Forsee, Gary D. 1950–
Gary D. Forsee
Chief executive officer and chairman of the board, Sprint FON and Sprint PCS
Education: University of Missouri–Rolla, BS, 1972.
Family: Married Sherry (schoolteacher; maiden name unknown); children: two.
Career: Southwestern Bell, 1972–1987, positions in operations; AT&T, 1987–1989, vice president of service operations; Sprint, 1989–1991, general manager and vice president of government systems division; 1991–1993, president of government systems division and president of business services group; 1993–1994, senior vice president of staff operations for long-distance division; 1994–1995, interim chief executive officer of PCS (wireless) division; 1995–1997, president and chief operating officer of long-distance division; Global One, 1998–1999, president and chief executive officer; BellSouth Corporation, 1999–2000, executive vice president and chief staff officer; BellSouth International, 2000–2001, president; Cingular Wireless, 2001, chairman of the board; BellSouth, 2002, vice chairman of the board; Sprint, 2003–, chief executive officer and chairman of the board.
Awards: University of Missouri–Rolla, professional degree, 2000.
■ Until 1989 Gary D. Forsee was an obscure figure, a civil engineer by training, who had worked his way up the corporate ladder at Southwestern Bell and its parent company, American Telephone and Telegraph (AT&T). In 1989 he accepted a job at Sprint that precipitated the first of the court cases that may represent Forsee's broadest and longest-lasting influence on American businesses, influencing the way millions of employment contracts would be written and interpreted. His shift from Global One to BellSouth in 1999 set further
precedents, and his spectacular move from BellSouth back to Sprint had a broad effect on the relationships between contractual employees and their companies.
During the 1990s Forsee established a reputation as a solid leader who could navigate businesses through thorny alliances. He became one of the most sought-after executives in the telecommunications industry because he had experience in every facet of the business and understood the relationships among wireless and wire-line communications, data-driven communications such as the Internet and voice-driven communication, and video and audio technologies. Further, he was sharp-minded, with superb skills for dealing with people. The combination of Forsee's wide-ranging knowledge and management skills made him the object of battles between giant corporations, with billions of dollars at stake. In 2003 these circumstances resulted in Forsee's being in a position to engineer a radical restructuring of Sprint, perhaps creating a new corporate model for 21st-century service industries.
When Forsee graduated from college with a degree in civil engineering in 1972, he joined Southwestern Bell, part of AT&T. He worked in various offices of AT&T, mostly in New Jersey and Washington, D.C. Records of his early years at AT&T are scant, but possibly it was while working in New Jersey and Washington that he began to develop the homesickness for Kansas City that would later affect some of the most important decisions of his career.
In 1987 Forsee was appointed vice president for service operations for AT&T, where his steady personality and extensive knowledge of telecommunications operations could help AT&T develop a good reputation for serving customers. When the U.S. government decided to reorganize all of its communications systems to prepare the country for 21st-century technology, AT&T was one of the winning bidders on the lucrative contract, with Sprint being the other: The two companies were expected to work together on the project, dubbed FTS 2000.
THE BITTERNESS OF JOINING SPRINT, PART 1
Sprint had its headquarters in Overland Park, Kansas, near Kansas City, Missouri, and a desire to return to his hometown may have motivated Forsee to take a job in December 1989 directing Sprint's half of the FTS 2000 program; he was named general manager and vice president of Sprint's government systems division. AT&T sued Forsee and Sprint, claiming that Forsee had proprietary information belonging to AT&T and citing a "noncompete" clause in Forsee's contract with AT&T that forbade his working for a competitor of the company.
Michael Schlanger of the King & Spalding law firm represented Forsee in a state court in Alexandria, Virginia. It was obvious that what Forsee knew about AT&T's work on FTS 2000 would be applied to his work on Sprint's FTS 2000, but this appeared to benefit both AT&T and Sprint because he would be in a position to help the companies coordinate their efforts. Noncompete clauses were common in employee contracts, especially in the telecommunications industry, where a competitive edge could mean millions of dollars in revenue. Yet Schlanger and Forsee successfully argued that the noncompete wording in Forsee's contract was too restrictive, and in 1990 the court allowed Forsee to join Sprint. The ruling was a blow to the noncompete clause tradition in corporate law.
