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big daddy 12/4/2012 | 11:07:04 PM
re: Lucent Execs Get Richer Can YOU say "move to Sweden"?
fk 12/4/2012 | 11:07:03 PM
re: Lucent Execs Get Richer I don't concern myself with the amounts.

You should, as should any shareholder. The amounts these guys are giving each other (Beelzebutt is right that it's a club) are grotesque considering the plain and incontrovertible fact that they do not merit this level of compensation.

I stand by my point, why should anyone worth their salt stay at LU if there is no reward for succeeding?

You have two erroneous assumptions here, Rebecca. First, that the people being hugely compensated are "worth their salt," and second, that they are being rewarded for "succeeding." The plain and simple truth is that they are being insulated from their failures by being awarded money for making mistakes. This isn't an incentive laden contract that provides for huge upside if the company does well. It's an award (note that this is different from a reward) based on membership in a clique, not on performance.

We are a society that rewards success.

If only. We are a country that rewards the illusion of success, the promise of success. Rarely if ever are the rewards directly proportional to actual success. This observation isn't restricted to business, either. We see this in the sports world as well. If the sports world were a true meritocracy, at the end of the season the players would each be ranked on the sort of season they had and be paid accordingly. If there were a true meritocracy at these large corporations, they wouldn't get bonuses during periods of abysmal performance. They wouldn't get millions of options. Now I happen to believe that some executives can indeed earn millions, but not by making the stock go up by 2%. That's just noise. For them to actually earn millions, they should create many millions or billions in stockholder value. For them to earn millions from their options, they should be increasing market capitalization from 20-50%. Then one can say it's earned. One cannot claim that presiding over a loss of market capitalization of 80% and loss of tens of thousands of jobs merits much of anything beyond a pink slip. Yet that is presicely what is happening here, and why your talk of "reward for succeeding" is misapplied.
optigirl 12/4/2012 | 11:07:03 PM
re: Lucent Execs Get Richer Merit has a lot to do with what they are being paid. How much are they being paid in cash versus stock? I saw a lot of shares that they have "options" on in addition to shares that they had accumulated over time. Also, what is the normal compensation structure for people at that level? If it is in line with what everyone else is getting at a comparable level in other companies, then what is the problem with how much? And, since the shares are not really worth much right now, if they do double share value, they win, aka, paid for success. If they fail, no pot of gold.

I also think that you are being idealistic about compensation. The market dictates what we all earn. If we demand nothing but championships from sports teams then the salaries get out of sight really quick. Keep buying the tickets and you have contributed to the problem. Demand higher share prices and you will eventually run into the situation that hypergrowth creates.

Have you ever given back a week's salary for not meeting a goal or deadline that you agreed to? Ever refuse stock options when they were offered to you?
Belzebutt 12/4/2012 | 11:07:01 PM
re: Lucent Execs Get Richer people who live in a capitalistic world get paid more than those in socialistic or however you would define the Asian world. The market dictates what you can have.

I agree with that ideology, however, that is not the reality for these exec salaries. It's pretty clear that they are not being paid at any kind of market price, but the salaries are artificial. For them to be paid according to performance, the pay would have to go up and down. But even in these times when performance was clearly abysymal, the same people who performed poorly are getting as good pay as ever. That is not "free market".

It's more like a cartel, where prices are artificially set. And cartels are bad for everyone except those few who are part of them.

You say:

I choose to have my money in some Lucent stock. I have no problem if executives make a ton of money making my share values go up.

Then logically, when your share values go down, would you not expect them to make less money? The share value went down by 90%, there is talk of bankrupcy and buy-out, yet the execs are still making as much money as ever. how much worse are you waiting for things to get before you say enough is enough? If the cuts and the valuation loss of last year are not enough to make you realize that these people are not paid accoring to their "free market" worth, then nothing will.
alchemist 12/4/2012 | 11:07:01 PM
re: Lucent Execs Get Richer I apologize in advance for the lengthy post...

In an efficient market economy, it is not only the privilege of individuals and entities to maximize economic rent, it is critical to the efficient functioning of the market (i.e., proper allocation of resources) to do so. Price is set to clear markets (supply = demand). Hence, any individual should seek maximum compensation.

The perfectly efficient market has never, and will never, exist, so it is reasonable to implement and exercise some checks and balances to prevent especially inefficient practices. One such safeguard against corporate misgovernance is some sort of shareholder review. The primary route for such review appears to be review by the company Board. While I have no data to back my assertion, I feel that executive management is paid in excess of what shareholders would approve owing to a lack of Board discipline.

Of course, one most times has the passive option not to purchase company. In such a case, one who disagrees strongly with a specific company's management should simply avoid the stock. For instance, I have not owned and do not hold Lucent stock. The passive option to sell or not hold stock is not always available. More important, shareholders should be able to have an active influence on the accountability of management. Again, the primary route should be to elect an effective Board. When this is insufficient, shareholders have the privilege to submit a proxy.

Those shareholders who are dissatisfied with excess compensation of executive management (especially compensation packages which purport to align the interests of management and shareholders) should submit proxies, or vote in favor of submitted proxies, to increase accountability. For example, proxy votes on a related aspect of CEO pay did happen at similar companies (e.g., AT&T; http://www.wsj.com/public/curr.... My limited research of this morning (caveat emptor) indicates that the SEC appears now to allow proxies related to executive compensation (this area is not now considered "ordinary business"); however, the results of such proxies appear to be non-binding on management. Nonetheless, such activism may give the Board leverage with management. More important, I feel we should write the SEC and our elected officials to extend the scope of shareholder rights (e.g., for binding proxies on executive compensation).
WDMer 12/4/2012 | 11:07:01 PM
re: Lucent Execs Get Richer
I wonder why you all love to hate Lucent???!!!

