More than a quarter of MCI's shares were withheld yesterday in the re-election of the company's board of directors, a sizable protest against...
CHANTILLY, Va. — More than a quarter of MCI’s shares were withheld yesterday in the re-election of the company’s board of directors, a sizable protest against their decision to accept an $8.5 billion buyout from Verizon rather than a higher-priced offer from Qwest.
Chief Executive Michael Capellas and board Chairman Nicholas deB. Katzenbach were re-elected with about 72 percent of the shares cast at the telecommunications company’s annual shareholder meeting. Seven other board members were re-elected by a similar margin.
It was unclear if the protest vote would spur Qwest, which angrily withdrew its $9.85 billion bid earlier this month, to re-enter the bidding against Verizon.
Qwest issued a statement saying the vote “demonstrates that a significant portion of MCI shareholders are unhappy with the MCI management and board decision to … accept a lower offer for MCI. That being said, we will continue to do what is in the best interests of our shareowners, customers and employees.”
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A Qwest spokesman declined further comment.
Under current securities rules, it is essentially impossible to block a nominee’s election or re-election to the board, even if a majority of voting shares are withheld.
Still, a strong display of dissent can prompt change. Last year, 45 percent of the shares of Walt Disney Co. were withheld in the re-election of chief executive and then-chairman Michael Eisner to the entertainment company’s board.
The shareholder revolt led to Eisner’s ouster as chairman.
The MCI meeting was extraordinarily calm despite the show of dissent. Fewer than 50 shareholders attended, and none asked any questions of the MCI management team.
Capellas, speaking to reporters after the meeting, said the board’s re-election “is a clear indication that now we’re moving forward.”
Capellas said he expects to hold a shareholder vote this summer on the deal with Verizon. He said he has not heard from Qwest executives recently and that “if anything new comes our way, we’ll address it as it comes.”
Several major MCI shareholders have urged Qwest to continue its efforts.
One of them, Leon Cooperman of Omega Advisors, said the fact that so many shareholders withheld their support yesterday without any organized leadership “should be very encouraging to Qwest if they decide to re-enter the bidding. Qwest has just got to decide. If Qwest resubmits its bid, Qwest wins.”
Cooperman, who controls 3 percent of MCI’s shares, was among those who withheld their vote.
The three-month bidding war for MCI brought several offers from Qwest that were substantially higher than what Verizon agreed to pay.
Each time it rejected Qwest’s overture, the MCI board argued that Qwest’s heavy debt load and uncertain business prospects made a deal with Verizon a safer bet.