2002 Top Ten: Fat Cats
2002 can't end fast enough for the thousands laid off as a result of the segment's worst year ever. For a precious few, however, there's a lining on that downturn cloud -- and it's made of pure gold.
Fat cats flourish, and they're adding padding aplenty despite the lean times. Oh, there's been some industry outcry over excessive executive enrichment (see Fat Cat Pay Roils Readers). But it's come to little so far. A slap on the wrist here, a federal hearing there, a sprinkling of lawsuits -- all have barely dented these folks' gilded shells. Indeed, some are doing better than they were in the boom times.
Now, we're not saying all these riches aren't earned; most fat cats came by their loot in perfectly legitimate ways. In fact, there may be plenty of good reasons for top execs' millions of dollars in bonuses, even if they are often obscure.
In any event, the industry has no one to blame but itself for the excesses that follow. So without further ado, we present Light Reading's take on the telecom world's most notorious fat cats, listed in descending order of rotundity:
No. 10: Assorted U.S. government recipients of telecom largesse
Granted, a few mil a year hardly a fat cat makes. But considering the stunningly slow progress of telecom legislation stateside, we think the $86 million corporate sponsors have sent to legislators since 1989 is far too much for far, far too little (see Telecom Dollars at Work in Washington).
No. 9: John Roth
Talk about working the system. The ex-CEO of Nortel Networks Corp. (NYSE/Toronto: NT) has made more since retiring in November 2001 than he did during his last months of running the company, even though his active tenure saw Nortel's market cap value halved (see Nortel's Roth Rakes It In). For the year that ended in November, Roth was on paid leave, earning about $1.5 million while dawdling at home. With plenty of time on his hands, Roth was able to divest himself of a hefty stack of Nortel shares (see Roth Selling Out? ).
No. 8: Dan DiLeo
Speaking of cushy retirements: After a 32-year career culminating in the job of executive VP of the optoelectronics group of Agere Systems (NYSE: AGR/A), technologist Dan DiLeo retired at an annual salary of $440,000. He also owned over one million options on shares of Agere stock, which would have turned into Agere common shares when the company separated from Lucent in June 2002 (see Lucent Completes Agere Spinoff). DiLeo's severance entitles him to "an additional $16,042 per month until April 1, 2004, and up to $10,000 to furnish and equip a home office," according to Agere's proxy statement. Apparently not ready to drive shuffleboard pucks, DiLeo has joined the board of MegaSense Inc., just to keep his hand in (see Agere Fat Cat Boards MegaSense).
No. 7: Joe Nacchio
As the high-flying CEO of Qwest Communications International Inc. (NYSE: Q), Joseph Nacchio earned close to $1 billion in 2000 alone. In 2001, he got $24,374,091 as part of a long-term incentive plan -- on top of his regular pay and bonuses (see Qwest: Ciao Nacchio?). As the year 2002 rolled in, his pay was set to rise from to $1.5 million from $1.2 million on January 1, 2002. As of March 1, his bonus was set to increase to 250 percent from 200 percent of his base salary. After a long period of criticism (see Qwest: Ciao Nacchio?), Nacchio resigned in June 2002 (see Notebaert Takes Out Nacchio). If his old employment agreement held up, he would have gotten double his annual salary on the way out.
No. 6: Tellium execs
Back in the spring and summer of 2000, Tellium Inc. (Nasdaq: TELM) gave loans to a bunch of its executives to exercise their stock options. By July 25, 2002, the balance of loaned money, with interest, was $32.9 million (see Tellium Execs in Trouble?). Some in the firm proposed to forgive the money due, but the board vetoed the suggestion, leaving a slew of fat cats on short rations. Stay tuned: This one's not over yet.
No. 5: Jack Grubman
Jack was the man at Salomon Smith Barney, earning a reported $20 million annually for his bullish reporting on carrier stocks. After angry shareholders took him to the cleaners, accusing him of purposely misleading them to further his company's interests (see stories too numerous to list), Grubman withdrew under a cloud but clutching a severance package said to be worth $32 million (see Jack Grubman Goes). Newspapers reported last week that he's agreed to a $15 million fine and will stay away from financial analysis forever. So now he's got only $17 million plus to play with. Oh, what a shame.
No. 4: Michael D. Capellas
The latest CEO of WorldCom WorldCom Inc. (OTC: WCOEQ) doesn't have any telecom experience (see Michael D. Capellas and Capellas Leads the IT Invasion of Telecom). But he's in line to get $5 million for his first year on the job, including a $1.5 million base salary and a $2 million signing bonus, plus potential performance bonuses worth $1.5 million, according to bankruptcy filings. Capellas will also get another $18 million in restricted stock in the newly reorganized WorldCom when it emerges from bankruptcy (sometime in 2003, the company expects). Hope it's enough, Mike!
No. 3: Gary Winnick
When the going got tough, the founder of Global Crossing Holdings Ltd. withdrew to his $40 million Beverly Hills mansion, hired a media rep to answer questions about how he could have made off with close to $1 billion, and left employees and common shareholders with nothing (see GlobalX: The Burst Bubble). Ongoing investigations apparently have called forth the best in Winnick, though, and this fall he emerged to offer $25 million of his personal funds to help employees whose 401(k)s were crushed in the carrier's collapse (see Winnick: I'll Cough Up $25M). That will have to do, at least for now.
No. 2: Bernie Ebbers
When the flamboyant founder of WorldCom Inc. (OTC: WCOEQ) resigned amid one of the year's highest-profile financial scandals (see WorldCom Goes Boom, WorldCom Files for Bankruptcy, and Ex-WorldCom Execs Charged With Fraud), he'd managed to score over $400 million in company loans, along with a princely annual salary and millions in bonuses. The jury's apparently still out on whether he'll get to keep it all. So far, though, that Mississippi possum's plenty plump!
No. 1: Lucent execs
Claiming the top spot for the second year in a row (see 2001 Top Ten: Fat Cats), Lucent Technologies Inc. (NYSE: LU) again demonstrated its ability to richly reward a chosen few while maintaining one of the industry's highest pink-slip percentages (see 2002 Top Ten: Pink Slips). According to SEC filings, CEO Patricia Russo got a guaranteed $1.8 million bonus, in addition to a base salary of $1.2 million. She's also gathered millions in stock options and restricted stock shares (see Lucent Fat Cats Gorge in 2002 and Post-Bubble Arrogance).
Besides Russo, Lucent paid at least four other execs to stay on through Russo's transition (she started work in January 2002). As disclosed in Lucent's proxy statement in 2001, Robert C. Holder, COO, received a retention payment of $4.5 million; William T. O’Shea, executive vice president of corporate strategy and business development, got $3.08 million; Frank D'Amelio, executive vice president and CFO, received $3 million; and Richard Rawson, senior vice president and general counsel, got $2.31 million to stick with the company through April 2002. They also received full vesting of their current outstanding stock options and restricted stock units.
Now, what's that ya said about a bubble?
— Mary Jander, Senior Editor, and staff of Light Reading