Executives of Nortel Will Repay Bonuses

[Thurston Howell IV]

Nortel Networks released its much-delayed audited financial statements for 2001 to 2003 on Tuesday and said that an internal inquiry showed that executives had manipulated the initial results to obtain bonuses.

In an unusual development, Nortel, the biggest maker of telecommunications equipment in North America, said that a dozen current executives who played no role in the manipulation would repay $8.6 million in bonuses voluntarily over three years. They will also give up the last two installments of a restricted stock payout dating back to 2003.

Brian Foley, an expert in executive compensation in White Plains, said he could not recall an instance of executives returning bonuses because the payouts were based on financial results later found to have been misstated. But he said some companies had begun considering adding provisions in executives' compensation agreements requiring a repayment under those circumstances.

"You can imagine the appetite in the executive suite to having such a provision put in," he said. "I'd question why you need a provision to go after the money. In the right circumstances you ought to be able to go back for it anyway. But you have to have a board that is willing to step up to the table and say, 'You didn't make it, I want it back.' "

http://www.nytimes.com/2005/01/12/technology/12nortel.html?oref=login