his experiences as a principal financial officer and president and chief executive officer of Liberty Media, which allows him to provide an invaluable perspective on financial and operational matters to our board.
GORDON M. BETHUNE, 72, Sprint director since 2004; retired Chairman and Chief Executive Officer of Continental Airlines, Inc., an international commercial airline company. | ||||||
Status: Independent, Continuity Director |
Committees: Compensation (Chair) and Nominating |
Public Company Board Directorships: Honeywell International, Inc. and Prudential Financial, Inc.
Former Directorships Held During the Past Five Years: Willis Group Holdings, Ltd.
Biography: Mr. Bethune served as Chief Executive Officer of Continental Airlines from 1994 and as Chairman and Chief Executive Officer from 1996 until December 30, 2004.
Qualifications: Mr. Bethune has extensive experience serving as a chief executive officer and director of large international corporations, providing our board with the perspective of someone familiar with all facets of an international enterprise. He has extensive experience with developing and implementing strategies and policies for the acquisition and development of employee talent.
|
Notice of Annual Meeting and Proxy Statement | 5 |
Proposal 1 Election of Directors
MARCELO CLAURE, 43, Sprint director since 2014; Chairman, CEO and President of Brightstar Corporation. | ||||||||
Status: |
SoftBank Affiliate Director SoftBank Designee |
Committee: Finance | ||||||
Biography: Mr. Claure is the founder of Brightstar Corp. and has been its Chairman, Chief Executive Officer and President since October 1997. Brightstar provides value-added distribution, supply chain solutions, handset protection and insurance, buy-back and trade-in solutions, multi-channel retail solutions, and financial services to wireless manufacturers, retailers and operators. Mr. Claure has been an Executive Director of Brightstar Corp. since October 1997. He serves as a Director of Activate IT, Inc. He serves on the board of directors of the Bolivian-American Chamber of Commerce and serves on the Board of Trustees of Bentley College.
Qualifications: Mr. Claure was selected because of his experience making Brightstar one of the largest global distribution, services, and innovation companies in the telecommunications industry. His experience in the telecommunications industry provides a valuable perspective to our board.
RONALD D. FISHER, 66, Sprint director since 2013 and Vice Chairman of the Board; Director and President of SoftBank Holdings Inc. | ||||||||
Status: |
SoftBank Affiliate Director SoftBank Designee |
Committees: Finance (Chair) Compensation | ||||||
Public Company Board Directorships: SoftBank Corp. (Tokyo Stock Exchange)
Biography: Mr. Fisher has over 30 years of experience of working with high growth and turnaround technology companies. Mr. Fisher joined SoftBank in 1995, overseeing its U.S. operations and other activities outside of Asia, and was the founder of SoftBank Capital. He is currently Director and President of SoftBank Holdings, Inc. Prior to joining SoftBank, Mr. Fisher was the CEO of Phoenix Technologies Ltd., the leading developer and marketer of system software products for personal computers, from 1990 to 1995. Mr. Fisher joined Phoenix from Interactive Systems Corporation, a UNIX software company that was purchased by the Eastman Kodak Company in 1988. At Interactive Systems he served for five years as President, initially as COO and then CEO. Mr. Fishers experience prior to Interactive Systems includes senior executive positions at Visicorp, TRW, and ICL (USA).
Qualifications: Mr. Fisher was selected because he possesses particular knowledge and experience in technology industries, and with strategic planning and leadership of complex organizations, including at other public corporations.
6 | Notice of Annual Meeting and Proxy Statement |
Proposal 1 Election of Directors
DANIEL R. HESSE, 60, Sprint director since 2007, President and Chief Executive Officer of Sprint. | ||||
Status: Executive Director | ||||
Former Directorships Held During the Past Five Years: Clearwire Corporation |
Biography: Before becoming the President and Chief Executive Officer in December 2007, Mr. Hesse was Chairman, President, and Chief Executive Officer of Embarq Corporation. He served as Chief Executive Officer of Sprints Local Telecommunications Division from June 2005 until the Embarq spin-off in May 2006. Before that, Mr. Hesse served as Chairman, President and Chief Executive Officer of Terabeam Corp., a wireless telecommunications service provider and technology company, from 2000 until 2004. Prior to serving at Terabeam Corp., Mr. Hesse spent 23 years at AT&T holding various senior management positions, including President and Chief Executive Officer of AT&T Wireless Services. He serves on the board of directors of the National Board of Governors of the Boys and Girls Clubs of America and the University of Notre Dames Mendoza College of Business.
Qualifications: As our President and Chief Executive officer, Mr. Hesse provides our board with unparalleled insight into our companys operations, and his 37 years of experience in the telecommunications industry provides substantial knowledge of the challenges and opportunities facing our company.
FRANK IANNA, 65, Sprint director since 2009; retired. | ||||||
Status: Independent, Continuity Director |
Committees: Audit and Nominating | |||||
Public Company Board Directorships: Harbinger Group, Inc. | ||||||
Former Directorships Held During the Past Five Years: Clearwire Corporation and Tellabs, Inc.
Biography: Mr. Ianna retired from AT&T in 2003 after a 31-year career serving in various executive positions, most recently as President of Network Services. Following his retirement, Mr. Ianna served as a business consultant, executive and board member for several private and nonprofit enterprises. He has experience in telecom company operations as well as wireless technology.
Qualifications: Mr. Iannas technical background and expertise, as well as his vast experience in the telecommunications industry as an executive and director for a diverse array of enterprises, allows him to provide a unique perspective to our board on a wide variety of issues.
|
Notice of Annual Meeting and Proxy Statement | 7 |
Proposal 1 Election of Directors
ADM. MICHAEL G. MULLEN, 67, Sprint director since 2013; former 17th Chairman of the Joint Chiefs of Staff | ||||||
Status: Independent, SoftBank Designee | Committee: Compensation | |||||
Public Company Board Directorships: General Motors Company | ||||||
Biography: Adm. Mullen serves on the board of directors as the Security Director under the National Security Agreement between Sprint, SoftBank, the Department of Justice, the Department of Homeland Security, and the Department of Defense (the NSA). Admiral Mullen served as the 17th Chairman of the Joint Chiefs of Staff from October 2007 until his retirement in September 2011. Previously, Admiral Mullen served as the 28th Chief of Naval Operations (CNO) from July 2005 to 2007. CNO was one of four different four-star assignments Admiral Mullen held, including Commander, U.S. Naval Forces Europe and Commander, Allied Joint Force Command, and the 32nd Vice Chief of Naval Operations. Since 2012, he has served as President of MGM Consulting LLC and is the Charles and Marie Robertson Visiting Professor at the Woodrow Wilson School of Public and International Affairs at Princeton University.
Qualifications: Adm. Mullen brings to our board extensive senior leadership experience gained during his 43-year career in the U.S. military. As Chairman of the Joint Chiefs of Staff, the highest ranking officer in the U.S. military, Adm. Mullen led the armed forces during a critical period of transition, overseeing two active war zones. Adm. Mullens experience and relationships within the government allow him to lead our Government Security Committee and provide guidance on national security matters impacting the telecommunications industry. Adm. Mullens unique experience leading change in complex organizations, executive development and succession planning, diversity implementation, crisis management, strategic planning, budget policy, risk management, and technical innovation, are important to the oversight of Sprints business and allows him to make a significant and invaluable contribution to our board.
MASAYOSHI SON, 56, Chairman of the Board, Sprint director since 2013; Chief Executive Officer and Chairman of the Board of SoftBank Corp. | ||||||||
Status: |
SoftBank Affiliate Director, SoftBank Designee |
Committee: Finance | ||||||
Public Company Board Directorships: SoftBank Corp. and Yahoo! Japan Corporation (each are listed on the Tokyo Stock Exchange)
Biography: Mr. Son founded SoftBank in September 1981, and has been its President and Chairman ever since and its Chief Executive Officer since February 1986. Mr. Son serves in various capacities with SoftBanks portfolio of companies, including service with BB Technologies Corporation (currently SoftBank BB Corp.) as president since 2001 and as Chairman and CEO since 2004, service with Japan Telecom Co., Ltd. (currently SoftBank Telecom Corp.) as Chairman since 2004 and CEO since 2006, and with Vodafone K.K. (currently SoftBank Mobile Corp.) as CEO and Chairman since 2006. In addition, Mr. Son has served as Chairman of Yahoo! Japan Corporation since 1996, which was established as a joint venture between SoftBank and Yahoo! Inc. Mr. Son has also served as Chairman of the Broadband Association in Japan and of The Great East Japan Earthquake Recovery Initiative Foundation.
8 | Notice of Annual Meeting and Proxy Statement |
Proposal 1 Election of Directors
Qualifications: Mr. Sons vast experience in the telecommunications industry, including his successes in Japan disrupting telecom duopolies, is valuable to Sprint. As part of the SoftBank Merger, it was determined that Mr. Son, because of his interest as Chairman and Chief Executive Officer of SoftBank, our controlling stockholder, would be appointed to our board. Mr. Son provides expertise, leadership and strategic direction to the Sprint board.
SARA MARTINEZ TUCKER, 59, Sprint director since 2013; President and Chief Executive Officer of the National Math and Science Initiative | ||||||
Status: Independent, SoftBank Designee | Committees: Nominating (Chair) and Audit | |||||
Public Company Board Directorships: American Electric Power Co., Inc. and Xerox Corp.
Biography: Ms. Tucker has been Chief Executive Officer and President at National Math and Science Initiative, Inc. since March 2013. Ms. Tucker served as the Under Secretary of the U.S. Department of Education from 2006 to December 2008. Her responsibilities included overseeing policies, programs and activities related to postsecondary education, vocational and adult education, and federal student aid. Ms. Tucker served as the Chief Executive Officer and President of the Hispanic Scholarship Fund from 1997 to October 1, 2006. Previously, she worked for 16 years at AT&T and served as Regional Vice President of its Global Business Communications Systems. She serves as a Director of Teach For America, Inc. She has been a Trustee of University of Notre Dame since June 2009.
Qualifications: Ms. Tucker brings to our board expertise relevant to a large telecommunications company, including her business experience and executive leadership expertise. These skills and experience are the result of her education, experience in the telecommunications industry, service at the U.S. Department of Education, leadership positions at the Hispanic Scholarship Fund and her service on other public company boards and committees.
|
Notice of Annual Meeting and Proxy Statement | 9 |
Proposal 1 Election of Directors
Summary of Director Qualifications and Expertise
The table below summarizes the key qualifications, skills or attributes of each of our directors that were most relevant to the decision to nominate him or her to serve on our board. The lack of a mark does not mean the director does not possess that qualification or skill; rather a mark indicates a specific area of focus or expertise on which our board relies most heavily. These qualifications and relevant experience have been discussed in more detail above.
Experience, |
Son | Fisher | Bennett | Bethune | Claure | Hesse | Ianna | Mullen | Tucker | |||||||||
Telecom |
|
|||||||||||||||||
Technology, Device and Services |
||||||||||||||||||
Leadership |
||||||||||||||||||
Global Business | ||||||||||||||||||
Financial |
||||||||||||||||||
Mergers & Acquisitions | ||||||||||||||||||
Public Company Board Service or Governance | ||||||||||||||||||
Research & Academic | ||||||||||||||||||
Ethnicity, Gender, National or Other Diversity |
Our Board of Directors Recommends That You Vote FOR The Directors Nominated In Proposal 1.
10 | Notice of Annual Meeting and Proxy Statement |
Board Operations
Governance Highlights
In keeping with good corporate governance practices, we maintain a comprehensive set of corporate governance initiatives that include the following:
ü | maintaining a majority of independent directors; |
ü | an Audit Committee comprised solely of independent directors; |
ü | a Nominating Committee currently comprised solely of independent directors; |
ü | a Compensation Committee chaired by an independent director; |
ü | Bylaws that provide, for so long as we are a controlled company, at least one member of our Compensation Committee and Nominating Committee will be independent; |
ü | maintaining written charters for each of our standing committees; |
ü | giving independent directors the ability to propose agenda items, including for executive sessions; |
ü | refining our policies and goals with respect to the determination of executive compensation programs, including increasing emphasis on performance-based equity compensation, as further described under Executive Compensation Compensation Discussion and Analysis; |
ü | permitting our stockholders to take certain actions by written consent; |
ü | adopting stock ownership guidelines for any officer at the level of senior vice president or above and for outside directors; and |
ü | maintaining a declassified board. |
|
Notice of Annual Meeting and Proxy Statement | 11 |
Board Operations
12 | Notice of Annual Meeting and Proxy Statement |
Board Operations
|
Notice of Annual Meeting and Proxy Statement | 13 |
Board Operations
14 | Notice of Annual Meeting and Proxy Statement |
Board Operations
Our board has four standing committees: Audit Committee, Finance Committee, Compensation Committee, and Nominating Committee. Each committee is described in the table below and each has a charter that describes such committees primary functions and principal responsibilities. A current copy of our Corporate Governance Guidelines and the charter for each standing committee of our board is available at www.sprint.com/governance or by email at shareholder.relations@sprint.com. Our charters and Corporate Governance Guidelines were adopted by our board and are annually reviewed and revised as necessary.
Committee Name and Membership | Primary Functions | |
The Audit Committee Robert R. Bennett, Chair Frank Ianna Sara Martinez Tucker
Ms. Tucker and Messrs. Bennett and Ianna are each an audit committee financial expert as defined in the SECs rules and each are financially literate and able to devote sufficient time to serving on the Audit Committee. |
Include assisting our board in fulfilling its oversight responsibilities with respect to:
the integrity of our financial statements and related disclosures, as well as related accounting and financial reporting processes; our compliance with legal and regulatory requirements; our independent registered public accounting firms qualifications, independence, audit and review scope, and performance; the audit scope and performance of our internal audit function; related party transactions policy and procedures; our ethics and compliance program; the audit committee report to be included in our annual proxy statement, and our enterprise risk management program.
The Audit Committee also has sole authority for the appointment, retention, termination, compensation, evaluation and oversight of our independent registered public accounting firm. The committees principal responsibilities in serving these functions are described in the Audit Committee Charter. | |
The Finance Committee Ronald D. Fisher, Chair Robert R. Bennett Marcelo Claure Masayoshi Son |
Include:
reviewing and approving our financing activities consistent with the authorization levels set forth in our fiscal policy; reviewing and making recommendations to our board on our capital structure, annual budgets, financial risk management, fiscal policy, investment policy and other significant financial initiatives; and reviewing and approving proposed acquisitions, dispositions, mergers, joint ventures and similar transactions consistent with the authorization levels set forth in our fiscal policy. |
|
Notice of Annual Meeting and Proxy Statement | 15 |
Board Operations
Committee Name and Membership | Primary Functions | |
The Compensation Committee Gordon M. Bethune, Chair Ronald D. Fisher Adm. Michael G. Mullen |
Include:
discharging our boards responsibilities relating to compensation of our executives in general and our principal senior officers in particular; reporting on executive compensation in our annual proxy statement in accordance with applicable rules and regulations; and reviewing with management plans for the development and orderly succession of senior officers.
Additional information about these processes and procedures can be found below in Executive Compensation Compensation Discussion and Analysis.
