Bonuses for Dismantling Nortel?

By Mark Evans | Published: June 24, 2009

Earlier this year, Nortel introduced some controversial bonus plans worth a potential $45-million, including one – the Key Executive Incentive Plan (KEIP) that could see eight senior executives (not including CEO Mike Zafirovski) receive as much as $7.3-million

The KEIP bonuses 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
With Nortel now deciding to sell all of its assets, the question that has to be asked is whether these bonuses should be paid. Should senior executives be rewarded for carrying out a restructuring plan that has nothing to do with restructuring, and everything to do with gutting Canada’s flagship high-tech company.

From where I sit, you shouldn’t get rewarded for presiding over a multi-billion dollar fire-sale after doing such a lousy job of managing the company over the past few years. It’s a farce that bonuses are being rewarded when employees are being axed without severance, while pensioners are getting their payments reduced.

For more on the bonus plans and growing opposition to them, check out the Ottawa Citizen.

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  • CrazyCanuk

    Should there be bonuses for admitting you're in over your head and giving up? Probably not. Will there be? Probably.

  • gone2moro

    Having been in a position to create and measure MBO's, these are pretty soft and I'm sure they'll get paid out on them.

    1. The achievement of targets to reduce costs in North America
    Achieved: If there is no compnany there are no costs.
    2. The achievement of a “leaner and more focused” business
    Achieved: There will be 4 leaner and more focused businesses. for example: Wireless was just reduced to CDMA and LTE (cough cough) with only 2500 people.
    3. Confirmation by the Canadian court of the reorganization plan
    Achieved: They are apparently fine with the breakup… SEE NSN Wireless announcement.

    The only time I've ever seen and MBO not paid is when the person wasn't liked personally. Rarely has to do with performance. And if the people making the decisions on the MBO are of the same ilk as the ones working them… well… you see where this goes.

  • Milan_Bekich

    KEIP, like all “bonus plans” at the executive level, are made purposely subjective. The “bonuses” were designed to be a part of target comp when the goals were contrived and the monies will be paid.

    Case in point when Jim Long and Bill Conner were at NT, one of their annual bonuses was tied to profitability. When it became obvious that sales were going to be soft during a portion of the bonus period the Mighty Mormon and the Wharton Wonder sold the training organization to Global Knowledge (at a price considerably above the understated book value for the organization).

    Viola ! Their goal was achieved and the bonuses were paid. Some things never change, eh?

    Milan

  • broadbandbill

    The most disgusting, demoralizing and self-serving corporate thievery ever implemented. This is real ‘blood money’ and it will come back to haunt them. Karma is real!–bb

  • 4merEmployee22

    They easily found money, $45 miilion dollars for bonuses, while
    they coudn't find money to pay my Retirement Allowance, who just
    happened to work for that company for 30 years!!!! Sucks doesn't it???

    Blame it on the Bankruptcy Court! The Judge allowed this crime!
    under the guise of the CCAA – Company Creditors Arrangements Acts!

    If one do a readings about this ACTS… It doesn't refer to any
    Arrangements of BONUSES!!!! to the top Exec and others head honchos!

    They should make “Arrangements” to pay their creditors! But NO!!!

    They found loopholes to device a scheme and made Pensioners &
    Retirees & Severed employees of their rights!!!

    They must be very proud that the DEMINSE of NORTEL happened
    under their watch! Or say it isn't so?

  • NortelTragedy

    Karma is real, as should be justice … just ask Bernie Ebbers or Ken Lay, opps, he got his already.

  • Nortelinio

    >>Blame it on the Bankruptcy Court! The Judge allowed this crime!
    >>under the guise of the CCAA – Company Creditors Arrangements Acts!

    Remember that the judge works for the corporations and is after their best interest, not after the best interest of the citizens

  • GoProto

    You are so right bb, karma is very real and if you have already disposed of your soul in the quest for (blood) money, i hear it comes back two-fold..

  • horace_grimswold

    Rewarding failure: the Nortel way of doing business

  • broadbandbill

    not sure they had souls when they started this round of getting more blood money…–bb

  • NTInfidel

    Being a corporate executive or board member is an old boys club. Entitlement and self enrichment are the name of the game and unfortunately this isn't Nortel unique behavior, it is industry standard!

    There will almost certainly be NEW large bonuses for transition the businesses to new owners.

    Huge bonuses are the executive “Raison d'être”. Running the business is a secondary concern. Remember this was a group that declared Chap11 in January, and the only thing they actually stood up for was getting into court and fighting for more bonuses without even having any kind of turn around plan.

    If you are an executive, you get a bonus when the business does well, because it does well. You get a bonus when it does poorly because they need to keep “talent” in “tough times”, and when you destroy the business you get a bonus to help transition it or wind it down in a “orderly fashion”.

    In short corporations exist to pay bonus to a special “in” crowd, that is the only consistent thing they do, the other stuff is incidental.

  • wasthere

    Well summarized . In this case ; pure and simple robbery with the blessing of the court.

