Sweet KEIP (aka Bonuses for Executives)

By Mark Evans | Published: February 28, 2009

While Nortel is working away on its new business strategy and restructuring plans, there’s also a lot of work being done to retain key employees from abandoning ship.

The two vehicles being used by Nortel are the Key Executive Incentive Plan (KEIP) and the Key Employee Retention Plan (KERP). In a court filing to seek approval for both plans, Nortel provided details how they would operate, and how much their implementation could cost.

Let’s focus on KEIP because it involves Nortel’s senior executives, including its “senior leadership team” (aka SLT). Of Nortel’s 25,000 or so employees, 92 have been identified as KEIP candidates based on having a “successful/most effective” rating on their last performance review. This includes eight members of the senior leadership team.

The awards under KEIP are tied to three milestones:

1. The achievement of targets to reduce costs in North America
2. The achievement of a “leaner and more focused” business
3. Confirmation by the Canadian court of the reorganization plan

Reaching the first objectives earns KEIP members 25% of the incentive award; reaching the second objective another 25%; and the third objective 50%.

Now, here’s where things get interesting.

The 92 executives participating in KEIP would be eligible to receive an award equivalent to 20% to 183% of their annual salary depending on their experience and responsibilities. The eight members of the senior leadership team would be eligible for bonuses of 100% to 183%. Nortel estimates total payments under KEIP could be about $23-million.

More: To read the KEIP and KERP plans, it’s docket #389 on the Epiq Systems site.

Addendum: The Ottawa Citizen has a story on the bonus plans – a day after AAN, mind you!

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http://nortelinsider.wordpress.com/ Desk Jockey

You're entirely correct, this is another example of the two faced behavior that this management has excelled at.

While they preach about “business as usual” and sending the right message to the customer, here we find out incontrovertible proof that they have been doing the opposite!
Moose_Chaser

Huron Consulting Group…as in LAKE HURON !!

AS IN CHICAGO !!!!

Very interesting:

http://investing.businessweek.com/businessweek/…

CORPORATE HEADQUARTERS*
550 West Van Buren Street
Chicago, Illinois 60607
RealityStrikes

It is the new reality: managers / architects in North America; laborers in China, India, Turkey, Mexico, …

There is no need for JCI 3, 2, or 1 in the US or Canada. Or so they think….
Moose_Chaser

OK…I don't get WHY it is Huron Consulting Group…BUT the Chicago scene is pretty “tight”…Check it out:

http://www.muckety.com/Query?SearchResult=124&S…

Then, explore the relationships/links between the CEO of Huron ( Gary E. Holdren ) ; Betsy D. Holden and The Museum of Science and Industry ….

That Muckety site is EXTREMELY powerful !

http://news.muckety.com/

Moose Chaser
AcrimoniousAl

Yep, and Z is also a trustee of the The Musuem of Science and Industry. See his profile at this link: Mike Svetozar Zafirovski”
Singapore1

More unethical behavior from Nortel management.
Singapore1

More unethical behaviour from these morons.
CrazyCanuk

I know that's what they think. They have been suffering under that delusion from some time now. They don't seem to realize that we're not making light bulbs here.

That's why I've spend most of my time over the last few years cleaning up messes that were created offshore.
WhoKilledDestroyedNortel

I`m speechless again !
Second Nortel`s Core Value should be modified ASAP because not applicable anymore:

**** We act on the belief that our people are our strength, knowing that the knowledge, commitment and talent of different people around the world drive our success. This is reflected in our people practices such as recognition, development, compensation, etc. We maintain a business environment of dignity and respect.
WhoKilledDestroyedNortel

One more good one from Nortel Web Page:
Note: Why there is KEIP and KERP when “Great people want to come work with us and “STAY” with us” …. so these Leaders are not Great People or what ?

**** These are our core values. When we all commit to them, three great things happen:

You always know what the standard is. You obtain guidance when you are making decisions.
Everyone we work with gets a consistent experience and they know what they can expect. That's important when you work with people in as many countries and languages and cultures as we do.
Great people want to come work with us and stay with us.

Nortel is committed to keeping our core values front and center in everything we do. Leaders play an important role in this by coaching others, modeling the core values, recognizing the core values in action, and rewarding people for living the values. But everyone has a leadership role to play when it comes to keeping the values fresh and meaningful. We stay in touch with people's perceptions of how well we are living the core values through our periodic employee opinion surveys. Nortel performance management systems also recognize employees for living the core values.

