New Haven Register (Sunday) (New Haven, CT)
Top pay for top exec at Frontier
In wake of bankruptcy, Frontier pays new executive chairman $48.5M, filing shows
On the heels of a bankruptcy that wiped out billions of dollars owed to creditors, a new regulatory filing reveals Frontier Communications estimates it paid its new executive chairman last year $48.5 million — the most of all Connecticut publicly traded company executives.
The compensation topped — by several million dollars — the amount earned by the CEO of Stamford’s Charter Communications, who was the second-highest paid executive.
Frontier operates the historic Southern New England Telephone network that dates back to the earliest days of the telephone, with its eastern operations center in New Haven, where SNET had been based.
In 2016, the company absorbed a massive amount of debt to take over Verizon territories in California, Florida and Texas, which never produced sufficient profits and contributed to Frontier’s April 2020 bankruptcy.
Frontier continued normal service during its bankruptcy, while making Connecticut one of its early states for an upgrade to fiber-optic broadband. After dropping broadband territories in four Northwest states through a sale, the company now operates a patchwork of territories across 25 states and entered this year with 15,600 employees.
Frontier revenue totaled $6.4 billion in 2021, down 10 percent from the previous year. Excluding a $4.5 billion gain that included elimination of debt, in the final eight months of last year Frontier recorded $414 million in profits, reversing a $404 million loss in 2020. The company continues to carry ample debt at $7.7 billion.
While Frontier has committed to maintaining its headquarters in Norwalk through February 2023 as a condition of Connecticut regulators approving its bankruptcy restructuring, the company in January leased nearly 100,000 square feet of office space in Dallas, where CEO Nick Jeffery lives.
Frontier installed Jeffery as CEO a year after its bankruptcy filing, paying the former Vodafone executive $17 million for his first nine months leading Frontier. That was more than his predecessor, Dan McCarthy, accumulated across his first four years as CEO of the company. McCarthy
stepped down months before the 2020 bankruptcy filing.
In his role as executive chairman, John Stratton made far more than Jeffery at $48.5 million in 2021, according to a company filing this week with the U.S. Securities & Exchange Commission.
His compensation was largely in the form of stock awards that could result in a different final tally depending on the price of shares when he cashes in. Stratton’s total compensation was more than twice as much paid last year to the CEO of Verizon Communications, where Stratton worked for 25 years before stepping down in 2018.
On a February conference call, Stratton said Frontier has “built a pay-for-performance compensation philosophy” into the company’s executive compensation program. From just under $27 in May 2021, when Frontier debuted a new stock listing coming out of bankruptcy, the company shares traded Thursday morning at just over $29, a 7 percent gain even as shares ebbed for several rival broadband carriers.
In recent years, there has been a growing investor backlash against big pay packages for CEOs, resulting in initiatives like “say on pay,” in which investors can pressure boards to ratchet back compensation, and a requirement for companies to report how much more CEOs make than workers at the median of their payrolls.
Frontier spokesperson Erin Kurtz said this week the company’s board deemed the CEO and executive chairman packages as necessary to getting the best possible talent to lead it out of bankruptcy.
Frontier shareholders can weigh in on the 2021 pay packages at an annual meeting that will be held online May 17.
Big paydays are nothing new in the broadband industry. In Stamford, Charter Communications paid CEO Tom Rutledge $41.9 million in compensation last year, while it also recommitted to the city for the long term with a new headquarters complex.
Altice USA, the New York company that owns Optimum, awarded CEO Dexter Goei $48 million in the first year of the pandemic. It was one of the 20 largest U.S. compensation packages in 2020 as tracked by the AFL-CIO.
A spokesperson in the office of Connecticut Attorney General William Tong declined to comment, citing an ongoing investigation of Frontier’s customer service announced in April 2020 after more than 1,000 customers lodged complaints.
Speaking on a February conference call, Jeffery addressed Frontier’s efforts nationally to improve customer service.
“We have put in place hundreds, if not thousands, of operational changes to make the customer experience better,” Jeffery said in February. “The brand is repairable — and indeed is repairing quite rapidly.”
Frontier is now upgrading its Connecticut offering by stringing fiber optic cable directly to customers for 2 gigabit broadband service. The company is using a mix of staff and external contractors from out of state to install those lines, according to the head of a Frontier labor union in Connecticut.
Workers voted to ratify a new contract in February that increases pay 9 percent over the three years of the deal. In its annual proxy to investors on Monday, Frontier reported its median employee nationally made $80,500 last year.
“The corporate greed level in this country is not any secret,” said Dave Weidlich, president of Local 1298 of the Communications Workers of America union based in Hamden.
“They are doing a fiber-to-the-home build in Connecticut, and that’s good news for us. Those people they brought in knew something about how to build a business — rather than the previous group of people, who knew a lot about killing a business.”