  • charlesolga

    The bonuses should go to the workers who sweated it out all these depressing years

  • tryn2makealivin

    Steve Bundersuck VP of Enterprise has already collected his 1.2 M bonus. Not only did he get the bonus payment but the company somehow found the money to move him to RTP, NC where he was supposed to have lived since taking on the CIO position years ago.

    He has done such a knockout job since becoming VP of Sales, they were only down 41% in first quarter.

    Drew or whatever his name is Carey. This guy has not been seen in months and is a Telecommuter as a President. Everyone refers to him as the ghost because most people have never seen or heard from him. Another one of the fabulous leaders from the GE crew. I really think he is one of those secret ninja Sick Sigma guys that is really there you just can't hear or see him.

  • Nortel_Employee_2009

    I agree. Canadian parliament should force Nortel execs to return all the bonuses and distribute it to current and laid off w/o severance employees.

  • TongueInCheek

    I agree with you in principle but it would only cover 10 cents on the dollar. I also think there are some non-executive roles at Nortel (certain R&D leads) that are highly valuable to retain.

  • zeroman

    yay. way to go Steve. you should be eligible to get another 1.2 once Norty is dissolved. costs would be 0.

    park the money for a tornado day in NC. might take off your mansion's roof.

  • Another_Nortel_Watcher

    Dennis Carey is the worst example of cronyism I have seen in a long time. Zero visibility, zero value-add over three years, and one of the highest paid members of the cabinet.

    Another line item for the BoD gross negligence lawsuits.

  • zeroman

    there are 30,000 employees and tons of shareholders who must be wishing bad karma or whatever on the execs every day.

    have a feeling this is gong to turn into a nortel curse for these pillagers or anyone who takes nortel products.

  • gmg733

    There are law suits on the horizon. Many locations have been asked to send in the server and backup media for legal purposes. I was told there is some huge law suit and the data is needed for evidence. Sounds like a needle in a hay stack to me, but I suspect it is only the start of legal issues.

  • less

    Any which old way, I'd still volunteer to physically vacate the labs, box 'em, then ship 'em… open and clean out the subfloors. DMS deserves that much…

  • zeroman

    oh canada. and what happened to the land of the brave. the judges are in the pockets of big corp.

    if there were a court filing in Michigan with a jury filled with 12 people from there, the execs would be ordered to pay $45 million.

    I think Z realized he could not have a turnaround plan. he did not have a plan for 3 years, what will he come up with in 3 months. hence the fire sale. nobody likes being chained to a stone.

    the execs are smart enough for that. the employees unfortunately not because they are so attached to the company. this was their life, some 15, 20 years. these execs were on board for less than 3 years did not build anything nor sweated it out. its nothing but a casual game.

  • zeroman

    the ones who built vaporware products that went nowhere and were killed after spending millions. or the ones who were sandbaggers with big bloated organizations.

  • sick_sigma

    10 cents on the dollar is fine. It beats zero cents on the dollar.

    It is the principle of the matter. For nortel executives to be collecting massive bonuses while the employees and ex employees are being cut off at the knees is an outrage of unbelievable proportions.

    Mike zeroman told us that KEIP and KERP were done in order to “preserve the value of the company.” Well, the value of the company was not preserved, so therefore the bonuses should be retracted.

  • sick_sigma

    I thought that Steve B. was still living in New York City. Did he move? Why would they relocate him at this point?

    I realize that steve b is a joel hackney stooge and all but I do not see the point of spending money to relocate him. What a waste.

  • sick_sigma

    I had never even heard of Dennis Carey before now. This guy draws a executive paycheck and he is supposed to be in charge of HR(among other things).

    Serious question…… has he ever sent out even one single e-mail of correspondence to the workforce?

    http://www.nortel.com/corporate/exec/carey.html

  • PM_Guy

    Nortel will annouce the sale of Enterprise this Friday and will have town halls meetings with the affect sites over the next few days.

  • brett5

    what do you mean 'affected sites'?

  • biddut

    Canadian GOVT is a disgrace. While United States as a free market capitalist country is helping out US companies, so called socialist Canada did not bother to swat fly in order to save the flagship Canadian high-tech company.

  • unshackled

    bb you are so right!

    Woe to the wicked! Disaster is upon them! They will be paid back for what their hands have done. – Isiah 3:11

  • tiredofitall

    At our site the town hall has been planned for a while as far as I can tell. There are even demos of our latest release planned. Seems a bit out of place considering.

    I'm getting rumours that the announcement was supposed to happen two days ago but was delayed. Also hearing that Avaya is the buyer. Is this in line with what you are hearing?

  • How_long

    Perhaps he is a cardboard cutout.

  • horace_grimswold

    Finders KEIPERS
    Losers Nortelers

  • S_O_S_This_is_HMS_Nortel

    As much as it's tough to see Avaya swallowing up Nortel's Enterprise and probably letting go most of the employees, I hope they smell out and get rid of all the useless VPs, Directors who follow Hackney into this divion per leaner more focus LOB model..

