Mad Money

After Taking Pay Cut, Sprint CEO Still Defends Apple Deal


When asked about his decision to return more than $3.25 million in compensation, Sprint Nextel CEO Dan Hesse on Tuesday said he wanted to “eliminate some of the distractions.”

Hesse has come under fire this year from shareholders disappointed with the hit the company's results took from subsidizing Apple's popular iPhones and other investments. In fact, the Ontario Teachers' Pension Plan — one of Sprint's key investors with about a 4 percent stake — plans to vote against Hesse’s re-election to Sprint's board.

In an interview with Jim Cramer on CNBC’s “Mad Money,” Hesse defended his company’s decision to subsidize the iPhone. He said 44 percent of all new customers to Sprint purchased the iPhone, which is 2X the percentage of its competitors.

“That’s a very positive sign. Early on, [there were] very few returns and exchanges. Very few calls to customer care,” Hesse told Cramer at CTIA Wireless, the U.S. cellphone phone industry's annual trade show. “So we feel it’s a good long-term decision, even though the upfront cost to Apple are quite high.”

Nevertheless, Sprint shareholders continued to complain. On May 4, Hesse responded to shareholder complaints by taking a pay cut. He said his total pay cut would amount to about $3.25 million after forfeiting $346,000 already received for 2012.

“I recently offered to cut my compensation before Ontario because what I didn’t want was a distraction,” Hesse said. “I knew some shareholders were concerned about the short-term dilutive effect of the iPhone … Over the long-term, we think it’s a great decision for the company. High customer lifetime value because they churn at a lower rate primarily. So I was hoping to, if you will, eliminate some of the distraction.”

The Ontario Teachers' Pension Plan believes the cut is not sufficient to deal with the scale of Sprint's problems, though.

"We view Hesse's reduction in compensation as only partially alleviating our concerns. We therefore do not support his re-election to the board," the fund said on its website.

Deborah Allen, a spokeswoman for the fund, told Reuters this is the first time it has opposed the re-election of any Sprint director and was taking the action because of the "poor linkages" between company performance and senior management pay.

—Reuters contributed to this report

When this story was published, Cramer’s charitable trust owned Apple.

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