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A Glimpse into Vonage’s Proxy…

Although the crystal ball is a bit murky on what Vonage Holdings Corp.—s (VG) first quarter earnings report will look like when it’s released May 5, 2010, we got a clear glimpse into the company’s executive compensation practices, thanks to the proxy that Vonage filed yesterday.

That filing might lead one to conclude that the company’s revenues are soaring. And in the press release that accompanied the 8-K that Vonage filed on February 25, 2010, the company reported some improvements which prompted CEO Marc Lefar to say:

—In many ways, 2009 was a remarkable year for Vonage. During the past year, we upgraded our value proposition, enhanced the customer experience, reduced costs and better positioned the Company for future growth — this has been a breakthrough financial year. Although we faced considerable challenges due to the economy, competition and wireless substitution, we are stronger and more vibrant than ever.

But a glimpse into the past leaves us less than convinced about Lefar’s rosy views.

Since 2002 (when it got its first residential subscriber), Vonage has used the voice over Internet protocol (VoIP) to provide customers with local and long distance telephone service. Based in Holmdel, New Jersey, Vonage reports that it employs about 1,225 people and serves about 2.4 million customers. That’s about 172,000 fewer subscriber lines than Vonage had at the end of 2008.

Vonage has traded for between $0.31 and $2.63 per share in the past year; it’s currently selling for $1.65 per share. That’s more than 86% lower than it traded for on May 31, 2006, when it sold for nearly $13.00 per share.

Now let’s take a closer look at that proxy.

Last year Lefar (who joined Vonage in July, 2008) got a base salary of $883,000 (he gets $925,000 in 2010), a bonus of $689,000, option awards of nearly $2.3 million, and almost $817,000 of —Other compensation. Most of that – $ 648,127 — was for —private travel, but $146,925 (more than $12,000 per month) paid for Lefar’s temporary housing expenses. Vonage also grossed-up the amounts to cover any taxes that Lefar owed on the benefits. As the proxy (and Michelle’s prior Vonage posts) explain:

“Mr. Lefar is entitled to payment for or reimbursement of his commercial air and car transport between Atlanta, Georgia, the location of our business office for certain product management and development employees and where Mr. Lefar maintains his primary residence, and our principal offices. Each year during the term of the employment agreement, Mr. Lefar is also entitled to (i) payment of or reimbursement for amounts up to a maximum of $600,000 plus the cost of commercial air travel (i.e., the cost of a first-class, fully refundable, direct flight booked one week prior to travel), to be used by Mr. Lefar for private air travel, (ii) payment of or reimbursement for the cost of housing (i.e., furnished housing, including utilities) near our principal offices and (iii) gross-up for tax purposes of any income arising from such expense payments or reimbursements that are treated as nondeductible taxable income.”

In July, Lefar will have completed two years of the three-year contract, an agreement that provides that his options will vest immediately if Vonage is sold and there’s a change in control. Had that occurred on December 31, 2009, Lefar would have received $2.5 million.

The company also announced a couple of weeks ago that it’s losing Gov. Tom Ridge as a board member. Ridge, who has served on Vonage’s board since 2005, declined to stand for re-election because of —other business commitments, including the travel and time demands associated with operating his global strategic consulting company.

Let’s hope that when the results are announced next week, the shareholders have as much to celebrate as Lefar and the other top executives do.

Image source: M. Gifford via Flickr

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