Generally, the Compensation Committees primary processes for establishing and overseeing outside director compensation and the role of Company personnel and compensation consultants are similar to those regarding executive compensation. Any appropriate changes to outside director compensation are made following recommendation to our board by the Compensation Committee. In accordance with its charter, the Compensation Committee may delegate authority to subcommittees or any committee member when appropriate. | |
The Nominating & Corporate Governance Committee Sara Martinez Tucker, Chair Gordon M. Bethune Frank Ianna |
Subject to our Certificate of Incorporation, Bylaws and Corporate Governance Guidelines, include:
ensuring that our company has effective corporate governance policies and procedures and an effective board and board review process; assisting our board by identifying individuals qualified to become directors; recommending to our board for approval the director nominees for the next annual meeting of the stockholders; recommending to our board for approval the chairs and members of each board committee; and developing, reviewing, and recommending to our board corporate governance policies and practices designed to benefit our stockholders. |
16 | Notice of Annual Meeting and Proxy Statement |
Board Operations
Calendar year 2013 Board and Committee Meetings |
Transition | |||||||
Total | Sprint Corporation |
Sprint Nextel |
Sprint Corporation | |||||
Board Meetings |
13 | 4 | 9 | 4 | ||||
Audit Committee |
11 | 5 | 6 | 2 | ||||
Compensation Committee |
6 | 3 | 3 | 2 | ||||
Finance Committee |
11 | 4 | 7 | 2 | ||||
Nominating Committee |
2 | None | 2 | None |
|
Notice of Annual Meeting and Proxy Statement | 17 |
Board Operations
Focus Area | 2013 Achievements | |||
People: We believe we should operate in a socially responsible way. This commitment sets the course for new opportunities for our customers, employees and communities. | - |
Provided charitable support for nearly 600 unique organizations, including more than $4 million in grants from the Sprint Foundation. | ||
- | Contributed more than 196,000 employee volunteer hours to community organizations across the country, worth an estimated $4.4 million. | |||
- | Launched a new Employee Resource Group, called REAL DEAL for employees with disabilities and the co-workers who support them. | |||
Product: Sprint offers solutions that allow customers to minimize their environmental footprint, help drivers stay safe behind the wheel, and to empower seniors and people with disabilities through accessible technology. | - |
Launched an Accessible Education ID Pack that makes it simple for students with print disabilities to access web-based educational content from their smartphone. | ||
- |
Worked with suppliers to launch two accessible mobile devices: Kyocera Kona, the first feature phone in the U.S. wireless industry to offer verbal translation enabling Internet browsing, and LG Optimus F3, the first U.S. smartphone to come preloaded with TalkBack by Google. | |||
- |
Developed a new website focused on providing a variety of privacy, safety and security content and solutions for customers. | |||
Planet: Sprints commitment to the planet means we strive to ensure responsible environmental stewardship in everything we do. | - |
Published a new supplier guide which provides information to suppliers on how to meet Sprints materiality assessment and greenhouse gas measurement and reporting criteria. | ||
- |
Sponsored a report commissioned by the World Wildlife Fund and the Carbon Disclosure Project called The 3% Solution, which uses rigorous analysis from the worlds leading consulting firms to demonstrate how the U.S. corporate sector can drive millions of dollars in savings by investing in carbon reduction activities. |
Our Nominating Committee has oversight of Sprints political contributions and expenses. Our Nominating Committee also reviews the Companys annual report on political contributions and discusses this report with our board. The report is available on our website at http://www.sprint.com/responsibility/gov-ethicspolicy/contributions.html. The report not only lists our contributions to political candidates during 2013, but it also describes the processes and oversight used in connection with such contributions.
18 | Notice of Annual Meeting and Proxy Statement |
Director Compensation
The compensation of our outside directors is partially equity-based and is designed to comply with our Corporate Governance Guidelines, which provide that the guiding principles behind our non-employee director compensation practices are: (1) alignment with stockholder interests; (2) preservation of independence; and (3) preservation of the fiduciary duties owed to all stockholders.
The following table summarizes director compensation for the members of Sprint Corporations board, with the exception of Messrs. Fisher, Hesse and Son. Our directors are also reimbursed for direct expenses relating to their activities as members of our board.
Compensation Element | Calendar Year 2013 Compensation |
Calendar Year 2014 Compensation | ||
($)(1) | ($) | |||
Annual Retainer |
80,000 | 85,000 | ||
Chairman Retainer |
N/A | N/A | ||
Audit Chair Retainer |
20,000 | 25,000 | ||
Compensation Chair Retainer |
15,000 | 20,000 | ||
Security Director Retainer(2) |
155,000 | 160,000 | ||
Finance Chair Retainer |
N/A | N/A | ||
Nominating & Corporate Governance Chair Retainer |
N/A | 15,000 | ||
Special Chair Retainer(3) |
10,000 | 15,000 | ||
Meeting Fees (per meeting): |
||||
In Person |
2,000 | 2,000 | ||
Telephonic |
1,000 | 1,000 | ||
Restricted Stock Units(4) |
Annual grant value of 110,000 |
Annual grant value of 150,000 |
(1) | Reflects compensation program adopted upon closing of the SoftBank Merger. |
(2) | Adm. Mullen does not receive an Annual Retainer. |
(3) | Includes any non-standing committee of directors established from time to time, but excludes the Vacancy Resolution Committee. |
(4) | Generally, restricted stock units or RSUs, underlying which are shares of our common stock, are granted each year on the date of the annual meeting of stockholders. Each grant vests in full upon the subsequent annual meeting. In addition, in connection with their appointments to the board. Mr. Claure, Adm. Mullen, and Ms. Tucker were granted sign-on RSU awards valued at $110,000. |
|
Notice of Annual Meeting and Proxy Statement | 19 |
Director Compensation
20 | Notice of Annual Meeting and Proxy Statement |
Director Compensation
|
Notice of Annual Meeting and Proxy Statement | 21 |
Director Compensation
2014 Director Compensation Table
On February 20, 2014, our Board resolved to change our fiscal year end from December 31 to March 31, effective March 31, 2014 in order to align our fiscal year with SoftBank. The table below sets forth the compensation earned by our outside directors who served during the three month transition period ended March 31, 2014.
Compensation information for Mr. Hesse, our President and Chief Executive Officer, can be found in the Executive Compensation section of this proxy statement.
Name | Fiscal Year |
Fees Earned Cash ($)(1) |
Stock Awards ($)(2) |
Total ($) | ||||
Robert R. Bennett | 3 months ended March 31, 2014 |
39,500 | | 39,500 | ||||
Gordon M. Bethune | 3 months ended March 31, 2014 |
35,250 | | 35,250 | ||||
Marcelo Claure | 3 months ended March 31, 2014 |
30,250 | 110,000 | 140,250 | ||||
Ronald D. Fisher | 3 months ended March 31, 2014 |
125,000 | | 125,000 | ||||
Frank Ianna | 3 months ended March 31, 2014 |
30,250 | | 30,250 | ||||
Adm. Michael G. Mullen | 3 months ended March 31, 2014 |
47,000 | | 47,000 | ||||
Masayoshi Son | 3 months ended March 31, 2014 |
N/A | | | ||||
Sara Martinez Tucker | 3 months ended March 31, 2014 |
28,125 | | 28,125 |
(1) | Consists of annual retainer fees, chairman and committee chair fees, and board and committee meeting fees. |
(2) | Represents the grant date fair value of 13,480 RSUs granted to Mr. Claure on February 19, 2014 in connection with his appointment to the board in January 2014. The grant date fair value is calculated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. For a discussion of the assumptions used in determining the compensation cost associated with stock awards, see note 2 of the Notes to the Consolidated Financial Statements in our transition report on Form 10-K for the three-month transition period ended March 31, 2014. As of March 31, 2014, our outside directors, except Mr. Son, held stock awards in the form of RSUs as follows: Mr. Bennett16,750, Mr. Bethune16,750, Mr. Claure13,480, Mr. Fisher71,736, Mr. Ianna16,750, Adm. Mullen15,782, and Ms. Tucker17,214. Although we issued no cash dividends during the first quarter of 2014, it is our policy that any cash dividend equivalents on the RSUs granted to the outside directors are reinvested into RSUs, which vest when the underlying RSUs vest. |
22 | Notice of Annual Meeting and Proxy Statement |
Audit Committee Report
The Audit Committee has reviewed and discussed our audited consolidated financial statements with management. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 16, issued by the Public Company Accounting Oversight Board, or PCAOB, in Rule 3200T.
The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firms communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence.
The Audit Committee met with senior management periodically during 2014 to consider the adequacy of our internal controls and discussed these matters with our independent registered public accounting firm and with appropriate financial personnel. The Audit Committee also discussed with senior management our disclosure controls and procedures and the certifications by our CEO and our Chief Financial Officer, or CFO, which are required for certain of our filings with the SEC. The Audit Committee met privately with the independent registered public accounting firm, our internal auditors and other members of management, each of whom has unrestricted access to the Audit Committee.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the board that our audited consolidated financial statements be included in our transition report on Form 10-K for the transition period ended March 31, 2014 for filing with the SEC.
The Audit Committee
Robert R. Bennett, Chair
Frank Ianna
Sara Martinez Tucker
|
Notice of Annual Meeting and Proxy Statement | 23 |
Compensation Discussion and Analysis
In connection with our change in fiscal year, this compensation discussion and analysis describes and analyzes our compensation program for our named executive officers for both the three-month transition period ended March 31, 2014 (Transition Period) as well as for the 12-month fiscal year ended December 31, 2013 (fiscal year 2013).
The named executive officers for the Transition Period were: Daniel R. Hesse, President and CEO; Joseph J. Euteneuer, CFO; Dow Draper, President, Prepaid; Steven L. Elfman, President, Products and Services; and Robert L. Johnson, President, Sprint Retail and Chief Service and Information Technology Officer.
Philosophy and Objectives of Our Executive Compensation Program
| Attract and retain qualified and experienced executives by providing base salaries, target incentives, and benefits that are market competitive and by requiring that a large portion of total compensation is earned over a multi-year period and subject to forfeiture to the extent that vesting requirements and performance objectives are not met; |
| Pay for performance by tying a substantial portion of our executives compensation opportunities directly to, and rewarding them for, our performance through short- and long-term incentive compensation plans that include performance objectives most critical to driving our continued financial and operational improvement and long-term stockholder value; and |
| Align compensation with stockholder interests by structuring our compensation programs to align executive interests with those of our stockholders, mitigate the possibility that our executives undertake excessively risky business strategies, and adhere to corporate governance best practices. |
Components of Our Executive Compensation Program
The major components of our executive compensation program are base salary, our short-term incentive compensation (STIC) plan, and our long-term incentive compensation (LTIC) plan. The base salaries as of March 31, 2014 and target opportunities under our fiscal year 2013 STIC and LTIC plans for our named executive officers are listed below.
Named Executive Officer |
Base Salary ($) |
2013 STIC Plan ($)(1) |
2013 LTIC Plan ($)(2) |
|||||||||
Hesse |
1,200,000 | 2,400,000 | 13,800,000 | |||||||||
Euteneuer |
775,000 | 1,007,500 | 4,025,000 | |||||||||
Draper(3) |
375,000 | 147,303 | | |||||||||
Elfman |
650,000 | 812,500 | 3,737,500 | |||||||||
Johnson |
625,000 | 625,000 | 1,840,000 |
(1) | The amount for Mr. Draper reflects his target opportunity for the second half-year performance period from July 1, 2013 through December 31, 2013 under the 2013 STIC plan. See Performance and Key Compensation DecisionsSTIC Plan. Mr. Draper was not employed by Sprint before July 1, 2013 and therefore did not participate in Sprints 2013 STIC plan during the first half-year performance period. |
24 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
(2) | As adjusted for the one-time overall 2013 LTIC plan target opportunity increase of 15% in connection with the SoftBank Merger, as discussed below. |
(3) | Mr. Draper did not participate in Sprints 2013 LTIC plan but received a sign-on award on September 10, 2013 of 131,579 RSUs, which had a total market value on the grant date of $832,895. |
Our mix of fixed and performance-based compensation target opportunities under the 2013 STIC and LTIC plans for Mr. Hesse is illustrated by the following:
Performance and Key Compensation Decisions
Fiscal year 2013 marked one of the most eventful years in Sprints history. We successfully completed the SoftBank Merger, which strengthened Sprints balance sheet and provided capital for continued investment in the modernization of our network, allowing us to upgrade our technology, expand our service offerings and to improve the quality and reliability of our product offerings. The SoftBank Merger also has allowed Sprint to leverage SoftBanks operational and technological expertise. We also completed the acquisition (Clearwire Acquisition) of the remaining equity interests in Clearwire Corporation and its consolidated subsidiary Clearwire Communications LLC that we did not previously own, from which we expect to fully utilize and integrate Clearwires complementary 2.5 gigahertz (GHz) spectrum and tower resources for use in conjunction with our network modernization plan. In addition, we shut down the iDEN network in 2013, and through our network modernization project, we are repurposing the 800 megahertz (MHz) iDEN spectrum and are continuing our buildout of fourth generation (4G) services using Long Term Evolution (LTE). We also unveiled Sprint SparkSM, a combination of advanced network and device technology capable of delivering up to 50-60 Mbps peak speeds today with increasing speed potential over time.
The Company also recognized the benefits of leadership continuity in light of the transformative SoftBank Merger and the ongoing execution of our network modernization plans. As a result, the Company entered into a new employment agreement in fiscal year 2013 with Mr. Hesse, which replaced his prior employment agreement. The agreement provides for a term through July 31, 2018, subject to earlier termination as provided in the agreement. The agreement provides for an annual base salary of $1,200,000 and participation in our STIC and LTIC plans. Also in fiscal year 2013, Mr. Hesse was granted a one-time award of 1,733,102 RSUs and 1,733,102 stock options. The RSUs and stock options vest on the fifth anniversary of their grant or, if earlier, upon an involuntary termination without cause or resignation with good
|
Notice of Annual Meeting and Proxy Statement | 25 |
Executive Compensation
reason, or upon death or disability, and are subject to certain restrictions, including Mr. Hesses compliance with the restrictive covenants in his employment agreement and clawback at the discretion of the board of any value related to his knowing or intentional fraudulent or illegal conduct. These awards were intended to enhance our ability to retain Mr. Hesses leadership for a minimum period of at least five years during which the Company plans to undergo a transformative change.
We continued to build on the successes of fiscal year 2013 throughout the Transition Period, as we delivered operating income of $420 million, representing our best performance on this metric in over seven years. We also launched the revolutionary new FramilySM plan during the Transition Period, which quickly became the fastest growing Sprint rate plan on record.
STIC Plan
Our STIC plan is our annual cash incentive plan, which is intended to ensure that annual incentives are tied to the successful achievement of critical operating and financial objectives that are the leading drivers of sustainable increases in stockholder value. As required under the SoftBank Merger Agreement, the Compensation Committee used two six-month performance periods for determining amounts payable under the 2013 STIC plan. The two six-month performance periods for 2013 provided flexibility to revisit the performance criteria at mid-year due to the anticipated transformative SoftBank Merger in 2013. The first performance period was from January 1, 2013 through June 30, 2013, and the second period was from July 1, 2013 through December 31, 2013. The SoftBank Merger closed on July 10, 2013. Each performance period had discrete performance objectives, and participants generally had to be employed on December 31, 2013 in order to receive compensation for either period.
The table below summarizes our key priorities during fiscal year 2013 and throughout the Transition Period as well as the metrics selected in support of these priorities, and the rationale for why each was chosen by the Compensation Committee.
Priority | Objective | Rationale | ||
Customer Experience |
Sprint platform postpaid subscriber churn, which is a measure of our ability to retain our subscribers who pay for their wireless service on a contract basis, typically for one- or two-year periods. | Measures the degree to which we retain our most profitable subscribers. | ||
Strengthening our Brand |
Sprint platform net additions, which is a measure of the new wireless subscribers we gain, net of deactivations. | Measures the degree to which we have attracted new subscribers to the Sprint brand. | ||
Generating Cash |
Adjusted EBITDA, which means Adjusted Operating Income Before Depreciation and Amortization less severance, exit costs and other special items. Includes certain impacts from the SoftBank Merger and Clearwire Acquisition that were not included in the standalone plan from which the 2013 STIC targets were established. | Measures our ability to generate cash and profit, which are critical to our ability to invest in our business and service our debt. |
26 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
The Compensation Committee approved the effective aggregate payout percentage for the 2013 STIC plan at 118.96% of the target award opportunity for all eligible employees who participated in the 2013 STIC plan for the full fiscal year 2013, including our named executive officers, based on actual performance results. Our 2013 STIC plan objectives, targets, and actual results are summarized in the tables below.
Fiscal Year 2013 First Half-Year Performance Period | ||||||||
Objective | Weight | Target | Actual Results | Percent Payout | ||||
Sprint Platform Postpaid Subscriber Churn |
30% | 1.87% | 1.83% | 116.7% | ||||
Sprint Platform Net Additions |
20% | 549,000 | 989,000 | 200.0% | ||||
Adjusted EBITDA |
50% | $2,582 million | $2,782 million | 200.0% | ||||
First Half-Year Payout |
175.01% |
Fiscal Year 2013 Second Half-Year Performance Period | ||||||||
Objective | Weight | Target | Actual Results | Percent Payout | ||||
Sprint Platform Postpaid Subscriber Churn |
30% | 1.88% | 2.03% | 28.56% | ||||
Sprint Platform Net Additions |
20% | 223,000 | (212,000) | 0% | ||||
Adjusted EBITDA |
50% | $2,909 million | $2,930 million | 110.53% | ||||
Second Half-Year Payout |
63.83% |
Payouts under the 2013 STIC plan were capped at 200% of target opportunity. The payout for the second half-year performance period was computed by adding the first half-year performance achievements that were above the 200% payout level for Sprint platform net additions and adjusted EBITDA to the second half-year achievement. We outperformed our adjusted EBITDA target for each of the six-month periods during fiscal year 2013; however, we underperformed on our performance objectives set for Sprint platform postpaid subscriber churn and Sprint platform net additions in the second half of 2013, despite having highest-ever Sprint platform subscribers at December 31, 2013 of 53.9 million. This occurred at a time of continued modernization of our network, including our expansion of 4G LTE to more than 200 million people and launching Sprint SparkTM in 11 markets as of December 31, 2013.
