WorldCom to Scrap Employee Stock Options
WorldCom Inc. plans to scrap stock-option grants for employees to reduce the potential for conflicts of interest after it emerges from the largest U.S. bankruptcy case, people familiar with the matter said.
WorldCom, the No. 2 U.S. long-distance phone company, with 20 million customers, will use shares instead as a direct form of pay, the people said. It is one of the measures court-appointed monitor Richard Breeden is expected to announce soon.
WorldCom, which is being renamed MCI, wants to rebuild an image tarnished by an $11-billion accounting fraud as it seeks to exit bankruptcy protection by October.
The Ashburn, Va.-based company also is said to be considering reforms such as splitting the roles of chairman and chief executive.
“It’s critical to try to rebuild trust with investors and customers,” said Pat Comack, a telecommunications analyst at Miami-based investment bank Guzman & Co.
WorldCom has been suspended from winning new contracts from the U.S. government, its top customer.
Drafts of the company’s certificate of incorporation and bylaws posted on the Bankruptcy Court’s Internet site Friday say all WorldCom’s directors except for the chief executive would be independent.
The Securities and Exchange Commission in November ordered Breeden to review the company’s governance as part of a settlement of a suit against WorldCom that was completed this month and includes a $750-million penalty, the largest for an accounting-fraud case.
WorldCom probably will implement the measures in Breeden’s report, board member Dennis Beresford said in an interview last week. The company can appeal any reforms it doesn’t like to the court, he said.
WorldCom’s effort to emerge from bankruptcy protection may be hurt by allegations surfacing last month that the company illegally avoided paying network fees to local-phone companies.
Competitors such as AT&T; Corp. and Verizon Communications Inc. accuse WorldCom of engaging in a plot to disguise long-distance calls as local connections and avoid paying fees to terminate them.
WorldCom’s official creditor committee denied the allegations Thursday and asked the Bankruptcy Court to order the company’s competitors to turn over documents that could disprove them.
