Emotions at WorldCom run gamut

by

Published: December 23,2002

CLINTON — Earlier this month, after passing up the number three job at Microsoft, former Hewlett-Packard president and Compaq Computer turnaround wizard Michael D. Capellas, 48, took over as chairman, CEO and president of WorldCom.

In his first full month on the job, Capellas, who lacks telecom experience but is a seasoned information technology executive with international management experience and credibility, made known three facts: most corporate decision-making will be conducted from the Ashburn, Va. offices, and Clinton will remain company headquarters in name only; layoffs will continue as the company endures reorganization pains; and he believes he is worth $3.5 million per year plus stock options and potential bonuses. On Dec. 6, Capellas laid off 3,000 workers nationwide. In December, Capellas will earn more than $2 million.

Capellas succeeds John W. Sidgmore, whose five-month reign as CEO included the announcement of $9 billion in fraudulent accounting; the filing of the world’s largest Chapter 11 bankruptcy case; watching five top WorldCom executives charged with federal fraud and conspiracy violations; and enduring the company becoming the poster child for corporate wrongdoing. Sidgmore’s last appearance in Mississippi was June 14, nearly two weeks before the initial $3.8 billion accounting fraud was made public.

Because Capellas was appointed to WorldCom’s top three positions, Sidgmore and Bert C. Roberts, the former CEO of MCI, were required to step down. The Nov. 15 press conference unveiling Capellas as

WorldCom’s new chief was held in New York.

Even though his official first day on the job was Dec. 2, Capellas’ first corporate stop was Nov. 15 in Ashburn, Va., where he met with some of the 9,000 employees at WorldCom offices. Before corralling senior managers onstage for an enthusiastic round of “If You’re Happy and You Know It, Clap Your Hands,” Capellas told employees in Virginia that customer service would be his top priority and that annual pay increases would soon be reinstated. In his pep talk, Capellas joked that he was house-hunting in the Washington, D.C. area. His current residence is in Houston, Texas, where he is a board member of Houston-based Dynegy, Inc., an energy and communications solutions provider.

That same day, WorldCom spokesperson Claire Hassett stated emphatically, “Our headquarters are in Clinton and we have no plans of moving it out of Clinton at this time.” Two weeks later, she repeated the statement. “Clinton is where most of our finance operations are located,” she said.

Three days later, Capellas toured the WorldCom campus in Clinton and then held a pep rally where he stepped onstage as rock music blared from loudspeakers. Even though employees were only notified earlier in the day that Capellas was expected to visit the facility, they asked questions for more than an hour.

“I’m encouraged, but I still feel apprehensive,” said one WorldCom worker. “He was forthcoming and I think we’ll hear a little more honesty quicker. Of course, there’s never any guarantee no matter where you work.”

Capellas told Clinton employees he would welcome former New York Mayor Rudolph Giuliani as WorldCom chairman, if he were interested in the post. “He’s Man of the Year. What’s not to like?” But Giuliani had little to gain and much to lose if WorldCom didn’t successfully emerge from bankruptcy and the appointment never materialized.

After the rally, a longtime WorldCom employee said: “I think (Capellas) listened and was as open with us as possible. We’re tired of being told one thing and then another happens. It’s tough when you’ve worked hard and your company has these problems and it’s not your fault.”

Clinton Mayor Rosemary Aultman didn’t attend the rally, but spoke to employees afterward. Many were optimistic, she said.

“I think they were reassured that he would keep the employees apprised of company decisions,” she said. “From what I’ve read in several national publications, he certainly has the credentials to move the company through the bankruptcy process. Perhaps it’s advantageous to have someone who hasn’t been in the WorldCom ‘family’ to come in and take a fresh approach to the situation.”

Capellas earned a business administration degree from Kent State University in 1976 and began his career at Republic Steel Corporation before joining Schlumberger Ltd. He was managing partner of Benchmarking Partners, a leading information management-consulting firm before serving as a senior executive at Oracle and SAP America. He made history as the turnaround king at Compaq Computers, which was recently sold to Hewlett-Packard for $19 billion.

Capellas has been busy working on his to-do list: selling nonessential assets like SkyTel, ending contracts for bandwidth WorldCom doesn’t need, reassuring the company’s 60,000 uneasy employees, retaining customers and appeasing creditors, who have until March 31, 2003, to endorse a reorganization plan.

Aultman said there have been several inquiries about the possible use of the WorldCom building if the company closes it.

“However, the site is still very active,” she said. “A cost analysis done a couple of months ago indicated that it would cost approximately $56 million to re-locate the employees here to another site, should the Clinton site be closed. That’s a lot of money for a company in a financial bind. My hope of course is that Mr. Capellas will keep a WorldCom presence in Clinton whether it’s the headquarters or not.”

Roughly 760 workers remain at the Clinton campus.

“I’m very optimistic about (WorldCom’s continued presence),” said Dianne Newman, executive director of the Clinton Chamber of Commerce. “He told them he would keep them apprised of developments within the company. I really do feel encouraged after his visit.”

Xan Vineyard, owner of Xan’s Diner in Clinton, said he isn’t concerned about possibly losing business. “We were going to open in Clinton no matter what, WorldCom or no WorldCom,” he said. “With the college and the fact that Clinton is very family- and community-oriented, we wanted to be there. It was the right fit with the right kind of people. WorldCom was a bonus to us going out there.”

Vineyard said he is concerned about people losing jobs at WorldCom.

“You hate to see that happening,” he said. “(WorldCom employees) have been great customers and we’ve made a lot of friends along the way.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com</a.


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