Our Compensation Committee did not establish financial and operational objectives and respective weightings and targets for the Transition Period. As a result, no payouts under our STIC plan related to performance during the Transition Period were made.
LTIC Plan
Our LTIC plan is designed to encourage retention, link payment of performance-based awards to achievement of financial and operational objectives critical to our long-term success, and create commonality of interests between our executives and our stockholders. By dovetailing with the STIC plan, it is also intended to create balance between short-term, or annual, performance goals and longer-term objectives that are critical to growing and sustaining stockholder value. We granted two types of awards under our 2013 LTIC plan:
| Time-based restricted stock units (RSUs)vest on February 27, 2016. |
| Performance-based RSUsvest on February 27, 2016, with payout conditioned on achievement of a predetermined performance objective during a single two-year performance period of 2014-2015. |
|
Notice of Annual Meeting and Proxy Statement | 27 |
Executive Compensation
The Compensation Committee selected the following primary objective to support our efforts with respect to the performance-based RSUs under the 2013 LTIC plan:
Priority | Objective | Rationale | ||
Generating Cash |
Cumulative adjusted EBITDA | Measures our ability to generate cash and profit, which are critical to our ability to invest in our business and service our debt. |
The Compensation Committee selected cumulative adjusted EBITDA as the primary objective in order to emphasize long-term focus on earnings and growing subscribers and revenues. Sprint offers wireless services on a postpaid and prepaid payment basis to retail subscribers and also on a wholesale and affiliate basis, which includes the sale of wireless services that utilize the Sprint network but are sold under a wholesalers brand. Payment on the adjusted EBITDA objective noted above in excess of 150% up to 200% of the targeted opportunity is contingent on achieving an additional objective of retail net subscriber additions, which includes both prepaid and postpaid additions but excludes wholesale and affiliate additions. The Compensation Committee believes use of retail net subscriber additions supports Sprints core focus of growing our subscriber base. Failure to attain the minimum threshold achievement level on the cumulative adjusted EBITDA performance objective results in forfeiture of the associated opportunity.
Pursuant to the terms of the SoftBank Merger Agreement, we delayed the grant of awards under the 2013 LTIC plan until after closing of the SoftBank Merger. As a result, awards under the 2013 LTIC plan were not granted on our typical schedule in February. Recognizing that participants would have received additional RSUs through the SoftBank Mergers equity exchange process in the absence of this delay of the traditional February grant and that participants would have benefited from the value creation since February 2013 with respect to those awards, the Compensation Committee increased participants overall 2013 LTIC plan target opportunities by 15%. The Compensation Committee decided such increase also was appropriate in order to reward participants for their performance in the first half of 2013. The adjusted target opportunities under the 2013 LTIC plan for our executives are reflected in Compensation OverviewComponents of Our Executive Compensation Program. Mr. Draper did not participate in our 2013 LTIC plan, but he received a sign-on award of time-based RSUs on September 10, 2013, which is reflected in Compensation OverviewComponents of Our Executive Compensation Program.
Consistent with its decisions regarding the STIC plan for the Transition Period, our Compensation Committee did not establish financial and operational objectives and respective weightings and targets for the Transition Period. As a result, no grants under our LTIC plan related to performance were made during the Transition Period.
Corporate Governance Highlights
We endeavor to maintain good governance standards, including with respect to our executive compensation practices. Several highlights are listed below:
| Our named executive officers are subject to a clawback provision in our incentive compensation programs, under which we may recover payouts thereunder to the extent based on financial results or operating metrics impacted by the named executive officers knowing or intentional fraudulent or illegal conduct. |
28 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
| We have stock ownership guidelines. See Other Components of Executive CompensationStock Ownership Guidelines; |
| Our named executive officers receive few perquisites, entitlements or elements of non-performance-based compensation, except for market-competitive salaries and modest benefits that are comparable to those provided to all employees; |
| Our severance benefits are positioned conservatively relative to market practices, with no benefit in excess of two times base salary plus annual incentive, change-in-control benefits payable only upon a double-trigger qualified termination, and no golden parachute excise tax gross-ups; and |
| The Compensation Committee retains Frederic W. Cook & Co., Inc. (Cook) as an independent advisor that performs no other work for the Company. |
Setting Executive Compensation
Role of Compensation Consultant and Executive Officers
The Compensation Committee has retained Cook as its independent compensation consultant. Cook provides no services to us other than advisory services for executive and director compensation and has no other relationships with the Company. Cook works with management only at the request and under the direction of the Compensation Committee and only on matters for which the Compensation Committee has oversight responsibility. The Compensation Committee has assessed the independence of Cook and other advisors to the Compensation Committee, as required under NYSE listing rules. The Compensation Committee has also considered and assessed all relevant factors, including those required by the SEC that could give rise to a potential conflict of interest with respect to Cook and its other advisors during 2013. Based on this review, the Compensation Committee did not identify any conflict of interest raised by the work performed by any advisors to the Compensation Committee.
Representatives of Cook attend Compensation Committee meetings at the Compensation Committees request and provide guidance to the Compensation Committee on a variety of compensation issues. The primary point of contact at Cook frequently communicates with the chair of the Compensation Committee and interacts with all Compensation Committee members without management present.
Cook has reviewed the compensation components and levels for our named executive officers and advised the Compensation Committee on the appropriateness of our compensation programs, including our incentive and equity-based compensation plans, retention incentives and proposed employment agreements, as these matters arose during the year. The Compensation Committee has directed that Cook provide this advice taking into account our overall executive compensation philosophy as described above. Cook prepares benchmarking data discussed below, reviews the results with the Compensation Committee, and provides recommendations and an opinion on the reasonableness of new compensation plans, programs and arrangements.
In addition to its ongoing support of the Compensation Committee and continuous advice on compensation design, levels and emerging market practices, Cook periodically conducts a comprehensive review of our overall executive compensation program, including direct and indirect elements of compensation, to ensure that the program operates in support of our short- and long-term financial and strategic objectives and that it aligns with evolving corporate governance best practices.
|
Notice of Annual Meeting and Proxy Statement | 29 |
Executive Compensation
Our CEO periodically discusses the design of and makes recommendations with respect to our compensation programs and the compensation levels of our other named executive officers and certain key personnel with the Compensation Committee. Our CEO does not make recommendations to the Compensation Committee with regard to his own compensation; rather, Cook provides the Compensation Committee with an annual report on CEO compensation and a range of alternatives with regard to potential changes.
Process for Setting Executive Compensation
The Compensation Committee annually reviews the compensation packages of our named executive officers in the form of tally sheets. These tally sheets value each component of compensation and benefits, including a summary of the outstanding equity holdings of each named executive officer as of year-end and the value of such holdings at various assumed stock prices. The tally sheets also set forth the estimated value that each of our named executive officers would realize upon termination under various scenarios.
The Compensation Committee uses these tally sheets when considering adjustments to base salaries and awards of equity-based or other remuneration and in establishing incentive plan target opportunity levels as follows:
| comparing each named executive officers total compensation against a similar position in our peer group; |
| understanding the impact of decisions on each individual element of compensation on total compensation for each named executive officer; |
| evaluating total compensation of each named executive officer from an internal equity perspective; and |
| assuring that equity compensation represents a portion of each named executive officers total compensation that is in line with our philosophy of motivating the executives to align their interests with our stockholders. |
Although the Compensation Committee reviews and considers the amounts realizable by our named executive officers under different termination scenarios, including those in connection with a change in control, as well as the current equity-based award holdings, these are not the primary considerations in the assessment and determination of annual compensation for our named executive officers.
Use of Benchmarking Data
To assist in setting total compensation levels that are reasonably competitive, the Compensation Committee annually reviews market trends in executive compensation and a competitive analysis prepared by Cook. This information is derived from the most recent proxy statement data of companies in a peer group of telecommunications and high-technology companies and, where limited in its functional position match to our executives, is supplemented with data on our peer group from a published compensation survey prepared by Towers Watson of approximately 80 participating industry companies all with revenues exceeding $4 billion.
Taking into consideration the recommendation of Cook, the Compensation Committee determines companies for our peer group based on similarity of their business model and product offerings as well as comparability from a size perspective, including annual revenue, market capitalization, net income, enterprise value and number of employees. For example, our
30 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
revenue is above the median of our peer group while our enterprise value is below the median. The Compensation Committee approved the use of the following 12 companies for its fiscal year 2013 executive compensation benchmarking analysis:
AT&T, Inc., CenturyLink, Inc., Comcast Corporation, Computer Sciences Corporation, Dell Inc., DIRECTV, Motorola Solutions, Inc., Qualcomm Incorporated, Texas Instruments Incorporated, Time Warner Cable, Inc., Verizon Communications Inc., and Xerox Corporation.
In September 2013, we made the following changes to our peer group for future executive compensation decisions: removed Dell Inc. from our peer group given its transition to a privately-held company and added Cisco Systems, Inc., EMC Corporation and Intel Corporation, based on size, business comparability and other relevant factors.
The Compensation Committee does not follow a specific formula in making its pay decisions, but rather uses benchmarks as a frame of reference and generally targets total compensation at the median of our peer group to reflect our relative position within it. Based on performance against predetermined goals and changes in total stockholder return over time, this approach results in an opportunity to earn total payouts above median market rates for over-achievement and below the median for under-achievement relative to the peer group. The Compensation Committee exercises its judgment by taking into consideration a multitude of other important factors such as experience, individual performance, and internal pay equity in setting target compensation levels, but actual payouts under our variable incentive plans are primarily determined based on formulaic outcomes. With respect to our named executive officers total targeted compensation for 2013, excluding Mr. Hesses retention awards, Messrs. Elfman and Euteneuer were above the median, and the remaining named executive officers, including our CEO, were below the median for the peer group.
Primary Components of Executive Compensation
Following is a discussion and analysis of the primary elements of our named executive officer compensation program. These components are available to each named executive officer throughout a typical 12 month period; however, not all were implicated during the three-month Transition Period.
Base Salary
Base salary is designed to attract and retain executives. Our named executive officers salaries are based on a number of factors, including the nature, responsibilities and reporting relationships of the position, individual performance of the executive, salary levels for incumbents in comparable positions at peer companies, as well as other executives within our organization, and experience and tenure of the executive.
Mr. Johnsons base salary was increased to $625,000 in 2013 due to a significant increase in job responsibilities as President, Sprint Retail and Chief Service and Information Technology Officer. Mr. Drapers base salary was increased to $375,000 in 2013 due to a significant increase in job responsibilities as President, Prepaid. The base salaries of both Messrs. Johnson and Draper after their respective salary increases remained below median for the peer group.
None of our named executive officers received an increase in base salary during the Transition Period.
|
Notice of Annual Meeting and Proxy Statement | 31 |
Executive Compensation
Short-Term Incentive Compensation Plan
Our STIC plan is our annual cash bonus plan, which we believe will ultimately result in an increase in stockholder value because our incentives under it are linked to business objectives that we believe will deliver our long-term success.
As required under the SoftBank Merger Agreement, the Compensation Committee used two six-month performance periods for determining the amount of plan payments under the 2013 STIC plan rather than one annual performance period. Based on performance against stated objectives, our named executive officers must have been employed through December 31, 2013 in order to be eligible to receive full compensation for the performance period. A prorated payout is received by employees who are terminated during the year as the result of death, disability, retirement, or involuntary termination without cause.
In February 2013, the Compensation Committee established financial and operational objectives and their respective weightings and targets for the first half-year 2013 performance period, continuing to balance our senior management teams and other plan participants focus among our most critical financial and strategic objectives, which remained as growing revenue and earnings while increasing subscriber growth and reducing churn. To that end, the Compensation Committee established the following objectives and weightings for the first half of 2013:
| adjusted EBITDA, 50%; |
| Sprint platform postpaid subscriber churn, 30%; and |
| Sprint platform net additions, 20%. |
Following the close of the SoftBank Merger, the Compensation Committee reaffirmed the stated objectives from the first half-year 2013 performance period by establishing the same objectives for the second half of 2013.
To further our goal of tying a significant portion of each named executive officers total annual compensation to our business performance, the STIC plan provides for a payment equal to the named executive officers targeted opportunity (set at a percentage of his base salary) only if our actual results meet the targets. Similarly, a payment in excess of a named executive officers targeted opportunity may be made if our actual performance exceeds the targeted objectives (capped at 200%), a payment below targeted opportunity may be made if our actual performance is below the target objectives but exceeded the minimum threshold level, and no payout would be made if our actual performance does not exceed the minimum threshold level. As previously disclosed on Sprints Current Report on Form 8-K filed on May 4, 2012, Mr. Hesse agreed to a reduction in his target opportunity under the 2012 STIC plan from 200% to 170%, which returned his incentive opportunity to his 2010 level. Also, in connection with Mr. Drapers entry into an employment agreement with Sprint and his increased responsibilities, Mr. Drapers targeted STIC opportunity (expressed as a percentage of his base salary) increased in 2013.
As discussed above, the Compensation Committee did not establish STIC plan financial and operational objectives and respective weightings and targets for the Transition Period.
Long-Term Incentive Compensation Plan
Our LTIC plan serves our compensation objectives by linking payment to achievement of financial and operational objectives and by linking executive interests with those of our stockholders.
32 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
Pursuant to the SoftBank Merger Agreement and following evaluation of the factors critical to driving long-term stockholder value, the Compensation Committee established the components and terms of the 2013 LTIC plan. Since 2009, the Compensation Committee has used performance units (cash-settled) as a component of awards under the LTIC plan. This was done during our turnaround phase when the stock price was low and highly volatile. However, the Compensation Committee returned to awards issued under the 2013 LTIC plan comprised solely of equity in light of the transformative SoftBank Merger and the desire to provide incentives for achieving long-term growth and alignment of stockholder interests. The Compensation Committee granted half of executives LTIC plan opportunities in the form of performance-based RSUs and half in time-based RSUs. The time-based RSUs were granted as a component in order to promote executive retention while allowing us to set aggressive performance goals for the performance-based RSUs component. In light of these considerations, the Compensation Committee established awards under the 2013 LTIC plan as follows:
| Time-based RSUsvest on February 27, 2016. |
| Performance-based RSUsvest on February 27, 2016, with payout conditioned on achievement of a predetermined performance objective during a single two-year performance period of 2014-2015. |
The 2013 LTIC plan places a longer-term focus on Company earnings and growing subscribers and revenues through establishing cumulative adjusted EBITDA as the primary performance objective. This metric was chosen for the performance period because it represents a critical financial and strategic objective. Payment on the adjusted EBITDA objective in excess of 150% up to 200% of the targeted opportunity is contingent on achieving an additional objective of retail net subscriber additions, which includes both prepaid and postpaid additions but excludes wholesale and affiliate additions. The Compensation Committee believes use of retail net subscriber additions as a performance objective under the 2013 LTIC plan supports Sprints core focus of growing our subscriber base.
Mr. Johnsons target compensation under the 2013 LTIC plan increased in connection with his increased responsibilities discussed under Base Salary above. His LTIC opportunity after the increase remained below median for the peer group. Otherwise, there were no changes in our named executive officers LTIC plan opportunities for 2013 compared to 2012.
As discussed above, the Compensation Committee did not grant awards under the LTIC plan during the Transition Period.
Other Compensation Decisions
On September 10, 2013, Mr. Elfman entered into an amendment to his employment agreement. In exchange for continuing his employment through the earlier of certain specified employment terminations and January 2, 2015, Mr. Elfman is entitled to the following under the amendment: (1) relocation of Mr. Elfmans place of performance to Seattle, Washington, (2) any change in his reporting relationship to anyone other than the chief executive officer or the board would constitute an event of good reason as defined in the agreement; and (3) following termination under certain circumstances and execution of a general release, continued and/or prorated accelerated vesting of his then-outstanding equity as if he was involuntarily terminated without cause on his termination date.
Effective September 6, 2013, Mr. Draper entered into an employment agreement and was appointed President, Prepaid of Sprint. Mr. Draper formerly was Senior Vice President and Manager, Retail of Clearwire. On September 10, 2013, Mr. Draper received a sign-on award of
|
Notice of Annual Meeting and Proxy Statement | 33 |
Executive Compensation
131,579 RSUs. On February 21, 2014, Mr. Draper entered into an amendment to his employment agreement, which provided for tax assistance with respect to the Companys payment of Mr. Drapers state home sale transaction expenses in connection with his relocation from Kirkland, Washington to the vicinity of our Overland Park, Kansas headquarters as required under his employment agreement. These expenses are included in the summary compensation table in the All Other Compensation column for the Transition Period.
