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What is lost can never be saved

The following was taken from The Ottawa Citizen archives on canada.com.


Hefty special bonuses gild Owens’s Nortel parachute

Bert Hill, The Ottawa Citizen
Published: Saturday, December 03, 2005

Former Nortel Networks chief executive Bill Owens got more than $5.5 million U.S. in special bonuses as he left his job.

The company disclosed yesterday that he got a $2-million severance payment based on two times annual pay, $3.4 million in double bonus payments based on his maximum annual bonus of 170 per cent of salary and a lump sum to cover nine weeks of unused holiday time.

The company also immediately vested Mr. Owens’s 2.9 million stock options, which means he can cash them immediately, rather than over four years. He also got unspecified relocation and tax-preparation services.

Earlier this year Nortel approved a special pension payment for Mr. Owens, who was a director for one year and chief executive for 19 months. He gets $703,913 in June and equal monthly payments of $99,073 through to November 2010.

Nortel also said Mr. Owens could get another bonus under a success incentive plan if it is are granted for 2005.

The Owens payments are another sign of the high cost of changing top leaders at Nortel.

New chief executive Mike Zafirovski received pay, bonus, restricted stock, options and other incentives that will likely generate about $4 million to $7 million in his first year. Nortel also paid him $11.5 million so he could repay Motorola Inc., his former employer, to settle a breach-of-contract lawsuit.

© The Ottawa Citizen 2005

4 Responses to “What is lost can never be saved”

  1. Dare I send you a condolences card..? :(

    It’s these kinds of “severence packages” that really get my goat in business. Now I know (courtesy of my MBA hubby!) that most of said packages are part of the deal when a CEO/CFO/etc signs on to a company (and hence, short of going to court, which likely means a VERY expensive legal battle that the CEO will probably win anyways – after all, it’s a written contract…). However, why haven’t many of these companies wised up to this fact, and not made severences dependent on company performance? Ev says that that severely limits the potential to get a true, world-class CEO/leader (someone of Lee Iacocca’s calibre, for example), but Nortel seems to have been cursed by a steady stream of such world-class “winners” lately, who have all managed to make off with millions in severence pay, despite driving the company into the ground…

    Does nobody learn? Or are people really idiots? :D

  2. What the world needs is an “executive lockout” similar to what happened with the NHL last year. In the end, the team owners and the players’ union struck a deal that allowed for reasonable salaries (which still includes multi-million dollar salaries for the stars). Corporate executives should be well compensated for their performance, but what really gets me is that they’re not compensated for their performance at all. They’re only compensated for the quality of their lawyers who negotiate their contracts. And then people wonder why we have such a huge problem with executive accountability in North America…

  3. I guess the part that I don’t understand is that underperforming executives who still walk away with oodles of money then wind up getting a cushy job somewhere else. I seem to recall that this happens on occasion. So what is truly idiotic is that people are still willing to rehire these guys after their dismal failures. Maybe those huge severances would make sense if the executive in question was unable to ever work again because their failure was common knowledge, but somehow I don’t think that’s the case…

  4. Homewrecker, even if that were the case, why would it make sense to reward people for dismal failures? “Here, you’ve screwed our company over, but let’s set you up for life since we know your immense suckitude prevents you from getting another job!”

    Also, as you say, underperforming executives manage to always find new jobs and new companies to mess up (not just “on occasion”).

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