Nortel Insider – by Desk Jockey

The view from one Desk Jockey

Nortel management follows the path of AIG in rewarding incompetence (But wait it gets worse)

with 8 comments

In a stunningly shameless move that reeks of the consistent greed that Nortel management has displayed, executives won the right to receive $7.3 million in bonuses at a time when rank and file employees are being told their severance won’t be honored and their pension is at risk.

The $7.3 million will be distributed as follows: $5 million would go to 5 executives in the US ($1 million per person on average), with the remaining $2.3 million going to 3 executives in Canada.

This is all part of the fraud that is KEIP bonuses which I talked about earlier. Previously the court had turned down Nortel’s request for KEIP for the senior leadership (the 8 executives who will receive the $7.3 million above) because the creditors wanted to see the non existent business plan before allowing more money to be flushed down the toilet with these executives.

Well, it turns out Nortel executives would have none of that as they believed they were entitled to the bonuses even if they were too incompetent to come up with a business plan. So they hired the best lawyers (using Nortel funds of course) to pull the wool over the court’s eyes and get their treasured bonuses approved. This was predicted by Nortel Downfall Part 9 but again I stress the goals of Nortel Downfall are parody, humor and exaggeration, not fact. This goes to show the level of absurdity the executive is willing to stoop to in order to enrich themselves.

KEIP has been something that has worried me ever since I first read about it in the initial BK filing back in January. Back then we did not know the details but we knew it had the potential to provide an incentive for the executive to further destroy the company and profit off the downfall at the same time. When the details became known it was clear that they had been planning for quite some time.

The goals that the executive have to accomplish in order to gain their bonus are laughable. Basically everything is tied to cost cutting, especially in North America. If they layoff more employees and revoke more severance they cut costs and thus directly benefit off of the hardships of others. In fact laying off more loyal employees benefits them more since the longer working employees will have larger amounts of severance to revoke and thus are better targets for cost cutting. This sort of behavior is NO DIFFERENT from the scumbag actions of AIG executives, other than the scope being smaller. Don’t think for a second that these losers wouldn’t enrich themselves with a government bailout if given the chance.

These sentiments were echoed this morning by Ms. Diane Urquhart who had the opportunity to appear on Canada’s AM news program to highlight the corruption of executives in their scheme to profiteer off of this whole fiasco. Please watch the video for the full story. Some have said her criticism was harsh. I say that her commentary was quite restrained, considering the circumstances! It’s about time these crooks received their deserved shame.

With all the news of the recent week it is becoming clear that Ch.11 was a ploy from the beginning to ensure that executives would continue to profit no matter what the outcome. Consider for example what would have happened if Ch.11 had not been declared: With the poor Q4 2008 results it’s likely no one would have received much of a bonus since bonuses are normally tied to performance.

Realizing this, management decided to opt for Ch.11, screwing over countless employees all so that they would have a chance to continue getting bonuses. Under Ch.11, the game changes: The normal rules no longer apply. Rather than having to make their case for bonuses to shareholders all they need to do is convince a judge that they deserve the bonus. As we can see, it’s much easier to do this! Essentially management has rewritten rules to ensure that they always come out on top no matter what.

What’s even more insulting is the fact that Nortel management claims they need the bonuses to improve morale. But whose morale are they talking about? Certainly giving big $$$ to executives improves their morale, but it has the exact opposite effect on the rank and file. Just how would you feel if your hard earned severance had been revoked, only to see it redistributed “up the food chain” to some useless and incompetent executive just so he/she could get a second summer home?

Furthermore the argument that bonuses are needed to “retain top talent” is a joke. There is no “top talent” among the executives. If there was, we wouldn’t be in this situation. I dare any of the executives to leave and try to find another job elsewhere, especially in this economy. I’m sure a prospective employer would love to see your resume: “Nortel – XXXX-2009: Responsible for driving the final nail through the coffin of this company

The impotent BoD deserves just as much shame as the executives. It was their inaction and their unwillingness to rein in the management that directly contributed to this crisis. They are clearly in the mindset that being on the Nortel BoD means you are on a gravy train and can collect your 6 figure paycheck without doing much. Management seems to understand this so it’s no wonder that the BoD hired their own lawyer to argue in favor of the executives:

“The board cannot properly function without the advice of its senior, experienced, leadership team,” Lyndon Barnes, a lawyer for the Nortel board, told the judge in Toronto. “This is an enormously complicated task.”

John Manley is perhaps the best example of the uselessness of the BoD. This man collects $215,000 for his “part time job” as a Nortel director (see SEC 10K filing here), while his full time job is at McCarthy Tetrault, a law firm that is also coincidentally representing the most criminal Frank Dunn! Not surprisingly, Frank Dunn has his fingers in this whole mess too and is arguing that Nortel should pay for his legal fees in his upcoming trial for being the biggest fraud at Nortel!

Not surprisingly the Nortel Propaganda machine was out in full force today trying to spin this story of excess and greed in to one of universal reward for all employees:

“First of all, it is important to note that the vast majority of employees at all levels are already on a quarterly incentive plan aligned to the short-term goals of company,” said Nortel spokesman Mohammed Nakhooda.

The incentive plan mentioned here is the Annual Incentive Plan (AIP) and it is basically going to be leftovers compared to what the executives are making. A few million is basically spread over the rest of the 19,000 employees resulting in a few hundred dollars.

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Written by Desk Jockey

March 20, 2009 at 7:11 pm

Posted in Uncategorized

Tagged with , , ,

8 Responses

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  1. I honestly don’t know how they can do this and keep a straight face. Sadly, why not profit on stupidity if now one does anything to prevent it…

    billeee

    March 20, 2009 at 7:25 pm

  2. Cannot believe this latest event. Just hope that one day we will all wake up from this horrible nightmare and the past number of months will not have occurred.

    ttd

    March 20, 2009 at 7:40 pm

  3. But remember, z-man is not part of this “initial” filing… His time to join the gravy train, with the other execs, is surely coming.

    In any case, it is a shame that the BK judges (Canada & USA) cannot [or will not] see the plain truth and reject what amounts to “legalized theft” by the greedy executives and their minions.

    Reality Strikes

    March 20, 2009 at 8:25 pm

  4. What of the major creditors? Have they bought into the Nortel arguments? It’s their money that is being paid out in KEIP.

    whosis

    March 21, 2009 at 1:27 am

  5. I thought that this kind of coruption exists only in east-european countries and Africa. But I see there is no difference. Incompetence is rewarded also in Canada and in States.

    Tetelu

    March 22, 2009 at 7:38 am

  6. Tetelu, you speak my mind. This is corruption protected by the US/Canada law. While a lot of people firing at the Nortel CxO SLT ELT i think we shall not forget the judges and the board of directors. It is them allowing this.

    MISA HK

    March 22, 2009 at 7:58 am

  7. […] Nortel management follows the path of AIG in rewarding incompetence (But wait it gets worse) In a stunningly shameless move that reeks of the consistent greed that Nortel management has displayed, executives won […] […]

  8. This is outrageous, unethical, disgusting and plain greedy. These incompetent boobs are to blame for running the company in the ground. How can anyone with a conscience accept a bonus while denying others severance? I guess they are all sociopaths

    Tom

    November 27, 2009 at 1:46 am


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