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The Almighty Buck

WorldCom Wins $25M Bonus Judgement 200

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.
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WorldCom Wins $25M Bonus Judgement

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  • Heh (Score:3, Funny)

    by SexyKellyOsbourne ( 606860 ) on Wednesday October 30, 2002 @02:15AM (#4562374) Journal
    It's nothing less than legalized robbery.
    • Re:Heh (Score:2, Insightful)

      by tanveer1979 ( 530624 )

      It's nothing less than legalized robbery.

      yes, if we did it.... robbery. But they are rich. They robbed the common investor.. thats it. For the lawmaker the layman doesn't count. Democracy was supposed to be "for the people, by the people, of the people"
      Now its just "Far the peple, buy the people, off the people".
      It is really pathetic that the same people who ruined the lives of thousands of small investors are getting bonuses.
      • Most investors are just gamblers. The people who really got screwed are the thousands who used to have a job until, the robber barons bankrupted the company. $25 million in bonuses? Where is the money coming from? How will a bankrupt company keep the checks from bouncing? Democracy? What has happened is the result of an economic theory called capitalism, not any form of government. Capitalism has nothing whatsoever to do with democracy. All power in the hands of a few rich old men is more like feudalism.
    • Funny Part (Score:2, Informative)

      by Anonymous Coward
      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
      ----

    • Read the Article. (Score:5, Insightful)

      by Troy H Parker ( 600654 ) on Wednesday October 30, 2002 @03:12AM (#4562558)
      the $25Mil is for the "Sales and service" teams, the "employees" not the Pigs at the top. You need to provide an incentive to good workers to keep rowing while the ship is sinking.
    • Hear Hear!

      CowboyNeal: Hopefully this will help them retain important members of their sales and service teams.

      Are you kidding? Your going to waste $25M on sales? Service, or Engineering I might agree with... but the fat-boys in Sales should probably be locked up. Executive sales ALWAYS inflate their projections - there in a better place than any to raise the "we are loosing revenue" flag... but they never do.

      That said, paying a "few key executives" of ANY stripe is a bad idea... the day one of these pompuous-windbags-with-a-good-hair-cut-and-nice-su it does 100000times the productive work of a janitor (or any other member of labour) is the day Ill eat these words.

      Legalized Robbery is right.. fraud.. and another example of American Corporatism run absolutely wild.
  • by docstrange ( 161931 ) on Wednesday October 30, 2002 @02:17AM (#4562385) Homepage
    .....when the company was called Enron. And the bonuses were awarded BEFORE the bankrupcy was filed.
    • by solman ( 121604 ) on Wednesday October 30, 2002 @04:42AM (#4562778)
      [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].
      • Please clarify. Are the bonuses paid to the bankruptcy judges also reduced?
    • K-Mart won a similar request of the courts. However, to K-Mart this did not include average worker, but executive management level only.
  • Well....... (Score:4, Funny)

    by eclectro ( 227083 ) on Wednesday October 30, 2002 @02:17AM (#4562386)
    Hopefully this will help them retain important members of their sales and service teams

    One can always hope, can't they???

  • i just hope (Score:5, Informative)

    by Anonymous Coward on Wednesday October 30, 2002 @02:18AM (#4562388)
    that those key people aren't the ones responsible for buying the $5k shower curtains for their $12 million NYC apartment.

    $25 million tho ... 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.

    non-dark-fibre-lighting-bastards
  • Nice tactic (Score:3, Interesting)

    by houseofmore ( 313324 ) on Wednesday October 30, 2002 @02:21AM (#4562397) Homepage
    Run the company into the ground, then line up for you bonus.
  • by schave ( 86634 ) on Wednesday October 30, 2002 @02:21AM (#4562399)
    $25 million / 325 key employees = $76,923 per key employee.

    Wow.
    • That would only be if it were divided evenly. Most likely anyone with a three letter acronym for a title that begins with a 'C' will see at least a million of that per person and there rest of the service staff will get to bend over and take one for the company.
      • by MalleusEBHC ( 597600 ) on Wednesday October 30, 2002 @02:59AM (#4562521)
        That would only be if it were divided evenly. Most likely anyone with a three letter acronym for a title that begins with a 'C' will see at least a million of that per person and there rest of the service staff will get to bend over and take one for the company.

