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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

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rjmcmahon 12/5/2012 | 12:57:13 AM
re: 2002 Top Ten: Fat Cats The result today is that a handful of people own the instruments with which consensus is manufactured (to use a Chomskian concept). They have used this concentration of ownership to build consensus on a destructive path toward war that will benefit them disproportionately.
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Agreed, sorta.

The consolidation of the media is a core problem in my opinion. Though, the primary instrument, broadcast television, is backed by $500B per year advertising budget. Amongst other idiotic things it "teaches" an insecure public that they can build their egos through the purchase of vehicles rolling on four wheels driven by an internal combustion engine (along with styling and brand of the day).

And, unfortunately, I'm not sure that the public waking up to their self deceptions would change the course. Our infrastructure is so screwed up being dependent on that oil to function. And contrary to popular press, hydrogen is not an energy source nor is turning the earth into a star via things like inexpensive fusion workable.

The only real solutions in my mind requires conservation and the rebuilding of our public infrastructures to be much, much more efficient. We also need to learn that consumerism is no way to build our collective ego -- but that seems to be mostly a maturity thing.

Also, violently agreed that WE need to DO something. The first step is to speak out as you are doing and as you suggest for others to do. The next step, in my mind, is to eliminate the bandwidth bottlenecks. The step after that is to get rid of the advertising subsidies and move to a content direct model.

But those all happening still won't solve our problems. The cost of media production is still too expensive and the media elite will still remain in the drivers seat w/respect to mfg'ing mass consensus.

So it seems that the elite will eventually have to get a moral conscious and understand their obligations to our society cannot be dictated by a banker.
gardner 12/5/2012 | 12:57:12 AM
re: 2002 Top Ten: Fat Cats
But those all happening still won't solve our problems. The cost of media production is still too expensive and the media elite will still remain in the drivers seat w/respect to mfg'ing mass consensus.


But the internet is cheap (relatively speaking) and the tools for producing original content are getting very cheap (digital cameras and editing stations). Samizdat worked well in the oppressive former USSR. It would work even better in the US. There are no laws to prevent people from taking an end run around the "mainstream press". Don't forget, the Trent Lott story didn't heat up until an internet reporter got the story talked about. It was difficult for the right wing controlled press to ignore and so they had to pile on too and Lott had to go. (They didn't want to at first because of the dangers of having people become too aware of the "Southern Strategy") This wasn't the first time Ol' Trent had made that same stupid comment but nothing happened until it looked stupid to ignore it. That was his job really. He was in charge of delivering the right-wing social reactionaries in the deep south to the Republican Party. He had to go anyway though because of the way it works here. The system for manufacturing consent in this country doesn't have the luxury of just arresting those who dissent. They may fly in Serbia or Red China but here the elites have a much more difficult job of trying to "get out in front" of a story. Basically the same techniques are used as Corporations use to manage image. When a Corporation takes a poop in the punch bowl or has a situation that must be handled (e.g. the Tylenol poisoning of a few years ago) they try to just "get out in front". It is doable but harder than just making the appropriate arrests as they might elsewhere. Knowing what they are doing and why (and knowing, by the way, that it isn't a conspiracy but instead a confluence of interests among a variety of elite groups) helps us who want to prevent the country from becoming yet more undemocratic counter their efforts. It is important to realize that no conspiracy is involved not just because there isn't one (;-)) but also because knowing why sometimes disparate elites cooperate can help one to divide them. The use of overly concentrated press power can be thwarted but you have to know what the trick is or you can't counter it. Fortunately the tricks of the trade are well publicized because they have to be learned by anyone who has to sell a product or manage a corporate image. Advertising works. It works for selling toothpaste and it works for selling a political candidate and it even works for selling an ideology that favors a certain group of people over another. The CPSU did it in a very unsophisticated way, with oppression and ham-handed propaganda. The corporate elites in the US, and to a slightly lesser extent Western Europe, do it with far more subtle and sophisticated means.

I also think the outcome depends on the future. I think the elites may be in the process of overplaying their hand. First the theft of the economy on a grand scale and now the war in Iraq. I think if things don't get better fast with the economy or if the US has too many casualties in the Iraq war (or if it results in a big blowup in the middle east resulting in an economy killing oil price spike)then more people will become resistant to the manufacture of consent. Americans are, despite some tendency for conformism, a pretty practical lot. They were fooled by Vietnam for a while but not forever. And Vietnam was much more popular in the beginning than Iraq is now.


So it seems that the elite will eventually have to get a moral conscious and understand their obligations to our society cannot be dictated by a banker.


I don't think it depends on just what the elites do. I think it matters how things turn out with the Iraq war and the economy. In addition it depends on how well we do convincing our neighbors, friends and relatives about what is going on.
rjmcmahon 12/5/2012 | 12:57:07 AM
re: 2002 Top Ten: Fat Cats But the internet is cheap (relatively speaking) and the tools for producing original content are getting very cheap (digital cameras and editing stations).
______________

Due to the lack of public awareness, the internet as a bit distribution network is trending towards more expensive and not less. Too many politicos are afraid to lead public opinion and deploy our democratic fiber. Instead they have abdicated their responsibilities and defered their duties to the oligopolists.

