Sprint Nextel (NYSE:S) CEO Dan Hesse agreed to cut his total compensation by $3.25 million after shareholders balked at his pay package in light of the heavy upfront costs Sprint is paying to carry Apple's (NASDAQ:AAPL) iPhone.
The voluntary changes Hesse is making reflect both shareholders' unease with the high costs carriers pay to Apple as well as pressure from shareholders over executive compensation in general. Sprint has agreed to pay Apple $15.5 billion over four years to carry the iPhone, and has said its iPhone business will not turn a profit until 2015. In the past two quarters Sprint has sold 3.3 million iPhones while AT&T Mobility (NYSE:T) has racked up 11.9 million iPhone sales and Verizon Wireless (NYSE:VZ) has activated 7.5 million.
Sprint hiked Hesse's total compensation 31 percent in 2011 compared to 2010, for a total of $11.9 million. Sprint discounted the negative financial impact of selling the iPhone as well as Sprint's now-terminated network-hosting deal with LightSquared when it calculated bonuses for eligible executives in 2011.
"I do not want, nor does our compensation committee want, to penalize Sprint employees for the company's investment with Apple," Hesse wrote in a letter to the company's human resources department, according to a filing to the Securities and Exchange Commission. "These voluntary actions regarding my personal compensation, which total $3,250,830, will eliminate any benefit for me to the discretionary adjustment the compensation committee made earlier this year, and will set my 2012 incentive compensation target opportunities at my 2010 levels."
Hesse said he is cutting his base salary by about $346,000 and is forgoing around $545,000 in future pay related to the company's performance last year.
In a separate filing with the SEC, Sprint Chairman Jim Hance commended Hesse for the decision. "We applaud Dan for his willingness to sacrifice personal compensation in order to reduce any distraction that could negatively affect the morale and performance of the company," he said. "Dan enjoys the full support of our board of directors and we appreciate the leadership he has demonstrated as he continues to guide the company through a turnaround in a difficult competitive environment."
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