        Ok, say for sake of discussion the top 20 guys take a million apiece, thus leaving $5 million for 300 people. That's nearly $17k per person. If that's bending over for the company, let me be the first one to grab my ankles.
        • by Cruciform ( 42896 ) on Wednesday October 30, 2002 @03:20AM (#4562584) Homepage
          For gods sake, don't accept a cheque!
        • by Phemur ( 448472 ) on Wednesday October 30, 2002 @08:31AM (#4563537)
          Unfortunately that's not how it works. Here's the typical breakdown for bonuses:

          • 75% goes to the top 5 employees (CEO, CFO, etc)
          • 15% goes to the next top 50 employees (sr VPs, directors
          • 10% goes to the remaining "key" personnel, which is typically only a fraction of the employees

          That means that the sales and service employees of WorldCom would get about 9250$ each, and the top 5 execs would share over 18.5 million, or about 3,750,000

          (Note: I read this on Forbes or Fortune, but I can't find the article for reference. I'll keep looking.)

          If you think this is absurd, consider this: The Ottawa Business Journal released their annual CEO compensation report. It's basically the breakdown of what CEOs and other COs make in the city of Ottawa every year. This year they had to produce two statistics: one that included 5 JDS Uniphase executives, and one that didn't. This was required because the total revenue for the 5 JDS execs on the list was 14 times the compensation for the other 120 non-JDS execs on the list. Consider:

          Average Salary (inc. JDS execs): 6.3 M$
          Average Salary (not inc. JDS): 430 K$

          Total Compensation, JDS execs: 724 M$
          Total Compensation, remaining 120 execs: 51 M$

          (And that includes the executives from Nortel, Corel, Cadence, Cognos, and bunch of other fairly large (1000+ employees) companies.

          Ottawa Business Journal [ottawabusi...ournal.com]

          It remains to be seen what WorldCom does with this money, but I predict it will be more of the same.

          Phemur

          • hmmm... the math works out to the five JDS executives getting an average bonus of $147,180,000 each. That's HUGE even in Canadian dollars!

            So even though your ratio of 14 is correct for the ratio of compensation of 5 JDS executives vs. 120 non JDS executives, the more appropriate ratio is the one executive to one executive ratio.

            And that works out to the "average" JDS executive getting 342 times as much as the "average" non-JDS executive.
        • That's the rough equivalent of 26 weeks of severence pay for an engineer.

          I was in a company that was bought and shut down, and that was the bonus offered to the people who stayed on an additional 3 months to close up the business. We were the guys to turned out the lights when we left.
        • Ok, say for sake of discussion the top 20 guys take a million apiece, thus leaving $5 million for 300 people. That's nearly $17k per person. If that's bending over for the company, let me be the first one to grab my ankles.

          Say you make $90-120k/year. (Not hard to do... Even a few years out of college) If you make that much money, and your current employer considers you a "key" employee, there's a good chance that there is job available for you at another company because if you weren't good at what you do, you wouldn't both be making that much money, and be considered a "key" employee. Now, if you were making that much money at a company that just filed for bankruptcy, and were offered another job at a company that wasn't bankrupt for the same salary, how much would it cost to keep you working at the bankrupt company? As somebody who went through this recently, I can tell you that $17k was not enough for me.
        • If you're that important a person, would you stay on with a company that had already filed for bankruptcy? Keep in mind that future bonuses are unlikely to be nearly as high as company performance is going to suck for a while.

          The ship is burning. The captain offers you a bag of gold if you stay on the ship to help put out the fire. Do you jump ship or do you start hauling buckets?
  • by intermodal ( 534361 ) on Wednesday October 30, 2002 @02:21AM (#4562401) Homepage Journal
    I don't see huge amounts of money being given to individuals who royally fuck their finances and claim "accounding errors" for huge debts. That's fraud, my friend. If WorldCom were a person, they'd be doing time. They should be disbanded with all speed. And if not, then businesses are liable for less than a human. Therefore, if a human is more responsible for their acts, then a human should therefore be also offered more protection under the law against such entities with such limited liability and unlimited lifespan. My $.02.
    • > I don't see huge amounts of money being given to
      > individuals who royally fuck their finances and
      > claim "accounding errors" for huge debts. That's
      > fraud, my friend. If WorldCom were a person,
      > they'd be doing time.

