More than two years ago, we asked the question “How long can Nortel go on being Nortel?” The final answer came this weekend, when it was announced that the remains of the company would be broken up and sold off, leaving not much except a once- respected, but long since discredited, name.
You might wonder what happened to Canada’s most valued corporate prize–this bastion of innovation that put Canadian technology on the map around the world. The answer is a failure of corporate governance, pure and simple.
Nortel had a series of boards that drew their cultural inspiration from the old Bell Canada monopoly model which gave the company its life many years ago. Many of Nortel’s directors in the 80s and 90s, and even in the 21st century, were also directors of Bell Canada. The former CEO of BCE (or Bell Canada now), Jean Monty, took two turns at being Nortel’s CEO and then going back to head BCE.
That model was about a never-ending deference to management and the assumption that large size would always translate into continued success. Nortel’s boards missed red flag after red flag and took the wrong turn in the market, like General Motors, on almost every occasion. They continued to put their fate in the hands of managers who were not up to it, and pay them absurd levels of compensation. They thought they could give lessons to the world on corporate governance. Several of Nortel’s directors, including one-time CEO John Roth, were on a committee appointed to reform Canada’s corporate governance practices. They fell embarrassingly short of that mark but did manage in one respect to provide an unexpected lesson: how to take a giant company with an astonishing pool of innovative workers and enormous shareholder support and turn it into a basket case of accounting scandals, self-serving management and stunningly complacent directors.
Rest in peace, Nortel. You deserved better.