WorldCom Inc.’s board agreed to a request from its chief executive to begin a search for a new CEO to lead the company through its massive restructuring.
At a board meeting Tuesday in Washington, D.C., directors of the telecom company, which filed for Chapter 11 bankruptcy protection in July agreed to a request from John Sidgmore to start a CEO search that’s expected to take several weeks.
“I have concluded that having moved WorldCom through the initial phase of the bankruptcy process now is the appropriate time for the company to initiate a search for a long-term CEO,” Mr. Sidgmore said in a prepared statement late Tuesday.
After a new CEO is named, Mr. Sidgmore will return to his vice chairman post. Bert Roberts will continue as chairman.
“When Mr. Sidgmore was appointed as CEO, his charter was to turn around a great company and to restructure its financial position,” the company said in its statement. “Mr. Sidgmore had always intended to bring the company to a point of stability and to hire a new CEO.”
Separately, the board also considered whether to undo the severance package of ousted Chief Executive Bernard J. Ebbers, which includes the repayment terms of a low-interest $408 million loan and lifetime retirement pay of $1.5 million a year, according to people familiar with the situation.
People close to the company said that plans to replace Mr. Sidgmore are intended to help the company as it tries to emerge from Chapter 11.
While it’s unclear who might succeed Mr. Sidgmore, a person close to the situation said the board is “going to set its sights high and get the best candidate out there.”
Meanwhile, the board’s revisiting of Mr. Ebbers’s big severance package comes amid questions of whether his loan might originally have been approved by a director who later received use of a corporate jet.
Richard Breeden, a court-appointed monitor of WorldCom and former Securities and Exchange Commission chairman, has investigated the use of a Falcon 20 jet. WorldCom rented it to board member Stiles A. Kellett Jr. for $1 a month, plus certain fees, in 2001. It normally would have cost as much as $1 million annually, said a person familiar with the matter. Use of the plane wasn’t disclosed at the time in regulatory filings, or to some board members, say people familiar with the matter.
Mr. Kellett, as head of the board’s compensation committee, was one of two directors, along with Max E. Bobbitt, who worked out terms of Mr. Ebbers’s departure after the board decided to oust him. The loan deal and a severance package won unanimous board approval. Mr. Breeden was expected to present his report, which is critical of the arrangement, to WorldCom’s board at a meeting this morning.
Prosecutors haven’t linked the roughly $7 billion of WorldCom accounting impropriety to Mr. Ebbers. Former Chief Financial officer Scott Sullivan, however, has been indicted. The loan agreement, which followed Mr. Kellett’s deal for a jet a year earlier, might give prosecutors a new avenue to pursue Mr. Ebbers criminally, say people familiar with the situation. These people also say prosecutors are also examining Mr. Kellett’s role, seeking to learn whether his approval of terms of Mr. Ebbers’s loan and severance package was tied to use of the jet.
Federal prosecutors also are understood to be focusing on the company’s chief operating officer, Ronald Beaumont, believing he may have information that could help make a case against Mr. Ebbers.