WorldCom Discusses Ebbers' Compensation CutsSep 10, 2002 | FT.Com
Board members of WorldCom, the bankrupt telecommunications group, met on Tuesday to discuss whether to withdraw the lucrative severence package awarded earlier this year to Bernie Ebbers, former chief executive.
John Sidgmore, the current chief executive, was also expected to tell the board that he planned to begin a search for his replacement.
Mr Sidgmore has been trying to restructure the company since it declared bankruptcy.
The WorldCom board was expected to hear a report on Mr Ebbers' compensation package that was prepared by Richard Breeden, a former Securities and Exchange Commission official appointed by a court to monitor the company.
Mr Breeden's report was said to be critical of Mr Ebbers' severance package and the role board member Stiles Kellett had in drafting it. Mr Kellett headed the company's compensation committee.
WorldCom declined to comment about the board meeting or about Mr Breeden's report.
When the board decided to oust Mr Ebbers in April, he was awarded annual payments for life of $1.5m and use of the corporate jet.
He was also given a lengthy repayment plan on more than $400m in personal loans, which carry interest of just 2.18-2.21 per cent a year. Private banking experts say an arm's-length interest rate on such a loan would amount to about 3.5 per cent to 4 per cent.
If the board were to alter Mr Ebbers' pay package, it would raise the question of whether his personal assets - which were used to guarantee the loans - could become property of creditors. Mr Ebbers owns a vast ranch in Canada and considerable timber holdings.
The report presented to the board highlighted Mr Kellett's role in creating Mr Ebbers' package, according to a person who has seen it.
However, Stuart Pierson, an attorney for Mr Kellett, said he "vigorously" disagrees with Mr Breeden's findings and plans to rebut them in front of the WorldCom board. Mr Pierson said the severance plan was not simply the work of Mr Kellett.
"The severance package and the demand for Ebbers to leave were decisions made by all the outside directors," he said. "That was not a decision made by the compensation committee" which Mr Kellett headed.
Mr Kellett, who joined the WorldCom board in 1981, drew criticism from activists who argued for term limits for directors.
He was also a co-investor with Mr Ebbers in VirtualBank, a privately-held company.
Just two months after Mr Ebbers left the company he founded, WorldCom announced it had uncovered a $3.9bn accounting fraud.
Two former WorldCom executives, Scott Sullivan, former chief financial officer, and David Myers, former controller, face criminal charges stemming from the accounting irregularity.