From February 1991 to February 1993 Forsee served as president of both the government systems division and the business services division of Sprint. In March 1995 he was named president and chief operating officer of Sprint's long-distance services. (Also that year he was appointed to the board of trustees of the March of Dimes, a volunteer position.) As chief operating officer of long-distance services, Forsee revealed a flair for creativity as well as for making canny decisions. From 1995 to 1998 Sprint's long-distance services' revenues grew 23 percent to $1.1 billion, thanks partly to marketing and pricing strategies such as the Fridays Free program for business customers.
In February 1998 Forsee was named president and chief executive officer of Global One, a joint venture of Deutsche Telekom, France Telecom, and Sprint. The companies had founded Global One in January 1996, with each owning one-third of the joint venture. The object of Global One was to offer companies doing international business a unified source for all of their communications needs, simplifying customers' international communications and saving them money.
In 1997 Global One had $1.1 billion in revenues but lost money. It fell behind its earning schedule, making Sprint, in particular, impatient. When the projection for Global One's making a profit was moved back by two years, Forsee was chosen in 1998 to replace the former president and CEO. Forsee was responsible for both finances and operations for a venture that had 30,000 business customers and 3,900 employees scattered through numerous outlets in 65 countries. Deutsche Telekom tried to buy Italy Telecom, which miffed France Telecom, whose management perhaps thought Deutsche Telekom was breaking the trust of the partners in Global One by trying to offer international services on its own. The two companies' bickering placed Forsee in the difficult situation of keeping the disagreement from breaking up Global One while he tried to meet Sprint's demands that the young venture start making profits soon. Further, he seemed to have been unhappy with working in Brussels, Belgium, where Global One had its headquarters. In July 1999 he resigned from Global One.
In September 1999 BellSouth Corporation hired Forsee as executive vice president and chief staff officer. BellSouth, headquartered in Atlanta, was a company on the rise. Its ambitious chairman of the board, Duane Ackerman, was expanding operations throughout the world. Forsee had the demanding responsibilities for all employee governance and for Bell-South's domestic operations. His contract with Sprint contained a noncompete clause, but Sprint took the high road and agreed to release him when BellSouth promised that Forsee would not, at least at first, work in BellSouth's long-distance operations. Even so, it seems to have been understood by all parties that Forsee would eventually help BellSouth with its broadband and long-distance operations.
Forsee impressed his coworkers with his quick mind and his careful managing of people, and he was very well liked. He worked on wire-line and wireless communications, on cable television, digital television, the Internet, other data-transmission services, marketing, and the Yellow Pages. In 1999 BellSouth tried to buy Sprint, only to have WorldCom intrude near the end of negotiations with a higher bid, killing what would have been a $129-billion merger. In 2000 government antitrust regulators disallowed WorldCom's purchase of Sprint.
In September 2000 BellSouth made Forsee president of BellSouth International. At the time, BellSouth had 34 million customers in 19 countries and was forming ambitious alliances with regional companies, especially in Latin America, where business was burgeoning. In May 2001 BellSouth allied with Central America's StarMedia to expand wireless communications in Latin America; the number of wireless users in the region was growing by 28 percent per year. In November 2001 BellSouth restructured its organization to put wholesale and retail operations into domestic operations under Forsee, who became vice chairman of the board for BellSouth on January 1, 2002, after the previous vice chairman, Jere Drummond, retired on December 31, 2001.
Therein may have been the seeds of the great corporate struggle that was played out on a world stage in early 2003. When Forsee became vice chairman, outsiders assumed it meant that he was Ackerman's heir, to become chairman of the board when Ackerman retired. Certainly Forsee's responsibilities showed a great deal of trust on the part of Ackerman and the board of directors, who gave Forsee not only Drummond's responsibilities but also those of the retiring president of network services, Charlie Coe. However, Forsee had the example before him of the vice chairman Drummond, another heir apparent who never got the chairmanship. Moreoever, Ackerman's contract ran to at least 2006 (perhaps 2007). The position of vice chairman could have been as far up BellSouth's corporate ladder as Forsee would go.
Forsee had plenty of work to do. He dealt with government regulations, marketing, BellSouth's wire-line and wireless networks, external affairs, and the Yellow Pages. In 2002 Bell-South had 600,000 digital subscriber line (DSL) customers, and 70 percent of its lines were ready for DSL, but this percentage had to improve. The company had 65,000 employees and $20 billion in revenue. Forsee coordinated the demands of DSL and other new technologies, the employees, and the revenues. He was well compensated for this, earning $7.3 million in salary, bonuses, and stock benefits for the year.
