Adelphia’s Executive Pay Plan Under Fire

A proposal by Adelphia Communications Corp. to pay a new top management team $1 million a week to pull the cable operator out of bankruptcy protection has angered shareholders, employees and local lawmakers, who contend the compensation package is outrageous.

Adelphia’s directors were scheduled to vote on the proposal at a board meeting Wednesday. But sources close to the situation said the board spent the session revising the proposal after the terms were critically reviewed in a front-page article Wednesday in the New York Times.

Adelphia filed for Chapter 11 bankruptcy protection in June. The company’s founder, John Rigas, was indicted in September on criminal charges of bank and mail fraud. The company, the largest cable operator in Southern California, has since raised consumer rates 6% in many cities and is expected to impose additional increases.

For months, the company has been negotiating to hire two former top executives of AT&T; Broadband as chief executive and chief operating officer.

Under a draft employment contract, Adelphia proposed paying the two former AT&T; executives, William T. Schleyer and Ronald Cooper, more than $65 million over an 18-month period, according to a letter to the Adelphia board from the law firm representing shareholders that was obtained by The Times.

Company executives and some of its debt holders defend the compensation as needed to attract seasoned cable executives who can increase the value of the company.

But shareholders, who worry they will never recover the billions of dollars in value they have invested, contend that the package is excessively generous.

“We are not aware of any other company in Chapter 11 ... that is compensating its CEO and/or COO on anything remotely resembling these extraordinary amounts,” stated the letter, dated Dec. 26, signed by Bryan Krakauer of Sidley Austin Brown & Wood of Chicago. The firm represents the equity committee appointed by the U.S. Bankruptcy Court to represent Adelphia’s shareholders.

By comparison, according to the letter, the new CEO of WorldCom Inc., a much bigger and more complicated company that also is in bankruptcy protection, is getting less than a third of that amount.

The proposed employment contracts perturbed some Adelphia employees, particularly considering the hard stance the company is taking in negotiations with labor unions.

City officials also were concerned about the payouts to top executives.

“As someone who represents hundreds of thousands of Adelphia customers, I’m outraged,” said Los Angeles City Councilman Jack Weiss. He said he would introduce legislation Friday requiring Adelphia to justify the executive pay at a time when the company is “pleading poverty and nickeling-and-diming ratepayers.”