Lucent Execs Get Richer

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Titanic Optics 12/4/2012 | 11:06:40 PM

re: Lucent Execs Get Richer >>Lucent: The board hasn't taken nearly enough blame for fiddling while Lucent burned in 2000, sending more than $200 billion in market value up in flames...The board itself is overpaid (directors get a $100,000 annual retainer, twice as much as that of Nortel's board and three times as much as Cisco's), overripe (only one director is under 60), clubbish (it has just six members, five less than the average S&P 500 firm), and staggered.<<

From "the worst boards":
http://www.fortune.com/indexw....

Back in the day when AT&T had a monopoly, a clubby, do-nothing board was fine. Getting put on the board represented an ascension and reward for a long career with many responsibilities--notice how many over-60 people there are--it was NOT based on the aptitude and potential to be a good director but instead the fact that you had been successful and held responsibility. Remember, this firm didn't really have to compete, and could coast by financially while having "sizzle" in Nobel prizes and patents for its protected scientists. So, handing out rewards in the form of board seats or management positions rather than thinking strategically didn't hurt Lucent until only recently, after the late 90s market reality. Now, the landscape is different. There are many competitors and the market is significantly more volatile--deregulation and the 1996 Telco Act resulted in a boom and bust cycle that had never been seen before.

Unfortunately, LU's board, management, and I suspect many of the rank and file employees weren't really ready or "configured" for this reality. Merely changing Lucent's management isn't going to keep everyone's job--the firm may have to be "reconfigured", and redundancies eliminated (Anyone who has dealt with Lucent's accounts payable vs. Ciena's accounts payable would know what I mean). Perhaps the management could have done a better job (ok, I can imagine the responses from this board about what barnyard animal could do better), but Lucent's trouble probably extend beyond the management suites. Still, it's chilling to read the link above and think about the failure in corporate governance and by extension the top management.

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DarkWriting 12/4/2012 | 11:06:39 PM

re: Lucent Execs Get Richer Actually, I should have said, "anyone that is running a company 'into the ground' and is openly
invested in a competitor should be in jail!" I don't look for the SEC "Stock Police" to make an Executive divest their holdings. But wouldn't you think that the Board of Directors of the hiring company would require it? Ever heard of a non-compete agreement? Shouldn't there be something like that on the way in the door as well as on the way out?

That's the whole point of this thread. Like I said before, there is no accountability anymore and many of the Executives and BoDs are in a big insiders club. Their pay has nothing to do with free markets and this is probably the proof! Meanwhile, for the people still at Lucent and the Executives that care about ALL the stakeholders, I hope they can turn the company around. ("Such men are hard to find" -Sun Tzu, The Art of War, 1,000 BC)

>Are you nuts? The stock police are gonna run >around making sure that a CEO sells all his >prior stock acquisitions when he changes jobs? >Get a grip!

>>Anyone that is running a company and is openly
>>invested in a competitor should be in jail!

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gardner 12/4/2012 | 11:06:39 PM

re: Lucent Execs Get Richer Being a non-socialistic, non-communist, right leaning, non-liberal, I believe that your boss(es)
owe(s) you nothing more than your agreed upon wages.

I just can't wait until this infatuation with the right wing is over. It is practically a religion in the US to make sure everyone knows you lean right and aren't a liberal. Poppycock. Kneejerk rightwingers are no more attractive than kneejerk left wingers. What's more, right/left is irrelevant to this discussion. This is about inefficiency. The rewards are going not to the successful but to the unsuccessful (albeit well connected). This is how inefficiency is rewarded in rightwing banana republics and communist people's republics alike. It is not capitalism and it is not efficient. It just gives capitalism a bad name.

We are a society that rewards success.

But in this case we are rewarding failure.

I choose to have my money in some Lucent stock.

Then perhaps you've been punished enough. . . ;-)

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gladysnight 12/4/2012 | 11:06:33 PM

re: Lucent Execs Get Richer OG:Who said anything about "perfect" competition? I certainly didn't. Whatever is happening at LU and other companies is a reflection of HOW THE MARKET WORKS. And, it seems to me that you are living in some world of idealism that sounds nice on paper but does not exist in the real one.

ME: Didn't he just say the same thing about you? this is not how the market works, this is how it breaks down.