Then, in December 2002, Sprint offered its positions of CEO and chairman of the board to Forsee. On the one hand, Forsee had been given a great deal of trust at BellSouth, where he was admired. On the other, Sprint offered him its top two jobs now rather than later, and he would return to his home-town of Kansas City if he rejoined Sprint, where he knew most of the management. He asserted in court documents that his principal reason for wishing to rejoin Sprint was that he would be going home, and there is no reason not to believe that this was, in fact, his foremost motivation. The press found out about the job offer before Ackerman did; Forsee did not tell Ackerman of the offer until January 29, 2003. On January 30 Ackerman and BellSouth's board of directors offered Forsee more money and more responsibility if he would remain with BellSouth. On January 31, with Forsee trying to call Ackerman throughout the day but not reaching him, BellSouth obtained a restraining order, probably after 5 p.m., against Forsee. Cingular, a wireless joint venture between BellSouth and SBC, soon joined a lawsuit against Forsee and Sprint. On February 3, 2003, a restraining order was issued against Forsee and Sprint.
THE BITTERNESS OF JOINING SPRINT, PART 2
Sprint was in a difficult situation in late 2002. Its ambitions for expansion into world markets had crashed; it laid off 17,000 employees worldwide from October 2001 to February 2003. In December 2002 alone it cut 1,200 jobs, 3 percent of its remaining workforce. On February 5, 2002, the Wall Street Journal reported tax troubles for the company's CEO and chairman of the board, William T. Esrey, and its president and chief operating officer, Ronald LeMay. Although they had both set up tax shelters recommended by Sprint's auditors, Ernst & Young, the Internal Revenue Service was auditing the 1999 and 2000 tax returns for both men. Ordinarily, the company and its officers would have weathered the bad news, taking no action until the government declared its conclusions, but recent scandals at Enron and other corporations made Sprint wary of how the news would affect its customers. It was a public relations nightmare even if the IRS exonerated Esrey and LeMay. Further, Esrey had lymphatic cancer and was undergoing treatment.
Forsee may have looked like a godsend to Sprint's board of directors. He was regarded as thoroughly ethical, he knew most of Sprint's operations, and he had a reputation for making good decisions, getting even the most trying ones right. His patience with people would be valuable in a corporation stressed by falling sales and job losses. Sprint also held attractions for Forsee besides returning to his home, working with people he knew and liked, and holding the top positions at a telecommunications giant. Sprint, with 26 million customers in 70 countries and $27 billion in revenue for 2002, offered him a great challenge and considerable power.
In its lawsuit BellSouth cited a "restrictive covenant" in its contract with Forsee, meaning a noncompete clause that forbade him to take a position with a competitor for 18 months after leaving BellSouth's employment. BellSouth also cited a confidentiality clause, the Georgia Trade Secrets Act, and the doctrine of "inevitable disclosure," which meant that Forsee would inevitably use BellSouth's trade secrets if he worked for Sprint, because the two had very similar markets. "It would be like the CEO of Coca-Cola defecting to PepsiCo, taking with him the company's marketing strategies and secret product formula," asserted BellSouth's February 2003 filing with the court (Law.com, March 7, 2003). It was BellSouth's contention that Forsee knew all of BellSouth's plans for the next three years and could damage the company by taking advantage of this knowledge on behalf of Sprint. During the period of restraining orders and court appearances, BellSouth continued to pay Forsee's high salary and may even have hoped he would continue to work for the company.
King & Spalding, which had represented Forsee in 1989–1990 when AT&T sued him, had drafted Forsee's Bell-South contract. In January 2003 King & Spalding joined with the Sonnenschein law firm to represent Forsee, with Michael Schlanger as Forsee's lead lawyer. BellSouth's lawyers tried to have both Schlanger and King & Spalding barred from the case because of a conflict of interest, but their efforts were denied. By then the case was being covered in media around the world, and in America it had broad implications for employment contracts. Could employers insist that employees restrict their job options? Cases for lesser lights had generally gone in favor of employers and the noncompete clauses.