As a result of the SoftBank Merger, which complicated our ability to accurately measure performance based on the goals that were originally set, the performance units and performance-based RSUs granted under the 2012 LTIC plan and, with respect to the 2013 annual performance period, the 2011 LTIC plan, were deemed met at target. Amounts deemed earned at target for these awards are included in the summary compensation table in the Non-Equity Incentive Plan Compensation column for fiscal year 2013.
Other Components of Executive Compensation
Our named executive officers total rewards opportunities consist of a number of other elements important to our compensation philosophy for both fiscal year 2013 and the Transition Period of attracting, retaining, and motivating our named executive officers:
Employee Benefit Plans and Programs. Our compensation program includes a comprehensive array of health and welfare benefits in which our eligible employees, including our named executive officers, are eligible to participate. We pay all of the costs for some of these benefit plans, and participants contribute a portion of the cost for other benefit plans.
Retirement Programs. Our retirement program consists of the Sprint Corporation 401(k) Plan, which provides participants a fixed matching contribution on up to 4% of eligible compensation an opportunity to build financial security for their future. The amount of any matching contributions made by us to participating named executive officers is included in the All Other Compensation column of the summary compensation table.
Deferred Compensation. Certain employees, including our named executive officers, are offered the opportunity to participate in the Sprint Corporation Deferred Compensation Plan, a nonqualified and unfunded plan, under which they may defer to future years the receipt of certain compensation in addition to that eligible under the 401(k) plan. Participants may elect to defer up to 50% of base salary, up to 75% of STIC plan payments, and up to 75% of cash-based performance unit payouts made under the LTIC plan. We believe this plan helps attract and retain executives by providing the participant another tax efficient retirement plan. Participants elect to allocate deferred and any matching contributions among one or more hypothetical investment options, which include one option that tracks our common stock and other options that track broad-based bond and equity indices. Our plan provides for a matching contribution using the same matching contribution percentage as our 401(k) plan of eligible earnings above the applicable annual limit, which is intended to compensate highly-compensated employees for limitations placed on our 401(k) plan by federal tax law. For each of fiscal year 2013 and the Transition Period, Mr. Hesse participated in the Sprint Corporation Deferred Compensation Plan.
Personal Benefits and Perquisites. The limited personal benefits and perquisites that we provide to our named executive officers are intended to promote executive retention and to allow our executives to maximize their focus on the Company. These benefits are summarized in footnote 6 to the summary compensation table. As a result of the recommendations contained in an independent third-party security study, the Compensation Committee established an overall
34 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
security program for Mr. Hesse. Under the security program, we currently provide Mr. Hesse with residential security systems and equipment, and he is required to use our aircraft for business and non-business travel. We believe these measures ensure the safety of Mr. Hesse and allow him to devote his full attention to Company business. Mr. Hesse is permitted to have his family accompany him on the corporate aircraft for business and non-business travel.
Change in Control. If a transaction that could result in a change in control were under consideration, we expect that our named executive officers would face uncertainties about how the transaction may affect their continued employment with us. We believe it is in our stockholders best interest if our named executive officers remain employed and focused on our business through any transition period following a change in control and remain independent and objective when considering possible transactions that may be in stockholders best interests but possibly result in the termination of their employment. Our change in control benefits accomplish this goal by providing each eligible named executive officer with a meaningful severance benefit in the event that a change in control occurs and, within a specified time period of the change in control, his employment is involuntarily terminated without cause or voluntarily terminated for good reason.
The Sprint Corporation Change in Control Severance Plan, which we refer to as the CIC plan, provides severance benefits to a select group of senior executives, including our named executive officers, in the event of a qualified termination of employment in connection with a transaction that results in a change in control. Any of these benefits payable would be reduced to the extent of any severance benefit otherwise available under any other applicable policy, program, or plan so that there would be no duplication of benefits. The benefits upon termination in connection with a change in control to which our named executive officers are entitled, as described in Potential Payments upon Termination of Employment or Change in Control, are likewise competitive within our peer group.
The SoftBank Merger was a change in control under the Change in Control Severance Plan. On September 17, 2013, our board amended the plan to modify the definition of Change in Control to (i) exclude acquisitions by SoftBank or its controlled affiliates from the change in control trigger associated with a group (within the meaning of Section 13(d)(3) of the Securities Exchange Act) acquiring 30 percent or more of the combined voting power of the Company, and (ii) include Sprint Corporation ceasing to have equity securities trading on a national securities exchange as a change in control trigger. The board also amended the plan to include an offset of change in control benefits for pay and benefits received during any WARN notification period to align with such an offset provided in the broad-based separation plan.
Tax Deductibility of Compensation
Section 162(m) limits to $1 million the amount of non-performance-based remuneration that we may deduct from our taxable income in any tax year with respect to our CEO and the three other most highly compensated executive officers, other than the CFO, at the end of the year. Section 162(m) provides, however, that we may deduct from our taxable income without regard to the $1 million limit the full value of all qualified performance-based compensation.
Our base salary and perquisites and other personal benefits are not considered qualified performance-based compensation and therefore are subject to the limit on deductibility. Our STIC plan and LTIC plan awards may be considered qualified performance-based compensation if certain requirements are met, including among others that the maximum number of stock option or full value share awards and the maximum amount of other cash
|
Notice of Annual Meeting and Proxy Statement | 35 |
Executive Compensation
performance-based remuneration that may be payable to any one executive officer has been disclosed to and approved by stockholders prior to the award or payment.
The Compensation Committee considers Section 162(m) deductibility in designing our compensation program and incentive-based compensation plans. In general, we may design our STIC and LTIC plans to be compliant with the performance-based compensation rules of Section 162(m) in order to maximize deductibility. In certain circumstances, however, the Compensation Committee has determined it necessary in order to retain executives and attract candidates for senior level positions to offer compensation packages in which the non-performance-based elements exceed the $1 million Section 162(m) limit. The Compensation Committee makes no assurance that such compensation will be fully deductible for federal income tax purposes.
The awards under our 2013 STIC plan and performance-based RSUs under the 2013 LTIC plan are designed so that they may qualify as qualified performance-based compensation under Section 162(m), except for those awards to Mr. Johnson due to the terms of his employment agreement.
For the 2013 STIC plan, the Compensation Committee for the first six-month performance period, and a sub-committee comprised of Messrs. Bethune and Mullen (the Section 16 Sub-Committee) of the Compensation Committee for the second six- month performance period, established Section 162(m) objectives for the named executive officers potentially subject to Section 162(m) at a small fraction of a percentage of our adjusted operating income. The Compensation Committee and Section 16 Sub-Committee are precluded from exercising upward discretion to the payout achieved under these objectives. The Section 16 Sub-Committee exercised its discretion to make payments under the 2013 STIC plan at levels below the payout achieved under the Section 162(m) objectives for both performance periods during 2013 as guided by the performance metrics discussed under Performance and Key Compensation DecisionsSTIC Plan.
For the performance-based RSU award for the 2013 LTIC plan, the Section 16 Sub-Committee established a Section 162(m) objective for the named executive officers potentially subject to Section 162(m) based on cumulative adjusted operating income during a single two-year performance period of 2014-2015. The Section 16 Sub-Committee is precluded from exercising upward discretion to the payout achieved under this objective.
The Section 16 Sub-Committee did not establish Section 162(m) objectives under the STIC plan or the LTIC plan for the Transition Period.
We have stock ownership guidelines for our named executive officers and other members of our senior management team. The board believes ownership by executives of a meaningful financial stake in our Company serves to align executives interests with those of our stockholders. Our guidelines encourage our CEO to hold shares of our common stock with a value equal to five times his base salary, and encourage the other named executive officers to hold shares of our common stock with a value equal to three times their respective base salaries. Eligible shares and share equivalents counted toward ownership consist of:
| restricted stock or RSUs; |
| common or preferred stock, including those purchased through our Employee Stock Purchase Plan; |
36 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
| intrinsic value (the excess of the current stock price over the options exercise price) of vested, in-the-money stock options; and |
| share units held in our 401(k) plan and various deferred compensation plans. |
Persons subject to the stock ownership guidelines have five years beginning on the date on which the person becomes subject to the ownership guidelines to achieve the ownership requirement. For fiscal year 2013, all of our named executive officers who had been with the Company for at least five years had met the stock ownership guidelines.
We provide our stockholders with the opportunity to cast an annual advisory vote on named executive officer compensation (a say-on-pay proposal). At our last annual meeting of stockholders, 81% of the votes cast on the say-on-pay proposal at that meeting were voted in favor of the proposal. The Compensation Committee considered the voting results at discussions among its members during its meetings, and the Compensation Committee believes this vote affirms stockholders support of the Companys approach to executive compensation. As a result of this consideration, we did not change our approach to named executive officer compensation in fiscal year 2013 or the Transition Period. The Compensation Committee will continue to consider the outcome of the Companys say-on-pay votes when making future compensation decisions for the named executive officers.
The Compensation Committee has reviewed and discussed Sprints Compensation Discussion and Analysis with management. Based on these reviews and discussions, the Compensation Committee recommended to the board that Sprints Compensation Discussion and Analysis be included in this proxy statement and the transition report on Form 10-K for the period ended March 31, 2014.
The Compensation Committee
Gordon M. Bethune, Chair
Ronald D. Fisher
Adm. Michael G. Mullen
Relationship of Compensation Practices to Risk Management
We have assessed whether there are any risks arising from our compensation policies and practices for our employees and factors that may affect the likelihood of excessive risk taking. Based on that review, we have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
In coming to this conclusion, in late 2013 and early 2014, our human resources department reviewed the Companys incentive plans, surveying sales- and non-sales-related compensation programs, as well as executive and non-executive compensation programs. Pay philosophies, performance objectives and overall incentive plan designs were reviewed. Human resources discussed plan elements with representatives from the business functions responsible for incentive plan design and administration. Design features were assessed to determine whether there is a likelihood that incentive plans could encourage excessive risk-taking resulting in a material adverse effect on the Company and to ensure that appropriate governance is in place to mitigate risk under unforeseen circumstances. The results of this assessment were reviewed by the Compensation Committee in February and May 2014. In addition, the Compensation Committees independent consultant, Cook, considered risk in all aspects of the
|
Notice of Annual Meeting and Proxy Statement | 37 |
Executive Compensation
plans in which our executives participate and advised the Compensation Committee accordingly. Cook confirmed that there are no aspects of the programs described in the preceding Compensation Discussion and Analysis that create an incentive to take risks that are reasonably likely to have a material adverse effect on the Company.
The table below summarizes the compensation of our named executive officers that is attributable to the three-month Transition Period ended March 31, 2014 and the fiscal years ended December 31, 2013, 2012, and 2011. The named executive officers are our President and CEO, our CFO, and our three other most highly compensated executive officers serving at March 31, 2014. Amounts included in Non-Equity Incentive Plan Compensation for 2013 include performance units granted under the 2012 LTIC plan, which, as provided for in the SoftBank Merger Agreement, were converted as if target performance had been achieved as of the closing date of the SoftBank Merger. Although these awards do not vest until December 31, 2014, the target amounts are required to be reported as earned in 2013 and account for nearly all of the increase over 2012 non-equity incentive plan compensation.
As previously disclosed, on May 4, 2012, Mr. Hesse agreed to a reduction in his 2012 base pay to repay amounts associated with a discretionary adjustment the Compensation Committee made under the incentive plan payouts for 2011 for the impact of the iPhone® on Sprints financial results. Amounts reported in the summary compensation table under the Salary, Non-Equity Incentive Plan Compensation and Total columns for 2012 and 2013 reflect amounts paid or awarded to Mr. Hesse before taking into account such repayments. The repayments are disclosed in supplemental columns under the headings Salary Foregone and Non-Equity Incentive Plan Compensation Foregone.
Each of our named executive officers has an employment agreement with us. For more information regarding our compensation philosophy and a discussion of the elements of our compensation program, see Compensation Discussion and Analysis.
38 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
Name and Principal Position | Fiscal Year | Salary ($) |
Salary ($)(1) |
Bonus ($) |
Stock Awards ($)(2) |
Option Awards ($)(3) |
Non-Equity Incentive Plan Compensation ($)(4) |
Non-Equity ($)(5) |
All Other Compensation ($)(6) |
Total ($) |
||||||||||||||||||||||||||||
Daniel R. Hesse President and Chief Executive Officer |
3 months ended 3/31/2014 |
300,000 | | | | | | | 13,299 | 313,299 | ||||||||||||||||||||||||||||
2013 | 1,200,000 | | | 27,782,547 | 6,291,160 | 13,431,914 | (2,000,000) | 372,078 | 49,077,699 | |||||||||||||||||||||||||||||
2012 | 1,200,000 | (346,223) | | 3,560,070 | 1,214,695 | 5,002,457 | (362,592) | 167,334 | 11,144,556 | |||||||||||||||||||||||||||||
2011 | 1,200,000 | | 829,322 | 3,222,768 | 1,692,000 | 4,844,272 | | 94,289 | 11,882,651 | |||||||||||||||||||||||||||||
Joseph J. Euteneuer Chief Financial Officer |
3 months ended 3/31/2014 |
193,750 | | | | | | | 19,708 | 213,458 | ||||||||||||||||||||||||||||
2013 | 775,000 | | | 4,776,268 | | 3,531,887 | | 10,200 | 9,093,355 | |||||||||||||||||||||||||||||
2012 | 775,000 | | | 1,215,727 | 742,609 | 1,430,935 | | 14,875 | 4,179,146 | |||||||||||||||||||||||||||||
2011 | 551,442 | | 688,150 | 930,557 | 689,755 | 895,935 | | 77,088 | 3,832,927 | |||||||||||||||||||||||||||||
Dow Draper President Prepaid |
3 months ended 3/31/2014 |
93,750 | | | | | | | 156,951 | 250,701 | ||||||||||||||||||||||||||||
2013 | 172,462 | | | 832,895 | | 94,023 | | 46,000 | 1,145,380 | |||||||||||||||||||||||||||||
Steven L. Elfman President Products and Services |
3 months ended 3/31/2014 |
162,500 | | | | | | | | 162,500 | ||||||||||||||||||||||||||||
2013 | 650,000 | | | 4,448,210 | | 3,133,242 | | 182,922 | 8,414,374 | |||||||||||||||||||||||||||||
2012 | 650,000 | | | 1,319,200 | 689,565 | 1,561,531 | | 14,875 | 4,235,171 | |||||||||||||||||||||||||||||
2011 | 650,000 | | 251,232 | 868,963 | 596,097 | 1,470,688 | | 7,837 | 3,844,817 | |||||||||||||||||||||||||||||
Robert L. Johnson President Sprint Retail and Chief Service and Information Technology Officer |
3 months ended 3/31/2014 |
156,250 | | | | | | | | 156,250 | ||||||||||||||||||||||||||||
2013 | 566,981 | | | 2,163,490 | | 1,645,661 | | 10,200 | 4,386,332 | |||||||||||||||||||||||||||||
2012 | 523,846 | | | 597,376 | 318,261 | 847,621 | | 14,875 | 2,301,979 | |||||||||||||||||||||||||||||
2011 | 486,308 | | 123,842 | 372,019 | 256,780 | 718,990 | | 47,578 | 2,005,517 |
(1) | As previously disclosed on Sprints Current Report on Form 8-K filed on May 4, 2012, Mr. Hesse agreed to a reduction in his base pay to repay amounts associated with a discretionary adjustment the Compensation Committee made under the incentive plan payouts for 2011 for the impact of the iPhone® on Sprints financial results. |
|
Notice of Annual Meeting and Proxy Statement | 39 |
Executive Compensation
(2) | The value shown for 2013 is the sum of several awards, including performance-based RSU awards allocable to the 2013 performance period under the 2011 LTIC plan plus time- and performance-based RSU awards under the 2013 LTIC plan. The value shown for Mr. Hesse also includes a retention award in the form of time-based RSUs. The value shown for Mr. Draper consists of a sign-on award of time-based RSUs. |
2011 pRSUs ($) |
2013 RSUs ($) |
2013 pRSUs ($) |
Retention ($) |
Sign-on ($) |
Total ($) |
|||||||||||||||||||
Hesse |
1,884,969 | 6,900,003 | 7,940,384 | 11,057,191 | | 27,782,547 | ||||||||||||||||||
Euteneuer |
447,821 | 2,012,501 | 2,315,946 | | | 4,776,268 | ||||||||||||||||||
Draper |
| | | | 832,895 | 832,895 | ||||||||||||||||||
Elfman |
428,946 | 1,868,747 | 2,150,517 | | | 4,448,210 | ||||||||||||||||||
Johnson |
184,778 | 919,998 | 1,058,714 | | | 2,163,490 |
For the 2013 RSU awards, the value represents the aggregate grant date fair market value computed in accordance with FASB ASC Topic 718 as of the date the Compensation Committee approved the applicable objectives and targets for the two-year performance period under the 2013 LTIC plan. The performance-based RSUs granted under the 2013 LTIC plan are based on target opportunity and vest on February 27, 2016 but are also subject to performance-based vesting conditions. Payout values for performance-based RSUs under the 2013 LTIC plan based on maximum performance and grant date fair market value would be $15,880,768 for Mr. Hesse, $4,631,892 for Mr. Euteneuer, $4,301,034 for Mr. Elfman, and $2,117,428 for Mr. Johnson. The time-based RSUs granted under the 2013 LTIC plan vest on February 27, 2016. The RSUs under the 2011 LTIC plan are allocated one-third to each annual performance period from 2011-2013 and represent the aggregate grant date fair market value computed in accordance with FASB ASC Topic 718 as of the date the Compensation Committee approved the applicable objectives and targets for the 2013 performance period. Each annual performance target was set by the Compensation Committee at the start of each respective single year performance period under the 2011 LTIC plan. The sign-on RSUs granted to Mr. Draper vest 25% on each of September 10, 2014, September 10, 2015, September 10, 2016 and September 10, 2017; the reported value represents the aggregate grant date fair market value computed in accordance with FASB ASC Topic 718. For more information regarding Mr. Hesses retention award, see Compensation Discussion and AnalysisSetting Executive CompensationOther Compensation Decisions for 2013. For more information regarding the 2013 LTIC plan, see Compensation Discussion and AnalysisPrimary Components of Executive CompensationLong-Term Incentive Compensation Plan. For more information regarding Mr. Drapers sign-on award, see Compensation Discussion and AnalysisCompensation OverviewComponents of Our Executive Compensation Program.