      You have no idea who the bonuses are being paid to and whether they had anything to do with the past Fraud so don't assume because a company was previusly run by crooks the people left are the same.

      The board members responsible are already currently enjoying the hospitality of the FBI... probably with a view to getting some juicy info on Bernie Ebbers himself.

      > They should be disbanded with all speed. And if
      > not, then businesses are liable for less than a
      > human.

      Please... there are 60,000 people left working for WorldCom. All normal people with families, homes and lives they don't want turned upside down. Do you really want to see all those lives ruined because some greedy &*%£ higher up decided to commit fraud and run a company into the ground for their own benefit.

      The bankruptcy protection process is designed to weed out the unprofitable parts of a business, re-organise the employees to support the profitable bits thereby protecting the jobs of those who stay and maximizing the return for the previous creditor, which you hope is the best result for all.

      > Therefore, if a human is more responsible
      > for their acts, then a human should therefore
      > be also offered more protection under the law
      > against such entities with such limited
      > liability and unlimited lifespan. My $.02.

      Now... this I do agree with. Compare some European countries where governments will pay healthy redundancy money or have very strict workers councils that mean you can only make employees redundant when absolutely necessary.. against the situation in the US where you can be made redundant on some execs whim at a moments notice. That's not good for the poor US employees.

      That said, Europe doesn't have a bankruptcy protection process for companies like the US. If you ruin your company in Europe, the bits get sold to the highest bidder and everyone loses their job. Look at poor KPNQwest.

      • 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.
      • > Please... there are 60,000 people left working
        > for WorldCom. All normal people with families,
        > homes and lives they don't want turned upside
        > down.

        Disbanding a conglomerate means selling off the divisions, not firing all the employees and auction ing the assets. No one needs to lose a job (except the executives).
  • Great Idea (Score:3, Insightful)

    by wandernotlost ( 444769 ) <slashdot.trailmagic@com> on Wednesday October 30, 2002 @02:22AM (#4562406)
    WorldCom will use the money for incentives to retain 325 employees, mostly sales and service people in its MCI and network and products services units.

    Which, of course, means that $1M will be split among the 325 employees, with the remaining $24M going to the executives for the brilliant idea of giving out bonuses to retain good employees.

  • So being under bankrupcy protection, does this mean that the money is coming from the government i.e. taxes? Hmm...

    I know this isn't a political decision but a legal one, but this sort of thing still pisses me off. Let someone buy the remains of the company, and if they want, pay for their own "recovery team" out of their own pockets. I don't get mad when my taxes go to good causes like science or welfare or public services, but I see no reason to bankroll sleazy and incompetent executives.

    Of course, this may not be what's happening--I don't really understand bankrupcy law.

    • No, it's coming from investors, who would sue them otherwise for such a misuse of their money.
      • I see... so do the investors get to "write off" these losses at tax time? Anyway, I find it shocking that WorldCom's investors are still a going concern. I mean, if the WorldCom investment did not bankrupt these investors, they must really be made of money! What do they say when they go home? Aw, honey, we we kinda took a hit here with our WorldCom investment... about 10 Billion dollars, maybe a bit more... now we have to bankroll their incompetent executives with $25Mil of bonuses. Boy, we're not very good investors... but then again, we can't be so bad, since we can pay this off...
    • 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.
    • 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.
    • by jaoswald ( 63789 ) on Wednesday October 30, 2002 @10:21AM (#4564418) Homepage
      Yet another "+4 Insightful" that deserves to be "-1 Has No Clue" None of this is coming from taxpayers. When Enron crashed, the (same?) batch of slashdotters complained about bondholders getting mythical compensation from the government.

      The real loss was suffered by stockholders when their stock became worthless, and by employees laid off when the fiction of profit could no longer be sustained. Bond and debt holders now get to stand in line to get whatever is left of value in the company, for instance, by reconstituting the company, issuing new stock in exchange for the bonds and debts. So instead of an IOU, they get stock in the new company, for whatever that is worth.

      The theoretical reason for the bonuses is that the company is worth more when enough people are left that know how things are actually set up. These clueful people are the most likely to be able to get jobs at competitors (and taking with them access to good customers), so you need a bonus to keep them from doing so.

      The ethical problem, of course, is that the clueful people either were aware or should have been aware of the rampant misstatements of the accounting reality. But hey, if I'm stuck with a Worldcom IOU, I'm more interested in getting my 25 cents on the dollar than in making sure everyone gets what they deserve.