OG: $400K in base compensation? I know sales people who pull that figure in every year. Is it excessive? Maybe. But then again, the going rates are the going rates. I, and many others, would take that amount in a heartbeat. Tell me you would turn down a compensation package like that.

ME: The root principle is that no-one (no employee) can be allowed to consume more value than they produce. Any business profits from purchasing goods or services (including the labour of its execs) at less value than it earns by owning the fruits of that labour.

Businesses that fail to operate like this suffer catastrophic failures. OH! - much like LUcent . . .

I have only ever demanded as much fixed income as I need to meet my existing lifestyle and commitments. Beyond that I would happily argue that all my compensation should be directly related to the health of the company. Honest people *do* exist, you know?

OG: Bottom line, if the board is paying that amount and that amount is available in other companies than that is THE market rate in that instance. Who sets it, what influences it or who you know is immaterial. I never said it was "fair", "moral" or "deserved".

ME: Precisely, and unfair, immoral and undeserved are what it has been labelled here.

What is the problem with that? You claim to not be communist but you're sure arguing hard to blunt any criticis of the elite . . . .

OG: Get off the soap box already. There are plenty of things that we can all point to that are not in synch with our own personal sets of beliefs.

ME: Sure, but some of us happen to think that there are beliefs that we have in common, like the inherent superiority of free market capitalism (for example), and that these things are being attacked. What is it that so disturbs you about our saying so?

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gladysnight 12/4/2012 | 11:06:33 PM

re: Lucent Execs Get Richer Folks, let's not confuse the issue...comp at executive levels has nothing to do with "performance". Now we can all breath easier knowing that those high level LU chaps are paid for attendance, that's right...show up and you're in the money. With a bonus for no on-the-job accidents. Stock options may reflect where they get paid for performance but the rule is: transfer before pay cuts, screw up and you'll have to change desks.
At those levels the culture is not the same as it is for the serfs.
- fatchance.
---------------------------

I think you're sort of right but also sort of wrong.

The problem is that the "performance" for which they are being paid is not one that focuses on the financial health of the company, or even it's financial "hygeine" (one of which is usually linked to the other).

They are being paid to make nice comforting noises at AGM's, produce semi-plausible "forward looking statements", and to maintain an air of unconcerned confidence in the face of absolute disaster.

The Board who pays them to do this has a huge vested interest in these things, an interest which is in direct conflict with that of the shareholders, which is typically in the financial states mentioned earlier.

The source (or at least one of them) of this conflict is in the circumstance where the Board members and the senior executives see themselves as forming a class of people apart from the shareholders and the employees.

(The cult of the MBA is not unrelated to this phenomena, but that is another story.)

This is further complicated by the fact that many of the shareholders in companies like LU are themselves large corporates suffering from the same inherent conflicts. Thus are the lines drawn and so the conflict rages.

None of this is necessarily motivated or informed by any great conspiracy, (although minor conspiracies do happen), all that is required is for self interest to take its natural course without the real owners of the company collectively enforcing appropriate disciplines on *all* of their employees.

All of Which is, natch, simply and only, IMO.

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gladysnight 12/4/2012 | 11:06:33 PM

re: Lucent Execs Get Richer I stand by my point, why should anyone worth their salt stay at LU if there is no reward for succeeding? If you have cling-ons and hacks then they "shouldn't" be paid, much less be there at all but if LU's board and shareholders are willing to pay these sums then that is their choice. Let everyone involved reap their just rewards.
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Optigirl, this is thepoint: the reward these guys are getting is not for "successding" it is for failing!

They are *not* getting their just rewards, they are stealing even more from their shareholders than they already have; once, by taking money for a job they haven't done, and twice, by taking even more money for making things worse.

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optigirl 12/4/2012 | 11:06:32 PM

re: Lucent Execs Get Richer Yo Gladys:

The point that I have tried to make here is that the compensation package is forward looking and geared towards getting their house in order. If they are successful, they get a big pay out. If they fail, then there's nothing substantial. It's in their best interests to be successful.

The just rewards comment means that people will receive the consequences of their choices. Good or bad.

And please tell me you are not expecting them to be unpaid for work they do moving forward. Nice idea but the world doesn't work that way.

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