U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant:
LUCENT TECHNOLOGIES INC.
2. Name of person relying on exemption:
LUCENT RETIREES ORGANIZATION
3. Address of person relying on exemption:
208 Richard Street Cranford, NJ 07106
4. Written materials. Attach written materials required to be
submitted pursuant to Rule 14a-6(g)(1) [sec. 240.14a-6(g)(1)]
(LRO Lucent Retirees Organization Inc.
logo)
Jim Breslin, President
______________________________________________________________
5150 Cralyn Court, Duluth, Georgia 30097-2450 770-416-8459
January 18, 2005
DEAR FELLOW LUCENT SHAREOWNER:
We are writing to urge you to VOTE FOR three important
shareholder resolutions that appear on Lucent's proxy card
for the February 16th Annual Meeting.
WE URGE YOU TO VOTE YOUR LUCENT PROXY
FOR PROPOSAL 4 (PERFORMANCE-BASED COMPENSATION),
FOR PROPOSAL 5 (ENHANCE AUDITOR INDEPENDENCE), AND
FOR PROPOSAL 6 (SHAREOWNER APPROVAL OF GOLDEN PARACHUTES).
Lucent's stock price has declined 93.6% over the most recent
five fiscal-year period. We support these proposals because
we believe they would better align executive compensation with
long-term shareholder interests and also ensure that the
company's auditor is free from the conflict of soliciting
tax-, pension- and consulting-related work.
- GOLDEN PARACHUTE SEVERANCE PLANS: PROPOSAL 6 would amend
the Bylaws to require shareholder ratification of severance
agreements with senior executive officers that promise
benefits with a total present value exceeding 2.99 times
the sum of the executive's base salary plus target bonus.
AN ADVISORY VERSION OF THIS PROPOSAL RECEIVED 65% SUPPORT FROM
SHAREHOLDERS AT THE 2004 ANNUAL MEETING, BUT IT HAS NOT BEEN
FULLY IMPLEMENTED. This proxy is therefore being
re-introduced in the hope of obtaining approval by 50% or more
of the total shares outstanding -- the vote required to pass a
bylaw amendment.
Although Lucent has adopted a policy to submit CERTAIN
severance agreements for shareholder ratification, we believe
its policy falls short of the modest standard endorsed
by the shareholders last year. Lucent's policy reflects only
a portion of the true cost of golden parachutes because it
excludes certain potentially costly benefits in calculating
the 2.99 threshold for shareholder approval.
In our view, Lucent's severance agreements are unjustifiably
costly. Even if there is no change in control, CEO Pat
Russo's severance package has a present value well in
excess of $20 million (and more if there is). If Ms. Russo
resigns "with good reason," or is terminated "without cause,"
she is eligible for a $6 million lump sum payment (two years
salary plus target bonus), continued benefit coverage, a
minimum annual pension payment of $740,000 for life, plus the
immediate vesting of 550,000 restricted shares and of options
on an additional 1.22 million shares.
Because it is not always practical to obtain prior shareholder
approval, the company is given the option to seek shareholder
approval AFTER the material terms are agreed upon.
WITH A 50% OR GREATER APPROVAL OF ALL SHARES OWNED, THIS
RESOLUTION WILL ENSURE THAT THE TOTAL COST -- INCLUDING PERKS,
"CONSULTING" PAYMENTS AND THE ACCELERATED VESTING OF
CONTINGENT EQUITY GRANTS -- WILL BE INCLUDED WHEN SHAREHOLDERS
CONSIDER AND VOTE ON RATIFICATION OF PROPOSED EXECUTIVE
BENEFITS.
- REDUCE AUDITOR CONFLICTS OF INTEREST: PROPOSAL 5 would
amend the Board's audit services pre-approval policy such
that the accounting firm retained to audit Lucent's
financial statements will perform only "audit-related"
work, and not perform services generating "tax fees" or
"all other fees," including pension and benefit plan
consulting and compliance services.
Accounting scandals and earnings management abuses have wiped
away billions in shareholder equity at several U.S. companies.
Last May, in a final judgment related to allegations of
accounting fraud, the SEC imposed a $25 million fine on
Lucent, the largest fine the agency had ever imposed. This
resolution requests that the Audit Committee go further than
the Sarbanes-Oxley law requires and separate the audit of
the Company's books from tax- and consulting-related services.
We specifically include pension and benefit plan services
because of the unusually large impact the pension trust --
which manages assets valued at more than double Lucent's
market capitalization -- has on Lucent's finances. Last March
the WALL STREET JOURNAL reported that "benefit plans -- thanks
to accounting rules -- have fed Lucent hundreds of millions of
dollars of income. Through a separate accounting maneuver,
the cuts that Lucent made in the benefit plans last fall will
contribute hundreds of millions of dollars more in income over
future years." Indeed, MORE THAN 90% OF LUCENT'S NET
OPERATING INCOME FOR 2004 IS ATTRIBUTABLE TO A $1.11 BILLION
NON-CASH PENSION ACCOUNTING CREDIT -- and not, in our view,
from a dramatic turnaround in operating performance.
- PERFORMANCE-BASED EQUITY COMPENSATION: PROPOSAL 4 asks the
Board to adopt a policy requiring that at least 75% of
future equity compensation (i.e., stock options and
restricted stock) awarded to senior executives be
performance-based, with the performance criteria disclosed
to shareholders.
We believe that a greater reliance on performance-based equity
grants is particularly warranted at Lucent at this time. As
FORBES opined, in an article headlined "Lucent Throws A Pay
Party" (May 6, 2004), the compensation of Lucent's senior
executives appear to be completely disconnected from returns
to shareholders.
During her first three years as CEO, Patricia Russo received
compensation valued at over $40 million (including 10.4
million standard options) -- yet Lucent's share price has
declined by more than 45% over the past three years, since
mid-January 2002, shedding more than $10 billion in market
value. During the five-year period through fiscal 2004,
Lucent's share price has declined 94% (source: Proxy
Statement, p. 35). In our view, a closer alignment between
executive compensation and key measures of shareholder
value would be a very positive development.
Sincerely,
/s/ Jim Breslin
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THE COST OF THIS LETTER IS BEING BORNE ENTIRELY BY THE LUCENT
RETIREES ORGANIZATION. THIS IS NOT A SOLICITATION. PLEASE DO
NOT SEND YOUR PROXY CARD TO THE LRO. PERMISSION TO QUOTE
DOCUMENTS CITED IN THIS LETTER HAS NEITHER BEEN SOUGHT NOR
OBTAINED.
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