      Lesson in life: we rarely get what we deserve. Better make do with what you can.
      • "When Enron crashed..."
        You clearly aren't paying my tax bills. The state is still selling bonds to make up for the prices they extorted via energy market manipulation. Every single manager at that company should rot in jail for decades. We're talking about the equivalent of thousands and thousands of grand theft cases. Perhaps thousands of thousands.
        • You miss my point. You weren't holding Enron bonds, the state is paying interest on bonds issued by your state (I'm guessing California).

          California decided to borrow money to pay for electric power. The easiest way to do that is to issue bonds (i.e., let people volunteer to give money to the state, in exchange for a bond, which is a promise to pay interest in the future). You are paying taxes to back up California's promise to holders of California bonds. That money eventually went to power companies, with Enron getting a commission.

          Your tax money is not going to Enron's bondholders.

          To claim that every Enron manager is criminally culpable for the energy market manipulations is a bit naive.
  • by tcd004 ( 134130 ) on Wednesday October 30, 2002 @02:24AM (#4562414) Homepage
    I called them the other day and this was all I heard. [lostbrain.com]

    tcd004
  • by xmark ( 177899 ) on Wednesday October 30, 2002 @02:29AM (#4562429)
    Works out to about 60 or 70 Large per "sales and service [employee]." This is BONUS dough, on top of regular salary.

    Just where would these people rush off to in the current abysmal telecom job market if they didn't get the bribe money?????
    • by Detritus ( 11846 ) on Wednesday October 30, 2002 @05:30AM (#4562950) Homepage
      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.
      • 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.
  • Two words (Score:5, Funny)

    by dido ( 9125 ) <dido@im[ ]ium.ph ['per' in gap]> on Wednesday October 30, 2002 @02:30AM (#4562433)
    Golden parachute.
    • by Genyin ( 415163 )
      Golden parachute.
      Yeah. Imagine dropping the execs out of a plane with a (preferrably thick) golden parachute.

      ... *splat*
  • After filing for bankruptcy, the company admitted finding another $3.8 billion in accounting errors....

    So that's where that other 3.8 billion went! And I thought for sure it got lost when they moved last time. It's nice to see that turn up; I was going to call the moving company and complain....
  • Just last week we were complaining that CEOs are getting paid to much and now slashdot is saying that it's a good thing that they get to give out $25 million worth of bonuses after filing Chapter 11? Like some other posters have already said, we know who's going to get the big bucks out of this bonus, the same executives that drove the company into the ground in the first place.
  • by solman ( 121604 ) on Wednesday October 30, 2002 @02:38AM (#4562449)
    When a company goes into bankruptcy, key employees who are capable of getting a job somewhere else, usually do.

    This mass exodus of employees would massively decrease the value of Worldcom, which appears likely to emerge from bankruptcy.

    Giving the employees bonuses that are contingent on remaining with the company is the best way to ensure that this exodus doesn't happen.

    The judge's job is to maximize the value of Worldcom, thus making sure that Worldcom's creditors get as much money as possible.

    SBC, in addition to being a creditor, is also a competitor. They had an interest in decreasing Worldcom's competitiveness, so they opposed the bonuses. The Judge (and tellingly, most of Worldcom's creditors) saw through this and supported the bonuses.
    • The judge's job is to maximize the value of Worldcom, thus making sure that Worldcom's creditors get as much money as possible.

      So Worldcom's creditors should expect $25 million in the near future? I'm not trying to troll; I want to understand the logic. Yes, the judge has to ensure that all assets are revealed and accounted for. I don't see how he should ensure bankroll for a bankrupt company, especially when we all know that bonus dough is going to a select few at the top of Worldcom's food chain. I mean fuck, what about the folks that put in an honest day's work, who depended on the decision makers at the top to at minimum not assfuck their company?

      I'm starting to sound like Michael Moore, and for that I truly apologize. But let's call a spade a spade.