    These Global Ops/ Services farts magically have positions in either Enterprise or the new virtual NBS division under Flannagan. They are the worst of the henchmen. They have managed to hanging around, still collecting paycheques and having a reserved tickets on the lifeboats.

  • How_long

    Its a game they play. How to get the most by doing the least. In the UK, MPs are doing the same, playing the system to benefit themselves.
    In Nortel's case it is the employees and pensioners who suffer. These guys care nothing for the common herd. Messign with peoples lives for their own game. Any sensible society would string them up in a public place. Unfortunately we don't have a sensible society.

  • Theleftbehind

    I just hope that Mike Z gets a heart attack or terminal ilness and dies soon

  • tiredofitall

    “As much as it's tough to see Avaya swallowing up Nortel's Enterprise and probably letting go most of the employees”

    It's tough to be one of those employees as well. For that last 8 years (up until bankruptcy protection) all we've been told is that our revenues were a major factor in keeping Nortel afloat. It seems that our reward for all our hard work is to be handed over to an unmerciful enemy. This stupid company is consuming way to much of my life.

  • bankrupt_bob

    If the KE's were at all honorable, they would follow the lead of their Japanese counterparts when faced with similar loss of face.

  • free_agent

    Yes, Kendall Law Group and Holzer Holzer & Fistel have both announced class action lawsuits on behalf of the (former) shareholders.

  • Nortel_Sucker

    You got it wrong Pal. The USA is now the most up and coming SOCIALIST Country in the world since the last election. Bailouts for banks, trillion dollar debt for social engineering programs, Gov't run auto companies, weak stance on world affairs (Iran) and the TOPPER, Universal Healthcare.
    You yanks are screwed.

  • free_agent

    Unfortunately, the law is that the executives are required to obtain as much value (money) for the debtors as possible. The debtors do include the pensioners, etc., although the people without severance probably aren't, as the company has no legal obligation to pay severance. But that definitely doesn't include the implicit value in 30,000 ongoing jobs. And given that Nortel hasn't been doing well for years and the telecom market is getting far more competitive, the executives probably have done the best job possible at extracting money. Even if they're mediocre, sacking the entire senior management team would put the company into chaos, cause sales to fall even faster, and cause every skilled manager (there must be some) to jump ship. So the debtors would be even worse off.

  • free_agent

    Do wake up and smell the coffee! Every morning, ask yourself, “Is working for this company the best way to maximize my wealth?” If the answer is “No”, get a different job. You haven't been keeping your eye on the money, and you're surprised that you're not getting any of it.

  • OffTheChains

    Even with all of these Executives and Board Members collecting millions in bonuses they can only enjoy it for a little while. They will all get old and die. No amount of money in the world can save anyone from that. They can't take it with them when they go, and what they did while they were here on this earth will determine their fate in the afterlife. I can sleep soundly and humbly in my bed every night, because I try my best not to screw anyone over in this life. I try not to get too greedy, for I know the end result greed is not really happiness. No amount of money can buy the little things in life that are priceless. Unfortunately, so many have to suffer at the hands of the corporocracy.

  • TongueInCheek

    Only two choices and both negative? Why am I not surprised that you can't offer some basic respect to those at Nortel that create new technologies and new intellectual property.

    There must be some decent leaders and developers that directly contributed to new intellectual property for things such as; 40G/100G Optical, SIP, JITC compliant systems and so on. Those people deserve a lot of credit for creating new technologies that add value to people around the world.

  • vvvv

    I'm not inclined to defend the execs, but many people who post to this forum seem to be thinking that Z and the Nortel board are still in charge of the company. They're not. For all practical purposes, the creditors and their representatives (E&Y) are in charge of the company. No major decision is made without their approval. That includes the incentive plans. Reality is, the creditors have calculated that THEY are better off with these incentives in place, and they don't care what the rest of the world thinks.

  • Milan_Bekich

    Why pray, do the creditors want to retain management? All the creditors are interested in is selling the parts, management adds nothing to the equation.

    Milan

  • zeroman

    developers yes. leaders no. JITC – no big deal. if thats your claim to fame take a f** hike. SIP – what did Nortel create here?

    what about the following so called duds that costed millions and millions of dollars

    Neptune 200 million
    MetroNext 100 million
    MetroNext smaller version
    WiMax
    MERS
    PBT supposed to change the world
    Web.dead
    BCS

    …
    list goes on

  • zeroman

    got out a long time ago. knew this was coming.

  • vvvv

    Because only the execs are able to package the company up for sale — and keep it going (such as it does) through divestiture. If the creditors believed that their future cash-out would be maximized by replacing Z and his team, that's what they would do in a heartbeat. But as much as Z and his team have screwed things up, they are the natural choice to start the liquidation. Seems crazy, but it's coldly rational.

    Once enough divestitures have been finalized, the creditors will begin to see it differently. Then they'll install a less costly executive team to administer the liquidation and wind-up.

  • zeroman

    they will suffer the same fate as nortel. the very useless execs will start the rot that plagued nortel.

    note to self. short all these companies. they will all drop 4-6% once they announce buying norty.

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