Nortel Networks CEO Landed $88 Million From Exercising Options

Nortel Networks Corp. Chief Executive John Roth reaped about $88 million in gains last year by exercising stock options, according to a regulatory filing.

Roth exercised options to buy more than 1.5 million shares of the biggest maker of fiber-optic equipment, according to the U.S. Securities and Exchange Commission filing.

Roth, 58, who has been chief executive of the Brampton, Ontario- based company since 1997, also was granted options last year to buy 750,000 shares at about $77, the filing said. The company estimated their value at about $92 million if the shares rise 10% per year over 10 years.

The shares vest in thirds on the first, second and third anniversaries of the July grant date. The strike price on the new options are currently higher than current stock prices. That means none of them could be profitably exercised now. Nortel fell 17 cents to $16.48 Tuesday.

The calculation of Roth’s $88 million in gains was based on the difference between the exercise prices of the options and the market prices on the days they were exercised. Bloomberg News then converted those prices, listed in the proxy in Canadian dollars, to U.S. dollars based on Tuesday’s exchange rate.

Roth’s salary, bonus and other pay rose about 35% to almost $6.9 million last year, the filing showed. His bonus rose to $5.6 million from $4.2 million. Since Roth was paid in Canadian dollars, the company averaged the exchange rates to represent those payments in U.S. dollars.

In January, Roth also received an entitlement to 89,280 restricted stock units as a reward for his performance, the filing said. The proxy cited Roth’s “outstanding contribution to Nortel Networks Corp.’s 2000 record financial results.”

“His guidance, direction and inspiration have been important factors in the success of the corporation and his investment in the development of the corporation’s strategies will ensure continual long-term success,” the filing said.

Nortel shares fell 36% in 2000 and have dropped a further 48% so far this year. The company faces a string of lawsuits alleging that Nortel and certain officers and directors misled investors with optimistic sales and earnings forecasts.

A company spokeswoman declined to comment.