Fat cat severance packages for Lucent bosses
Ordinary workers get Schatt on
Details have emerged of a multi-million dollar severance package that struggling telecoms equipment manufacturer Lucent has paid out to its formed chief executive, Richard McGinn.
Reuters reports that Lucent's quarterly filing with the US Securities and Exchange Commission (SEC) reveals that it gave McGinn a $5.5 million one-time payment and took on loans of $4.3 million that he had run up with two banks in exchange for the repurchase of his stock options. McGinn already has a pension plan from Lucent worth $1 million a year, so its not as if he was going to go short even without the severance package.
When you take into account the stock options McGinn exercised before Lucent's stock went through the floor then its clear that he's sitting pretty on an extremely tidy nest egg, and that's even before you consider a health package and an $9,000 a month office space allowance from Lucent.
Lucent's former chief financial officer Deborah Hopkins has also received a more than generous severance package that includes a one-off payment of $3.3 million and the repurchase of stock options worth $1.3 million. She'd been at the firm little over a year when she was ousted in May, and will probably have much of her $4 million signing bonus still in the bank.
News of the fat cat severance package given to former Lucent execs is sure to irks the firm's workers, particularly because there is widespread discontent at the firm about the severance packages given to ordinary workers who have lost their jobs. There are 19,500 staffers and 5,000 contractors at Lucent that have already being shown the door, some of which have received poor severance packages.
Some disgruntled former workers resorted to extreme actions including a threat in April by a technician to blow up a Lucent plant in Massachusetts with a fertiliser bomb after layoffs were announced at the facility.
As previously reported, last month Lucent announced plans to axe another 15,000 to 20,000 jobs as part of its plan to reduce its costs by $4 billion per year. The former darling of Wall Street lost $3.25 billion in its third quarter on sales down 21 per cent at $5.8 billion.
Much of the problems that have afflicted Lucent can be traced back to poor business decisions, a failure to execute on plans and a long string of damaging incidents that bedevilled Lucent during McGinn's tenure as chief executive, before he was replaced by Henry Schatt last October.
Securities and Exchange Commission accounting probes into Lucent's finances after overstated sales figures and allegations that workers had sold hi-tech secrets to the Chinese were among the bombshells that hit Lucent during McGinn's reign.
Of course a downturn in IT spending and the collapse of competitive carriers in the States, a key market for Lucent, have hardly helped matters. That said it very difficult to think what McGinn has done to deserve such generous package after leading Lucent towards penury.
One thing for sure is he wouldn't have received such a package if employees (or shareholders) had drawn up his pay-off package. ®
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