What About Senior Executive Compensation?

By Mark Evans | Published: November 10, 2008

More details may follow on this morning’s conference call but something missing from Nortel’s cost-cutting strategy is a symbolic gesture by senior management regarding compensation.

If Mike Zafirovski had decided to take a $1/year salary or decline any bonuses in 2009, it wouldn’t have meant much to the bottom line but certainly would have sent a strong signal to Nortel’s employees who are being asked to suck it up.

In fiscal 2002, Cisco CEO John Chambers drew a $1/year salary at a time when the company was laying off 8,500 employees.

Among some of the measures Nortel is taking to slash costs are:

- Deeper cuts to discretionary spending, including a freeze on substantially all internal travel and the curtailing of all travel that is not customer facing;

- A comprehensive re-evaluation of all real estate holdings

- A further review of consultant and professional service relationships with a view to cut back or eliminate spend in these areas

- A freeze on salary increases (except for strategic exceptions and certain pre-commitments), and an extension of the Company-wide hiring freeze already in effect, both of which are expected to last through 2009.

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  • If Mike Z takes home as much this year as he did last year, he will be reaping over 3% of what the current market cap is. That makes no sense.

    If NT is to have a hope in hell of surviving they need good executive leadership. However, it's a catch-22. What good CEO would want to come to Nortel and more importantly does Nortel even have the cash to attract such a person?

    The BoD bet big when they went for Mike Z. Hard to judge them since hindset is 20/20 but looks like they may have gambled away all chances of success...
  • puddintane
    $100mio... $500mio... $4bio..

    All the money and its waste boggles the minds that prefer simplicity over complexity. Here I am day after day looking for lunch specials at around $5-6...
  • Anonymous
    If they at least agreed to increase compensation to keep up with market averages and inflation, then we'd have a reason to work as hard as we did when there was a chance of being recognized and rewarded for the effort and accomplishments. Considering that the executives earn more money in a couple years than the average tech worker does in a lifetime, I think it's more than fair for them all to take $1/y.
  • >:(
    IMO, none of the NT executives has vision and innovation in this industry to make good products. NT is a sinking ship. Unfortunately, the company has to pay these people to go away.
  • Fins
    It's not about products. It's the lack of commerce expertise. Compare buying a switch or phone from Cisco, then try and buy one from NT. You will see what I mean.
  • Smoke&Mirrors
    I'd like to see a detailed list of the "strategic exceptions and pre-commitments"
  • The Psychiatrist
    What a sham this "Great Canadian Icon" has turned out to be


    today's announcement amounts to nothing more than their usual spin,but what else would anyone expect Mikez to say,after all he does have a large amount of egg already on his face,more so with that useless BOD that agreed to pay off Motorola for this "turn around" specialist!

    If only a sense of shame existed within the corporate world,but it's not to be apparently.

    FWIW John Roese's termination reflects worse on MZ than on John or Lauren as individuals.

    Nortel management-YOU ARE NOT LIVING IN A FISHBOWL!
  • NTEmployee
    Yes, so what I read is, as an employee you will not receive any pay increase or bonus even though you've been doing exactly what we've asked of you and have been performing very well this year. We need to take the money that you earned for us and give it to the executives who are leaving the company who have just told us how great the company is and how much good work we are doing an need to keep up the fight, but BTW you aren't getting rewarded for your performance because I need to take my money and run.

    Ah, good to see martyrdom isn't dead.
  • Tired
    I imagine it's never good news to hear that your pay is frozen. And I guess it's even harder to swallow when you believe that your workload is greater than before and that you've been a big contributor to helping the company succeed. But I think that if I were in your place, considering how tough the job market is and will be in coming months, I would rather have a job with a frozen salary than no job at all.
  • protosphere
    "- A comprehensive re-evaluation of all real estate holdings" sure sounds enticing in that they have some sort of large asset base there

    However, wasn't their greatest real estate asset their headquarters they already sold to Rogers for around $100M. What else do they have that may be of any substantial significance or worth mentioning?
  • Skeptic
    I had a slightly different take on that statement. I believe most of the NT locations are leased not owned, but in many cases the size of the space being leased is no loger necessary.

    Some locations NT has entire floors or entire buildings leased, some of these locations are now down to a handfull of people. NT could reduce the "real estate holdings" in these locations by either moving to a smaller office space, or take it a step further for locations with very few employees have them work out of their homes.

