Why and When Nortel’s Board Lost Faith

By Mark Evans | Published: January 11, 2010

Since Nortel filed for bankruptcy protection nearly a year ago, one of the few (if only) directors to provide details about what was happening behind the scenes has been John Manley.

In a recent interview, Manley essentially concedes that the board threw in the towel in late-2008 when growing losses, declining sales and $4.5-billion of debt created the “perfect storm”.

“I think all of us maintained hope (for the company), until the sales collapsed in the autumn of 2008. We always knew it was a long shot.”

Still, you do have to wonder why the board decided that Nortel couldn’t be restructured as opposed to having all of its assets sold off. Why did the board believe Nortel was a lost cause rather than biting the bullet and seeing whether Nortel could come out of bankruptcy protection as a viable, if not smaller, player.

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  • less

    “In a technology business… you can't spend that kind of time looking at the past because your competitors eat your lunch.”

    Instead, you need to implement Lean Six Sigma.

    “Nortel was not at the dance because essentially it had a built-in poison pill with the lawsuits and the regulatory proceedings, so you knew that we were slipping,” he said. “We were no longer dominant in any part of the market.”

    Yet, despite all these lawsuits, money was stil being shoveled into Dumpsters in a shows of “movement” and “consolidation”.

    “Was (Z) the right choice? I can tell you there weren't a lot of people with background in the industry with CEO skills,” Manley said. “They weren't lining up, and Mike surprised us with his ability to attract a really high talent team of executives to try and make this go.”

    …via LSS, outsourcing, and relocating to low-cost centers of excellence.

  • MyHeadHurts

    Mark, the answer to your last question is quite possibly answered in the interview. The Nortel brand is tarnished. They could have renamed the company, but, ultimately, the customers, the ones who pay the bills, understood that without management being changed over, there would be no recovery. Lest not forget, that some of Nortel's big customers, aka Verizon, where pushing them to file for bankruptcy as well.

    At the end of the day, tarnished brand + bad management = the end. Try that with “ME Consulting” and you will see the outcome :)

  • random123

    “I think all of us maintained hope (for the company), until the 'I believe' campaign kicked off in the autumn of 2008. We then knew it was truly over”

  • protosphere

    There were so many contradictions and loss of credibility, that the plans put forth were full of too many contingencies that could not be relied upon. Nothing worked for a decade as they shrunk.

    To inject more good money after bad, or to limit the amounts available to creditors may have not been feasible in light of its decline, let alone almost all of their profits in wireless going out to pasture.

    It is intersting that this honorable member was fiance minister during Liberal adgate fraud scandal, worked for a company after they were embroiled in the largest fraud settlement in Canada, and while a member on Nortel's board his law firm defended ex-CO Frank Dunn who is charged with fraud on both sides of the border. Ironic he traded options for cash again than calling it something else, like contingency remuneration or something, anything else. It is almost as though they are trying to diffuse the initial allegations cooking books for immediate cash than traditional options.

    Mike Z was also convincing, seemingly moral and honest. John has a stellar reputation among his peers from what I hear reiterated… He may be a terrific person, I do not know but if actions speak louder than words as in Mike_Z's case, his trip to Afghanistan following Nortel's collapse was all show and theatrics for the position he holds and his very ability to go there as a civilian… where I question propaganda … restoring or maintaining an image…

    I dunno, everyone thinks he is stellar and maybe he is, I just hope he isn't playing loopholes against what is right, has a conscience and not one of the big business elite who work on behalf of the big guy than little guy… or severances would have been paid, as did other more ethical companies… Too many red flags for me, and I hope I am wrong. Do I trust John. No. he is acquiring Crooks 101 in the real world I fear.

  • fatzoff

    John Manley and all the other board of directors were responsible and were supposed to be like any board in place to protect shareholders interest.
    They were all to eager to receive their lofty compensation all the while Nortel shareholders were left holding the bag.
    John Manley and all his BOD cronies are crooked and can all rot in hell as far as I am concerned.

