Golden Parachutes: 21 CEOs Landed $100M Plus

By Dan Kloeffler

Jan 27, 2012 7:31am

While 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)
				
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