(3) | Represents the grant date fair value of options granted in 2013 computed in accordance with FASB ASC Topic 718. The grant date fair value for the options awarded is $3.63 per share. See Note 2Summary of Significant Accounting Policies in Sprints Transition Report on Form 10-K for the fiscal year ended March 31, 2014 for more information. For more information regarding Mr. Hesses retention award, see Compensation Discussion and AnalysisSetting Executive CompensationOther Compensation Decisions for 2013. |
40 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
(4) | The value shown for 2013 is the sum of performance unit awards under the 2011 LTIC plan allocable to the 2013 performance period, performance unit awards earned in 2013 under the 2012 LTIC plan, and the payout under the 2013 STIC plan. |
2013 STIC ($) |
2011 Performance Units ($) |
2012 ($) |
Total ($) |
|||||||||||||
Hesse |
2,855,114 | 1,956,800 | 8,620,000 | 13,431,914 | ||||||||||||
Euteneuer |
1,198,553 | 583,334 | 1,750,000 | 3,531,887 | ||||||||||||
Draper |
94,023 | | | 94,023 | ||||||||||||
Elfman |
966,575 | 541,667 | 1,625,000 | 3,133,242 | ||||||||||||
Johnson |
662,327 | 233,334 | 750,000 | 1,645,661 |
With respect to the 2013 STIC plan, with the exception of Mr. Draper, each named executive officer earned a payout of 118.96% of his targeted opportunity based on actual performance in 2013. Mr. Draper was not eligible to participate in the first half-year performance period under Sprints 2013 STIC plan because he was not a Sprint employee until the second half-year performance period. Mr. Draper earned a payout of 63.83% of his targeted opportunity based on actual performance from July 1, 2013 through December 31, 2013. For more information regarding our STIC plan, see Compensation Discussion and AnalysisPrimary Components of Executive CompensationShort-Term Incentive Compensation Plan.
With respect to the performance units under the 2011 LTIC plan, the amount shown is the amount allocable to the 2013 performance period with respect to performance units granted by the Compensation Committee on February 23, 2011. The performance unit award under the 2011 LTIC plan is allocated one-third to each annual performance period for three years (2011-2013) and is payable in cash after the end of the three-year period. Each annual performance target is set by the Compensation Committee at the start of each respective single-year performance period, and the payout of the performance unit award may range from 0% to 150% based on the achievement of specified results. As a result of the SoftBank Merger, the performance units granted under the 2011 LTIC plan with respect to the 2013 annual performance period were deemed met at target, resulting in an aggregate payout percentage for our named executive officers of 100% for those awards. Performance units granted under the 2012 LTIC plan were deemed met at target as a result of the SoftBank Merger, resulting in an aggregate payout percentage for our named executive officers of 100% for those awards. See Note 2Summary of Significant Accounting Policies in Sprints Transition Report on Form 10-K for the fiscal year ended March 31, 2014 and Compensation Discussion and AnalysisPrimary Components of Executive CompensationOther Compensation Decisions.
(5) | As previously disclosed on Sprints Current Report on Form 8-K filed on May 4, 2012, Mr. Hesse agreed to forfeit performance units valued at $2 million granted to him on February 22, 2012 under the 2012 LTIC plan and reduce his 2012 STIC plan opportunity from 200% of his annual base salary ($2.4 million) to 170% ($2.04 million), which returned his incentive opportunity to his 2010 level. |
|
Notice of Annual Meeting and Proxy Statement | 41 |
Executive Compensation
(6) | Consists of perquisites and other personal benefits and tax gross-ups during fiscal year 2013 and the Transition Period as follows: |
Transition Period
Non-business use of Corporate ($)(i) |
Security Services ($)(ii) |
Relocation Costs ($)(iii) |
Tax Gross-Ups ($)(iv) | |||||
Hesse |
6,265 | 7,034 | | | ||||
Euteneuer |
| | 10,554 | 9,155 | ||||
Draper |
| | 139,117 | 17,834 | ||||
Elfman |
| | | | ||||
Johnson |
| | | |
(i) | The incremental cost of use of our aircraft is calculated by dividing the total variable costs (such as fuel, aircraft maintenance, engine warranty expense, contract labor expense and other trip expenses) by the total flight hours for the past 12 months and multiplying such amount by the individuals total number of flight hours for non-business use for the year. |
(ii) | The Compensation Committee has established an overall security program for Mr. Hesse. Under the security program, we provided Mr. Hesse with residential security systems and equipment and he was required to use our aircraft for business travel as well as non-business travel. Mr. Hesse was permitted to have his family accompany him on the corporate aircraft for business and non-business travel. |
(iii) | For Mr. Euteneuer, consists of relocation costs incurred in connection with relocation of Mr. Euteneuers principal residence to the Overland Park, Kansas area. |
For Mr. Draper, consists of relocation costs incurred in connection with relocation of Mr. Drapers principal residence to the Overland Park, Kansas area. For more information regarding Mr. Drapers relocation, see Compensation Discussion and AnalysisPrimary Components of Executive CompensationOther Compensation Decisions.
(iv) | For Mr. Euteneuer, consists of tax gross-ups in connection with relocation of Mr. Euteneuers principal residence to the Overland Park, Kansas area. |
For Mr. Draper, consists of tax gross-ups in connection with relocation of Mr. Drapers principal residence to the Overland Park, Kansas area. For more information regarding Mr. Drapers relocation, see Compensation Discussion and AnalysisPrimary Components of Executive CompensationOther Compensation Decisions.
42 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
Fiscal Year 2013
Non-business use of Corporate ($)(i) |
Security Services ($)(ii) |
Relocation Costs ($)(iii) |
Tax Gross-Ups ($)(iv) |
Legal Fees ($)(v) |
Company Contributions to 401(k) and Compensation Plans ($) | |||||||
Hesse |
6,686 | 8,687 | | | 226,794 | 129,911 | ||||||
Euteneuer |
| | | | | 10,200 | ||||||
Draper |
| | 45,100 | | 900 | | ||||||
Elfman |
| | 143,549 | 29,173 | | 10,200 | ||||||
Johnson |
| | | | | 10,200 |
(i) | The incremental cost of use of our aircraft is calculated by dividing the total variable costs (such as fuel, aircraft maintenance, engine warranty expense, contract labor expense and other trip expenses) by the total flight hours for the past twelve months and multiplying such amount by the individuals total number of flight hours for non-business use for the year. |
(ii) | The Compensation Committee has established an overall security program for Mr. Hesse. Under the security program, we provided Mr. Hesse with residential security systems and equipment and he was required to use our aircraft for business travel as well as non-business travel. Mr. Hesse was permitted to have his family accompany him on the corporate aircraft for business and non-business travel. |
(iii) | For Mr. Draper, consists of relocation costs incurred in connection with relocation of Mr. Drapers principal residence to the Overland Park, Kansas area. For more information regarding Mr. Drapers relocation, see Compensation Discussion and AnalysisPrimary Components of Executive CompensationOther Compensation Decisions. |
For Mr. Elfman, consists of relocation costs in connection with relocation of Mr. Elfmans principal place of work to Seattle, Washington. For more information regarding Mr. Elfmans relocation, see Compensation Discussion and AnalysisPrimary Components of Executive CompensationOther Compensation Decisions.
(iv) | Consists of tax gross-ups in connection with relocation of Mr. Elfmans principal place of work to Seattle, Washington. For more information regarding Mr. Elfmans relocation, see Compensation Discussion and AnalysisPrimary Components of Executive CompensationOther Compensation Decisions. |
(v) | For Mr. Hesse, consists of legal fees relating to the negotiation of Mr. Hesses employment contract. For Mr. Draper, consists of phone allowance. |
|
Notice of Annual Meeting and Proxy Statement | 43 |
Executive Compensation
Transition Period. No grants of plan-based awards were made to our named executive officers during the Transition Period.
Fiscal year 2013. The table below summarizes awards under our 2013 STIC and LTIC incentive plans and other option awards to our named executive officers for the fiscal year ended December 31, 2013. These awards consisted of the following:
| Awards granted pursuant to our 2013 STIC plan; |
| Performance units and performance-based RSUs granted for the 2013 portion of our 2011 LTIC plan; |
| Time-based and performance-based RSUs granted pursuant to our 2013 LTIC plan; |
| Stock options and time-based RSUs granted to Mr. Hesse in connection with Mr. Hesses new employee agreement as described in Compensation Discussion and AnalysisPerformance and Key Compensation Decisions; and |
| Time-based RSUs granted to Mr. Draper in connection with Mr. Drapers sign-on award as described in Compensation Discussion and AnalysisCompensation OverviewComponents of Our Executive Compensation Program. |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards |
|||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date |
Award Type |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
All Other Stock Awards: Number of Shares of Stock or Units (#) |
All Other Option Awards: Number of Securities Underlying Options (#) |
Exercise or Base Price of Option Awards ($/Sh) |
Grant Date of Stock and Option |
||||||||||||||||||||||||||||||||||||
Hesse |
2/27 | STI(1) | 600,000 | 2,400,000 | 4,800,000 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2/27 | LTI(2) | 1,467,600 | 5,870,400 | 8,805,600 | | | | | | | | |||||||||||||||||||||||||||||||||||||
2/27 | pRSU(3) | | | | | 321,667 | 321,667 | | | | 1,884,969 | |||||||||||||||||||||||||||||||||||||
9/16 | pRSU(4) | | | | 298,960 | 1,195,841 | 2,391,682 | | | | 7,940,384 | |||||||||||||||||||||||||||||||||||||
7/24 | RSU(5) | | | | | | | 1,195,841 | | | 6,900,003 | |||||||||||||||||||||||||||||||||||||
8/1 | RSU(6) | | | | | | | 1,733,102 | | | 11,057,191 | |||||||||||||||||||||||||||||||||||||
8/1 | SO(7) | | | | | | | | 1,733,102 | 6.38 | 6,291,160 | |||||||||||||||||||||||||||||||||||||
Euteneuer |
2/27 | STI(1) | 251,875 | 1,007,500 | 2,015,000 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2/27 | LTI(2) | 437,500 | 1,750,000 | 2,625,000 | | | | | | | | |||||||||||||||||||||||||||||||||||||
2/27 | pRSU(3) | | | | | 76,420 | 76,420 | | | | 447,821 | |||||||||||||||||||||||||||||||||||||
9/16 | pRSU(4) | | | | 87,197 | 348,787 | 697,574 | | | | 2,315,946 | |||||||||||||||||||||||||||||||||||||
7/24 | RSU(5) | | | | | | | 348,787 | | | 2,012,501 | |||||||||||||||||||||||||||||||||||||
Draper |
2/27 | STI(1) | 36,826 | 147,303 | 294,606 | | | | | | | | ||||||||||||||||||||||||||||||||||||
9/10 | RSU(8) | | | | | | | 131,579 | | | 832,895 | |||||||||||||||||||||||||||||||||||||
Elfman |
2/27 | STI(1) | 203,125 | 812,500 | 1,625,000 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2/27 | LTI(2) | 406,250 | 1,625,000 | 2,437,500 | | | | | | | | |||||||||||||||||||||||||||||||||||||
2/27 | pRSU(3) | | | | | 73,199 | 73,199 | | | | 428,946 | |||||||||||||||||||||||||||||||||||||
9/16 | pRSU(4) | | | | 80,968 | 323,873 | 647,746 | | | | 2,150,517 | |||||||||||||||||||||||||||||||||||||
7/24 | RSU(5) | | | | | | | 323,873 | | | 1,868,747 | |||||||||||||||||||||||||||||||||||||
Johnson |
2/27 | STI(1) | 142,757 | 571,027 | 1,142,054 | | | | | | | | ||||||||||||||||||||||||||||||||||||
2/27 | LTI(2) | 175,000 | 700,000 | 1,050,000 | | | | | | | | |||||||||||||||||||||||||||||||||||||
2/27 | pRSU(3) | | | | | 31,532 | 31,532 | | | | 184,778 | |||||||||||||||||||||||||||||||||||||
9/16 | pRSU(4) | | | | 39,861 | 159,445 | 318,890 | | | | 1,058,714 | |||||||||||||||||||||||||||||||||||||
7/24 | RSU(5) | | | | | | | 159,445 | | | 919,998 |
(1) | STIRepresents the threshold, target and maximum estimated possible payouts for fiscal year 2013 under our 2013 STIC plan. With the exception of Mr. Draper, payouts under the 2013 STIC plan, which were based on our 2013 actual performance compared to the financial and operating objectives of the |
44 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
plan, were made at approximately 118.96% of each named executive officers target opportunity. With the exception of Mr. Draper, each named executive officer earned a payout of 118.96% of his targeted opportunity based on actual performance in 2013. Mr. Draper was not eligible to participate in the first half-year performance period under Sprints 2013 STIC plan because he was not a Sprint employee until the second half-year performance period. Mr. Draper earned a payout of 63.83% of his targeted opportunity based on actual performance from July 1, 2013 through December 31, 2013. Payouts under the 2013 STIC plan are reflected in the summary compensation table in the column entitled Non-Equity Incentive Plan Compensation. Each performance objective under the plan had a threshold achievement level, below which there would be no payout, a target achievement level, at which the target opportunity would be paid, and a maximum achievement level, at which 200% of the target would be paid for the annual performance period. For purposes of this table, the minimum estimated possible payout assumes that the threshold achievement level was satisfied and for target, assumes payout at satisfaction of target. For more information on the 2013 STIC plan, see Compensation Discussion and AnalysisComponents of our Executive Compensation ProgramPerformance and Key Compensation DecisionsSTIC Plan. |
(2) | LTIRepresents the threshold, target and maximum estimated possible payouts for the 2013 portion of performance units granted by the Compensation Committee on February 23, 2011 under our 2011 LTIC plan; the summary compensation table reflects target payouts, as described in footnote 3 thereto. As a result of the SoftBank Merger, the performance units granted under the 2011 LTIC plan with respect to the 2013 annual performance period were deemed met at target, resulting in an aggregate payout percentage for our named executive officers of 100% for those awards. |
(3) | pRSUsRepresents a performance-based RSU award for the 2013 portion of our 2011 LTIC plan, which, as granted, was payable only upon satisfaction of performance conditions, and now is payable at target in accordance with the SoftBank Merger Agreement and vested 100% on February 23, 2014 (April 4, 2014 for Mr. Euteneuer). |
(4) | pRSUsRepresents a performance-based RSU award granted under our 2013 LTIC plan, which is subject to adjustment in accordance with the performance objectives. Vesting occurs 100%, as adjusted for achievement in the two-year performance period ending on December 31, 2015, on February 27, 2016. |
(5) | RSUsRepresents a time-based RSU award granted under our 2013 LTIC plan. Vesting occurs 100% on February 27, 2016. |
(6) | RSUsRepresents a time-based RSU award granted to Mr. Hesse. Vesting occurs 100% on August 1, 2018. |
(7) | SORepresents stock options granted to Mr. Hesse. Vesting occurs 100% on August 1, 2018. |
(8) | RSUsRepresents a time-based RSU award granted to Mr. Draper. Vesting occurs 25% on each of September 10, 2014, September 10, 2015, September 10, 2016 and September 10, 2017. |
|
Notice of Annual Meeting and Proxy Statement | 45 |
Executive Compensation
Option Exercises and Stock Vested
Transition Period. The table below summarizes option awards that were exercised and stock awards that vested for the Transition Period with respect to each of our named executive officers.
