Wednesday, November 28, 2007

Idiot Corporate Looters Strike Retirement Gold

The 5 richest payoffs for fired CEOs
Many axed CEOs depart their troubled companies with millions of dollars in cash, stock and options -- like Merrill Lynch's Stanley O'Neal did last month. Here are five who stand atop this golden goodbye club.
The sweetest sound on Wall Street these days? "You're fired."
Regular folks may get a modest pension or maybe just a box for their personal items. But for Wall Street CEOs, the exit sign needs at least eight digits.
The latest example is the $161.5 million retirement package collected by former Merrill Lynch (MER, news, msgs) chief Stanley O'Neal on his way out the doors of the troubled brokerage last month.
On O'Neal's watch, Merrill cranked out risky debt instruments backed by dodgy subprime mortgages. Then last month, O'Neal left the brokerage amid revelations of Merrill's heavy exposure to the imploding mortgage market.

Despite all the problems that developed while he was at the helm, he will benefit nicely if his successors can clean up the mess. Most of the value of O'Neal's golden goodbye comes in the form of restricted stock and stock options. But astonishingly, unlike options or stock grants that are wiped out or expire quickly for regular employees when they leave to "spend more time with the family," O'Neal's awards will continue to vest for years to come under a timetable set years ago.

The big 5

O'Neal, of course, is not the sole member of the exclusive corner office golden goodbye club. Paul Hodgson, a CEO pay expert at The Corporate Library, estimates that getting rid of the CEOs at 16 investment banks and financial institutions that potentially have the biggest exposure to the subprime mess would cost an astonishing $1 billion, including O'Neal's take. Angelo Mozilo, who as co-founder and chief of mortgage lender Countrywide Financial (CFC, news, msgs) bears a good bit of the blame for the current subprime mess, would collect more than $73 million, according to Hodgson.
As big as O'Neal's $161.5 million "retirement package" was, he ranks only fifth in the golden goodbye club so far this millennium. Below are the other CEOs who got even more loot than him on the way out the door, with numbers courtesy of an Oct. 31 Corporate Library research note on this problem called "Too Little, Too Late."
No. 4: Ex-Gillette chief James Kilts. Total retirement take: $165 million.
It's been more than two years since Procter & Gamble (PG, news, msgs) took over Gillette, putting Gillette CEO James Kilts out of a job. A lot of CEOs have left their corner offices since then, but Kilts' golden goodbye was so huge it still takes the No. 4 slot for the all-time biggest retirement payouts this millennium. His take: $165 million, including a $13 million "gross-up" payment to help cover taxes triggered by a golden parachute. In response to criticism in the local press for this huge retirement cash-out, Kilts described himself as "Boston's piƱata" and argued that he earned the pay by creating billions of dollars in shareholder wealth.
Continued: Home Depot's former CEO
No. 3: Former Home Depot CEO Robert Nardelli. Total retirement take: $210 million.
The sheer size of former Home Depot (HD, news, msgs) CEO Robert Nardelli's golden goodbye sparked outrage on many fronts when he left the company in early 2007. First, Home Depot stock declined nearly 8% under his six-year watch. Next, he got all the loot even though he had already collected huge sums in annual pay -- including $219.7 million in the two years before leaving the company, according to The Corporate Library.
Finally, $84 million of his golden goodbye came in the form of accelerated vesting of deferred stock awards and grants of unvested options, according to the AFL-CIO Office of Investment. So just like Merrill's O'Neal -- but unlike most rank-and-file employees -- Nardelli got to keep his restricted stock and options and will gain if his successor, Frank Blake, manages to turn Home Depot around and make its stock go up.
No. 2: Former Pfizer boss Henry McKinnell. Total retirement take: $213 million.
Under Henry McKinnell's watch from early 2001 through 2006, the shares of Pfizer (PFE, news, msgs) declined 40%. That cost shareholders $140 billion. No matter. He still left the CEO slot in July 2006 with a $213 million golden goodbye, thanks to an extremely generous board.
While private-sector pensions typically replace 20% to 35% of salary, the value of McKinnell's pension worked out to about $6.5 million a year, or 100% of his annual salary and bonus before leaving, according to the AFL-CIO. He actually took it in the form of an $82 million lump sum, part of that $213 million total.
No. 1: Former ExxonMobil boss Lee Raymond. Total retirement take: $351 million.
Given the strength in energy stocks since 2000, it probably comes as no surprise that the richest golden goodbye this millennium went to Lee Raymond, who retired as CEO of ExxonMobil (XOM, news, msgs) in 2006. He got $351 million. That's a lot for a guy who earned $70 million in his last year of work, or $34,457 an hour, according to The Corporate Library. His cash-out included a $98.4 million lump-sum pension payment.
ExxonMobil stock advanced nearly fourfold during the 13 years he served as CEO, so supporters argued he earned the money. However, much of that advance was linked to a broad rise in energy stocks as oil prices advanced sharply in the past several years. Should Raymond really get credit for that?
What you can do If any of this ticks you off, there are a couple of things you can do. First, if you own stock, watch closely for proxy votes during the shareholder meeting season. Two of the most popular shareholder resolutions these days call for limits on severance pay and "say on pay," in which shareholders vote thumbs up or thumbs down on company compensation reports. These votes aren't binding, but they send a message.

Next, if you have a political bent, you can ask your representatives to support legislators like Rep. Barney Frank, D-Mass., who are working on bills that would require public companies to have these votes on severance pay and "say on pay" votes.

Finally, contact the Securities and Exchange Commission and support changes in rules that would allow shareholders to have more proxy access to change company bylaws. This kind of leeway could allow shareholder activists to change the way board members are voted on -- so it's easier to boot out the ones who consistently buckle to executive demands for higher pay.

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