On the production side, the cost is labor in the form of human time. Tools help, but they are no panacea.
jj388 12/5/2012 | 12:57:06 AM
re: 2002 Top Ten: Fat Cats Geeze, is this Lightreading, or have I stumbled on to the Nation web site by mistake? All this hysteria about "elites" and all.

So, who ARE the "elites" anyway? The old money, Rockefellers and those types? Or Bill Gates and Larry Ellison? Or Oprah Winfrey and Katie Couric? And considering how often America churns out brand new millionaires and billionaires, do you suddenly get a letter in the mail asking you to join the "elites" once your bank account hits a certain point? ("Congratulations. Your net worth just passed 500 million dollars. You are now eligible for membership in a conspiratorial organization dedicated to suppressing freedom and ideas. You will also receive a ten percent discount on airline tickets.")

The crack about the "right wing controlled press" was a great giveaway too. Hooo brother.

Anyway, contrary to all this "manipulation" of the masses, there are dozens if not hundreds of alternate news sources readily available to those that want them. In print, on radio, on TV and of course on the internet. Most of the alternatives are left-of-center, in fact, though I guess that depends where you put the center. (If CBS, for example, is considered "right wing", then I guess even The Nation is middle of the road.)

And incidentally, Chomsky is a psychopath and a misanthrope. He needs a rubber room. I suggest you read Malcolm Muggeridge to understand what motivates Chomsky. And no, let's not open a discussion on this front. Though it's worth noting in passing, that if these "elites" are so darn powerful at "manufacturing consent", how come Chomsky is allowed to print whatever he wants, speak wherever he wants, and be constantly broadcast all over Pacifica radio, etc.?


optiboom 12/5/2012 | 12:57:04 AM
re: 2002 Top Ten: Fat Cats I may be able to help - at least for NE opportunities. Send your specifics to:
[email protected]
gardner 12/5/2012 | 12:57:02 AM
re: 2002 Top Ten: Fat Cats
Geeze, is this Lightreading, or have I stumbled on to the Nation web site by mistake? All this hysteria about "elites" and all.

Hysteria? Has anyone gone to jail yet over the Enron debacle? Fastow is still building his mansion in Florida. Sheesh! If you are not upset you should be.


So, who ARE the "elites" anyway? The old money, Rockefellers and those types? Or Bill Gates and Larry Ellison? Or Oprah Winfrey and Katie Couric?


Who are they? Have you been under a rock? It's not like there is a club with a membership list. It is far more subtle. It is more of a subculture than a well-defined group or organization. There isn't even a fixed set of interests although there are certain more or less permanent ones (oil, manufacturers of various sorts, the arms industry, etc.) Contributions get made, laws get changed, billions get stolen and nobody goes to jail. The board of directors of some rather major corporations look the other way while billions get stolen and nobody goes to jail. It is not like there exists a council of these folks. It isn't a frigging conspiracy. The really interesting thing about this is that it isn't a single entity with a membership list. There is a group of people who share interests because of the their wealth and position (and how they make their money) and they have the money and power to highjack the "democratic" political system of the US. They do it with campaign contributions and control of a handful of media companies that provide the vast majority of news that most americans every hear about.


Anyway, contrary to all this "manipulation" of the masses, there are dozens if not hundreds of alternate news sources readily available to those that want them. In print, on radio, on TV and of course on the internet. Most of the alternatives are left-of-center, in fact, though I guess that depends where you put the center. (If CBS, for example, is considered "right wing", then I guess even The Nation is middle of the road.)


This is a beautiful example of how a concerted campaign of labeling by rightwing talk show hosts and sound-bite politicians has managed to "mainstream" right wing thinking in this country. Over the last 20 years the center has been pulled far enough to the right so that anything to the left of the Fox News Network appears "left wing" to many.


And incidentally, Chomsky is a psychopath and a misanthrope.
And so any insight he might have is suspect huh? Does the word "ad hominem" mean anything to you? The fact is that media concentration and the use of advertising and mass marketing techniques works. Consent for things like the Iraq war is manufactured. Consent for further relaxing regulation of monopolies is manufactured by those that hope to gain from it. You can try to divert attention from this fact by labeling Chomsky as a psychopath but it doesn't change the situation. Things like "Countdown Iraq" don't just happen by accident. They have a purpose and if you think that purpose is left wing you are sadly mistaken.



Though it's worth noting in passing, that if these "elites" are so darn powerful at "manufacturing consent", how come Chomsky is allowed to print whatever he wants, speak wherever he wants, and be constantly broadcast all over Pacifica radio, etc.?

