Nortel seeks $45M for 'incentive pay' for key employees
Posted March 2, 2009 7:51 a.m. EST
Updated March 2, 2009 1:47 p.m. EST
Research Triangle Park, N.C. — 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.