      • by Justin Cave ( 945 ) <jcave@ddbc[ ].com ['inc' in gap]> on Wednesday October 30, 2002 @04:10AM (#4562702) Homepage
        I believe the logic goes more as follows--

        Worldcom, though bankrupt, has assets now with value v0. Some of these assets are tangible, i.e. fiber cable, servers, etc, with value v_tan0. Some of these assets are intangible-- i.e. the top sales guys, with value v_intan0. By definition, Worldcom's current value is

        v0 = v_tan0 + v_intan0

        When Worldcom declares bankruptcy, the servers and whatnot stay with the company and can be sold off if the company is liquidated. Worldcom, however, doesn't want to be liquidated, which would throw away v_intan0. They believe that they can provide more money to their creditors by reorganizing, where they'll be able to use both tangible & intangible assets to generate money to pay off their debts.

        Value of liquidated WorldCom = v_tan0
        Value of reorganized WorldCom = v_tan0 + v_intan0

        The problem comes in that the intangible assets aren't likely to stick around of their own volition. I'm sure Worldcom's top sales folks could get jobs with a much stabler company pretty quickly if they walked out. As the intangible assets depart, the value of Worldcom's intangible assets decreases by v_desertion. The company would then have a value v1 of

        v1 = v_tan0 + (v_intan0 - v_desertion)

        Thus, WorldCom asks to spend $25 to keep their intangible assets around. Basically, they're transferring $25 million of tangible assets to the intangible assets. The new value of the company, v2, assuming that the bonuses cause v_desertion to go to 0.

        v2 = (v_tan0 - $25) + v_intan0

        The judge has to compare v1 & v2 to see which leaves more value in the company for creditors. If v1 > v2, the bonuses are a bad idea. If v2 > v1, the bonuses, while decreasing the value of the company from its initial value, are good for the creditors.
        • That's the justification. I just don't happen to believe it. The way I read the tea leaves, when a company gets into this kind of situation, the guys at the top essentially give up on saving it, and try to see how much they can skim off before jumping ship. So they vote themselves huge "bonuses" for sticking around while they look for their next job. To make this a bit more acceptable, they disguise just how large a percentage of the amount they're taking, as promise bonuses to the people who work, but don't get to decide in the rake-off, if they'll stick around. Usually they acutally do let a few crumbs drop, for various reasons, none of which have to do with fairness.

          Ideally the guys making these decisions would end in the slammer at hard time. Instead they get to earn even more than they normally would, while the people who actually do proper work are left to hang in the wind.
      • WorldCom is clearly worth many billion dollars, even in its present form. That will be divided amongst the creditors (either as cash, securities in a new WorldCom, securities in an acquiring company or some combination of all three)

        WorldCom's creditors can reasonably expect that this $25M expenditure will ultimately increase the value of WorldCom by more than $25M. This is what the Judge was saying when he approved the deal.

        Keep in mind that most of the value in any company is in its people, processes and knowledge. Hard assets represent a small part of the equation. MOST of the creditors' potential for recovering their investment lies in the hope that the profitable divisions of WorldCom (and there are many) will retain their key people.

        The Judge has to evaluate the cost of NOT allocating the bonuses (people leave, and the business becomes worth less), and compare it to the $25M cost. Judges DO nix deals like these when they don't make sense. $25M is very little in comparison to the value of the (soft) assets that are being protected.
    • by deblau ( 68023 ) <slashdot.25.flickboy@spamgourmet.com> on Wednesday October 30, 2002 @04:20AM (#4562724) Journal
      The judge's job is to maximize the value of Worldcom

      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 [cornell.edu] 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) [cornell.edu], as long as SBC

      will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date,
      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 [elawforworldcom.com] 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.)
    • What you say is very unlikely... it is rare for a company to emerge from bankrupcy even a chapter 11 reorg.

      A mass exodus will happen because people working there are finally hearing about the underhanded crap they all specualted and heard in the rumor mill... seeing it in newspaper headlines make you fly the coop faster than anything else...

      Finally.. these "bonuses" are certianly not going to anyone who has the ability to raise the company from the ashes... the techs in the field, the Sysadmins that worked 18 hour days for years on end, and other employees that are the real reason a company moves and makes money will never see anything but a token gesture... while I guarentee that "high level executives" all will get hefty bonuses... these same idiots and thieves that made the decisions to destroy the company already.

      you want to save worldcom? fire the top 3 levels of management right here and now. everything from the vice presidents on up. get a management team in there that has a clue about business and is actually interested in something silly like getting the company to be Number one in customer satisfaction, service and technology... if you do not focus on the customer then you fail, and fail horribly... somehow all the telcoms forgot this basic fact of business.

