For some at CenturyLink, time is money…

April 14, 2011

Ben Franklin supposedly once said, “Time is money,” but we found some modern day executives who illustrate the point nicely in 2011 terms.

The first, Thomas Gerke, resigned from CenturyLink, Inc. (CTL) last December after serving as the Executive Vice Chairman from July 1, 2009 through December 15, 2010. Prior to that, Gerke spent a few years at Embarq (which merged with CenturyLink in July, 2009), where the board eventually appointed him to be the interim, and later permanent, CEO andPresident. A stint at Sprint preceded that.

In the proxy that CenturyLink filed last week, the filing discloses that Gerke left with a severance package valued at more than $7.76 million – a hefty chunk of the $13.93 million in total compensation he received in 2010. After he resigned on December 15, 2010, the company began sending him checks for $1.8 million (in bi-weekly payments of $34,615, to be remitted over a two-year period), as well as:

“…(ii) $1,440,000 of cash payments intended to compensate Mr. Gerke for foregone bonuses, paid in two equal installments in March 2012 and March 2013, (iii) a $122,467 cash payment compensating Mr. Gerke for accrued, unused vacation time, paid in early 2011, (iv) $67,756 of health and welfare benefits, including outplacement services and cash payments to compensate Mr. Gerke for estimated federal income taxes payable as a result of receiving these benefits, and (v) $4,333,746 of accrued value attributable to the accelerated vesting of Mr. Gerke’s equity awards over the severance period.”

The proxy explains that when CenturyLink merged with Embarq, that transaction triggered the change in control provisions for executives at both companies. At some point during the merger negotiations, Gerke and five other “legacy senior officers” from Embarq “entered into agreements permitting them to resign with severance benefits (in most cases at 1.5 or 2.0 times their annual compensation) during ‘window periods’ of varying lengths beginning at various specified dates following the merger.”

Gerke used that opportunity to leave during one such window period, writing a letter to CenturyLink’s CEO, Glen F. Post, III that spelled out the terms of the understanding between the two.

The second former Embarq executive, Dennis G. Huber, also left during a window period, collecting nearly $1.63 million in severance benefits on his way out the door. But Huber’s exit turned out to be temporary. The proxy explains that sometime after May 3, 2010, the date of Huber’s departure, CenturyLink asked him to return. According to his September 7, 2010 new employment agreement, CenturyLink had concluded “…that it need[ed] Executive’s expertise to close the Qwest Transaction and integrate Qwest with CenturyLink.”

Huber’s new deal runs until the earlier of a year after the Qwest deal closed (which occurred April 1, 2011), the company replaces him, or May 1, 2012. His new job – bearing the title of Executive Vice-President of Network Services of CenturyLink – pays him a biweekly salary of $15,517.28, which adds up to $403,449 per year. CenturyLink also gave him 75,000 shares of time-based restricted stock (worth more than $3 million at today’s price of $40.11 per share) as a reward for coming back.

And – because what would an executive employment agreement be without it? – he also gets a new clause that provides for severance payments. If he stays as long as the parties anticipate, Huber will get nearly $132,000 more in severance payments at the time the employment gig ends, plus benefits that include insurance, outplacement, and payment for any unused PTO.

For both Gerke and Huber, their short stays within the CenturyLink organization are paying off handsomely. We suspect that’s a bitter pill for Embarq’s non-union retirees to take: They received notification last December that CenturyLink planned to freeze their defined-benefit pension plans – a move that the company estimated would save it approximately $20 million over the next five years. Perhaps in their case, Ben Franklin’s adage falls a bit short.

Image source: tlindenbaum via flickr

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