Nortel is an Equal Opportunity Employer
scalpcutter

That could very well be true.
That seems to the mentality at the big campuses.
It might indeed be as simple as that.
scalpcutter

Ironic.
Here they insist to overpay useless managers, execs, black belters, suck sigma etc and bypass the rank and file and if they reward them it is with the steel toe.
Yet now these same ones are being paid too offshore more, close more NA ops. More cost cutting. We moved an operations to Singapore or Burma. Hurray, we get a bonus.
Doesn't matter if they can't build the product, design or develop it there. It's there. That's all that matters.
It really is no wonder the company is crumbling. After the accounting fiasco the leaders were determined to drive this ship into as many icebergs as they locate in one night.
scalpcutter

So this guy supports JCI4's and above.
He thinks they do all the good work.
Talk about a walking contradiction.
DRP666

You don't need to be a manager to be above a JCI 2 , but you wouldn't know that right loser…what happened, didn't meet or exceed your objectives …I guess you're not working hard enough and surfing the net all day. Easy to just blame everyone else but more too it than just blaming everyone above a JCI 2 for your problems..so don't worry….they won't come for you this week…just keep blogging away
NortelTragedy

Mark,

The title of the artle should have been: NORTEL HELD HOSTAGE BY KEIP

Or, EXECUTIVE PIRATES DEMAND KEIP FOR NORTEL'S RANSOM

The BoD and Mike Zudas need to go!! It is criminal. Cowards.
WhoKilledDestroyedNortel

OK last one for today….
Since Nortel Board Of Directors is totally useless…. should Mike Z and HR-SVP ask Mercer to provide a “Market Comparaison Study” and explain the reason why there is more JCI-5 (358) then JCI- 4 (322) ?
Hotwheeler1

More bloodletting expected this week in NA…The execs are on their way in achieving their objectives…Great plan !

Either way, Mercer won !!!!..They couldn't care less, money in their pocket. If the court denies the plan, too bad.
less

“Svetozar” translates into “czar ('king') of sweat” which more loosely means:

!) hardest-working
2) bestest Mujahid ('struggler') ever
3) on solid (if sweaty') footing
joremero

I find it questionable too, but I also found questionable that they would file for CH11 given they had 2.4 billion of cash….
not sure whey they got that info though
Still_At_Nortel

Folks.. are we really surprised about this? have we seen anything different from many of the previous execs @ Nortel?
Here's my simplified theory on this. There are two types of execs: ones that produce and ones that milk. From some reason, Nortel and it's exec team turned from a producing team to a milking team somewhere in late 1990s.
They have been milking the company one way or the other since the bubble burst. while other “producing” execs (Mr. Chambers of Cisco) were taking 1$ salaries and getting their companies ready for the down turn, our execs were trying to stuff their pockets.

My guess is that once the management team realized they don't know how to rescue the titanic (NT), they tried to figure what they can get out of it before it sank. Hence all the corruption we've had since 2000.

So at this point, i'm not surprised at the least to see this type of behavior. In the past 8 years, we've talked more about doing something than actually doing something. this quote is the essence of our hard work in the past 8 years:

“We trained hard, but it seemed that every time we were beginning
to form up into teams, we would be reorganized. I was to learn later
in life that we tend to meet any new situation by reorganizing;
and a wonderful method it can be for creating the illusion of progress
while producing confusion, inefficiency, and demoralization.”

(search for “Petronius Arbiter quote” to get more info on it)

The people who actually worked and produced are getting nothing. People who talked and played the game are recognized as Key Employees.

If you want to produce, find a company that is interested in producing. If you want to stay, learn to either Milk or put up with being milked.
longgone

Zman and his jackals at their finest, and they deserve the very worst that Life has to bestow upon them.

Raleigh's internet news account only lasted a short time on the home page before being moved to the Business section as public outrage came forward.

The Zcrew are truly despicable.
exnt2

after chapter 11 I mentioned that there will be big bonuses for executives. its a given as any executives are greedy (look at the financials Meryll Lynch etc.)

this is just writing on the wall that insolvency is around the corner and this is a temporary cash payout since there will be no severances.

wonder how much this consultant from MErcer made for planning only exec retention bonuses. yeah like the economy is booming right now and there are a lot of exec jobs to run to. come on the only retention bonuses should be for the people in lower ranks i.e. key engineers who can and will jump ship.

no wonder they did not want a shareholder conference.
NortelGal

From the Ottawa Citizen article:

“Nortel said the incentives are designed to energized a dispirited workforce, but the disparity in treatment could have the opposite effect.”

Ya think?!?

