RESEARCH TRIANGLE PARK, N.C. – Nortel’s beleaguered Chief Executive Officer Mike Zafirovski must have felt like an unarmed gladiator in the Roman Coliseum in Toronto on Thursday.
He escaped with his life – but he certainly took a lot of body blows in yet another round of his seemingly never-ending struggle to keep the telecommunications gear maker alive.
With hundreds of Nortel retirees and laid-off workers looking for blood, Zafirovski made an ordered appearance before members of Canada’s parliament to discuss millions paid in bonuses to Nortel employees while others were denied anything once the company entered bankruptcy in January.
"We are absolutely convinced that paying the annual incentive plan and the retention (plan) is critical to preserve value within Nortel," Zafirovski told the committee, according to news reports.
Mike Z. just said no to a Parliament invitation to testify last week even though his inquisitors said they weren’t on a witch hunt. Then they compelled him to testify.
As he has said in the past, the $45 million in bonuses, which were approved by bankruptcy courts in the U.S. and Canada and didn’t include him, were key to retain people who would otherwise bolt the troubled company.
“He , saying the process was ‘painful’ and ‘agonizing,’" is how the Ottawa Citizen described the hearing.
“Not a day goes by that I don’t think about the implications our difficult decisions have had on our former and current employees,” the newspaper quoted him as saying.
Mike Z. also pointed out he had invested $500,000 of his own money last year in Nortel stock that is now virtually worthless. Plus, he said he sought financial help from the Canadian government before taking the bankruptcy route but was denied.
His critics, the pensioners and the laid-off employees were not satisfied. But what can they do, especially since the courts have endorsed Nortel’s actions of layoffs, pension reductions, no severance – and the oddity of paying quarterly bonuses recently to current and some recently laid-off workers despite mounting losses?
And in no great surprise, the man in charge said Nortel was continuing to weigh opportunities to sell some of its business units. Mike Z. also told the media later than a reorganization plan that has been promised but not yet unveiled could be forthcoming in the next couple of weeks.
So was the bloodletting of benefit to the CEO and Nortel’s survival?
“While he got a rough treatment, the experience could ultimately prove a necessary part of saving Nortel from liquidation,” the Citizen’s reporters wrote. “It is becoming increasingly likely that Nortel will need loan guarantees or other support from government if it is to emerge from bankruptcy protection.”
Better bailed out than dead, eh?