Option Awards | Stock Awards | |||||||
Number of Shares Acquired on Exercise (#) |
Value Realized Exercise ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($)(1) | |||||
Hesse |
| | 958,903 (2) | 8,112,319 | ||||
Euteneuer |
| | | | ||||
Draper |
| | | | ||||
Elfman |
| | 218,207 (3) | 1,846,031 | ||||
Johnson |
| | 93,997 (4) | 795,215 |
(1) | Amounts reflect the average high and low common stock price as reported on the NYSE composite of the underlying common stock on the day the RSU award vested multiplied by the number of shares that vested. |
(2) | Mr. Hesse surrendered 459,794 shares of common stock receivable upon the vesting of his RSU award to satisfy tax withholding obligations, resulting in Mr. Hesse receiving 499,109 shares of our common stock. |
(3) | Mr. Elfman surrendered 91,538 shares of common stock receivable upon the vesting of his RSU award to satisfy tax withholding obligations, resulting in Mr. Elfman receiving 126,669 shares of our common stock. |
(4) | Mr. Johnson surrendered 43,662 shares of common stock receivable upon the vesting of his RSU award to satisfy tax withholding obligations, resulting in Mr. Johnson receiving 50,335 shares of our common stock. |
Fiscal year 2013. The table below summarizes option awards that were exercised and stock awards that vested in 2013 with respect to each of our named executive officers for the fiscal year ended December 31, 2013.
Option Awards | Stock Awards | |||||||
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($)(1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($)(1) | |||||
Hesse |
| | 738,781 (2) | 4,332,951 | ||||
Euteneuer |
| | | | ||||
Draper |
| | | | ||||
Elfman |
| | 221,634 (3) | 1,299,883 | ||||
Johnson |
871,267 | 6,207,777 | 94,564 (4) | 554,618 |
(1) | Amounts reflect the average high and low common stock price as reported on the NYSE composite of the underlying common stock on the day the option shares were exercised or RSU award vested multiplied by the number of shares that vested or were exercised. |
46 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
(2) | Mr. Hesse surrendered 323,775 shares of common stock receivable upon the vesting of his RSU award to satisfy tax withholding obligations, resulting in Mr. Hesse receiving 415,006 shares of our common stock. |
(3) | Mr. Elfman surrendered 97,133 shares of common stock receivable upon the vesting of his RSU award to satisfy tax withholding obligations, resulting in Mr. Elfman receiving 124,501 shares of our common stock. |
(4) | Mr. Johnson surrendered 32,352 shares of common stock receivable upon the vesting of his RSU award to satisfy tax withholding obligations, resulting in Mr. Johnson receiving 62,212 shares of our common stock. |
Outstanding Equity Awards at Fiscal Year-End
Transition Period. The table below summarizes option and equity awards outstanding as of March 31, 2014 held by each of our named executive officers based on the closing price of a share of our common stock of $9.19 on that date.
Option Awards |
Stock Awards |
|||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Date |
Number
of Shares or Units of Stock that Have Not Vested (#) |
Market Value of Units of Stock that |
Equity Incentive Number of |
Equity Market or | ||||||||||||||||||
Hesse |
| 1,733,102 | (2) | 6.38 | 8/1/2023 | 4,044,201 (5) | 37,166,207 | 1,195,841 (6) | 10,989,778 | |||||||||||||||||
741,928 | (3) | 370,965 | (3) | 2.00 | 2/22/2022 | | | | | |||||||||||||||||
1,005,977 | (4) | | 3.76 | 2/23/2021 | | | | | ||||||||||||||||||
508,070 | (4) | | 3.09 | 3/16/2020 | | | | | ||||||||||||||||||
2,968,678 | (4) | | 3.22 | 2/25/2019 | | | | | ||||||||||||||||||
573,795 | (4) | | 5.84 | 3/26/2018 | | | | | ||||||||||||||||||
1,117,753 | (4) | | 12.45 | 12/17/2017 | | | | | ||||||||||||||||||
1,117,753 | (4) | | 14.94 | 12/17/2017 | | | | | ||||||||||||||||||
1,425,135 | (4) | | 17.42 | 12/17/2017 | | | | | ||||||||||||||||||
Euteneuer |
453,580 | (3) | 226,791 | (3) | 2.00 | 2/22/2022 | 1,133,260 (5) | 10,414,659 | 348,787 (6) | 3,205,353 | ||||||||||||||||
254,447 | (7) | 127,224 | (7) | 4.14 | 4/4/2021 | | | | | |||||||||||||||||
Draper |
| | | | 131,579 (5) | 1,209,211 | | | ||||||||||||||||||
Elfman |
421,181 | (3) | 210,591 | (3) | 2.00 | 2/22/2022 | 810,395 (5) | 7,447,530 | 323,873 (6) | 2,976,393 | ||||||||||||||||
354,409 | (4) | | 3.76 | 2/23/2021 | | | | | ||||||||||||||||||
304,841 | (4) | | 3.09 | 3/16/2020 | | | | | ||||||||||||||||||
989,677 | (4) | | 3.22 | 2/25/2019 | | | | | ||||||||||||||||||
172,138 | (4) | | 7.06 | 5/4/2018 | | | | | ||||||||||||||||||
487,038 | (4) | | 8.48 | 5/4/2018 | | | | | ||||||||||||||||||
Johnson |
97,196 | (8) | 97,196 | (8) | 2.00 | 2/22/2022 | 383,993 (5) | 3,528,896 | 159,445 (6) | 1,465,300 | ||||||||||||||||
50,890 | (4) | | 3.76 | 2/23/2021 | | | | | ||||||||||||||||||
32,517 | (4) | | 3.09 | 3/16/2020 | | | | |
(1) | Market value is based on the closing price of a share of our common stock of $9.19 on March 31, 2014. |
(2) | Stock options vest 100% on August 1, 2018. |
(3) | Stock options vest/vested 33 1/3% on February 22, 2013, February 22, 2014 and February 22, 2015. |
|
Notice of Annual Meeting and Proxy Statement | 47 |
Executive Compensation
(4) | Stock options are fully vested. |
(5) | Consists of Mr. Hesses time-based RSU award of 1,733,102 shares that vest on August 1, 2018 and Mr. Drapers time-based RSU award of 131,579 that vests 25% on September 10, 2014, September 10, 2015, September 10, 2016 and September 10, 2017. |
Consists of Mr. Euteneuers restricted stock award of 32,718 shares that vested on April 4, 2014 and 227,809 performance-based RSUs that vested on April 4, 2014 and with respect to which the applicable performance periods have been completed.
Consists of time-based RSU awards that vest on February 27, 2016:
Name | Amount | |||
Hesse |
1,195,841 | |||
Euteneuer |
348,787 | |||
Elfman |
323,873 | |||
Johnson |
159,445 |
Consists of performance-based RSUs that vest on February 22, 2015 and with respect to which the applicable performance periods have not been completed:
Name | Amount | |||
Hesse |
1,115,258 | |||
Euteneuer |
523,946 | |||
Elfman |
486,522 | |||
Johnson |
224,548 |
(6) | Consists of performance-based RSUs that vest on February 27, 2016 and with respect to which the applicable performance periods have not been completed: |
Name | Amount | |||
Hesse |
1,195,841 | |||
Euteneuer |
348,787 | |||
Elfman |
323,873 | |||
Johnson |
159,445 |
(7) | Stock options vest/vested 33 1/3% on April 4, 2012, April 4, 2013 and April 4, 2014. |
(8) | Stock options vest/vested 50% on February 22, 2014 and February 22, 2015. |
48 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
Fiscal year 2013. The table below summarizes option and equity awards outstanding as of December 31, 2013 held by each of our named executive officers for the fiscal year ended December 31, 2013 based on the closing price of a share of our common stock of $10.75 on that date.
Option Awards |
Stock Awards |
|||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Date |
Number of Shares or Units of Stock that Have Not Vested (#) |
Market Value of Units of Stock that |
Equity Incentive Number of |
Equity Market or |
||||||||||||||||||||||||
Hesse |
| 1,733,102 | (2) | 6.38 | 8/1/2023 | 5,003,104 | (8) | 53,783,368 | 1,195,841 | (9) | 12,855,291 | |||||||||||||||||||||
370,964 | (3) | 741,929 | (3) | 2.00 | 2/22/2022 | | | | | |||||||||||||||||||||||
670,651 | (4) | 335,326 | (4) | 3.76 | 2/23/2021 | | | | | |||||||||||||||||||||||
254,035 | (5) | 254,035 | (5) | 3.09 | 3/16/2020 | | | | | |||||||||||||||||||||||
2,968,678 | (7) | | 3.22 | 2/25/2019 | | | | | ||||||||||||||||||||||||
573,795 | (7) | | 5.84 | 3/26/2018 | | | | | ||||||||||||||||||||||||
1,117,753 | (7) | | 12.45 | 12/17/2017 | | | | | ||||||||||||||||||||||||
1,117,753 | (7) | | 14.94 | 12/17/2017 | | | | | ||||||||||||||||||||||||
1,425,135 | (7) | | 17.42 | 12/17/2017 | | | | | ||||||||||||||||||||||||
Euteneuer |
226,790 | (3) | 453,581 | (3) | 2.00 | 2/22/2022 | 1,133,260 | (8) | 12,182,545 | 348,787 | (9) | 3,749,460 | ||||||||||||||||||||
254,447 | (10) | 127,224 | (10) | 4.14 | 4/4/2021 | | | | | |||||||||||||||||||||||
Draper |
| | | | 131,579 | (8) | 1,414,474 | | | |||||||||||||||||||||||
Elfman |
210,590 | (3) | 421,182 | (3) | 2.00 | 2/22/2022 | 1,028,602 | (8) | 11,057,472 | 323,873 | (9) | 3,481,635 | ||||||||||||||||||||
236,272 | (4) | 118,137 | (4) | 3.76 | 2/23/2021 | | | | | |||||||||||||||||||||||
228,630 | (6) | 76,211 | (6) | 3.09 | 3/16/2020 | | | | | |||||||||||||||||||||||
989,677 | (7) | | 3.22 | 2/25/2019 | | | | | ||||||||||||||||||||||||
172,138 | (7) | | 7.06 | 5/4/2018 | | | | | ||||||||||||||||||||||||
487,038 | (7) | | 8.48 | 5/4/2018 | | | | | ||||||||||||||||||||||||
Johnson |
| 194,392 | (11) | 2.00 | 2/22/2022 | 477,990 | (8) | 5,138,393 | 159,445 | (9) | 1,714,034 | |||||||||||||||||||||
| 50,890 | (12) | 3.76 | 2/23/2021 | | | | | ||||||||||||||||||||||||
| 32,517 | (13) | 3.09 | 3/16/2020 | | | | |
(1) | Market value is based on the closing price of a share of our common stock of $10.75 on December 31, 2013. |
(2) | Stock options vest 100% on August 1, 2018. |
(3) | Stock options vest/vested 33 1/3% on February 22, 2013, February 22, 2014 and February 22, 2015. |
(4) | Stock options vest/vested 33 1/3% on February 23, 2012, February 23, 2013 and February 23, 2014. |
(5) | Stock options vest/vested 50% on March 16, 2013 and March 16, 2014. |
(6) | Stock options vest/vested 25% on March 16, 2011, March 16, 2012, March 16, 2013 and March 16, 2014. |
(7) | Stock options are fully vested. |
|
Notice of Annual Meeting and Proxy Statement | 49 |
Executive Compensation
(8) | Consists of Mr. Hesses time-based RSU award of 1,733,102 shares that vest on August 1, 2018 and Mr. Drapers time-based RSU award of 131,579 that vests 25% on September 10, 2014, September 10, 2015, September 10, 2016 and September 10, 2017. |
Consists of Mr. Euteneuers restricted stock award of 32,718 shares that vest on April 4, 2014 and performance-based RSUs for each named executive officer that vest on February 23, 2014 (April 4, 2014 for Mr. Euteneuer) and with respect to which the applicable performance periods have been completed: |
Name | Amount | |||
Hesse |
958,903 | |||
Euteneuer |
227,809 | |||
Elfman |
218,207 | |||
Johnson |
93,997 |
Consists of Mr. Hesses time-based RSU award of 1,733,102 shares that vest on August 1, 2018 and time-based RSUs for each named executive officer that vest on February 27, 2016:
Name | Amount | |||
Hesse |
1,195,841 | |||
Euteneuer |
348,787 | |||
Elfman |
323,873 | |||
Johnson |
159,445 |
Consists of performance-based RSUs that vest on February 22, 2015 and with respect to which the applicable performance periods have not been completed:
Name | Amount | |||
Hesse |
1,115,258 | |||
Euteneuer |
523,946 | |||
Elfman |
486,522 | |||
Johnson |
224,548 |
(9) | Consists of performance-based RSUs that vest on February 27, 2016 and with respect to which the applicable performance periods have not been completed: |
Name | Amount | |||
Hesse |
1,195,841 | |||
Euteneuer |
348,787 | |||
Elfman |
323,873 | |||
Johnson |
159,445 |
(10) | Stock options vest/vested 33 1/3% on April 4, 2012, April 4, 2013 and April 4, 2014. |
(11) | Stock options vest 50% on February 22, 2014 and February 22, 2015. |
(12) | Stock options vest 100% on February 23, 2014. |
(13) | Stock options vest 100% on March 16, 2014. |
None of our named executive officers for the Transition Period are entitled to pension benefits under the Companys pension or retirement plans.
50 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
Nonqualified Deferred Compensation
Certain employees, including our named executive officers, are entitled to participate in the Sprint Corporation Deferred Compensation Plan, a nonqualified and unfunded plan under which participants may defer to future years the receipt of certain compensation.
Transition Period. For the Transition Period, the plan permitted participants to defer up to 50% of base salary, up to 75% of their STIC plan payout and up to 75% of cash-based performance unit payouts made under the LTIC plan. To compensate participants for federal tax law limitations under our 401(k) plan, we match deferrals to the plan using the same matching contribution formula as our 401(k) plan for eligible compensation above the applicable annual limit, which for the calendar year 2014 is $260,000.
Name | Executive Contributions in Transition ($)(1) |
Registrant Contributions in ($) |
Aggregate Earnings in Transition ($) |
Aggregate Withdrawals/ Distributions |
Aggregate Balance at 3/31/2014 ($) | |||||
Hesse |
158,910 | | 13,392 | | 1,443,727 | |||||
Euteneuer |
| | | | | |||||
Draper |
| | | | | |||||
Elfman |
| | | | | |||||
Johnson |
| | | | |
(1) | Includes contributions by Mr. Hesse with respect to base salary during the Transition Period and 2013 STIC plan payout, the amount of which is included in the summary compensation table in Salary and Non-Equity Incentive Plan Compensation, respectively. |
Fiscal year 2013. For fiscal year 2013, the plan permitted participants to defer up to 50% of base salary and up to 75% of their STIC plan payout. We also matched deferrals to the plan in 2013 using the same matching contribution formula as our 401(k) plan for eligible compensation above the applicable annual limit, which for 2013 was $255,000. Of our named executive officers for the fiscal year ended December 31, 2013, only Mr. Hesse participated in this plan with respect to compensation earned during 2013. The table below summarizes the information with respect to this plan and the activity and balances with respect to the account of each named executive officer.
