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WorldCom Wins $25M Bonus Judgement
tekBuddha writes "According to this article at CNN.com WorldCom has won a suit allowing them to pay $25 million in bonuses to certain 'key employees' that are necessary for their re-organization." They hope to be out of bankruptcy protection by mid-2003. Hopefully this will help them retain important members of their sales and service teams.
that those key people aren't the ones responsible for buying the $5k shower curtains for their $12 million NYC apartment.
... eh, who cares. they'd need to have like $250 million to waste before the price of my T1 through them comes down any. $25 million is a drop in the bucket.
$25 million tho
non-dark-fibre-lighting-bastards
$25 million / 325 key employees = $76,923 per key employee.
Wow.
No, it's coming from investors, who would sue them otherwise for such a misuse of their money.
Contrary to the popular belief, there indeed is no God.
Is checking out who the bonus' are going to.
Not necessarily the feet to the pavement types in Sales/Service. Actually Upper level executives with little to do with either function if the Wall Street Journal Article is right. Hardly essential to the proper functioning of a telecom company.
Lobbyists, lawyers, lots of geeks(console/line/net design varieties) maybe. UUNET's sales core in not a bad choice either (but probably won't see a penny). Not the stuffed shirts who are obviously not the peak of their supposedly hard working profession.
Looks like a kickback from the $800/hr Restructuring rep for his outrageous salary.
Next Question: How is this kickback to lucky Execs from the restructuring 'third party' any less slimy than former boardmember Kellett's giving Bernie the Great those $400 million 'loans' and plush parachute?
The more things change the more they stay the same
pr0ct0r
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My understanding is that the 'protection' is from creditors. The company obviously has assets and revenue streams, the question is who should get the funds first (or at all).
When insolvent (ie you don't have the cash or equivalent to meet your current debts) you are given the 'protection' from the wolves at the door if you can show that there is a good chance that you can recover from the current short-fall without digging a deeper whole for yourself and your creditors. Resturcturings, lay-offs, liquidation, etc.
Every single dime coming into or leaving Worldcom has to be approved by the Bankruptcy Court. Good ol' Chapter 11.
Technically speaking, this is not accurate. It's the job of the debtors (Worldcom, et al) to maximize the value of Worldcom, so as to satisfy their creditors. IANAL.
The judge's job is to make sure that Worldcom files a reorganization plan under Title 11, Ch 11 of the US Code, whose purpose is to regain financial stability, and that the plan is acceptable (within some limits) to all creditors. According to the article, one creditor (SBC) objected to the plan, but the judge had the authority to overrule the objection under 1129(a)(7)(A)(ii), as long as SBC
and assuming subparagraph (B) doesn't apply. Which it might if SBC holds any liens on property in which Worldcom has an interest. This information would be contained in the 521(1) report, but it hasn't even been filed yet, because Worldcom's financials are too damn complicated. (See here for more details. Click the folders for "WorldCom Bankruptcy Case", then "WorldCom, Inc.", and look up docket #1663. Basically, Worldcom have until Jan 31, 2003 to file their 521, unless they want another extension.)This post expresses my opinion, not that of my employer. And yes, IAAL.
[Serious response to what may or may not have been intended as a funny comment].
Bonuses like this are standard practice when an organization files under chapter 11. Enron was definitely not the first time it happened.
HOWEVER, it is interesting to note that many aspects of Enron's retention strategy were modified. Many of the bonuses were reduced during negotiations with their creditors, and the proposed contract for Enron's CEO during the reorganization was rejected by the Judge overseeing the reorganization.
BTW, bankruptcy judges are empowered to (and do) reverse bonus awards made by companies in the weeks leading up to bankruptcy. [I think they can go back up to one year but IANAL].
The top performing sales people can walk out the door and get a job selling widgets in a week. The company can't afford to lose these people. If they don't get their commissions and bonuses, they will leave.
Mea navis aericumbens anguillis abundat
Actually we do - we call it 'administration' where the receivers take over and try to make the company run at a profit. Failing that they try to sell it as a going concern (there is legal protection that says if you buy a running business you can't sack everyone w/o paying their redundancy). Only then is the company wound up.
This happened with KPNQwest. The problem was the whole telecoms market is in depression due to a glut of bandwidth and nobody wanted to buy it whole - I'm not even sure after they gave up and broke it up that all the pieces were sold.
Chapter 11 means that all the people they owe money to can't ask for it. Therefore they are paying this cash from that.
Taxes don't come into it.
An Eye for an Eye will make the whole world blind - Gandhi
I don't know about that - I worked for Wcom in the UK as a techie. The Account Managers were on between 3x - 4x salary than that of the technical staff (& I was a senior engineer). And that figure was BEFORE any commission. It's one of the reasons I jumped ship in 1997. Maybe the US is different.
Matt
The Sales & Service team at WorldCom Canada alone is 200 people.
Your numbers are way off, there are several thousand people in Sales & Service at WorldCom.
"You've got an invalid haircut" -Warren Zevon - Life'll Kill Ya
I don't think Worldcom is worried about widget sales being helped. Instead, their sales people can take their Rolodex with them to a *competitor*, and start (in order of revenue, of course), calling them and telling them yarns about how everybody with talent is fleeing Worldcom, so expect their service to go to hell quick. Better change your ISP and telephone service, before I start telling people other than my golfing buddies.
You think selling widgets is the same as selling telecom services? That's like saying database programmers can get jobs programming embedded systems in a week. They're both programmers, right? Sure, good programmers are good programmers, but knowledge of customers and markets are valuable to have as a salesperson.