  • scalppeeler

    My God is Manless ever out of touch and out to lunch.
    Has he started his new job yet.
    But no surprise here in that much like his leaders Iggy and Rae the Liberals have no pulse on the nation and are nothing but moronic clowns.
    Witness how iggy is putting out commericials about how jihadist terrorists
    are being detained by afghan citizens howling about purported abuse while we have
    the Detroit bomber terrorist almost succeeding and the fort hood massacre succeeding all in the name of jihadist islam. When Iggy, jack and rae howl the afghans release terrorists who come back to plant more IED's and kill canadians the very next day!! What a disgrace.
    I would classify the official oppostion action as traitorous and a threat to national security. Manless, like Iggy is useless.
    While manley was stewing and stammering on the Nortel Bored of Diectors, why was he not using his Lieberal connections to stop the train from derailing. He should have been leading the charge for a bailout and trumpeting the fact that the accounting fiasco had torpedoed Nortel. Using that as a crutch, an excuse a trump card or whatever. He should have put the interests of Nortel and its employees in Canada first. Instead what did he do?
    He did Nothing.
    Much like Iggy and much like Dalton.
    If it does not involve terrorist sympathizing, bailout of undereducated jimmy hoffa unionists, refugee payouts to canadians of convenience, the Official languages act or dollars for dictators in Africa you won't smell a lieberal in the building, in the press room or on the hill.
    Iggy we don't care about your harping on the detainee anti canadian military stance.
    We don't care and we Canadians are offended by the actions of you jack and bob rae. Manley, the more he says the dumber and more guilty he comes across much like iggy.
    Keep it up lieberals, please keep it up.

  • bankrupt_bob

    Who said it first…. “Why ask why?”

  • bankrupt_bob

    PS: “We are not going to actually declare bankruptcy, we are just investigating the slight possibility that we may have to if… or …. you know… whatever.”

  • protosphere

    K, we lied… but we will emerge even stronger as a leaner and more focused Nortel by restructuring.

    K, we lied again …but we are working hard to preserve value for our stakeholders and our employees

  • protosphere

    Perhaps they voted to kill the company because the money was not there for the board.

    Options by definition are performance based ..but only upwards in Nortel's case it seems.

    Unlike past boards, who approved and received exorbitant bonuses on false prophets to keep the company going, or by diluting, or by printing Nortel money…

  • Gratefully_no_longer_w_Nortel

    “Was (Z) the right choice? I can tell you there weren't a lot of people with background in the industry with CEO skills,” Manley said. “They weren't lining up, and Mike surprised us with his ability to attract a really high talent team of executives to try and make this go.”

    Z attracted a really large group of robber barons to pilfer the funds at the expense of the employees and shareholders. They never intended to do more than gorge themselves at the trough and run at the best possible moment.

    Deliver me from Sick Sigma, GE executives and Performance Based (joke) Management.

  • mikeblevans

    Hey Mark Evans —- maybe your the ASSH0LE!!!!!!

  • whopperscan

    The Nortel BoD was always a laughable joke, just a club of do-nothings.

    I remember a decade ago, just started with Nortel from anohter global group, and i was GOBSMACKED how backwards and out of date the corporate affairs of Nortel were.

    Hundreds – no, thousands – of isolated, stand-alone IT systems globally. They'd parachute this year's fave salesman into some country and say “here's a huge bag of money, start a business”. And he did… sometimes successfully, sometimes not. But there was almost no real (as opposed to ppt chart spin) leverage. The cost creation was amazing.
    And THAT approach comes from the BoD.
    Of course, they just hid int eh skirts of whatever CEO they had going that year. The CEO changed remarkably often, as they grabbed their millions in bonuses then fled. The behaviour was quite plain, but the BoD – including Manley – were so over their heads, so incompetent and asinine, they thought it was actually normal.
    The multinational I left is still going, Nortel is dead. Enough said.

  • horace_grimswold

    'Real leadership' award goes to Manly!

    No 'plan B' if the long shot bet didn't work out?

    http://www.ebusinessforum.com/index.asp?layout=…
    “Mr Zafirovski, though, claims that Nortel doesn't need a merger to survive. He has admitted that the company has been involved in discussions, but says that Nortel won't succumb to what he called the two sins of acquisition–overpayment and poor integration. He has also stated that he is not interested in selling or merging Nortel with another company.”

    Who wudda thunk that “liquidation” is preferable to “merger”? Only Johnny and team!

    Johnny, brilliant results ye earned. Don't quit your day job. BOARD of directors doesn't mean thinking like a two by four.

  • horace_grimswold

    The doofus cited in the interview is equally complicit with his naivety about the CEO and the executive team that was appointed as the BoD remained in “Hibernation” mode.

    Great post-mortem interview on all the woulda-shoulda-couldas that DIDN'T occur prior to bankruptcy. Time management skills? Er, I suppose lawyers bill by the hour so that's not an expected competency…

    This gets filed under the “Lessons Learned” folder while pensioners and debtholders take it on the chin.

  • horace_grimswold

    Mark is a good man.

    Mark reports it like it is.

    Mark is determined to be last Nortel reporter standing. Mark will still be blogging all things NT when all that can be heard at Nortel HQ is the crickets chirping.

