board members faced scathing criticism from
shareholders today for failing to detect the accounting irregularities that
sent the telecom equipment maker into a tailspin.
“So the board was not aware of anything? What [kind of] organization is
this?” a shareholder asked at today’s annual meeting. “We were in total
darkness when this company’s shares were falling from hundreds of dollars to
one or two dollars. How come this board allowed this to happen?”
Nortel Chairman L.R. Wilson said the accounting problems, which closely
followed the telecom industry meltdown, were “the last thing we needed or
Wilson said they were not flagged by internal auditors, outside accountants
or employees at any level. “I would suggest to you that no board could have
found these problems,” he said.
Wilson, who will retire after today’s meeting, stopped short of an apology,
however. “We very much regret what has happened and we’ve been committed to
address problems head-on and solving them so we can move forward with
leadership and integrity,” he said.
The fallout of the accounting scandal included the firing of
former CEO Frank Dunn, CFO Douglas Beatty and several other senior
It also cost the Canadian company approximately $200 million to restate
earnings statements. What’s more, the company is still in the early stages
of defending itself from class-action shareholder lawsuits.
Wilson and CEO Bill Owens also took heat for the recent resignations of President and COO Gary
Daichendt and CTO Gary Kunis. The executives were on the job for only three
months before resigning because their management styles clashed with Owens.
“Did the question of their management style never come up?” a shareholder
Owens, who has been on the job for a little more than a year, did not
elaborate on the friction, but said it was in the best interest of the
During a presentation, Owens outlined steps the company has taken to prevent
any future ethical problems. He also tried to convince attendees that the
company is back on track and is focusing on increasing its revenues and
cash reserves and cutting costs.
He cited several potential growth areas: the acquisition
of PEC Solutions to boost its presence in the federal government market; a joint
venture with LG Electronics; and efforts to expand in markets such as China,
India and South Korea. Also promising are security and voice-over-cable, he
“I think of you shareholders every day of my life,” Owens said. “This is a
consolidating market that is undergoing considerable change. We are in this
not for short-term gain but long-term value, and we are playing to win.”