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Archive for Wednesday, December 11, 2002

Judge criticizes pay plan for new WorldCom chief

December 11, 2002

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— A federal judge on Tuesday criticized WorldCom Inc.'s compensation plan for incoming CEO Michael Capellas, warning that he could still hand down a multibillion dollar fine if the company doesn't show it is truly "committed to reform."

Judge Jed Rakoff issued a four-page memorandum order summoning company representatives to court on Monday to discuss the compensation package.

A WorldCom filing in bankruptcy court said Capellas would be paid a signing bonus of $2 million, an annual salary of $1.5 million and a $1.5 million bonus guaranteed in 2003.

He is due to get $18 million in WorldCom stock if, as expected, the company exits Chapter 11, plus additional stock in future years.

WorldCom's filing called the package "eminently reasonable" and "well below" what two other candidates WorldCom considered for the CEO job would have required.

Rakoff questioned WorldCom's assertion in the filing that the court-appointed monitor, Richard Breeden, was likely to approve Capellas' compensation terms.

"A compensation package so potentially problematic raises serious concerns as to whether proposed new management is as committed to reform as the nature of this case requires," Rakoff said.

The papers do not say what specific elements of the compensation rankle the monitor.

WorldCom did not comment on the judge's memorandum.

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