The case was argued in Fulton County (Georgia) Superior Court before Judge Stephanie B. Manis. Sprint's senior vice president, Liane Pelletier, filed an affidavit with the court, arguing that government regulation of the telecommunications industry was so great, requiring so much disclosure, that there really were few actual trade secrets. Although it was a thin argument, it touched on an aspect of BellSouth's claims that seemed to backfire: the "inevitable disclosure" doctrine. Georgia's constitution forbade restraint of trade; indeed, Geogia's right-to-work laws were second in strength only to California's. If the disclosure was inevitable, then the confidentiality aspect of BellSouth's argument equated to preventing Forsee from practicing his trade with any company, meaning he could not find work. Forsee's lawyers contended that BellSouth's arguments meant he could not work in at least 34 states and 14 foreign countries.
More telling was the argument against the noncompete clause preventing Forsee to work for any competitor of Bell-South's for 18 months. The clause was too broad and too vague, insisted Forsee's lawyers. On February 11, 2003, Judge Manis struck down the noncompete restrictions in Forsee's BellSouth contract. She called the geographical restrictions unenforceable, said that other restrictions were unreasonable because they prevented Forsee from pursuing too wide a range of types of jobs, and declared the noncompete clause too restrictive, too broad, too vague, and void. Thus, in 1990 and 2003 Forsee dealt two telling blows to employment restrictions in contracts. The implications extended far beyond Virginia and Georgia: noncompete clauses could be too restrictive, broad, and vague and could prove to be unenforceable anywhere in the United States. A standard clause that was routinely used to intimidate employees became of dubious legality because of the awareness to its unfairness brought by Forsee's cases.
Judge Manis ordered Forsee and BellSouth to go to arbitration for no more than 30 days on aspects of the confidentiality issues. BellSouth appealed Judge Manis's ruling to the Georgia Supreme Court, but the appeal was rejected. In March 2003 an arbitration hearing was held before Judge William H. Webster, former head of the FBI and the CIA. The court order allowed Webster to consider only the confidentiality and trade-secrets clauses of the contract. On March 18, 2003, Judge Webster made his decision, declaring that from March 19, 2003, to March 19, 2004, Forsee could not lobby for Sprint in areas where BellSouth had business, could not participate in decisions about marketing that competed with BellSouth and Cingular, and could not participate in acquisition and merger discussions. Sprint's board of directors was required by Judge Webster to acknowledge the restrictions placed on Forsee for the one-year period. Apparently Forsee abided by the spirit as well as the letter of Webster's decision, and it seems that he never gave away BellSouth's confidences.
On March 19, 2003, Forsee became CEO of Sprint and joined its board of directors; he did not attend board meetings when restricted subjects were discussed. Esrey and LeMay remained with Sprint to help with the transition of authority, leaving on May 14, 2003, when Forsee became chairman of the board. He created a national strategy for Sprint that emphasized "bundling" all of Sprint's resources into packages customers could purchase, with bundles tailored to suit specific kinds of customers, and he directed the simplifying of the process by which customers ordered services. In September 2003 International Business Machines Corporation and Sprint formed an alliance to consolidate customer service, saving Sprint hundreds of millions of dollars per year, and Forsee reorganized Sprint into two groups: business customers and general consumers. In January 2004 Sprint allied with Samsung, Sanyo, Toshiba, and RealNetworks to offer 3-D games on cell phones, enable customers to download television clips, and provide both voice and data services over multiple platforms. In April 2004 Sprint combined its FON and PCS (wireless) stocks, exchanging one-half FON stock for one PCS stock, in an effort to make Sprint stock easier to understand.
See also entries on AT&T Corp., BellSouth Corporation, and Sprint Communications Company, L.P. in International Directory of Company Histories.
sources for further information
Anderson, Charlie, "Sprint Reorganization Could Bring Thousands of Worker Layoffs," New Mexico Business Weekly, September 26, 2003.
Bischoff, Glenn, "BellSouth Forsees Consolidation," TelephonyOnline, December 3, 2001, http://telephonyonline.com/microsites/magazinearticle.asp?mode=print&magazinearticleid=135144&releaseid=&srid=11357&magazineid=7&siteid=3.
Bonavia, Mark, and Melinda Tiemeyer, "Sprint Names Gary Forsee Chief Executive Officer," Financials.com, http://www.financials.com/c/info/story.cfm?storynum=427775.
Conley, Janet L., "BellSouth, Sprint Litigate over Exec," Law.com, March 7, 2003, http://www.law.com/jsp/article.jsp?id=1046833522587.
—Kirk H. Beetz