Allowed? You don't get it do you? How would they prevent it and why would that be necessary? The constitution remains in place. Old fashioned Soviet style techniques are not how it is done. Perhaps you should read Chomsky as well as Muggeridge--regardless of his motivations--you might gain a little insight. Do you think that people can only be manipulated by tossing writers in the gulag if they write the wrong things? How important is it to prevent Pacifica radio from broadcasting when you have CNN, MSNBC, and my personal favorite punching bag Fox at your disposal?
rjmcmahon 12/5/2012 | 12:57:01 AM
re: 2002 Top Ten: Fat Cats Consent for things like the Iraq war is manufactured.
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I don't know if this is correct. For some reason our Congress gave consent and abdicated their responsibility to declare war but rather handed it over to the current administration. This one done prior to any real public consent.

That act seemed a bit odd to me. Why did they behave in such a weak kneed manner?

PS. On the Trent Lott thing. You may be giving the internet too much credit. It was obvious after the last election, any Republican that would anger and get out the minority vote would be on the chopping by his own party. Dubya wanted to replace Lott w/Frist. CSPAN was broadcasting Frist speeches prior to Thurmond's birthday. Thurmond's party was then broadcast live on CSPAN. No internet reporter required.

PSS. How would you propose the existing nation state go about securing the world's primary oil supply? Or do you believe we can give break our dependency?
jj388 12/5/2012 | 12:57:00 AM
re: 2002 Top Ten: Fat Cats OK, this should all get moved to some political chat board somewhere, rather then LightReading.

But anyway,your definition of "elites" was what I expected it would be, a manifestation of paranoia. First, companies do not work in concert most of the time. What they are doing is competing with one another, and often viciously. Are they at the same time working together?

And yes, companies influence politicians. So what? So do unions, trial lawyers (more than any corporation, in fact), race hustlers, Hollywood nitwits, you name it. For better or worse, that's the system. You want influence? Start an organization. If AARP did it, so can you. And they are often working for conflicting ends. You can hardly think that the interests of ambulance chasing lawyers (the largest contributors to the Democratic party) are in ANY way conjoined to the interests of the industries they are busy suing for lots of phony claims.

And maybe "Countdown Iraq" happens for a simpler reason: they are trying for ratings, and the media always exaggerates everything as a plea for attention. In any case, you don't even seem to consider the notion that many people "consent" with the war on Iraq for a simple reason: they actually agree with it. I for one can't wait until Sadamm and his gang of thugs are vaporized (and no, I don't care if "the children of Iraq" are hurt in the process -- you always know somebody is full of it when they start invoking "the children"), and that's not because the media is telling me to think this. In fact, they probably push more anti-war stories than pro-war. You must always consider the possibility that you have an extreme minority view about certain things because people just don't agree with you, not because they are fooled into believing something else (of course the assumption is always that YOU are correct and never fooled yourself!). I have plenty of non-mainstream views, but I'm aware enough to realize that they aren't ever going to happen, because most people just don't go along with my thinking, at least not yet (drug legalization, for example).

And if everybody out there is so busy manufacturing consent, then how do you get Michael Moore and Ann Coulter on the same best-seller list at the same time?

And finally, you CAN argue that the (non-existent) "war fever" favors the left-wing, because it focuses power more and more on the central government, which is precisely what left-wingery is about. War has always been used to consolidate and expand the powers of the central government. What amazes me about the leftists is how they always act so aggreived, when they have made and continue to make enormous strides in nearly all their goals, with a US government that has done nothing but move leftward for a hundred years.

Anyway, I will post no more on this subject in this forum (have the last word if you like). Let's get back to bitchin' about the bunch of idiots that run Lucent.

rjmcmahon 12/5/2012 | 12:56:57 AM
re: 2002 Top Ten: Fat Cats In any case, you don't even seem to consider the notion that many people "consent" with the war on Iraq for a simple reason: they actually agree with it. I for one can't wait until Sadamm and his gang of thugs are vaporized (and no, I don't care if "the children of Iraq" are hurt in the process -- you always know somebody is full of it when they start invoking "the children"), and that's not because the media is telling me to think this.
________________

Your word choice is interesting for someone who "talks" support. Why did you use the third person and say "they actually agree"? You should have used either first or second person, "we" or "I agree."

Also, if you really consent, have you signed up at the local Armed forces? And if you don't care about children, have you signed up your own children to fight this "war"?

Try to be more honest with yourself and you won't look so silly to the rest of us.
rjmcmahon 12/5/2012 | 12:56:53 AM
re: 2002 Top Ten: Fat Cats Who are they? Have you been under a rock? It's not like there is a club with a membership list.
_______________________

There may be a list. They all enroll in yoga classes. Their Yoga instructors must be their leaders. (Don't tell Dubya, but those yoga classes are something to be afraid of.)

Uh oh, I took a yoga class. I may be becoming one of them...

In all seriousness, the fear of the unknown does get a bit tedious. Why don't we understand that the motivations are nothing more than what motivates an army of ants to stay on their trail?
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