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AlcaLu Investors Vote for Change

Ray Le Maistre
NXTcomm News Analysis
Ray Le Maistre, Editor-in-Chief
5/30/2008

Alcatel-Lucent (NYSE: ALU) shareholders today passed all 14 resolutions at the company's combined Annual and Emergency General Meetings in Paris, including the proposed change to the rules surrounding the dismissal of the CEO and chairman. (See AlcaLu Seeks CEO Dismissal Rule Change.)

That means that only a simple majority is now needed in a board-level vote to oust the CEO, currently Pat Russo, or the chairman, currently Serge Tchuruk. Until now, a two-thirds majority had been needed.

That vote could be significant, as AlcaLu is believed to be looking for its next CEO. (See Is AlcaLu Seeking a New CEO? and AlcaLu's Next CEO?)

Another of the resolutions passed today concerns the conditions surrounding Russo's pay-off if she is dismissed. Currently, her "severance benefits" amount to "two years of total annual remuneration (including fixed and variable pay) and the accelerated acquisition of her option to subscribe for or purchase shares of the company." The value of that package is believed to be up to approximately €6 million (US$9.3 million).

Today's vote in favor of Resolution 7, though, will make it harder for Russo to pick up the maximum amount if she is dismissed after January 1, 2009. In line with French commercial codes, from next year that payoff will be linked to the company's financial performance, which it currently is not. If Russo's contract is terminated after the start of next year, AlcaLu must have hit 90 percent of its revenue target or 75 percent of its operating profit targets for a maximum payout to be possible.

That means Russo is more likely to receive a maximum compensation package if her contract is terminated this year, as it wouldn't be linked to any performance targets. The CEO recently revealed that AlcaLu expects this year's revenues to be lower than 2007 sales. (See AlcaLu Posts Loss, Warns on Full Year.)

The company has stressed on a number of occasions that Russo's job is not currently under threat.

AlcaLu's share price closed on the Paris exchange today at €4.86, up 2.74 percent. On AlcaLu's first day of trading in December 2006, the share price stood at €10.12.

— Ray Le Maistre, International News Editor, Light Reading

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optodoofus
optodoofus
12/5/2012 | 3:39:50 PM
re: AlcaLu Investors Vote for Change
I wish I had a job where I got 100% of my pay for achieving 75% of my goal.

optodoofus
rahat.hussain
rahat.hussain
12/5/2012 | 3:39:50 PM
re: AlcaLu Investors Vote for Change
@Optodoofus

Most people do get paid 100% of their pay for doing less than 100% of their job.

odo
heritagejd
heritagejd
12/5/2012 | 3:39:48 PM
re: AlcaLu Investors Vote for Change
It will be interesting if I get one "Bananna". After 'Her' performance at the old AT&T, Kodak, Lucent they (ALU) should have done a back-ground... Who was her coat-tail?
bibgho
bibgho
12/5/2012 | 3:39:48 PM
re: AlcaLu Investors Vote for Change
She was brought in by Henry Schacht and the LU board.

It's really sad to see that one of the stellar companies failing because it could not find the right management, people who knew how to manage a non-monopolistic, extremely competitive, non-AT&T-like behemoth.

People making product portfolio decisions always picked the wrong products and always held on to the wrong bunch of people that repeatedly made the same mistakes (Ms. Davidson and Ms. Cristy were famous - sorry notorious). It's so sad to see how the inventions of the Bell Labs could not build a model for corporate governance by idiots.

The same incompetence still persists in ALU under the patronage of Pat Russo. It's the bevy of bimbos that have run the company aground but are still there.

As an ex-Lucent employee, who left on his own accord, I was eagerly waiting to see Mike Quigley take the helm. If someone of his calibre is sidelined, it speaks volumes about the dead-weights at the helm. I do not regret my decision but certainly regret the fate of some of my old time friends that are holding on to their pension pay-offs as their only lucre for staying on with the company.

Glad to see that the 2/3 majority clause was removed from the CEO expulsion guideline, would have loved it if the decision was made alongside to get the Board to vote and get Ms. Russo and her bevy out ASAP.

heritagejd
heritagejd
12/5/2012 | 3:39:47 PM
re: AlcaLu Investors Vote for Change
I had several conversations with "OLE" Henry and P. Russo's office, I knew Henry brought her on board, but he was nobody of vision either. Their only strategy of turning a company around was to cut costs, primarily employee's and R&D?? Except for themselves.

Both surpassed their levels of the
"Peter Principle"! I really knew the "Tail", just wanted to know if anyone else knew how "she" got there

gocowboys
gocowboys
12/5/2012 | 3:39:46 PM
re: AlcaLu Investors Vote for Change
Pat has infused the Alcatel organization with her flunkies and the business is back sliding in a big way. I am very supportive of the decision to "facilitate" her removal, but the company will have to cut out more of the cancer. Cindy Cristie, etc...all have to go.

IMHO, Mike would not likely take the CEO position. I would think that he has better options than to clean up the mess. The next CEO is going to have to put on the hip waders. The job to have is the successor to the next CEO; that should be at the point that the ship is righted.
rahat.hussain
rahat.hussain
12/5/2012 | 3:39:43 PM
re: AlcaLu Investors Vote for Change
It is time for a French supported Americanized CEO to take over to remove the flunkies, support meritocracy, and eliminate favoritism.

My bet is HdP can do this - he has a finance background, he is young, ambitious and can easily find the right talent to arm the businesses without meddling too much.

Any takers?

odo
gocowboys
gocowboys
12/5/2012 | 3:39:42 PM
re: AlcaLu Investors Vote for Change
There are a number of issues with splitting the company into pieces:

1. Customers are buying from medium/large companies today and the pieces may not be perceived as strong enough to maintain market momentum.

2. ALU is doing well in the IPTV space with a solution and any breakup risks their solution sell.

3. Without explicitly selling off the pieces, it is not clear to me how the shareholders garner value. It is not like the pieces will be spun off as an IPO.

Just my 2 cents
gocowboys
gocowboys
12/5/2012 | 3:39:42 PM
re: AlcaLu Investors Vote for Change
I am not a big HdP fan. He was very business oriented when he ran NA. However, he did not engender confidence in his team and pretty much threw his team under the bus during the merger. That team was producing at a very high level at that time.

But, maybe a step on everything kind of person is the right type to turn this mess around.
Stevery
Stevery
12/5/2012 | 3:39:42 PM
re: AlcaLu Investors Vote for Change
But, maybe a step on everything kind of person is the right type to turn this mess around.

The current ship is obviously sinking. Solid turnaround leaders have been approached before and are not biting. So another possibility that is probably being considered is a sell-it-in-pieces leader.

Splitting it into pieces might be the best return at present, and then the various pieces would be forced to sink or swim on their own merits.
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