Two stockholder research firms say the board of Qwest lacks independence and pays too much to top executives in light of the company's lackluster...

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DENVER — Two stockholder research firms say the board of Qwest lacks independence and pays too much to top executives in light of the company’s lackluster performance.

Glass Lewis and Proxy Governance issued the reports as Qwest prepares for its annual shareholders meeting next Tuesday, two weeks after losing out to Verizon in the bidding war for MCI. The reports singled out Chief Executive Richard Notebaert and other executives.

Glass Lewis gave Qwest an “F” for its pay-for-performance model.

“Overall the company paid more than its peers, but performed worse than its peers,” the report said.

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Notebaert’s 2004 pay package is estimated at $11 million to $12.5 million, depending on what value the two research firms placed on 1.9 million stock options he received in 2004, The Denver Post reported.

“Given the company’s current low stock price, we believe it is particularly egregious to give out nearly 2 million options without building in a performance component,” Proxy Governance said.

The Denver-based company, the dominant local phone carrier in 14 mostly Western states, is advising stockholders to vote against three proposals that address executive compensation and board independence.

“In terms of pay, you will find Dick Notebaert at the lower end of the scale when compared to his direct peers,” Qwest spokesman Steve Hammack said Tuesday. “His overall compensation is commensurate with his experience in our segment, and the results have borne that out.”

The executive pay packages include salary, bonus, stock options and other compensation. Notebaert cannot profit from his options unless Qwest’s stock rises above $4.70 per share.

Glass Lewis and Proxy Governance also criticized Qwest’s board for lacking independence and for having numerous connections with Qwest founder and board member Philip Anschutz, who owns 16.5 percent of the company.

Qwest paid $2.5 million in office rent and other expenses to companies controlled by Anschutz through October 2004. It also entered into an aircraft time-sharing agreement with an Anschutz subsidiary in January.

“The number of relationships between the company and Anschutz or entities controlled by him is unusual for a large public company, even one with a significant individual stockholder,” Proxy Governance said.

Qwest has said that its board complies with rules for director independence laid down by the New York Stock Exchange.