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Lucent Retirees Get the Schacht

Light Reading
News Analysis
Light Reading
9/26/2003



Lucent Technologies Inc. (NYSE: LU) is sending former CEO Henry Schacht to face retirees in eight U.S. cities who are enraged over their loss of benefits.

Schacht, who himself turns 69 on October 16, will attempt a dialogue with thousands of pensioners who are "mad as hell" over Lucent subsidy cuts (see Lucent Retirees Ask Questions and Lucent Cuts Retiree Healthcare). Schacht has picked metro areas with the largest concentration of Lucent retirees. At each stop, he'll head up hour-and-a-half sessions, mostly in large conference halls.

While not actually retired from Lucent himself, Schacht has ceased working there full time. Instead, he has been acting as a board member and advisor since Patricia Russo took over as CEO and board chairman in February 2002. On the tour, he will represent an entity called Lucent's Pension and Benefits Task Force.

It won't be an easy trip. The Lucent Retirees Organization (LRO) says its members are "outraged and disgusted" by what they see as Lucent backing down on its commitments after they based career and retirement choices on staying with the company.

Originally, representatives of LRO met with various Lucent personnel, including Russo, but say they were "blindsided" when the company declared earlier this month that it would no longer pay subsidies to dependents of former management workers who retired on or after March 1, 1990, and whose base salary at retirement was $87,000 or more. Lucent's also eliminated dental coverage and Medicare Part B expenses (any doctor visits and outpatient medical care not associated with in-patient stays) for all management retirees and their dependents.

The cuts will affect about 50,000 retirees.

The LRO bristles at Lucent's ongoing payments to executives, which have made headlines in the past (see Lucent Fat Cats Gorge in 2002 and Post-Bubble Arrogance). Schacht himself made a base salary of $1,100,000 in 2002 --relatively modest for a Lucent CEO.

"At the same time Lucent has shrunk to 25 percent of its former size, have executive salaries and perks been reduced proportionately by 25 percent? The answer is no," said LRO president Ken Raschke in a prepared statement. "Lucent executives continue to draw multi-million-dollar salaries, retention bonuses and pensions -- all on the backs of its retirees, without whom there would be no Lucent."

The LRO is considering legal action against Lucent.

Lucent spokesman Bill Price acknowledges that Lucent "thought long and hard" about its benefit cuts, but despite the difficulties, no policy changes are in sight. Instead, Schacht will attempt to reason with the retirees and show them Lucent's still among just 10 percent of U.S. companies that still offer any retiree healthcare at all. Lucent's position is that despite cutting subsidies, it's still offering reduced group rates to retirees, which are "up to half" of what they'd have to pay on their own.



Lucent's retiree population swelled over the years as the company absorbed employees who remained on the benefit roster after the company spun off from AT&T Corp. (NYSE: T) in 1996. It has seen an 85 percent increase in healthcare benefit costs ever since, Price says, amounting to $850 million annually. The ratio of Lucent retirees to employees is 5 to 1; add retirees' dependents and the ratio climbs to 10 to 1.

Bottom line? To keep any retiree health care at all, Lucent is forced to make the choices it has, Price says. "We have to take action to ensure the long-term viability of the business." Without Lucent, there won't be anything for retirees.

As to those executive benefits: Price claims Lucent execs make about 30 percent of what they did even three or four years ago. About 60 percent of executive compensation is tied to options and long-term incentives that have no immediate cash value, he says. What's more, even eliminating all executive pay wouldn't dent the retiree healthcare bill.