Very glad to see this article out there for all to see (not everyone reads AAN, amazingly!) Pray the courts have some sense and DO NOT approve this ridiculous, unnecessary plan!
tryn2makealivin

Thats not the total number of 4's&5's at the company just the number that will be getting payoffs.
godstypo

I am surprised that news of this KEIP has not reached many people(both ex and current nortel employees). Why can't all people who vent their frustration here on this blog, get together and hold a rally in either Ottawa or RTP or in some other Nortel office? Will that be illegal ?
I think it would ensure widespread media coverage of this blatant executive robbery.
exnt2

the i believers and kool-aid drinkers will still see this in positive light to defend it. when they are booted out they will join the rest of us.
DRP666

Great idea….I mentioned that ex and current Nortel should do something to stir up the abusive treatment by Mike and the BoD in the media as well but some folks are still content in keeping a low profile. Maybe this latest injustice against employees will get the exposure needed to really show how corrupt they are.
NortelGal

Fortunately, there is widespread media coverage as of this morning. Click on the “Nortel on Twitter” link on the left side of AAN, and you'll see links to several articles in the press about this. Fortunately, since Z and his cronies have to gain approval for their schemes through the courts now, they can't hide them as they could have in the past. The information is getting out. The press exposure is worth a lot more than employee rallies, which wouldn't make a bit of difference as the plan has already been determined and requested. All a rally would accomplish is putting a big target on the back of any current employee organizing or attending.
Impartial_Observer

First Mercer and KEIP/KERP, now this – I am astounded that the trail of corruption never seems to end. How does an average shareholder put an end to this?
Still_waiting

For those of you whom wish to show your disapproval of KEIP for Nortel Execs.
email : E-mail: DEB_Chambers_Judge_Kevin_Gross@deb.uscourts.gov
Found in http://www.deb.uscourts.gov/ under Chambers then selecting on the Judge Kevin Gross. One Caveat is that there are chamber rules to follow.
DRP666

Anyone have the email address for the Canadian judge in Toronto. The presiding judge in the CCAA filing is Judge Jeffrey Morawetz but I'm unable to find his email. I'm sure that there are many people in Canada that would like to send their disapproval and dismay with what they are attempting.
whatnext4nt

Integrity

We compete vigorously and fairly in the marketplace with integrity. We are honest, and obey all applicable laws. We are committed to live out our values. We treat others with dignity and respect. We strive to do the right thing for individuals, organizations and society in general.
whatnext4nt

Accountability

We are clear on what we're doing, why we're doing it, and what outcome each of us has to deliver. We are all accountable to each other and our stakeholders for doing what we say we will do.
whatnext4nt

People

We act on the belief that our people are our strength, knowing that the knowledge, commitment and talent of different people around the world drive our success. This is reflected in our people practices such as recognition, development, compensation, etc. We maintain a business environment of dignity and respect.
Another_Nortel_Watcher

I watched an expose of the retention bonus scandal on Global News tonight. The word is starting to get out. What's missing is pointed reporting of names. The press needs to understand that John Manley is on the board and is presiding over this ruin. The press needs to understand that MikeZ and the Board appointed a woman-beater to lead the Enterprise business and it's now tanking. The story is here. The sensational stuff the media loves is here. Make the press aware of it!
AnotherSlave

How many jobs would $45M save?
scalpcutter

Let me translate that.

We act on the belief that people outside of North America are our strength, knowing we can pay them with food stamps for working their asses off, even though they have no clue what they are doing, the finished product is garbage and we need to constantly hold their hand. But this is low cost center reality. They drive our success on paper. And paper is how we are paid. This is reflected in our people practices such as outsourcing to illiterates who recognize that there is no hope for recognition, development or compensation. We maintain a business environment of angst and uncertainty.
scalpcutter

As long as it is not in North America.
RealityStrikes

Apparently too many since the executives only know two things: “cut cut cut” and “I'm a key employee, so pay me.”

To have more employees would mean that the executive “leadership” would need to have a clue where to lead Nortel in terms of existing AND new product development. Well, they don't. Instead, they've come up with an easier solution, and that is to line their pockets with $45M and point the finger at Mercer since “the bonus plan is normal” and “our consultants came up with this idea, and not us” (yeah, right).

Lowe (Carrier Networks) has a “framework” and not a “plan” in terms of decision making (listen to his pathetic GIS from Tuesday). He thinks complaints about his inability to make decisions is disingenuous (his word). No, that is not the case. Lowe, himself, is the definition of disingenuous, and he should resign.