    I doubt there are many real estate assets that could be sold. (and where would you find a buyer in todays marketplace)
  • JR
    Believe it or not, Nortel execs are still flying business and first class internationally. They could take some lessons from Cisco where policy requires only economy be booked regardless of fiight duration.
  • exnt2
    true. many take trips to asia costing big time. also they fly on weekdays unlike other cos where its weekends. so they lose time sitting on a plane getting to somewhere.
  • Nortelhand
    JR,

    YOu don't fly very much do you? Would you rather the exec get some sleep on a flight then walk into a meeting and then back on the plane or screw around two or three days before he gets over enough of the jet lag to be on his game.
  • exnt2
    um lets see.

    business class to asia 3000+. economy 1400.
    hotel per night 150 unless execs stay in fancy 5*s. 3 nights 450.
    still save 1100.

    Nortelhand you an exec???
  • exnt
    Nortelhand,
    Would you rather spend $7K on a flight to Brazil or $1K? Cisco execs seem to do fine with economy, why do Nortel execs need fancy service?
  • Nortel watcher
    exnt,
    You are dead-on. There are many flights to Europe and South America from US cities where the duration is from 6 to 10 hrs with departure times that are early enough where the traveler arrives at 3am his time.
    One can always arrange for afternoon meetings or next day meetings in order to rest and be on one's game if that were an excuse to begin with. When the deal matters, your jet lag should not.
  • zmailhater
    I think $1 per year would be paying MikeZ too much. After all, his job should be performance based.
  • many
    I agree Zafirofski ought to be paying the shareholders to work there.
  • >:(
    Mike Z. is no John Chamber.
  • many
    Firm grip on the obvious. Zafirofski may even be the anti-Chambers.

    BTW Chambers took a $1 salary proactively *before* the results were reported.
  • NT survivor in TX
    $1 salary? (or any salary change at all)? Not likely. Mike made it pretty clear to the employees-- back when he first took the job and NT chose to fork over the $11.5 million to Motorola-- that he wanted to turn Nortel around, but he wasn't willing to take a hit on his wallet to do so. I assume his feelings haven't changed.
  • Hmmm...
    Isn't that why unions were created?
  • A4306
    Everyone deserves to bring home their paycheck if they indeed earned it. No salary increase is a bold move and will be a double hit for high growth regions but it does keep a few more of us around. The sad thing is that the performance reviews are not weeding out the low contributors.
  • Another Nortel Watcher
    Ok everyone, the trading window for Nortel insiders is now OPEN! With the stock at an all-time low, it is the perfect buying opportunity for anyone who believes in this company. Let's watch closely to see who in the cabinet and on the board - if anyone - believes in the future of Nortel.
  • nt survivor
    What is the golden parachute for the execs that are leaving? And another year whithout a pay raise? Like that was unexpected.
  • NewBlue
    "A freeze on salary increases (except for strategic exceptions and certain pre-commitments)..."

    "Certain pre-commitments" will continue to be paid. Honestly, isn't that a hoot?
  • OneOfTheFewLeft
    Zafirovski take $1 / year salary and/or not take a bonus. THAT'S FUNNY!! Thanks Mark. You made me smile on a gloomy day.

    I bet the GE-nius is pacing a hole in his office rug right now worrying about whether he will get less or more than 28% this year. I mean lets be realistic. A company in the financial straits that Nortel is in and he still takes a limo back and forth to work every day. He has already proven that he has no vision other than how to fatten up his bank account.

    Sooner or later people are going to have to stop drinking the koolaide
  • exnt
    Mike Z is a money-hungry ex-GE exec. He is not giving anything back.
  • The Left Behind
    I would think it is better to ask them to return 2007 bonuses
  • notafan
    i'd really like to see mike z take a $1/year salary for 2009. we are still not sure whether he's going to stick around or not. it doesn't help that z still hasn't made it crystal clear that he will stay. lets forget about whether he's doing a good or bad, but if he does this, it'll really show that he's 100% committed to see through the tough times at nortel.

    but with that said, my guess is that the likeliness of this happening is slim to none. actually my guess is that if the board offered him and other execs salary increases or bonuses, they would probably take it, despite the freeze on employees.
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