March 23, 2009, 5:15 PM — Bankruptcy courts will allow Nortel Networks to pay as much as US$7.3 million in incentive bonuses to eight key executives after creditors of the bankrupt communications equipment maker dropped their objections, the company has confirmed.
The bonuses would be part of a larger $23 million incentive plan, covering 92 employees, that was approved March 1. Creditors had objected to the bonus plan for the eight executives and asked for financial projections for 2009. After those were provided, they dropped the objections. CEO Mike Zafirovski is not one of the eight executives, according to Nortel. Both the U.S. Bankruptcy Court for the District of Delaware and the Ontario Superior Court approved the payouts. Nortel is based in Brampton, Ontario.
In addition to the incentive plan, Nortel also has a $22 million retention bonus plan for other employees that the courts also approved on March 1.
The vast majority of Nortel employees are already on a quarterly incentive plan aligned with the company's short-term goals, according to a Nortel statement.
"These additional programs are largely goals-based programs which will ensure that employees, management, and our creditors are all aligned behind a common set of goals," Nortel said.
Plagued by a financial scandal and years of losses, amid growing competition in its key service-provider equipment business, Nortel declared bankruptcy on Jan. 14. Last November, it announced a $400 million cost-cutting plan that included cutting 1,300 jobs, closing facilities and selling assets.