this bailout is only helping these big guns get bonuses.
Nortel to ask court to approve US$23M in bonuses
Lawyers for Nortel Networks Corp. are scheduled to appear in a Toronto bankruptcy court tomorrow to ask for approval of a controversial US$23-million bonus plan for its top executives.
Earlier this month, courts in Canada and the U.S. gave the green light to US$22 million in payments to about 900 key engineers and other professionals at the telecommunications equipment giant, about five per cent of its workforce.
A Nortel spokesman said the company will take the list of top executives to court for approval, but it will not include chief executive Mike Zafirovski.
Nortel (TSX: NT) said the bonus payouts are intended to help it retain staff members who are receiving other job offers from outside and also to boost weakening morale at the company.
Losing key staff members often affects a company's ability to operate efficiently and hinders product development.
The bonus plan for executives would reward them for achieving cost reduction goals and tightening the organization's focus, based on their annual base salaries.
Nortel's creditors had objected to the inclusion of higher-paid executives, and urged the company to provide an earnings outlook for 2009.
Other lawyers involved in the case have either echoed the creditors' viewpoint or asked for reassurance that the incentive payments will reward employees, not simply encourage them to stick around during such uncertain times.
"Our clients take no objection so long as there is no incentive plan that rewards employees for simply staying with the company or that gives them an incentive to reduce benefits for former employees and retirees," said Mark Zigler, a lawyer at the Koskie Minsky law firm in Toronto, which represents former employees of Nortel.
Nortel spokesman Mohammed Nakhooda declined to comment specifically on the proceedings, but noted that the company has established a "goal-based" cash bonus program that it believes is in the best interests of its key stakeholders.
"This is in line with how other companies manage through a restructuring," he said in an email response.
Nakhooda noted that the company had publicly said it was always planning to resubmit the proposal for executive pay.
Nortel, which has been restructuring under court protection since January, is seeking to sell non-core businesses during the bankruptcy protection process and is expected to outline its restructuring plan publicly in April or May.
The company is required to seek the most value for creditors as part of the proceedings, which include holders of US$4.5 billion in debt, former staff members owed severance pay and retired managers who were paid through a company pension plan that used operating funds.
About 95 per cent of the company's employees fall under separate inventive programs which reward quarterly bonuses, though the funding of that plan has not been made public.