Want more money? Fail It works for some CEOs anyway, judging from some of their lucrative paydays when they're fired, pushed out or just fail to meet expectations. NEW YORK (CNNMoney.com) -- In the quest for more pay, forget the whole "list your accomplishments, then ask the boss for a raise" thing. It doesn't seem nearly as effective as getting fired or doing a mediocre job before quitting. At least if you're a CEO, or in some cases just president.
CEOs have profited handsomely from less-than-stellar tenures, often walking away with more money than most people earn in three lifetimes, despite a track record marked by layoffs, falling stock prices, failed initiatives, legal troubles or some combination of the four. Severance typically is given to those fired without cause, and unlike in the real world, doing a bad job often isn't considered "just cause" to fire CEOs. "Poor performance on the job does not constitute cause in most CEO contracts," corporate law scholars Stewart J. Schwab and Randall S. Thomas write in their analysis of contracts in use at 1,500 public companies. They also found that only in half of the contracts is breach of fiduciary duty to the company a just cause for firing. Delightful, isn't it? To add insult to injury, getting ousted can be more lucrative than leaving a company voluntarily. New York University finance professor David Yermack found that among 179 CEOs at Fortune 500 companies who left their posts between 1996 and 2002, the CEOs who were dismissed were more likely to get separation pay and more likely to receive a bigger exit package than those CEOs who retired voluntarily. An earlier study by The Corporate Library found that among 367 companies, more than half offered exit packages to terminated CEOs that would total three years or more of annual compensation. We should all be so lucky. We're not, of course, but here are some folks who have been and those who are likely to be: Michael Ovitz, former president of Disney (Charts): Hired and fired by pal Michael Eisner, Ovitz ran Disney for a mere and unremarkable 14 months in the mid-1990s before being paid $140 million in severance, making it the humdinger of you-must-be-joking severance packages. Shareholders filed suit against the company, contending the payment was excessive and not in the best interest of the shareholders. But in June, the Delaware Supreme Court ruled on appeal that Disney did not breach its fiduciary duty. Carly Fiorina, former CEO of Hewlett Packard (Charts): Fiorina, who led HP's merger with Compaq in a failed attempt to boost revenue growth, got paid $21 million upon termination, in addition to a reported $21 million in other benefits. Soon after Fiorina left, HP announced it would lay off 14,500 employees, or 10 percent of its workforce. In the year following her departure, HP's stock price rose 50 percent. Peter Dolan, former CEO of Bristol-Myers Squibb (Charts): Dolan was ousted this month after the company came under investigation by federal authorities for a settlement offer it made to try to ward off a generic competitor. During his tenure the company stock fell more than 50 percent. No word yet on the size of Dolan's severance package, but if it's anything like the agreement he made with the company in the event he was terminated in connection with a merger, he will do quite nicely for himself. Under the change of control agreement, he would receive roughly 3 times his base salary and bonus, plus any unpaid incentive compensation from the prior calendar year through to the date of his termination. All his outstanding stock options would vest immediately as would any company matches in the company's savings plan, and restrictions on his restricted stock awards would be removed. Stephen Hilbert, former CEO of Conseco (Charts) (CNO): Hilbert's tenure was marked by deep company debt and a failed attempt to sell one of its businesses. His reward: an exit package worth more than $70 million, according to the Corporate Library. In 2002, two years after his departure the company filed for bankruptcy, and since 2000, three other CEOs have come and gone, each leaving with fat payouts, the latest of which, according to published reports, is a $6.7 million exit package for former CEO Bill Kirsch, who left on May 23, just 21 months after taking the job. Phil Purcell, former chairman and CEO of Morgan Stanley (Charts): After a group of influential shareholders launched a very public campaign to push him out of office, Purcell resigned in June 2005. He was given a nearly $52 million exit package, which included a $44 million bonus and lifetime benefits totaling $3.1 million, according to a company proxy. Charles Fote, former CEO of First Data (Charts) (FDC): When Fote announced his departure in 2005, analysts speculated he was pushed from his job because underwhelming stock performance and concern about the company's strategic direction, according to published reports. As part of his exit package, Fote agreed to serve as a consultant for the same $1.1 million he was earning as CEO, except the severance agreement specified he would not spend more than 20 percent of his time consulting, according to Michelle Leder, who writes the corporate watchdog blog footnoted.org. Walden O'Dell, former CEO of Diebold (Charts): In the wake of shareholder lawsuits over insider trading, O'Dell stepped down at the end of last year, and the company gave him $3.86 million in severance, according to Leder reporting for the New York Times. The company spokesman told Leder that was equal to two years' salary and bonus. The company is now formally being investigated by the SEC. ---------------------------------------------------------------------- CEOs free ride ... to Perksville Jeanne Sahadi writes about personal finance for CNNMoney.com. For comments on this column or suggestions for future ones, please e-mail her at everydaymoney@cnnmoney.com. |
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