As eight unnamed Nortel executives collect a total of $7.3 million in retention bonuses, thousands of former employees are being denied severance payments. Instead, Nortel has offered former U.S. employees early access to their pension plans and the company's retiree medical pan, but former workers would have to give up their severance payment claims in bankruptcy court to receive the pension early.
On Friday, an Ontario judge allowed Nortel to pay eight top-level executives, despite objectives from a lawyer representing 67 Nortel workers who were fired and didn't receive severance pay. Under terms of the incentive plan, the execs could get cash incentives of 100 percent to 183 percent of base salaries. While company has not disclosed salaries, executives at this level were paid in the million dollar range in the past.
A Nortel spokesperson said CEO Mike Zafirovski is not a part of any of the incentive plans approved by the court, but the company isn't saying if Mr. Z has a separate deal going.
Bonus talk is not making former employees happy, given that their only alternative is to stop suing the company for severance pay in exchange for early access to their pension plans and Nortel's retiree medical plan. Nortel has sent out fewer than 10,000 letters to former workers age 55 and over who had not received severance payments and have standing in the bankruptcy proceeding as creditors.
Trying to collect on severance pay through the bankruptcy court means that retirement-eligible employees can't get to pension money, since severance pay affect's an ex-worker's pension benefit calculation. Pass on severance pay, and the pension amount is reduced.
Needless to say, former employees are not happy about the choice, but some may take Nortel up on the offer because they need the pension cash now.
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