      "The customer is always right.... even when they are wrong"... anyone that says otherwise is a complete idiot.

      • 1. When large public companies with profitable units go bankrupt, they almost always either re-emerge from bankruptcy, or are sold for substantially more than asset value. Even grossly unprofitable concerns (witness Exodus) are able to fetch a substantial premium to asset value by keeping the key employees in place.

        It is flat out wrong to suggest that keeping key employees in place does not have a massive positive impact on value to creditors. For proof, you need look no further than the frequent endorsement of these bonus packages by creditors. They are looking out for their own best interests when they do this. Its their money that's ultimately paying these bonuses.

        2. As I mentioned elsewhere, these bonuses are standard practice. Key employees are likely to be made aware that retention bonuses are in the offing before they make alternative employment plans.

        3. Right now WorldCom executives have to make a series of difficult decisions on how best to wind down unprofitable operations and prepare profitable ones for sale or re-emergence. Tens of thousands of jobs are at stake. Very complicated negotiations amongst many different classes of creditors are required. Much of the top two levels of management are gone. Firing the remaining managers would plunge the company into chaos, while the new managers spend many months learning enough about the organization to figure out what to do. Its bad for the creditors, bad for the customers, and would most probably cost many thousands of innocent employees their jobs. I understand your emotional reaction, but its terrible policy.

        4. This is going to sound harsh, but sysadmins can be replaced. If one quits, another can be hired without significant cost to the organization and its valuation. Working 18 hours a day is great dedication, but it doesn't make them irreplacable. In a multi-billion dollar business like WorldCom, there are many upper level management people whose sudden disappearance, in the middle of a massive restructuring, would cost large quantities of money. (And the more executives that leave, the more important the remaining executives become). Fair or not, ultimately the marginal difference in valuation created by firing a high level executive is much larger than the valuation change produced by firing a sysadmin.
  • by twoslice ( 457793 ) on Wednesday October 30, 2002 @02:42AM (#4562466)
    was up to no good at Worldcom...
  • The Art of WorldCom (Score:2, Interesting)

    by GreatDave ( 620927 )
    Sun Tzu argued that a soverign (or business) required knowledgeable leadership (executives), the blessing of the Heavens and the Earth (the cooperation of the Powers That Be, in this case the court, which it seems they have now) and Justice (doing what's right -- I'd say they've learned their lesson) to overcome adversity and opponents (their creditors.)

    I'd say WorldCom is doing a good job of getting back on their feet. 'Tis a good thing. UUNet falling into the hands of say, a Baby Bell like SBC (as FCC Chairman Michael Powell wanted at first) would not be a good thing at all.
  • Hopefully this will help them retain important members of their sales and service teams.

    Oh, it definitly will! Just as soon as all the executives get thier "demotions" for putting thier company into bankruptcy. You know, the demotions that will put the CEOs and Vice Presidents into lowly salesmen and and service positions... that'll show em.
  • by Anonymous Coward on Wednesday October 30, 2002 @02:56AM (#4562513)
    Salespeople often work for very low base wages and count on commissions to make up the difference. When a company tanks like WorldCom did the sales taper off and these workers suddenly find themselves without commissions. No commissions means no rent money. There are legitimate reasons to award bonuses to sales staff. And regardless of what you techs may think, good sales and support teams are critical to the success of a company.
    • 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
  • by bskin ( 35954 ) <.moc.liamg. .ta. .bmotneb.> on Wednesday October 30, 2002 @03:19AM (#4562579)
    judging from the comments here, people don't seem to be getting this.

    these *aren't* the people who committed the fraud. those people are gone. these are people who have come in afterwards and are trying to save the company. these are people who more than likely could easily go somewhere else and get more money. they're trying to give them incentive to stay and do the work that needs done. if you think the damage done to investors and employees is bad now, just see how bad they'd be screwed if the company completely liquidated.
    • these *aren't* the people who committed the fraud. those people are gone.

      Wow! A few token arrests and some people think the problem is solved.

      I watched MCI burn for a year. Every single manager was "in" on it. I doubt the Clubs Fed have room for all of the truly guilty. I know there aren't enough honest people left at WorldCom for the company to function.

      But as long as simplistic idiots are impressed by a handful of perp walks, most of the guilty can get even more money. Hope you like it that way.