Name | Executive Contributions in 2013 ($)(1) |
Registrant Contributions in 2013 ($)(2) |
Aggregate Earnings In 2013 ($) |
Aggregate Withdrawals/ Distributions |
Aggregate Balance at 12/31/2013 ($)(3) | |||||
Hesse |
162,734 | 119,711 | 16,255 | | 1,151,715 | |||||
Euteneuer |
| | | | | |||||
Draper |
| | | | | |||||
Elfman |
| | | | | |||||
Johnson |
| | | | |
(1) | Includes contributions by Mr. Hesse with respect to 2013 base salary and 2012 STIC plan compensation, the amounts of which are included in the 2013 Summary Compensation Table in the Salary and Non-Equity Incentive Plan Compensation. |
|
Notice of Annual Meeting and Proxy Statement | 51 |
Executive Compensation
(2) | Represents matching contributions by us with respect to 2013 base salary deferrals on STIC plan compensation earned in 2013 but paid in 2014 and were credited to Mr. Hesses account on March 20, 2014, the respective amounts of which are included in the summary compensation table in the All Other Compensation column. |
(3) | Represents the aggregate balance as of December 31, 2013, which does not include the matching contribution noted in footnote 2 above. |
Compensation deferred by participants and any matching contributions made by us are credited to a bookkeeping account that represents our unsecured obligation to repay the participant in the future. Participants elect to allocate deferred and matching contributions among one or more hypothetical investment options, which include one option that tracks our common stock and other options that track broad-based bond and equity indices. Participants may change hypothetical investment elections only four times a year and at least three months must elapse between each change. Under the plan, the amount of our unfunded obligation is determined by tracking the value in the bookkeeping account according to the performance of the hypothetical investments.
Potential Payments upon Termination of Employment or Change in Control
Upon a termination of employment at the end of the Transition Period, as applicable, due to a resignation without good reason or termination by us with cause, our named executive officers would be entitled to only those payments and benefits provided to all our salaried employees on a non-discriminatory basis, including:
| accrued salary and vacation pay; and |
| payment of any vested balances or accrued benefits under our 401(k) plan and deferred compensation plan, pension plan and supplemental executive retirement plan. |
In addition, while none of our named executive officers satisfied the age and service requirements as of the end of the Transition Period, had their termination been at their normal retirement, they would be entitled to receive (consistent with benefits provided to all our salaried employees) (1) accelerated vesting of options granted with exercisability thereof for five years and of RSUs granted (except for those under the 2013 LTIC plan) with performance-based RSUs payable at target; (2) continued participation in group life and health plans; and (3) the 2012 LTIC plan performance unit award prorated to their termination date and payable based on actual performance. For more information on the retirement and deferred compensation benefits available to our named executive officers, see Setting Executive CompensationOther Components of Executive Compensation.
Pursuant to the terms of our named executive officers respective employment agreements or our Change in Control Severance Plan (CIC Severance Plan), upon an involuntary termination without cause or resignation for good reason (in connection with a change in control or not) or a termination in connection with their disability or death, our named executive officers would be entitled to not only their accrued benefits noted above, but other payments and benefits as set forth in more detail below.
While each of the applicable employment agreements and the Change in Control Severance Plan set forth relevant definitions in full, generally:
Change in control means: (1) the acquisition by a person or group, excluding SoftBank or its controlled affiliates, of 30% or more of Sprints voting stock; (2) a change in the composition of a majority of our directors; (3) the close of a merger, reorganization, business combination or
52 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
similar transaction after which: (a) Sprints stockholders do not hold more than 50% of the combined entity, (b) the members of Sprints board do not constitute a majority of the directors of the combined entity, (c) a person or group holds 30% or more of the voting securities of the combined entity; (4) Sprint ceasing to have equity securities trading on a national securities exchange; or (5) the liquidation or dissolution of Sprint.
We have cause to terminate the employment of a named executive officer involuntarily where that officer materially breaches his employment agreement, fails to perform his duties, intentionally acts in a manner that is injurious to us, or violates our code of conduct.
Good reason means the occurrence of any of the following without the named executive officers consent:
| our material breach of his employment agreement; a reduction in salary or short-term incentive compensation target opportunity, except for across-the-board reductions; certain relocations; or |
| in connection with a change in control: |
¡ | a significant and adverse reduction of a named executive officers duties or responsibilities or organizational status; |
¡ | the failure to provide a long-term incentive compensation opportunity comparable to other senior executives or a greater than 10% across-the-board reduction to any of base salary or short- or long-term incentive compensation opportunities; or |
¡ | our failure to obtain an agreement from a successor to assume the employment agreement. |
As a condition to our named executive officers entitlement to receive the amounts below, except for vested retirement or death benefits, they would have been:
| required to execute a release in favor of us; |
| subject to confidentiality and non-disparagement provisions on a permanent basis following the termination of their employment; and |
| for the duration of their payment period, prohibited from: |
¡ | engaging in certain employment activities with a competitor of ours; |
¡ | soliciting our employees and certain other parties doing business with us to terminate their relationship with us; and |
¡ | soliciting or assisting any party to undertake any action that would be reasonably likely to, or is intended to, result in a change in control or seek to control our board. |
If the named executive officer breached any of these obligations, he would have no rights in, and we would have no obligation to provide, any severance benefits yet to be paid or provided under his employment agreement and any outstanding equity-based award granted under his employment agreement would have terminated immediately.
|
Notice of Annual Meeting and Proxy Statement | 53 |
Executive Compensation
The following table and footnotes, along with the narrative below, describe the potential payments and benefits that would be provided to our named executive officers upon each respective hypothetical March 31, 2014 termination of employment scenario, based on the closing price of a share of our common stock of $9.19 on that date. The Non-CIC column shows the amounts due to each named executive officer in the event of his involuntary termination without cause or resignation with good reason on March 31, 2014. These amounts include the effect of the SoftBank Merger on July 10, 2013, which was a change in control of Sprint. Amounts in the CIC column assume a qualifying termination in connection with a subsequent change in control occurring after July 24, 2013.
Without Cause or For Good Reason(1) | ||||||||||||||||||||||
Non-CIC ($)(2) |
CIC ($) |
Disability ($) |
Death ($) |
|||||||||||||||||||
Hesse |
Salary-based | 2,400,000 | 2,400,000 | 1,200,000 | | |||||||||||||||||
STI-based | 5,391,781 | 5,391,781 | 591,781 | 591,781 | ||||||||||||||||||
LTI-based(3) | 48,315,311 | 62,313,241 | 60,652,201 | 60,652,201 | ||||||||||||||||||
Benefits/Perquisites | 55,336 | 55,336 | 10,168 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Total | 56,162,428 | 70,160,358 | 62,454,150 | 61,243,982 | ||||||||||||||||||
Euteneuer |
Salary-based | 1,550,000 | 1,550,000 | 775,000 | | |||||||||||||||||
STI-based | 2,263,425 | 2,263,425 | 248,425 | 248,425 | ||||||||||||||||||
LTI-based(3) | 13,560,390 | 17,643,120 | 17,204,024 | 17,204,024 | ||||||||||||||||||
Benefits/Perquisites | 55,336 | 55,336 | 10,168 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Total | 17,429,152 | 21,511,882 | 18,237,617 | 17,452,449 | ||||||||||||||||||
Draper |
Salary-based | 562,500 | 562,500 | 375,000 | | |||||||||||||||||
STI-based | 589,469 | 589,469 | 83,219 | 83,219 | ||||||||||||||||||
LTI-based(3) | 2,344,366 | 2,344,366 | 2,344,366 | 2,344,366 | ||||||||||||||||||
Benefits/Perquisites | 50,252 | 50,252 | 10,168 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Total | 3,546,587 | 3,546,587 | 2,812,753 | 2,427,585 | ||||||||||||||||||
Elfman |
Salary-based | 1,300,000 | 1,300,000 | 650,000 | | |||||||||||||||||
STI-based | 1,825,342 | 1,825,342 | 200,342 | 200,342 | ||||||||||||||||||
LTI-based(3) | 9,771,972 | 13,563,072 | 13,155,340 | 13,155,340 | ||||||||||||||||||
Benefits/Perquisites | 49,513 | 49,513 | 7,257 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Total | 12,946,828 | 16,737,928 | 14,012,939 | 13,355,682 | ||||||||||||||||||
Johnson |
Salary-based | 1,250,000 | 1,250,000 | 625,000 | 625,000 | |||||||||||||||||
STI-based | 1,404,110 | 1,404,110 | 154,110 | 154,110 | ||||||||||||||||||
LTI-based(3) | 6,443,035 | 6,443,035 | 6,254,851 | 6,254,851 | ||||||||||||||||||
Benefits/Perquisites | 71,084 | 71,084 | 10,542 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Total | 9,168,229 | 9,168,229 | 7,044,503 | 7,033,961 |
(1) | The CIC Severance Plan provides that if the payments and benefits provided to an executive under the CIC Severance Plan or any other plan or agreement would constitute an excess parachute payment for purposes of Section 280G of the Internal Revenue Code, the executive would either have his or her payments and benefits reduced to the highest amount that could be paid without triggering excise taxes under Section 4999 of the Internal Revenue Code; or, if greater, receive the after-tax amount of his or her payment and benefits taking into |
54 | Notice of Annual Meeting and Proxy Statement |
Executive Compensation
account the excise taxes and any other applicable federal, state and local taxes. Amounts do not take into account any possible reduction due to the effects of Section 280G of the Internal Revenue Code. |
(2) | If Mr. Johnsons termination was for good reason based on relocation, his salary-based benefit would have been $625,000, his STI-based benefit would have been $779,110, his LTI-based benefit would have been $6,443,035, and his benefits/perquisites would have been $10,542, for a total value of $7,857,687. |
(3) | Includes performance units (payable in cash), stock options and RSUs. The value of options is based on the intrinsic value of the options, which is the difference between the exercise price of the option and the market price of our shares on March 31, 2014, multiplied by the number of options, and the value of RSUs is based on the market value of our stock on March 31, 2014, multiplied by the number of RSUs, as adjusted for performance prior to 2013, for performance-based RSUs. |
Resignation for Good Reason or Involuntary Termination without Cause
If our named executive officers employment had been terminated either by them for good reason or by us without cause, they would have been entitled to:
| a lump sum payment equal to their then-current base salary for their respective payment period, which is 24 months for each named executive officer (18 months for Mr. Draper and 12 months for Mr. Johnson if his termination was for good reason based on relocation); |
| a lump sum payment equal to their STIC target opportunity for their respective payment period and payment of their STIC plan award for the calendar year of their termination at their STIC target opportunity, prorated to their termination date for a March 31, 2014 termination; |
| a payment of their 2012 LTIC plan performance unit award payable at target and immediate vesting as of their termination date of: |
¡ | outstanding options with exercisability of such options vested through the 90th day (12 months for Mr. Johnson) after such vesting; and |
¡ | RSUs granted, prorated (except for Mr. Johnson) to their termination date for RSUs granted under the 2013 LTIC plan for a termination not following a change in control, with performance-based RSUs: under the 2012 LTIC plan payable at target and under the 2013 LTIC plan payable based on actual performance (at target for Mr. Johnson, or for terminations following a change in control); and |
| continued participation for the payment period at employee rates in our group health and life plans (and for Mr. Johnson, the long-term disability plan) and outplacement services in an amount not to exceed $35,000 (for Mr. Johnson: $50,000; zero if his termination was for good reason based on relocation), each for the duration of his payment period. |
In addition, Mr. Hesse would have received his Sign-On RSU Award (as defined in his employment agreement) on the first business day of the seventh month following his termination and Mr. Draper would have received the remaining balance in his Restricted Cash Account, plus the prorated balance of his 2013 Restricted Cash Account (each as defined in that certain Agreement and Plan of Merger by and among Sprint Nextel Corporation, Collie Acquisition Corp, and Clearwire Corporation) less any prior payments received, with such proration based on the sum of 365 days plus the number of days worked during the vesting period, divided by the total number of days in the vesting period.
|
Notice of Annual Meeting and Proxy Statement | 55 |
Executive Compensation
Termination Disability Plan Benefits
If our named executive officers employment had terminated as a result of their disability, they would have been entitled to:
| continuation of their base salary for 12 months, less (except for Mr. Johnson) any benefits paid under our Long-term Disability Plan, through periodic payment with the same frequency as our payroll schedule; |
| a payment of their 2014 STIC plan award prorated to the termination date and payable based on actual performance; |
| a payment of their 2012 LTIC plan performance unit award prorated to their termination date and payable at target, and immediate vesting of options granted with exercisability thereof for five years (12 months for Mr. Johnson) and of RSUs granted with performance-based RSUs payable at target; and |
| continued participation at employee rates in our group health and life plans for 12 months. |
In addition, Mr. Hesse would have received his Sign-On RSU Award on the first business day of the seventh month following his termination and Mr. Draper would have received the remaining balance in his Restricted Cash Account, plus the prorated balance of his 2013 Restricted Cash Account (each as defined in that certain Agreement and Plan of Merger by and among Sprint Nextel Corporation, Collie Acquisition Corp, and Clearwire Corporation) less any prior payments received, with such proration based on the sum of 365 days plus the number of days worked during the vesting period, divided by the total number of days in the vesting period.
Termination as a Result of Death
Had our named executive officers employment terminated as a result of their death, their estates would have been entitled, as with respect to our employees generally, to a payment of their 2014 STIC plan award prorated to the termination date and payable based on actual performance; a payment of their 2012 LTIC plan performance unit award prorated to the termination date and payable at target; and immediate vesting of options granted with exercisability thereof for 12 months and of RSUs granted with performance-based RSUs payable at target.
Mr. Hesses estate also would have received his Sign-On RSU Award on the first business day of the seventh month following his death, Mr. Drapers estate would have received the remaining balance in his Restricted Cash Account, plus the prorated balance of his 2013 Restricted Cash Account (each as defined in that certain Agreement and Plan of Merger by and among Sprint Nextel Corporation, Collie Acquisition Corp, and Clearwire Corporation) less any prior payments received, with such proration based on the sum of 365 days plus the number of days worked during the vesting period, divided by the total number of days in the vesting period, and Mr. Johnsons estate also would have received continuation of his base salary for 12 months.
56 | Notice of Annual Meeting and Proxy Statement |
Certain Relationships & Related Transactions
|
Notice of Annual Meeting and Proxy Statement | 57 |
Certain Relationships & Related Transactions
58 | Notice of Annual Meeting and Proxy Statement |
Certain Relationships & Related Transactions
|
Notice of Annual Meeting and Proxy Statement | 59 |
Certain Relationships & Related Transactions
60 | Notice of Annual Meeting and Proxy Statement |
Certain Relationships & Related Transactions
|
Notice of Annual Meeting and Proxy Statement | 61 |
Security Ownership
Security Ownership of Certain Beneficial Owners
The following table provides information about the only known beneficial owners of five percent or more of our common stock. For purposes of the table below, beneficial ownership is determined based on Rule 13d-3 of the Securities Exchange Act of 1934, which states that a beneficial owner is any person who directly or indirectly has or shares voting and/or investment or dispositive power.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership |
Percent of Class (1) | ||
SOFTBANK CORP. |
||||
1-9-1 Higashi-Shimbashi, Minato-ku, |
3,205,665,088 (2) | 81.2% | ||
Tokyo, 105-7303 Japan |
(1) | The ownership percentages set forth in this column are based on Sprints outstanding shares on June 9, 2014 plus shares of Sprint common stock issuable upon exercise of a warrant to SoftBank, dated July 10, 2013, and assumes that SoftBank continued to own the number of shares reflected in the table above on June 9, 2014. |
(2) | According to a Schedule 13D filed with the SEC on September 18, 2013, by SoftBank Corp. According to the Schedule 13D, SoftBank is the beneficial owner of, and has sole voting power and sole dispositive power with respect to, all of the shares. |
62 | Notice of Annual Meeting and Proxy Statement |
Security Ownership
Security Ownership of Directors and Executive Officers
The following table states the number of shares of our common stock beneficially owned as of June 9, 2014 by each director, named executive officer, and all directors and executive officers as a group. Except as otherwise indicated, each individual named has sole investment and voting power with respect to the shares owned.
|
|||||||||||||||
Name of Beneficial Owner | Shares Owned |
Shares (1) |
Percentage of Common Stock | ||||||||||||
Robert R. Bennett |
56,553 | | * | ||||||||||||
Gordon M. Bethune |
109,440 | | * | ||||||||||||
Marcelo Claure |
| 13,480 | * | ||||||||||||
Brandon Draper |
| | * | ||||||||||||
Steven L. Elfman |
127,323 | 2,729,284 | * | ||||||||||||
Joseph J. Euteneuer |
188,409 | 835,251 | * | ||||||||||||
Ronald D. Fisher |
| 71,736 | * | ||||||||||||
Daniel R. Hesse |
1,749,717 | 9,459,089 | * | ||||||||||||
Frank Ianna |
48,649 | | * | ||||||||||||
Robert L. Johnson |
| 97,196 | * | ||||||||||||
Adm. Michael G. Mullen |
| 15,782 | * | ||||||||||||
Masayoshi Son |
| | * | ||||||||||||
Sara Martinez Tucker |
| 17,214 | * | ||||||||||||
Directors and Executive Officers as a group (20 persons) | 2,308,248 | 13,503,262 | * |
*Indicates ownership of less than 1%.
