Nortel Gets Permission to Pay $45 Million in Staff Bonuses

Nortel Networks has received authorisation from the Canadian and US Bankruptcy courts to pay bonuses of US$45 million to its staff and managers. Eight of the executives will share up to US$7.3 million between them, as part of an overall US$23 million bonus program for 92 senior managers. A further US$22 million has been earmarked for 880 key employees.

Nortel president and CEO Mike Zafirovski is not party to the bonus pool though.

Lyndon Barnes, a lawyer for the Nortel board argeued that the bonuses would only be paid if the company achieves certain goals, including court approval for its restructuring. The company is currently in bankruptcy protection after losing nearly US$7 billion since 2005, although it has cash reserves of US$2.4 billion.

The US Bankruptcy Judge Kevin Gross approved the bonus plan, while Ontario Superior Court Judge Geoffrey Morawetz also granted approval in Toronto despite objections from 67 Nortel workers who had been made redundant. The company is looking to shed some 5,000 staff this year as it seeks to exit bankruptcy protection.

The US$22 million retention plan for key employees and managers was approved earlier in the month, although full approval for the executives bonus was delayed pending financial projections for the remainder of the year.

 

In related news, bankrupt telco, Hawaiian Telcom is also seeking court permission to make bonus payments worth US$6 million to its employees. The move has been criticised by Hawaii's Governor Linda Lingle, "Hawaiian Telcom is the critical communications backbone for our state, and its action to pay millions in bonuses puts the company in a precarious position that jeopardizes its long-term viability, as well as threatens Hawaii's economic recovery. "

"The fact that company president and CEO Eric Yeaman himself turned down a bonus shows that he clearly recognized bonuses were wrong and counterproductive to Hawaiian Telcom's efforts to restructure its finances and operations.  He could have and should have put an immediate stop to this outrageous action."

Posted to the site on 22nd March 2009