How good a CEO was Nortel Networks Corp.'s (NYSE/Toronto: NT) John Roth? So good that he is being paid more not to be at work than he was getting when he ran the company.

Just a few days before former Nortel CEO Roth announced his retirement back in May 2001, he received a $250,000 annual raise, according to documents Nortel filed with the Securities and Exchange Commission (SEC).

For the first four months of 2001, Roth’s base salary was $1,250,000 per year. This climbed to $1,500,000 a year on May 1, 2001. Roth officially retired as Nortel's president and CEO on November 1, 2001. Since then he has been on a yearlong leave of absence, during which he will continue to draw his entire salary.

In 2000, Roth earned $6.7 million in cash, including $1,104,167 in base salary, a bonus of $5.6 million, and miscellaneous pocket-change of $33,199 (see 2001 Top Ten: Fat Cats).

Roth, now Nortel's vice chairman, became Nortel's president and CEO in October 1997, and while he held that title Nortel shrank in size by about 28 percent and lost about 50 percent of its market capitalization.

When Roth took the top job, Nortel had a stock price of around $105 a share and employed more than 72,800 people. By the time he retired, Nortel was down to around 52,600 employees, and its stock price was less than $6 a share.

In the summer of 1997, Nortel's market capitalization was hovering around $32 billion. Now it is about half that.

Along with many other telecom chief executives in the late 90s, Roth's cheerleading about the Internet's exponential growth contributed to many of the unsustainable investments in the telecom market. Moreover, the vendor financing and overblown acquisitions that took place on his watch helped usher in a long and humiliating restructuring period at Nortel (see Nortel Buys: Reaping the Whirlwind? and Nortel: Can This Company Be Saved?). "He misread so many of the signals the market gave him in 2001," says Ariane Mahler, an analyst at Dresdner Kleinwort Wasserstein.

Frank Dunn, Roth's successor, began 2001 with a base salary of $475,000 a year (see Nortel Swings Axe, Switches CEOs). By November 1, he'd been bumped up to $825,000 a year to reflect his promotion, according to Nortel's SEC filings.

Nortel declined to discuss Roth's compensation. "I'm not going to dissect the numbers. They are what they are. They speak for themselves," says Nortel spokesman David Chamberlin.

— Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com