  • by symbolic ( 11752 ) on Wednesday October 30, 2002 @03:24AM (#4562594)

    I noticed the other day when I looked at my phone bill, that MCI(Worldcomm) was so gracious to raise the minimum account billing to $10.00 per month, up 50% from the previous $5 per month. Funny thing is, I've NEVER made a long distance call using MCI as a carrier. What a load.
  • by tlambert ( 566799 ) on Wednesday October 30, 2002 @03:39AM (#4562630)
    So let me make sure I have this clear...

    This is to guarantee that the bankruptcy doesn't interfere with them calling to ask me to "please switch your long distance service to our bankrupt company" during dinner, while I'm in the shower, or in the middle of having sex.

    With all that going for it, who could possibly criticize the bonus plan...

    -- Terry
  • by panaceaa ( 205396 ) on Wednesday October 30, 2002 @03:46AM (#4562644) Homepage Journal
    Here's the breakdown of the 325 affected employees:
    • 10 Ugly People for MCI Neighborhood commercials
    • 1 WorldCom Guy to ride around office on mini-scooter
    • 1 Michael Jordan to continue MCI 5-cent Sunday commercials with Donald Duck
    • 10 UUNet people to help spammers contribute to Usenet
    • 303 Telemarketers
    Without these key positions, how could WorldCom possibly go on as a going concern?!
  • by NeuroManson ( 214835 ) on Wednesday October 30, 2002 @05:37AM (#4562975) Homepage
    First Slashdot say Worldcom bad, then Worldcom good, then Worldcom bad! Frankenstein's head hurt! Slashdot BAD!!!
  • I thought the "genius of capitalism" was that people were free to fail. The idea being that those who are no good leave the stage.

    If these executives destroyed the company, why are they being asked to stay?

    • Well, capitalism is a good theory and does work well, but like all systems the flaws are found in the implementation.

      First, it does not work well - long term - in industries with large barriers to market entry (national telecom, shipping and distribution, utilities). In these cases, governement regulation is required to either a) define a monopoly and limit pricing or b) prevent the merger of competing entities into a de facto monopoly. Once a monopoly exists, the barriers to entry (money, infrstructure, personnel) can rarely be overcome.

      Second, the theory works great when everybody is above board and decisions are made logically - as in an efficient investment market. The late 90s were not an efficient market. The 90s were not a banner time for corporate financial honesty.

      While I would generally agree with the "let 'em fail" attitude, the problem is there is no personal accountability. The CEO, CFO, etc. are not left penniless and destitute. The CFPs and investment councellors who recommended the corporations are not penniless and destitute. The losses are, one might say, born by the unwashed masses. Yes, perhaps the masses shouldn't have been investing when they didn't know any better, but everybody in finance and gov't has been harping on the need to invest for your retirement. I don't see them coughing up the dough and saying "oops, I was wrong."

      The other problem with national/global capitalism is the size of the companies which fail, and the domino effect if left to take its own course. Prior to the modern era, it was not uncommon for a large, leveraged corporation's failure to cause the collapse of a bank, causing the loss of depositors (sometimes other corporations) savings, causing further collapses. This domino effect, extended to the multi-national firms we're talking about could cause a serious global collapse.

      The only way out of this is personal liability. As a former co-worker used to say - you must have "one ass to kick." Meaning, simply, there must be a responsible person for each decision, and they must be liable for that decision. If anything goes wrong - you've got to have someone to pin it on. I'm for requiring the liquidation of officer's and, perhaps, board of director's assets to pay the creditors, and leans put against future earnings (less a stipend amount equal to, say 2087 hours at minimum wage) for the full amount of the debt, payable jointly and separably by the lot. I won't hold my breath for this legislation to pass, though.
  • by k98sven ( 324383 ) on Wednesday October 30, 2002 @05:59AM (#4563037) Journal
    "You got us into this mess, you get us out!"

    The company does well, the bosses get bonuses.
    The company does poorly, the bosses get bonuses.
    The company -files for bankruptcy- the bosses get
    even bigger bonuses..

    Why do they even call it a bonus?
  • They should fire the incompetent leadership (no severance package) and use the $25 million
    to hire people who knows how to run a company without becoming greedy.
    • What, and admit that MBAs from an expensive school plus really really nice suits are not the same thing as business sense? Good grief, that would rattle the whole system to the core. I mean, if actual business success is what you're after there's probably a thousand 25 year oid MacDonald's managers out there who could run the company just as well as some Harvard MBA.