  • less

    Recall that Z said “obviously I'm not going to be a CEO of a residual company dealing with patent assets and claims. But once we got here, our goal became 'let's make this one of the better examples of what it's possible to do in Chapter 11.' “

    I'll try to emulate Nortel when I file.

  • cwlh

    On the subject of people being unable to spell “you are” as “you're” rather than “your”, I hope everyone has seen the tattoo at

    http://failblog.org/2008/12/12/spelling-fail-6/

    If you're (your!?) going to have a tattoo, then it's worth checking that the chap doing it can spell.

  • less

    If you want to be really hip you should spell it the new-fangled way:

    “UR MINE lol”

  • Meridian

    Mike —- from your other posts you seem to have a clear fixation about the anus.

    Freud put that in perspective in his theories.

    http://www.victorianweb.org/science/freud/devel…

  • felixmk

    This is pretty simple. Manley is re-writing history to make himself look good. Z did the same thing when he left in August. Good thing they made the movie “Perfect Storm” so all these irresponsible losers can use the phrase in their post-mortems. I think they should have used “Dumb and Dumber”, but that's just me…

  • protosphere

    He ( Mr Zafirovski) has also stated that he is not interested in selling or merging Nortel with another company.” His predecessor Owens, had also publicly stated that Nortel would be the acquirer not the acquiree.

    Why were the most recent CEOs (after Dunn) so hellbent against selling Nortel?

    All CFOs (after Dunn) were insiders only before they hired bankruptcy pro Bining.
    Even after hiring ex-Marconni's Bining (who is being sued with CEO for misleading assets on books), Nortel reiterated they didn't not know they would go bankrupt.

    Even at a government inquiry they were forced to attend, where CEO was only ones sweating, denying they knew they would go bankrupt earlier.

    These ultimatum artists then scrapped restructuring only to announce liquidating the immediate business day following this inquiry!

    Also, are the years extended repair of internal controls the lenient SEC finally stepped in to monitor also years later no longer a priority if they are liquidating. Could they be hiding something not to sell the company, earlier when worth more, or is this lame they didn't know when they should have hard to prove too.

    Why is Manley's law firm defending Dunn (while a board member at Nortel).
    Is this not a conflict of interest any more than a CEO trying to manipulate a publicly traded stock (let alone his own), calling it a great buying opportunity and mentioning his kids like Mulrooney did at the Government inquiry. Like a legal template, as Dunn and Nortel also tried to dismiss US charges on jurisdictional grounds.

    Heck. they use to dilute hundreds of millions of shares earlier to pay themselves (under the oxymoron to “keep good people”) while still losing money. No negotiating pay after ultimatum settlement, bonuses and trading options again after bankruptcy, raises, they even could take these liberties while terminating severances for big business pals.

    How obvious does it have to get?

    Why did a green CEO who defrauded his past employer on several written occasions, announced when joining Nortel from day one, promote than fire his criminally charged pal, let alone see him transferred to Avaya after stating his pals were risking careers. What liberties.

    How could they think all this could elude the obvious?

    Now Avaya who took Hackney misleads to claim there is no better time to buy Nortel, or how 90% of top 500 fortune companies do, as Nortel liquidates into the abyss

    All this following the largest fraud settlement in Canada makes it too obvious.

    Enron should have been so lucky to have been afforded a fraction of their liberties. But hey this is Canada where they were once huge enough to have entangled the support of Canadian establishment as they accounting for 1/3rd of the TSX!

    endless no? …be thankful it is gone with so many that were termed still there and hard to find …perhaps making the news yet again as fraud trials loom on both sides of the border and blemish the companies they were transferred to… like those maintaining there is no better time to buy Nortel with Hackney who brought his area “to a new level” alright.

    …it WAS endless…

  • protosphere

    Absolutely not! What “maybe”.
    Mark doesn't rudely slander like you.

    Evidently, there is no “maybe” with you.
    Your unsubstantiated name calling in this cowardly low class / low IQ hit and run speaks for itself.

    You should stop shamelessly spitting in the mirror. You are an utter failure in even when trying to antagonize amid an exponentially more civil audience of readers.

  • protosphere

    “Mike surprised us with his ability to attract a really high talent team of executives to try and make this go.”

    Amused easily this isn't the first time Manley struck up for poor decisions.

    what “really high talent team of executives” when he was restricted from recruiting Motorola people

    Furthermore Nortel paid a premium for this green passed by CEO to pay back Motorola who he defrauded on several written occasions.

    How could they not trust this first time CEO and his green team..only to result in bankruptcy.

  • protosphere

    And if they were not so green, missing in action during the telecom wars, perhaps they would have made exponentially braver and more radical decisions to save the company.

