Days before a bankruptcy court hearing is scheduled to be held on whether Adelphia Communications Corp. can hire two high-profile executives, a group of unsecured creditors came out in favor of the plan.
In December, Adelphia announced it would hire former AT&T Broadband executives William Schleyer and Ron Cooper as CEO and chief operating officer, respectively. But the compensation package to which the company agreed — which could pay the two men $40 million over three years — came under criticism from several groups, who called it excessive.
Most vocal was Adelphia's committee of equity security holders, led by Citizens Communications Corp. chairman Leonard Tow, one of Adelphia's largest individual shareholders.
But in a Feb. 20 filing with the bankruptcy court, Adelphia's committee of unsecured creditors — which includes such companies as AOL Time Warner Inc. and Viacom Inc. — came out in favor of hiring Schleyer and Cooper.
According to the document, the unsecured creditors said that Schleyer and Cooper are essential to Adelphia's future success and called the equity committee's attempts to block the hirings "perhaps the most exhaustive compensation critique in history."
The unsecured creditors added that the equity committee is "shamelessly hoping to ride the wave of corporate responsibility to further its own parochial interests."
The bankruptcy court must still approve the compensation package. U.S. Bankruptcy Court Judge Robert Gerber is scheduled to hear the matter on Feb. 24 in New York.
According to earlier bankruptcy court filings, Schleyer and Cooper were guaranteed about $23.9 million over three years, as well as stock-option incentives that boosted the total pay package to $40 million.
Also last week, former Adelphia chairman John Rigas filed a document with the court objecting to the pay package and a plan by his former company to move its headquarters from Coudersport, Pa., to Denver.
Rigas, along with his sons — former chief financial officer Timothy and former executive vice president of operations Michael — and two other company executives were indicted last year on charges of bilking the company out of hundreds of millions of dollars. A trial is expected to begin on Jan. 5, 2004.
In the document, John Rigas objected to the compensation package because he claimed it was geared toward benefiting creditors and not shareholders. He also criticized the Denver move, adding that most of Adelphia's subscribers are in the Northeast, not in Colorado. He also lamented the effect such a move would have on employees.
"Uprooting management from Coudersport, Pa., will result in a severe disruption in the lives of Adelphia employees who have long lived in the area and worked for the company," the document said. "Removing senior management from the physical location of most of the middle managers and rank-and-file employees is a poor business strategy that decreases morale, increases the difficulties of personal communication and decreases the effectiveness of the organization."