This article proves beyond doubt that
Lucent is the only company which takes
best care of its employees, even when
they no longer work with the company.

I am sure LU will be in top slot when
vote is taken for "Best company to work for".

Its just the matter of time before LU Bounces
back with a bang. I will love to see your
reactions than..!!! :) :)
espressoes 12/4/2012 | 11:07:01 PM
re: Lucent Execs Get Richer "Also, what is the normal compensation structure for people at that level?"

Normal compensation for people at that level who lose 85% of shareholder value and who have to sell off parts of the business in order to meet payroll is a pink slip and NOT $3M in CASH just to come to work for the next 6 months.

Retention bonus?! Is there really anyone stupid enough to try and steal people who have screwed up a company this badly?
Belzebutt 12/4/2012 | 11:07:00 PM
re: Lucent Execs Get Richer Sure Lucent management screwed up. As did Nortel and a few others. Ciena, on the other hand, is down almost 80% from its high. Is anyone screaming for Gary Smith's head? Yet he presided over a huge decline.

I don't know about Gary Smith, but Roth had several articles written about him. It's not just about LU excecs. And yes, you could say it wasn't their fault and it was just a big industry downturn, but on the flip side, you could also say that the gains of 2000 were just due to the whole industry rising, and they still got compensated as if it as all due to them.

The stock options they get, as far as I know they can still make millions off them even today. Is that public information? Do these guys really get options that are under water and all their real money comes from base salary this year, as opposed to millions from exercised options last year? Or do they get options today at such a low price that they can still make a bundle?

In summary, I wouldn't complain if they got paid a "free market" salary, but I just think that's happening.
jj388 12/4/2012 | 11:07:00 PM
re: Lucent Execs Get Richer "Will any of those $12 options be worth anything before they expire?"

Well, the stock only has to be $13 for them to cash in millions.

"Witness Carly Fiorina heading up HP; Pat Russo tapped to lead Kodak; and the latest, Ben Verwaayen off to boss British Telecom. My point is, someone must think these folks have some talent, no? Is everyone a dummy?"

I pay no attention to Kodak, so I'll skip that. Carly at HP has been a disaster, and she is either going to get fired ("doing a McGinn") or preside over a catastrophic merger with Compaq. Verwaayen we will wait and see. But what the hell, he's just going from one company with a monopoly mindset to another, so he'll probably fit right in. You know, big expense account, lots of glad-handing, not really getting much done.

"I just wonder who could have said, "No, I think 5% growth is fast enough," when the rest of the industry was saying, "Go go go!""

Who would have said that? A smart executive. McGinn should have realized that Lucent was not Cisco (or Ascend or whoever). Lucent was an entirely different animal, much more diversified, with its hand in both slow-growth and fast-growth environments. The smart thing would have been to position Lucent as a step beyond the rest of the pack, a true diversified Blue Chip company along the lines of a GE, not a tech company. Expecting to match Cisco's percentage growth off a revenue base about, oh, eight times larger, was crazy. Nobody could do it, and that should have been obvious.

Lucent got very, very lucky and rode the first Internet wave, as the Telcos had to buy switch ports by the ton to accomodate all those users suddenly dialing in from their computers. Meanwhile, while money poured in, McGinn and Company did nothing to strengten the company, to cut the fat, to fix the sclerotic back-end systems. They bought companies like crazy, and presided over one botched takeover after another. They caught the "services" mantra and did what? Bought INS, an enterprise services company that sold mostly Cisco gear!

Hey, there were a lot of great guys at INS, but the integration was a disaster. I still remember the shouting -- actual shouting -- at sales meetings as sales reps screamed at the services group for one screw up after another. Oh, you know, little things, like the services guy coming in after the gear salesman and saying, "Oh no, don't buy that Lucent product, get the Cisco, it's much better." This happened so many times you couldn't count them! Why? Lousy management. This should have been stopped in a day. It took over a year.

Anyway, I'm digressing. Point again is that McGinn was handed a (potential) Mercedes sedan but he tried to drive it like a motorcycle. Lucent should have been socking away billions in cash. It should never have sold off Avaya, or Agere, or whatever else. But the executive egos got in the way, and they did the most dangerous thing of all: they started believing their own press. Geeze, how many magazine covers was McGinn on? Oh yeah, the Executive of the Year, presiding over "the greatest company in America"! 35 percent growth from here to eternity!!

Well, now he's remembered for one of the greatest disasters ever inflicted on a great American company. And for that he gets almost a million bucks a year... FOR LIFE!


optigirl 12/4/2012 | 11:07:00 PM
re: Lucent Execs Get Richer Fair points...but:

1. How much does your average CEO earn? How much does an average senior level exec. earn? I do not believe that LU's people are that much better off than other people in other situations. That to me sounds like you have a market value going on. Artificial? Perhaps but any less so for what you pay for US engineers versus ones from other parts of the world.

2. Yes, I would like to see them get paid on performance but it just ain't gonna happen if we expect to see people earn no salary for bad years. If that was the case, we would all be working for free this year...from the CEO who makes the decisions right down to the engineers who's code fails or sales people who don't make quota.

Sure Lucent management screwed up. As did Nortel and a few others. Ciena, on the other hand, is down almost 80% from its high. Is anyone screaming for Gary Smith's head? Yet he presided over a huge decline.

The fact is, our system is set up to pay people a set amount and no one out there will accept anything less. I accept that there might be better or more fair ways of doing things but I am just going with how it really works. I obviously am in a different boat than a lot of investors for I came on board late and own the stock at current prices. Call me a merc. if you will but I am in this to make money. Nothing more, nothing less.

whew...nice debates and good points to chew on but I need to get back to work and stop being such a chatty Cathy.
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