      Business Administration is not, and never will be, an academic discipline.

  • but what about the shareholders? are they just going to cancel the stock (Like williams communication did) ?
  • This time they let a judge ok over spending.

  • WorldCom will use the money for incentives to retain 325 employees, mostly sales and service people in its MCI and network and products services units.

    That comes to around 76K per person. It seems like they might could spread that a bit thinner, and keep some more people, especially the ones at and below Manager level. But How much do you want to bet that every penny of that is going to VP's and Directors?

  • Hopefully this will help them retain important members of their sales and service teams.

    What I interpreted that to mean was that they were fleecing the pockets of the upper management before they totally rolled under rather than paying the hard-working grunts that make $$$ for the company. That was my take when I read that comment.

  • by jmcwork ( 564008 ) on Wednesday October 30, 2002 @09:25AM (#4563918)
    this shows up as a 1.7 billion dollar capital expenditure for "Snacks".
  • I wonder if any of those Key Employees getting the bonuses were in the last edition of Playboy...
  • This is just crazy! (Score:2, Interesting)

    by gotvim ( 610753 )
    Nevermind who's getting what!

    Anytime someone files for bankruptcy, insurance companies loose a lot of money, they increase they're rates and so on. It hurts all of us. Obviously, bankruptcy is bad to begin with. If they have 24 mil.somewhere, how about this - PAY YOUR FREAKIN BILLS! I have no sympothy for their employees. We all have had to struggle hard in this industry, and scramble for work whereever we get it. This is ludicrous, I never even new this happened. I guess the judges approach, is to try to salvage the company and keep them from filing, but it sounds to me like it's too late. It sounds to me like the company (maybe in good intention) is just delivering it's severances early and looking out for it's employees with complete disregard to it's public responsibilities!
  • The legal documents regarding the WCOM bankruptcy are hosted here [elawforworldcom.com]; the judge's order hasn't been posted yet, but WCOM's motion for the retention plan is docket entry 1656, filed October 18.

    The document doesn't explain who will participate in the retention plan (though it is careful to point out that top-level executives will not), but there's about 325 "key employees," divided into three groups, who will get bonuses predicated on their staying with WCOM. I'd expect that these are going to include IT heavyweights like former UUNet executive Elizabeth Hackenson (now head of strategy for IT) as well as the folks from sales, LEC relations, and marketing communications, and a couple of hundred directors responsible for ten to fifteen major projects apiece. (Anyone with TeamNet access care to make some educated guesses about who's going to get those bonuses?)

    These aren't the folks who ran the company into the ground; they're hard-working people, generally pretty decent, and they've invested a lot of time and sweat equity in the company. During the duration of my contract with WCOM (Hi, Ron!), I found them to be a good lot, dedicated to doing what's best for the company, who demanded a lot of themselves and those around them. If WorldCom wants to pull itself out of its hole, it's got to keep these people around.

  • Revoke (Score:3, Interesting)

    by Seanasy ( 21730 ) on Wednesday October 30, 2002 @11:14AM (#4564867)

    Maybe we need to send out more of these [adbusters.org].

  • > Hopefully this will help them retain important
    > members of their sales and service teams.

    Hopefully they will be unsuccessful in "coming out of bankruptcy" and will be broken up. There is no sane reason for WorldCom to exist.
  • by boatboy ( 549643 ) on Wednesday October 30, 2002 @11:51AM (#4565139) Homepage
    As someone who lost a nice chunk of change thanks to WorldCom, I have to disagree with these people saying the company should be obliterated. I (and alot of other stockholders) still have those shares, because if I sold them I may be able to buy a coke with the money. If, though, we hold on to the shares, and the company rebuilds, then in a few years, we may actually make our money back. (worst case, hello tax write-off) So my question is, who's actually "for the stockholders"? The people trying to re-build the company, or the people saying there should be no WorldCom? Now as for Ebbers, lock him up.
  • Since I haven't seen this mentioned yet, here's an article from yahoo.com that lists how the bonus will be paid [yahoo.com] to the employees. Very, very little (if any) is going to the avergage worker. The bulk (if not all) is going to the VP level and above, with the exception of the four most senior people at WCOM.

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