Sunday Late Night: For CEOs, Failure Pays Well
Scary words, for most people.
But for CEOs of American companies, those two scary words still mean an outsized payday.
Golden parachutes and swell termination deals were a hallmark of the go-go Oughties whether CEOs they were successful or not. Some of them even tried to parlay their exit-bucks into public office. Outsize severance became a symbol of this century’s corporate misgovernance and crony capitalism: buddies on compensation boards scratched each others’ backs as compensation, especially the farewell kind, climbed into the stratosphere.
Now that the American economy is fully recovered from Wall Street’s predation, now that every American who wants to work has a full-time job earning a living wage to support her family, now that asset and real estate appreciation has re-fattened every American family’s balance sheet, corporations realize it’s time again to ease the pain of the unwillingly-let-go CEO.
Just last week, Léo Apotheker was shown the door after a tumultuous 11-month run atop Hewlett-Packard. His reward? $13.2 million in cash and stock severance, in addition to a sign-on package worth about $10 million, according to a corporate filing on Thursday.
HP paid Apotheker $2.9 million in moving expenses to Northern California (from where: Mars??) and will pay a likely equivalent amount to move him to Belgium or France.
HP investors saw their company lose half its value during his tenure:
Severance policies typically call for a lump-sum cash payment, the ability to cash out stock awards and options immediately instead of having to potentially wait for years, and sometimes even bonuses. And that’s not counting the retirement benefits and additional company stock that executives accumulate, which can increase the total value of their exit package by millions of dollars.
Performance and pay are unrelated at this level.
At Burger King, John Chidsey, its chief executive, departed in April with a severance package worth almost $20 million, despite severely underperforming McDonald’s. Michelle Miguelez, a Burger King spokeswoman, declined to comment.
That is what happened with Ms. [Carol] Bartz, a hard-charging technology executive who was brought in to help turn around Yahoo in 2009. She was given a sign-on package worth over $47.2 million in cash and stock, and pay worth an additional $11.9 million in 2010, according to Equilar, an executive compensation research firm.
But after her plans to revive the beleaguered search giant failed to improve its results, Yahoo’s board fired Ms. Bartz this month. She walked away with a large allotment of deeply depressed stock options as well as cash severance worth about $5.2 million. The company said some of the stock was subject to future performance goals.
And not just in tech:
At the end of August, Robert P. Kelly was handed severance worth $17.2 million in cash and stock when he was ousted as chief executive of Bank of New York Mellon after clashing with board members and senior managers.
Runaway CEO compensation shows no signs of stopping. In fact, it’s getting worse:
On Thursday, H.P. released a regulatory filing showing that Meg Whitman, its new chief executive, would receive a sign-on package worth about $13.1 million, according to an analysis of the filing by Equilar. Much of the compensation comes from a stock option grant that is subject to certain performance targets. She also stands to collect severance if she leaves.
Rational tax policy could address this. But that would be class war.
And we mustn’t have class war in America.