October 21, 2005

Zafirovski's Pay Package

So now we know what it costs to attract a world-class telecom CEO after Nortel disclosed its compensation package
for Mike Zafirovski. At first blush, it doesn't look too bad: a base
salary of $1.2 million a year with the opportunity to make an annual
bonus of $3.6-million. Of course, it helps to have five million
restricted stock units currently worth $7.5 million and five million
stock options that could be worth a cool $10 million if Zafirovski can
bump up Nortel's anemic stock by
a couple dollars over the next few years. According to a statement by
Nortel yesterday, discussions are taking place between Nortel, Motorola
and Zafirovski about resolving that pesky lawsuit
launched by Motorola earlier this week that alleges Mr. Z. is breaching
non-compete clauses by becoming Nortel's CEO. I suspect this
“problem” will be worked out in a few weeks. Look for Zafirovski to
return $11-million of $16.8-million severance package he was given in
January by Motorola, and agree to several restrictions such as not
going after former colleagues. Don't be surprised to see Nortel
“compensate” Mike Z with a “special bonus” that will make up for the
$11 million he'll hand back to Motorola.
Bottom line:
Nortel knew what it was getting into when it agreed to hire Zafirovski,
and if it takes a few million dollars to make it happen so be it.
If Zafirovski can revive Nortel's business and stock, few people
will complain about his compensation package.
Update: For an interesting behind-the-scenes read about Mike Z's
hiring, including some fascinating details about Zafirovski speaking
with Motorola CEO Ed Zander after accepting the Nortel gig, you should
check out James Bagnell's story in the Ottawa Citizen.

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