Golden Parachutes: 21 CEOs Landed $100M Plus
EmailWhile TV viewers love to hear the words, “You’re Fired,” from Donald Trump, few would ever want to have that conversation with their own boss. That is, unless they are the boss and managed to negotiate a hefty separation package.
So-called golden parachutes are contractual provisions that compensate executives, if they are terminated without cause. And according to a first-of-its-kind report, the payout practice has guaranteed several outgoing chiefs with nine-figure landings to help soften the fall from their corner offices.
The biggest parachute according to GMI Ratings Report? More than $400 million awarded to Jack Welch, after he served as General Electric’s CEO from 1981 to 2001. While Welch is widely credited with turning GE into a global conglomerate powerhouse, the report does not compare an executive’s performance with the amount of their compensation. Rather, its authors say the purpose of the survey was to cast light on the amount of compensation that was awarded above and beyond the salary provided during the CEO’s tenure.
‘He [Jack Welch] was already paid for that performance, while he was acting as CEO. These parachutes are awarded after the fact, after they’ve left,’ said Paul Hodgson. Hodgson helped gather data for GMI’s report that included executive packages from 2000 until 2012. While the company has been gathering information on executive compensation since it was founded in 2000, this is the first time the findings have been published in a comprehensive report.
According to the study, 21 CEOs received more than $100 million each in “‘walk away” packages. In all, companies like GE, Exxon Mobil Corp., AT&T and Home Depot Inc., have collectively provided nearly $4 billion in golden parachutes. But according to Hodgeson, those figures could be on the low-side.
‘These numbers don’t include the perks – the use of the corporate jet, the corner offices – a lot of the compensation that doesn’t get listed on the public files.’
But despite the staggering amounts, golden parachutes serve a purpose when it comes to wooing a potential CEO to take the helm.
“The first thing someone asks is, ‘What happens if I get fired because of a merger or the company gets sold?’ These provisions compensate for taking that risk,” said Bill Catucci, adjunct professor at Fordham University Graduate School of Business.
Catucci, a former CEO himself, explained that golden parachutes also encourage CEOs to act objectively when facing a decision that could ultimately lead to their termination. Some of the examples in the GMI Report include instances where CEO’s elected to pull the cord on their golden parachute, after their companies either merged with or were acquired by other firms.
But is that worth $100 million?
Catucci concedes that not all cases are the same but that in many instances, the outgoing executive fulfilled their obligation as leader of the company while generating huge value for shareholders.
“Some of these CEO’s that have increased a company’s value by hundreds of millions or even billions of dollars, they see these golden parachutes as justified.”
21 CEOs over $100 million
Company CEO Tenure Total Payout General Electric John F. Welch Jr. 1981-2001 $417,361,902 Exxon Mobil Corp. Lee R. Raymond 1993-2005 $320,599,861 UnitedHealth Group William D. McGuire 1991-2006 $285,996,009 AT&T Edward E. Whitacre Jr. 1990-2007 $230,048,463 Home Depot Inc. Robert L. Nardelli 2000-2007 $223,290,123 North Fork Bank John A. Kanas 1977-2006 $214,300,000 Merck & Co., Inc./Schering-Plough Fred Hassan 2003-2009 $189,352,324 IBM Louis V. Gerstner Jr. 1993-2002 $189,005,929 Pfizer Inc. Hank A. McKinnell Jr. 2001-2006 $188,329,553 CVS Caremark Corp. Thomas M. Ryan 1998-2011 $185,415,435 Gillette Co. James M. Kilts 2001-2005 $164,532,192 Target Corp. Robert J. Ulrich 1994-2008 $164,162,612 Merrill Lynch & Co. E. Stanley O'Neal 2002-2007 $161,500,000 U.S. Bancorp Jerry A. Grundhofer 2001-2006 $159,064,090 Omnicare, Inc. Joel F. Gemunder 2001-2010 $146,001,476 Wachovia/South Trust Wallace D. Malone Jr. 1981-2004 $125,292,818 United Technologies Corp. George A. L. David 1994-2008 $122,631,309 eBay Inc. Margaret C. Whitman 1998-2008 $120,427,360 WellPoint Health Leonard Schaeffer 1992-2004 $119,041,000 XTO Energy Inc. Bob R. Simpson 1986-2008 $103,485,972 Viacom Thomas E. Freston 2006 $100,839,772
(Source: GMI)
Apple Factories: An Exclusive Look 
Gas Prices Rising: What Can White House Do? 
RSS
Twitter
Facebook
Those poor, poor souls. I don’t know how their families will make it. Damn this administration for expecting these poor 1% ers to pay higher taxes, essentially stealing the very bread from their children’s mouths! Oh the humanity!!!!!! The gnashing of teeth!!!!! Why won’t anyone help them!!!!
Posted by: tibertrom13 | January 27, 2012, 11:01 am 11:01 am
Think of the jobs that could’ve been created or saved for $400 Million, or even $100 Million.
Posted by: Stizostedion Vitreum | January 27, 2012, 11:26 am 11:26 am
From this milieu come the Romney/Gingrich types; so many voters willing to accept and perpetuate this kind of corporate behavior.
Posted by: Aaron Ververs | January 27, 2012, 11:30 am 11:30 am
They all sit on each others Board of Directors, that’s how they get these “golden Parachutes” voted in!!!
Posted by: tom | January 27, 2012, 1:49 pm 1:49 pm
And we wonder why the cost of products in the US are so high. They blame the unions but just look at this. This kind of money cost the company that much more to operate. The cost is passed down to the consumer. Imagine how much cheaper things could be if they simply earned a wage like the rest of us. They want to get something extra for their work? Give them stocks. Enough is enough with corporate greed. No one is worth that kind of money. I don’t care what he or she has done for the company they work for.
Posted by: Bob Anithers | January 27, 2012, 5:14 pm 5:14 pm
In the case of KILTS from Gillette all the US employees have either been pushed out of the company or had to settle for pay cuts and benifit losses ever since he showed up and the sold out the company so that he could get his golden parachute.
Posted by: steve | January 27, 2012, 5:23 pm 5:23 pm
The CEOs and the boards are an old boys club, a tight group of people. If you get admitted into the club, you get paid insane money regardless you have any real management skills or not. The only qualification is the willingness and skill to run a racket. The board member of one company is the CEO of another, vice versa. They give each other big pay at the expense of the share holders. And they hire each other to run this racket. The market based approach in hiring all other positions in a company doesn’t apply to CEO. It should. There is no reason why the hiring of CEO can not be handled by the HR like any other positions in the company. The job interview should be done by the knowledgeable people in the company as well, just like the job interview for any other positions. If this market based approach is adopted, there will be plenty of qualified candidates to make offers to. Most of the CEOs will be happy to work for less than $500K. The only reason this market based approach is not used is because that would break the old boys club. The boards and the CEOs (basically the same group of people) won’t be able to run the current rackets to transfer the shareholder’s investment money into their own pockets. Just look around to see how many of these CEOs get hired as CEOs over and over again despite running companies into the ground repeatedly. Also look around to see how many CEOs are also board members of many other companies.
Posted by: frank | January 27, 2012, 10:18 pm 10:18 pm