After going down in history with the largest and probably most scandalous bankruptcy filing ever, one might expect WorldCom Inc. to be pinching pennies at every turn. When it comes to certain “key employees,” however, the company is actually loosening its purse-strings.
Late last Friday afternoon, the company filed a request with the U.S. Bankruptcy Court of the Southern District of New York to allow it to hand out $25 million in bonuses to 325 top employees. Judge Arthur Gonzalez will consider the retention plan at a hearing scheduled for October 29.
“I find it really incredible that they would pay bonuses now, when they havenâ€™t even finished paying us severance,” says Kate Lee, who was laid off from her position as senior manager of internal communications back in June. Lee is now the chairperson of the exWorldCom Employee Assistance Fund, which aims to help former employees of the company who can no longer scrape up enough money for essentials such as rent and food. “Iâ€™m adding at least one or two people to the list every day,” she says.
WorldCom spokeswoman Claire Hassett insists that the severance pay issue has been resolved. â€œThis is a moot issue,â€� she says. â€œWorldCom is taking care of those who were with the company and is trying to incent [sic] others in mission-critical positions to stay with the company.â€�
While Lee acknowledges that many of the employees being offered bonuses are probably good workers and are important to the corporation, she says some of them may have caused the problems in the first place. â€œI find it absurd. These are the same people that got WorldCom into this mess and werenâ€™t able to avoid bankruptcy,â€� she says. â€œSo now they get a massive reward?â€�
If the plan is approved, as WorldCom expects it will be, the employees in question will get bonuses ranging from $20,000 to $125,000, or between 35 percent and 65 percent of their annual base salaries. According to the plan, the employees will get the first 25 percent of the bonus on December 1 this year, the next 25 percent on March 31, 2003, and the final 50 percent 60 days after the courts approve WorldComâ€™s reorganization plan.
This is a revision from the companyâ€™s original plan, through which it wanted to pay nearly double this $25 million to less than half the number of employees, according to a source close to the company, who has asked to remain anonymous. The companyâ€™s court monitor, Richard Breeden, reportedly asked the company to revise its plan.
WorldCom isnâ€™t saying which of its employees will be getting a bonus, but it has stated that four of its top executives are not on the list. While the company wonâ€™t say who these executives are, they’re likely to include company CEO John Sidgmore who has said that he will step down as soon as a replacement is found along with chairman Bert Roberts and COO Ronald Beaumont.
â€œThe purpose of the program is to help retain employees in mission-critical positions and to boost employee moral,â€� says Hassett. She wouldnâ€™t comment on which employees will be rewarded, but they will certainly all be in high-level positions. According to the anonymous source, WorldCom is facing potential massive flight by many upper executives who donâ€™t want to deal with the stress of working for a bankrupt company. Others are considering leaving due to the difficulties connected with consolidated office space, the source says.
â€œ[The bonus program] would seem to indicate that theyâ€™re having a problem withâ€¦ a lot of key people leaving,â€� says Davenport & Co. LLC analyst F. Drake Johnstone. â€œIf too many key people leave, it could spell the end of the company.â€�
On the other hand, for former WorldCom employees, who are still waiting for the rest of their severance pay, as well as for shareholders of the company, who lost everything when the company filed for Chapter 11, paying tens of thousands more to the guys at the top probably doesnâ€™t seem like the best way for WorldCom to be spending the little money it has.
WorldCom should also consider compensating people further down in the organization for a change, Lee says. â€œWould I expect it? No. Do I wish that they would recognize their achievements more? Yeah. The company wouldnâ€™t be there without them.â€