Harold Graham, another empty suit, only knows how to measure kloc (thousand lines of code) — I doubt he's seen a line of code in his life, but he sure likes to throw around “kloc” [I've lost touch, so maybe he is now caught up in some other metric, such as how much KEIP/KERP will pay him.]

The BoD, z-man, and the entire SLT are a disgrace and should immediately resign.
madcitizen

It sickens me to think that my tax dollars that are supposed to be used as government assistance to “Save Jobs” are going to line the pockets of some of the richest people in this country.
Do these executives have no limits to their greed???
Just disgusting!
RealityStrikes

The U.S. Trustee has filed an objection for KEIP/KERP — good reading — it is docket #396, where Judge Gross may potentially overrule the U.S. Trustee if he signs the order in docket #400.

Docket #396 (very good read!!!):

http://chapter11.epiqsystems.com/viewdocument.a…

Docket #400:

http://chapter11.epiqsystems.com/viewdocument.a…
Main_Event

Looks like it's already been signed and overruled. So must for honest and conscience objection. It was probably out of formality. You know like those just represent percentage.

Where's good ole Lynch Mop when you need…..?
Anonymous

I thought we have until March 4 to file objection to this motion !!!!..
What was that ?..At least we still have the Canadian court judge to work on….let go people..call your MPs now !!!!!!
RealityStrikes

Yes, but I think what has happened (and someone correct me) is that the Judge has overruled the U.S. Trustee's objection that the hearing (scheduled for later this week) should be delayed to later this month for the reasons they list in their motion.

I would guess that the U.S. Trustee will raise the objections at the hearing this week. Maybe the Judge will see through the KEIP/KERP bonus-gate (we need a new “gate” scandal, and Nortel will provide many in the weeks and months to come).
Hotwheeler1

Read the dockets again, yes, you're right ..thanks for clearing it up…People, write or call your MPs or Congressmen now !
DRP666

As mentioned previously, does anyone have the Canadian judges email address. The judge is Jeffrey Morawetz according to the court docs.
Texan2

Got sick and tired of reading the docket filings… For a change, I read a book that is highly recommended among leaders that know how to lead.. The book was “Do the Right Thing: How Dedicated Employees Create Loyal Customers And Large Profits” by James F. Parker, former CEO of Southwest Airlines.

Time frame – immediately after 9/11 when virtually every other airline in the country was getting ready to announce massive cuts/layoffs/service reductions… Key excerpt below from page 22:

At Southwest, we made a different decision. With the full support of our board of directors and the leadership of the chairman of our board, Herb Kelleher, we decided that Southwest would not lay off employees. We would not ground any of our airplanes. We would not cut pay of our employees. And we would pay the $179.8 million to our employees' profit-sharing plan on time, on September 14, the same day our planes were allowed to return to the skies.

The only people who took a pay cut at Southwest Airlines were the company's officers, who we allowed to take a voluntary 10 percent pay reduction if they chose. (Although we exerted no pressure for them to do so, I believe they all did.) The only people who gave up their paychecks entirely were the members of the board of directors and the top executive officers, who voluntarily gave up their pay in the fourth quarter of 2001 to help ensure that we would have sufficient cash to meet our other obligations.

END QUOTE

This is where I started to get emotional.

Board and executive officers who gave up their pay for a quarter – compared to Board wanting to get paid in cash instead of worthless stock going forward.

Company's officers taking 10% pay cut – compared to company's officers wanting to take >100% pay raise via KEIP.

No layoffs no reduction in profit-sharing plans – compared to massive layoffs and canceling profit-sharing plans for all JCI3 and below and most of JCI4 through JCI6.

I am seriously considering mailing every ELT/SLT member in Nortel a copy of James Parker's book. It cost me $15 on Amazon… Perhaps if they read it, it will eventually dawn on them?
4merEmployee22

I really wonder if a Federal MP (Members of Parliament)
will or can influence to say or comment about the dealings
of a Provincial Court (Ontario)???
Maybe an MPP (Members of Provincial Parliament).
Which I already did!!!

THE CCAA is a Federal statute Acts and yet the filing was
in the Provincial Court of Ontario. Perhaps because
Nortel Networks is based in the province of Ontario.?
4merEmployee22

I wished I knew the Judge's e-mail address, but
I don't think that he will entertain any e-mails.
Good Luck ! if one can find out his e-mail address!
You have to go throught the Monitor ( E & Y Law firm)
to ask any enquiry regarding the case!
4merEmployee22

No one mentioned if some of these people (92 exec) are eligible for retirement?

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