RESEARCH TRIANGLE PARK, N.C. – What in the world is going on within the leadership suite at bankrupt Nortel?
Recently, employees – including some who were recently laid off – received quarterly bonuses despite the fact revenues are falling and losses are mounting for the telecommunications gear maker. These payouts are not the widely reported and heavily criticized ‘retention bonuses” totaling tens of millions of dollars for selected employees. This bonus money went to folks not on the elite list. The money also was handed out even though laid-off workers have been denied severance benefits.
“We just received our bonuses for the first quarter,” a long-time and certainly befuddled Nortel veteran wrote The Skinny. He was laid off May 5 but received a bonus anyway.
“Comparatively speaking it is the largest bonus I’ve ever received, even compared to the bonuses in our heydays of the late 90s.”
He has his own opinion as to why the bonuses were handed out. “The only reason we received these bonuses is to justify the six-figure bonuses that will be paid out to the executives.”
Perhaps some answers will emerge today when CEO Mike Zafirovski appears as ordered to testify before the Canadian Parliament House of Commons finance committee. Zafirovski declined an invitation and then was told to appear. The committee wants answers from Zafirovski about retention bonuses paid to Nortel employees even as the company struggles to survive.
James Bagnall, who has covered Nortel for years at the Ottawa Citizen, spelled out in a column today () much of the background about the dispute over bonuses and the anger among retirees and laid-off workers about what’s happening to their pensions as well as other benefits.
“Earlier this month, North American workers at Nortel received a quarterly incentive bonus based on a number of metrics including customer satisfaction, Nortel’s cash balances and ‘stabilization of revenues,’” Bagnall wrote.
“In a letter to employees, Zafirovski said the company would ‘pay out at above-target levels for the first quarter.’ Ordinary Nortel employees received payments of $3,000 to $5,000.
“The odd part is, the workers qualified for the bonus during a quarter in which Nortel’s total revenues fell 37 per cent year-over-year and the firm recorded a net loss of $507 million.”
The Nortel veteran who reached out to the Skinny certainly didn’t understand the logic of bonuses for such a bad quarter.
“I really wish that Nortel would pay severance due to us laid-off employees rather than paying bonuses for a quarter in which we lost money and filed Chapter 11,” the vet said, “Go figure.”
By the way, the bonus certainly hasn’t removed the sting of the layoff. After more than two decades of service he received a warning from a supervisor about being on the let-go list. Otherwise, normal procedure is a two-hour notice.
Nortel employs around 2,000 people in RTP. I’m sure they will all be listening with great interest to Mike Z’s comments today – along with all those who once worked for a company in which they took great pride.