    Instead, they hunkered down scared of their own shadows, with rewarded Nija cuts after rewarded financial innovation than technological one, the rockets just kept coming in to their inaction even after the BSNL/PEC gambles to beef revenues but also losses.

    Sold UMTS and got LTE going but a laggard with too little too late as CDMA nosedived to carry them any further.

    Hindsight is easy for a leaner more profitable Nortel growing in key segments to perhaps even lead again instead of vaporizing itself into the abyss of misfortune to ruin thousands and thousands of lives, quite literally.

    _______________________________

    I reiterate a great post from only employees let alone investors:
    (thwarts any home invasion post the largest fraud here that they politely term accounting malfeasance or scandal with books extended repair for years to hiring green fall guys and a finance minister who defends them, even OSC are crooks, and Diana is right saying tons of fraud in Canada as yes4's link to You Tube shows in an earlier post)

    This is what fraud creates and created with Nortel, catalyzing their downfall, especially with post fraud revisions that made them…. toast/ no credibility :

    http://cnews.canoe.ca/CNEWS/Canada/2010/01/09/1…

    Arlene Plante, Ottawa – Plante, along with 408 others on disability, discovered months ago that Nortel had self-insured and that there wouldn’t be the funds to protect them once the company went out of business.

    They are beyond frustrated.

    “In my case, I will likely lose up to 85% of my disability income, 40 to 70% of my pension at age 65 and all my medical benefits at a time when I can never qualify for any insurance at all.” she said.”

    —————————-
    Life has painted Jennifer Holley into a corner. . .
    Without Jennifer’s benefits, a single room will be it for them, while a planned laneway from the road to the house just a fading dream.

    “Nortel’s status forces us to concede that our house won’t be completed within our lifetime,” Jennifer says.

    “We’ll never be able to build a road to our house. Our existence is about to become hand-to-mouth. Nortel’s greedy executives have stolen. our security and plans.”

    ————————–
    John Oram, Ottawa – “I have not received any severance from Nortel, as was expected when I left the company,” he said. “I have managed to salvage a portion of my pension, although it’s considerably less than expected and definitely not enough to carry us through this financial event.”

    He no longer had medical and dental benefits for his family. He didn’t even have life insurance anymore.

    Like others in this story, he’s now considered an unsecured creditor.

  • Looking4Work

    Agree.

    John P. Manley, “Pinocchio” to his family and friends is re-writing history so that he is a legend in his own mind.

    The day the board decided to pull the plug on Nortel, Manley was quoted in the media stating Nortel would not be seeking bankruptcy protection.

    Manley's memoirs will read like pulp-fiction.

  • happy2b

    In a previous interview, John Manley said, he didn't do enough, and wasn't involved enough in Nortel. Manley is a politician he says one thing one day and another thing the other day, his first interview after filling was a more accurate and honest interview, he got his $200K retaining bonus then was laid off after filling for bankruptcy, he's the same as all the other white collar criminals at Nortel.

  • disc64
  • http://nortelinsider.wordpress.com/ Desk Jockey

    Manley is probably the worst of what was formerly on the BoD of Nortel. (Besides Z himself, of course)

    Here we have Manley continuing to praise Z for attracting “top talent”, keeping in mind this “top talent” were the ones at the helm when Nortel went bankrupt.

    Manley may be clueless but he is not stupid. He's just trying to cover his own ass, which is strange because all the $$$ he made from being a loser on Nortel's BoD ought to be enough.

  • scalppeeler

    It's all about the hair with johnny.
    He has to keep that polished turd look.
    Like Mr. Hankey from Southpark.
    But he carries around a hair brush.

  • 4merEmployee22

    I wonder how much these BoD's made by just being a member of the Board?
    They had a chance to MILKED the company, but an employee who had worked
    for 30 years and retired had no power to MILKED the company!

    The HAITIANS could be RESCUED, but not the RETIREES & PENSIONERS!!!

  • manchunli

    Original concept of Bankrupt protection is protect the company may have financial problem for running the bussiness. This protection is help the company a second chance to clean up or resturcture their company and come back into market. But Nortel use this bankrupt protection is eliminated Nortel employee benefit and trf nortel property to other competitor. Think about Avaya deal 95xM, How long Avaya can get back the money, 12 months or 24 months ?? Nortel decision market is RUBBISH

  • manchunli

    Original concept of Bankrupt protection is protect the company may have financial problem for running the bussiness. This protection is help the company a second chance to clean up or resturcture their company and come back into market. But Nortel use this bankrupt protection is eliminated Nortel employee benefit and trf nortel property to other competitor. Think about Avaya deal 95xM, How long Avaya can get back the money, 12 months or 24 months ?? Nortel decision market is RUBBISH

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