Sey%20and%20Fall%20of%20Nortel.pdf + + + The Rise and Fall of Nortel At the peak, Nortel was a giant diversified Canadian corporation focused primarily on telecommunications. In July 2000, Nortel's market capitalization peaked at more than $350 billion. Ranking among the largest companies in the world, Nortel accounted for just over 37 percent of the total value of Toronto Stock Exchange Composite Index. Nortel's expertise in wireless and broadband communications allowed it to achieve unparalleled revenue gains in the rapidly growing telecommunications sector. Nortel was intent on exploiting this rapid growth based on the international trend towards deregulation in the telecommunications industry. Using an aggressive acquisition strategy, Nortel quickly established itself as a global corporation. Its share price tripled in four years, reaching a peak of just over $200 per share by the middle of 2000. Nortel's CEO compensation strategy was heavily based on option compensation. The fixed salary awarded to the CEO each year amounted to slightly less than $ 1 million, while short-term bonuses reached $1.3 million in 1998, $4.2 million in 1999, and $5.6 million in 2000. Nortel's 2000 and 2001 statements indicated that most heavily weighted driver for bonus compensation was revenue, followed by operating earnings per share. As such there was significant incentive for Nortel's CEO to pursue an aggressive strategy of growth through acquisitions. Although John Roth, CEO of Nortel between 1996 and 2001, was well compensated in terms of salary and bonus, this compensation appeared meagre relative to the value of options awarded to him: $5 million in 1998, $18 million in 1999, and $33 million in 2000. It was shortly after the last that the bottom fell out. Nortel's decline was rapid and multi-faceted. The apparently accelerating levels of growth and earnings were largely informed by massive accounting and financial irregularities