Nortel seeks $45M for 'incentive pay' for key employees

Posted March 2, 2009

— As Nortel prepares to lay off 3,200 people, or 10 percent of its work force, the bankrupt telecommunications gear-maker has asked a bankruptcy court to authorize $45 million in so-called “incentive pay” to 92 executives and 880 other employees.

The Delaware federal bankruptcy court handling Nortel’s case must approve the spending. A hearing on the request is set for March 5.

Nortel, which employs more than 2,000 people at its campus in Research Triangle Park, filed for bankruptcy on Jan. 14. As part of that procedure, Nortel was granted permission by courts in the U.S. and Canada to terminate severance agreements the company had made with people laid off in 2008.

Monday morning, Nortel also disclosed that it lost more than $2 billion in the fourth quarter of 2008. The loss of $2.14 billion was more than double the $844 million loss in the same quarter for 2007.

Revenues fell to $2.72 billion from $3.2 billion a year earlier. Nortel also wrote down more than $1 billion in assets.

Last week, Nortel disclosed plans for another round of layoffs as part of a restructuring plan. The company also retained an outside consulting firm, Mercer Inc., to develop a compensation plan.

“The damage that could be done to (Nortel) as a result of employees leaving or losing focus on their jobs demonstrates the need to provide supplemental motivation,” said John Dempsey, a member of the Mercer firm and one of those who helped formulate the incentive plan, according to the Ottawa Citizen newspaper.

Chief Executive Officer Mike Zafirovski is not included in the incentive plan. Zafirovski, who makes a salary of more than $1 million, has declined to take a pay cut. (An earlier version of this story said whether the CEO was part of the plan was not known.)

In its court filing, Nortel said the incentive payments were necessary to retain what it called “highly skilled and well-trained members of its work force.”

Nortel is seeking court approval for two plans – a “key-employee retention plan” and a “key-executive incentive plan.”

The executive plan would include eight members of the senior leadership team, 82 other members of the executive leadership team and two other “officers” who were not identified by position.

According to Nortel, executives would be eligible for $23 million in payments.

The “key employee” plan would cover some 880 “key non-insider employees,” Nortel said.

This group would be eligible for $22 million in compensation.


This story is closed for comments.

Oldest First
View all
  • thomasharrell Mar 2, 2009

    This would be a great 5 On Your Side story. Go get um Monica!!!!

  • billybarnes6721 Mar 2, 2009

    By the way, Mercer Inc, the outside consulting firm which formulated this ingenious incentive plan is the same company over seeing my mother-in-laws retirement pension fund.

    I'm very much open to anyone with suggestions on how to proceed. To hire a lawyer would only consume the money she could potentially gain by bringing a law suit.

  • billybarnes6721 Mar 2, 2009

    My mother-in-law worked for Nortel for several years during"the good time" and due to an on-going medical condition has been on long term disability for several years. Since October of 2008, she been trying to get her retirement pension fund from Nortel in one lump sum (which she was under the impression she could do) so she can spend it down in order for her to qualify for Medicaid. She's on a ventilator and needs to do this "spend down" to qualify for Medicaid to get the 24/7 skilled nursing care she needs, but Medicare doesn't cover.

    This story about Nortel's recent request to the Bankruptcy Court for $45 million dollars in incentives for "key employees" is too much. How about a drop in the bucket of just over $100,00.00 for a woman who worked for several years, EARNED her money, desperately needs access to it, and can't get it because Nortel doesn't have the money to pay her. Very wrong and shameful. This needs to be brought to the publics attention. Nortel may not be a ban

  • btb Mar 2, 2009

    Dear court,


    Thank you. (the end)

  • CrewMax Mar 2, 2009

    Your numbers are correct - I had to do the math, too, and couldn't believe my eyes. Probably, the 880 regular employees will get a few thousand and the millions would be shared with the executives.
    This is just more evidence of the poor management of this company.

  • Go GT Mar 2, 2009

    If my numbers are correct- that wold be 880 + 92 = 972. Take 972 people and divide the 45 mil. That means each person will get 46,296.30 each under this plan. (if they all got equal amounts). and they want to cut jobs??? this is insane..

  • Boostershot Mar 2, 2009

    What a bunch of bologna. If these employees are so key, great, pat em on the back. The senior management team is already paid a hefty salary. Wake up folks, we can't bail out the entire USA. Our children and grandchildren will suffer from our mistakes being made now for many years to come.

  • 12345_here Mar 2, 2009

    It's too bad that Nortel is run by absolute crooks.
    This company should be in Chapter 7, Chapter 11 isn't going to change their destiny. The management keeps making very bad decisions.

    They are trying to ship all their work to India and Turkey at the expense of the Us and Canadian workforce.

    I hate to break it to Nortel, but those Indian and Turkish designers aren't worth squat without their US backup.

  • 68_polara Mar 2, 2009

    That's awesome.. Nortel executives have figured out away away to give them selves bonuses while at the same time laying the workers off. At least the last time the fraudulently changed the numbers to make it look like they made a profit so they could give themselves huge bonuses. And that resulted in even more workers being laid off (fired) once the numbers were corrected. This time they know they can't fudge the numbers enough so they are just trying to give themselves bonuses regardless of whether they were profitable or not. This is one reason the country is going down faster than a snow ball headed for you know what. The executives are robbing companies blind and it's always the workers that end up losing because of executives greed.

  • happymom Mar 2, 2009

    You have GOT to be kidding me...