Table 1: Henry Schacht Retiree Meetings

City Date/Time Location Address
Greensboro, NC Sept. 30/9 to 10:30 a.m. Radison Hotel 415 Swing Rd.
Somerset, NJ Sept. 30/3:30 to 5:00 p.m. Doubletree Somerset Executive Metting Center 200 Atrium Dr.
Atlanta, Ga. Oct. 1/9:30 to 11:00 a.m. Sheraton Buckhead Hotel 3405 Lenox Rd. NE
Orlando, Fla. Oct. 1/2:30 to 4:00 p.m. Rosen 9700 International Dr.
Boxborough, Mass. Oct. 2/9:30 to 11:00 a.m. Holiday Inn Boxborough Woods 242 Adams Place
Columbus, Ohio Oct. 7/10:30 a.m. to Noon Ramada Plaza Hotel 4900 Sinclair Rd.
Lisle/Naperville, Ill. Oct. 7/2:00 to 3:30 p.m. Wyndham Lisle Hotel 3000 Warrenville Rd.
Allentown, Pa. Oct. 8/10:30 a.m. to Noon Days Inn Conference Center 1151 Bulldog Dr.


— Mary Jander, Senior Editor, Light Reading

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BobbyMax
BobbyMax
12/4/2012 | 11:23:05 PM
re: Lucent Retirees Get the Schacht
Mr. Schacht single hande3dly brought down Lucent. He should not associate with any activity of Lucent. He entered Lucent through backdoor and tto advantage of Lucent in terms of salary and bonus. He was not aware of any part of Lucents' business.

As far as recent progress of Lucent is concerned. there are no products, no dedicated sales and marketing workforce, poor customer support, no contribution to the wireless market(broadband), no modification to #5 ESS, no progress on edge switches and routers. It is well recognized that Lucent could have done much better job both in the enterprise and carrier's market.

Lucent is still maintaining a workforce of 35,000 personnels. But its productivity in the last two years have been almost zero. The conclusion the company is not managed by the right people. The company is not taking outside help to evaluate the performance of its employees.

Lucent has joined the ranks of 3Com, Xerox, Novell and many other similar companies. It will continue to pay its employees, but the shareholders are not going to benefit.

Mrs. Pat Russo does not respond to letters. The Lucent board members are getting a lot of benefit but paying any attention to the company.
whyiswhy
whyiswhy
12/4/2012 | 11:23:04 PM
re: Lucent Retirees Get the Schacht
Henry, all the folks on the LU board of directors want to say:

"Helluva good idea! Afterall giving them your personal time and attention is more valuable than medical and dental benefits, good for you Henry. Real noblesse oblige there. We admire you. Don't wear yourself out and spoil your handicap."

Signed: The Broad of Directors

LR: You forgot to mention there will be an admission charge of $100 per former employee. Public and reporters invited free.

Scott Raynovich
Scott Raynovich
12/4/2012 | 11:22:48 PM
re: Lucent Retirees Get the Schacht
I'm wondering what the turnout will be like in Somerset tomorrow... anybody planning on going? Light Reading is considering attending.
erbiumfiber
erbiumfiber
12/4/2012 | 11:22:44 PM
re: Lucent Retirees Get the Schacht
Lightreading should DEFINITELY attend this circus. I think this tour is Lucent's revenge on ol' Henry. If I were anywhere near one of these meetings I wouldn't miss it for the world. Unless he is one smooth speaker, he will need bodyguards...I'm with the retirees on this one- a lot of the reason people stayed with AT&T was that there was a solid paycheck with a solid retirement. In return, you had to put up with plenty of really annoying BS and stupid management but retirement was at least a light at the end of the tunnel (not enough of a light for me, I was too young and retirement too far off when it was clear the companies would break apart so I headed for start-up land back in the good times...).

Maybe it will be dull and calm but if there is ANY chance for audience participation it should be lively...anyway if you do decide to go, please report back all the juicy details...

ef
capolite
capolite
12/4/2012 | 11:22:41 PM
re: Lucent Retirees Get the Schacht
If you don't go and expose Lucent's egregious behavior then send back your Woodward/Bernstein dolls and STFU.
whyiswhy
whyiswhy
12/4/2012 | 11:22:36 PM
re: Lucent Retirees Get the Schacht
Scott:

This series of corporate PR meetings will be unique from the perspective that Henry will be far less worried about a stab from your journalistic pen than some PO'd LU retiree and a sharp object.

:-)!

-Why
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