Distress call

It's hard not to smirk reading that former CEO Frank Dunn is suing Nortel Networks, claiming the board wrongfully fired him in 2004. I'm not pre-judging his case; it's just that, according to Nortel, Dunn is suing not just for wrongful termination and defamation but also because, in doing those things, Nortel caused him “mental distress.” Again, if Dunn is right, I don't doubt the whole episode was distressing in the extreme. It's just that, on the tail end of the 21st century telecom sector massacre, if everyone in this business who suffered mental distress was remunerated for it, the entire industry could retire in financial security.

I'm not sure who has been saddled with more mental distress: Frank Dunn or his current counterpart, Mike Zafirovski. The latter is busily trying to scrub off the stain left by sloppy accounting while rewriting the company's business model. Maybe Zafirovski should sue Nortel for hiring him.

In the ongoing criminal trial of former Enron executives, it's been disclosed that, in 2001, the fallen energy giant's now-accused ex-CEO Jeffrey Skilling turned away a headhunter who was searching for a new CEO to lead Lucent Technologies. Patricia Russo eventually took the job Skilling didn't want, probably saving the ex-Enron man a world of headaches. The man probably thought, “Sure, I've ridden a Fortune 5 company into the dirt and might do some time in prison. But a telecom equipment company? I don't need that kind of stress.”

Mental distress is a fair two-word job description for any telecom equipment vendor executive, especially at Nortel. After being berated by investors for its two major earnings restatements, the news of a third restatement was almost numbing, and the news (this month) that that restatement was larger than previously indicated brings to mind ancient images of a cursed man endlessly pushing a boulder uphill.

That's probably why telecom CEOs are paid so well. When reports surface such as the Corporate Library's recent revelation of the wide gap between pay and performance found disproportionately among telecom firms, directors at those firms can argue that these jobs are so mentally distressing that only beaucoups bucks can lure the most qualified candidates. But how necessary are those CEOs? Maybe it depends on the individual. For example, when Broadwing's CEO stepped down this year, the company's stock jumped. And in its first quarter with no CEO (only the troika of its chief financial officer, general counsel and head of sales), the company turned adjusted EBITDA positive for the first time.

In the end, it's tempting to think that the CEO's most important role is shouldering all that mental distress. Others might say it should have something to do with the company's performance. But who would want a job like that?