(1) | Represents shares that may be acquired upon the exercise of stock options exercisable, and shares of stock that underlie restricted stock units to be delivered, on or within 60 days after June 9, 2014 under our equity-based incentive plans. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC and the NYSE initial reports of beneficial ownership and reports of changes in beneficial ownership of our shares and other equity securities. These people are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file, and we make these reports available at www.sprint.com/investors/sec.
To our knowledge, based solely on a review of the copies of these reports furnished to us and written representations that no other reports were required, during the three month transition period ended March 31, 2014, all Section 16(a) filing requirements applicable to our directors, executive officers and beneficial owners of more than 10% of our equity securities were met.
|
Notice of Annual Meeting and Proxy Statement | 63 |
Proposal 2 Ratification of the Selection of the
Independent Registered Public Accounting Firm
Proposal 2. Ratification of the Selection of the Independent Registered Public Accounting Firm
(Item 2 on Proxy Card)
Our Audit Committee has voted to appoint Deloitte & Touche LLP as our independent registered public accounting firm to audit the consolidated financial statements and the effectiveness of internal control over financial reporting for our company and our subsidiaries for the year ending March 31, 2015. Our stockholders are asked to ratify that appointment at the annual meeting. In keeping with good corporate governance, the Audit Committee will periodically assess the suitability of our incumbent independent registered public accounting firm taking into account all relevant facts and circumstances, including the possible consideration of the qualifications of other accounting firms.
Deloitte has served as the independent registered accounting firm of Sprint Corporation (formerly known as Starburst II, Inc) since its formation in 2012. Prior to the completion of the SoftBank Merger on July 10, 2013, KPMG LLP served as the independent registered accounting firm of Sprint Nextel Corporation.
Representatives of Deloitte are expected to be present at the annual meeting and will have the opportunity to make a statement and to respond to appropriate questions. If the appointment of Deloitte is not ratified at the meeting, the Audit Committee will consider the selection of another accounting firm.
The following table provides the fees billed for professional services rendered by Deloitte for the three-month transition period ended March 31, 2014 and by Deloitte and KPMG for the fiscal year ended December 31, 2013. The Audit Committee determined that the non-audit services rendered by Deloitte in 2013 were compatible with maintaining its independence as auditors of our consolidated financial statements.
Deloitte | KMPG | |||||
Three-month transition period ended March 31, 2014 |
January 1, 2013 - December 31, 2013 |
January 1, 2013 July 10, 2013 | ||||
Audit Fees |
$5.0 million (1) | $9.1 million (1) | $9.7 million (2) | |||
Audit-Related Fees |
$0.0 million (3) | $1.1 million (3) | $3.6 million (4) | |||
Tax Fees |
$0.0 million | $0.1 million | $0.8 million | |||
All Other Fees |
$5.6 million (5) | $13.6 million (6) | $0.2 million |
(1) | For professional services rendered for the audit of our consolidated financial statements, the audit of the effectiveness of internal control over financial reporting, the review of the consolidated financial statements, and the audits of certain subsidiaries for statutory reporting purposes. |
(2) | For professional services rendered for the audit of Sprint Nextel Corporations consolidated financial statements, the audit of the effectiveness of internal control over financial reporting, the review of the consolidated financial statements, and the audits of certain subsidiaries for statutory reporting purposes. |
(3) | For professional audit-related services rendered to us, generally related to other attestation services including registration statements and other offering related services. |
64 | Notice of Annual Meeting and Proxy Statement |
Proposal 2 Ratification of the Selection of the
Independent Registered Public Accounting Firm
(4) | For professional audit-related services rendered to Sprint Nextel Corporation, generally related to other attestation services including registration statements and other offering related services. |
(5) | All other fees include approximately $3.3 million and $1.3 million for management advisory services for the periods from January 1, 2013 through December 31, 2013 and January 1, 2014 through March 31, 2014, respectively, and approximately $10.3 million and $4.3 million billed to us by Deloitte for the periods from January 1, 2013 through December 31, 2013 and January 1, 2014 through March 31, 2014, respectively, for amounts paid by Sprint directly related to Deloitte providing subcontractor services to an independent third party administrator that oversees the Federal Communications Commission 800 MHz Band Reconfiguration Order. |
(6) | All other fees included non-audit services of approximately $13.6 million which included approximately $3.3 million for management advisory services and approximately $10.3 million billed to us by Deloitte in 2013 for amounts billed to and paid by Sprint directly related to Deloitte providing subcontractor services to an independent third-party administrator that oversees the FCC 800 MHz Band Reconfiguration. |
The Audit Committee has adopted policies and procedures concerning our independent registered public accounting firm, including the pre-approval of services to be provided. Our Audit Committee pre-approved all of the services described above. The Audit Committee is responsible for the pre-approval of all audit, audit-related, tax and non-audit services; however, pre-approval authority may be delegated to one or more members of the Audit Committee. The details of any services approved under this delegation must be reported to the full Audit Committee at its next regular meeting. Our independent registered public accounting firm is generally prohibited from providing certain non-audit services under our policy, which is more restrictive than the SEC rules related to non-audit services. Any permissible non-audit service engagement must be specifically approved in advance by the Audit Committee. We provide quarterly reporting to the Audit Committee regarding all audit, audit-related, tax and non-audit services provided by our independent registered public accounting firm.
Our Board of Directors recommends that you vote FOR Proposal 2.
|
Notice of Annual Meeting and Proxy Statement | 65 |
Proposal 3 Advisory Approval of the
Companys Executive Compensation
Proposal 3. Advisory Approval of the Companys Named Executive Officer Compensation
(Item 3 on Proxy Card)
The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and Section 14A of the Exchange Act require that we permit our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in the Executive CompensationCompensation Discussion and Analysis and accompanying Executive Compensation Tables and related narrative disclosure beginning on page 25. At our 2011 Annual Meeting, Sprint Nextel stockholders approved, on an advisory basis, that an advisory vote on executive compensation should be held annually. Based on such result, our board determined that the advisory vote on executive compensation will be held every year until the next advisory vote on the frequency of future advisory votes on executive compensation, which will be no later than the Companys 2017 annual meeting of stockholders. The next stockholder advisory vote on executive compensation will be held in connection with the 2015 annual meeting of stockholders.
Our executive compensation programs are designed to attract, motivate, and retain our named executive officers, who can contribute to our success. We believe our incentive compensation must strike a balance between rewarding achievement of our short-term objectives and rewarding long-term stockholder return and must be highly sensitive to the degree to which those results are realized. Please read the Executive CompensationCompensation Discussion and Analysis for additional details about our executive compensation programs.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a say-on-pay proposal, gives our stockholders the opportunity to express their views on our named executive officers compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we will ask our stockholders to vote FOR the following resolution at the 2014 Annual Meeting:
RESOLVED, that the compensation paid to the Companys named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
The say-on-pay vote is advisory, and therefore not binding on Sprint, the Compensation Committee or our board of directors. Our board of directors and our Compensation Committee value the opinions of our stockholders and expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results.
Our Board of Directors recommends that you vote FOR Proposal 3.
66 | Notice of Annual Meeting and Proxy Statement |
Proposal 4 - Stockholder Proposal Concerning
Executives Retaining Significant Stock
Proposal 4. Stockholder Proposal Concerning Executives Retaining Significant Stock
Kenneth Steiner of Great Neck, New York, who owns no less than 500 shares of the Companys stock, has given notice of its intention to introduce the following resolution at the annual meeting. The stockholder proposal and the supporting statement appear as received by us and we are not responsible for its contents. Following the stockholder proposal is our response.
(Item 4 on Proxy Card)
Proposal 4 Executives To Retain Significant Stock
Resolved: Shareholders urge that our executive pay committee adopt a policy requiring senior executives to retain a significant percentage of shares acquired through equity pay programs until reaching normal retirement age and to report to shareholders regarding the policy before our Companys next annual meeting. For the purpose of this policy, normal retirement age would be an age of at least 60 and determined by our executive pay committee. Shareholders recommend that the committee adopt a share retention percentage requirement of 50% of net after-tax shares.
This single unified policy shall prohibit hedging transactions for shares subject to this policy which are not sales but reduce the risk of loss to the executive. Otherwise our directors would be able to avoid the impact of this proposal. This policy shall supplement any other share ownership requirements that have been established for senior executives, and should be implemented so as not to violate our Companys existing contractual obligations or the terms of any pay or benefit plan currently in effect.
Requiring senior executives to hold a significant portion of stock obtained through executive pay plans would focus our executives on our companys long-term success. A Conference Board Task Force report stated that hold-to-retirement requirements give executives an ever-growing incentive to focus on long-term stock price performance.
Please vote to protect shareholder value:
Executives To Retain Significant Stock Proposal 4
Our Response to the Stockholder Proposal
The Board recommends a vote against this proposal because we believe Sprints current executive compensation program and governance practices already adequately encourage executives to focus on the Companys long-term performance. In addition, the proposal, if adopted, would undermine our ability to attract and retain executives.
We agree that senior executives should have a significant stake in the Company to align their interests with our long-term success. To that end, under our compensation program, we typically grant equity awards annually with three- or four-year vesting periods, so at any particular time our executives hold unvested equity awards that provide proper incentives for them to build long-term stockholder value.
Further, our Board has established share ownership guidelines requiring our CEO to own a number of shares with a market value equal to at least five times his base salary and each of our other named executive officers to own a number of shares equal to at least three times their respective base salaries.
|
Notice of Annual Meeting and Proxy Statement | 67 |
Proposal 4 - Stockholder Proposal Concerning
Executives Retaining Significant Stock
Each of our named executive officers who has been with the company for at least five years met these guidelines at December 31, 2013.
Contrary to the proponents suggestion, requiring holding periods for future equity awards in addition to satisfying these guidelines, which we believe sufficiently retain their effectiveness over time, is unnecessary. Rather, taken together, our existing practices and policies strike an important balance between ensuring that our executives have a significant equity stake in Sprints future, while allowing them to prudently manage their personal financial affairs during their employment.
The policy called for under the proposal would place Sprint at a competitive disadvantage in recruiting and retaining executives. According to a recent survey report by Towers Watson, approximately 37 percent of companies have retention requirements in their equity plans, but of those only eight percent require that the retention period be to retirement. We also believe requiring executives to retain shares until reaching a minimum retirement age of 60, regardless of their age at employment termination as called for under the proposal, would further make Sprint an outlier and place us at a competitive disadvantage.
Our Board of Directors recommends that you vote AGAINST adoption of Proposal 4.
68 | Notice of Annual Meeting and Proxy Statement |
Proposal 5 Stockholder Proposal Concerning
Political Contributions
Proposal 5. Stockholder Proposal Concerning Political Contributions
(Item 5 on Proxy Card)
The New York City Fire Department Pension Fund, the New York City Teachers Retirement Systems, the New York Police Pension Fund, and the New York City Board of Education Retirement System, who own 34,087, 772,001, 143,970, and 53,484 shares respectively, have given notice of their intention to introduce the following resolution at the annual meeting. The stockholder proposal and the supporting statement appear as received by us and we are not responsible for its contents. Following the stockholder proposal is our response.
Resolved, the shareholders of Sprint Nextel (the Company) hereby request the Company to prepare and semiannually update a report, which shall be presented to the pertinent board of directors committee and posted on the Companys website, that discloses the Companys
(a) Policies and procedures for making political contributions and expenditures (both direct and indirect) with corporate funds, including the boards role (if any) in that process, and
(b) Monetary and non-monetary political contributions or expenditures that could not be deducted as an ordinary and necessary business expense under section 162(e) of the Internal Revenue Code; this would include (but not be limited to) contributions to or expenditures on behalf of political candidates, political parties, political committees and other entities organized and operating under sections 501(c)(4) of the Internal Revenue Code, as well as the portion of any dues or payments that are made to any tax-exempt organization (such as a trade association) and that are used for an expenditure or contribution that, if made directly by the Company, would not be deductible under section 162(e) of the Internal Revenue Code.
The report shall identify all recipients and the amount paid to each recipient from Company funds.
Stockholder Supporting Statement
As long-term Sprint Nextel shareholders, we support transparency and accountability in corporate spending on political activities. Disclosure is consistent with public policy and in the best interest of the Company and its shareholders. Indeed, the Supreme Courts 2010 Citizens United decision which liberalized rules for corporate participation in election-related activities recognized the importance of disclosure to shareholders. The Court said: [D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
Sprint Nextel contributed at least $4.7 million in corporate funds since the 2004 election cycle. (CQ: http://moneyline.cq.com and National Institute on Money in State Politics: http://www.followthemoney.org)
We note that our Company discloses its contributions to state-level candidates and candidate committees on its website. We believe this is deficient because the Company will not disclose:
| ballot measure payments; |
|
Notice of Annual Meeting and Proxy Statement | 69 |
Proposal 5 Stockholder Proposal Concerning
Political Contributions
| independent expenditures; and |
| payments to third-party organizations such as trade associations, super PACs, and groups organized under the sections 527 and 501(c)4 of the I.R.S. tax codes, if any. |
Relying on publicly available data does not provide a complete picture of the Companys political spending. Information on indirect political engagement through trade associations and 501(c)4 groups cannot be obtained by shareholders unless the Company discloses it. This proposal asks the Company to disclose all of its political spending, direct and indirect. This would bring our Company in line with a growing number of leading companies, including Exelon, Merck and Microsoft, which support political disclosure and accountability and present this information on their websites.
The Companys Board and its shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.
Our Response to the Stockholder Proposal
Sprint shares the proponents support for transparency and accountability in corporate spending on political activities. To that end, we have been responsive to input from our stockholders by publishing earlier this year a report on our 2013 political contributions. The report, available on our website at http://www.sprint.com/responsibility/gov-ethics-policy/contributions.html, not only lists our contributions to political candidates during 2013, it also describes the processes and oversight used in connection with such contributions. We intend to publish this report annually. The information contained in or accessible though our website is not part of this Proxy Statement.
While agreeing with the policy espoused by the proposal, we take issue with its overly prescriptive nature. For example, the proposal calls for us to identify the persons responsible for political contributions. We believe our published reports description of the process and oversight provided by the Nominating Committee is an appropriate best practice followed by many other companies.
Government policies and regulation have a significant impact on our business. It is important that we be able to advocate effectively for public policies that support our business objectives, our ability to compete fairly in the marketplace, and candidates who share our public policy views. We believe our level of transparency has been equal to, or in excess of, that of our competitors. Parties with interests adverse to us, sometimes with significantly more resources than us to expend on political advocacy, also participate in the political process to their business advantage. Any unilateral expanded disclosure could benefit those parties while harming our interests and the interests of our stockholders.
Our Board of Directors recommends that you vote AGAINST Proposal 5.
70 | Notice of Annual Meeting and Proxy Statement |
General Information
|
Notice of Annual Meeting and Proxy Statement | 71 |
General Information
Election of Directors |
Auditor Ratification |
Advisory Approval of Executive Compensation |
Stockholder Proposals | |||||
Voting Standard | Plurality, which means directors receiving the highest number of votes FOR will be elected | Majority of shares present and entitled to vote |
Majority of shares present and entitled to vote | Majority of shares present and entitled to vote | ||||
Broker Non-Votes | Not counted as entitled to vote and therefore no effect | Not applicable | Not counted as entitled to vote and therefore no effect | Not counted as entitled to vote and therefore no effect | ||||
Treatment of Abstentions |
Not applicable | Will be treated as a vote AGAINST | Will be treated as a vote AGAINST | Will be treated as a vote AGAINST | ||||
Uninstructed Proxy | Will be voted FOR this item. | Will be voted FOR this item. | Will be voted FOR this item. | Will be voted AGAINST these items. | ||||
Board Recommendation |
FOR | FOR | FOR | AGAINST |
We do not intend to bring any other matters before the meeting, and we do not know of any matters to be brought before the meeting by others. Should any matter not described above be properly presented at the meeting, the persons named in the proxy card will vote in accordance with their judgment as permitted.
72 | Notice of Annual Meeting and Proxy Statement |
General Information
|
Notice of Annual Meeting and Proxy Statement | 73 |
General Information
74 | Notice of Annual Meeting and Proxy Statement |
General Information