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CEO Compensation
Lacey Rose with Scott DeCarlo, 05.25.05, 9:35 AM ET
NEW YORK - Wanna get rich? Try this surefire method. First, spend twenty years or so clawing your way up the corporate ladder. Get named CEO. Then screw up royally (anything this side of criminal will do.) Get fired. And then, cash in.
Despite the mounting investor fury over excessive CEO compensation--the average CEO earned $10 million in 2004, more than 300 times what an average worker makes--the practice of paying millions to get rid of underperforming or disgraced chief executives remains the norm in corporate America. (Click here to read our recent special report on CEO compensation.)
Dick Grasso, the former head of the New York Stock Exchange, remains the undisputed champion of the golden handshake, pocketing nearly $140 million on his way out the door. Of course, the size of Grasso's payout made it front-page news--and sparked an ongoing legal battle--but dozens of other CEOs quietly pocket millions after getting the boot. Click here for five of their stories.
Name: Carly Fiorina
Former Company: Hewlett Packard
Ousted: Feb. 10, 2005
Reason For Departure: Fiorina is best known for publicly fighting with HP heir Walter Hewlett over HP's acquisition of Compaq Computer in 2002. Fiorina got her way, paying $19 billion to buy Compaq, creating what was fleetingly the world's No. 1 PC maker. (Dell quickly regained its crown.) But while Fiorina won the battle, she lost the war--and her job--when it became increasingly clear that the Compaq merger was, indeed, a dog.
Golden Parachute: approximately $21 million in one-time payouts
Name: Christopher Galvin
Former Company: Motorola
Ousted: Sept. 19, 2003
Reason For Departure: Grandpa founded the company, and Dad turned it into a world-class tech giant. Then young Christopher took over. When he became CEO in January 1997, Motorola was the world leader in mobile phone handsets, with a 31% market share. By the spring of 2003, Motorola could only command a 19% share. The company had gone from being profitable to posting a loss of $3.8 billion in fiscal 2001, its first in 71 years. The stock slid from $20 in 1997 to $8 by May of 2003. Galvin resigned in September.
Golden Parachute: $29.1 million in one-time payouts plus a $2.3 million annual consulting fee for two years. (One-time payout includes a 2003-04 performance bonus of $3.5 million, $10.8 million in vested restricted stock, total funding worth $13.8 million under the company's supplementary retirement plan--including the tax obligation--and another $98,000 in perks--including the value of a automobile retirement gift.)
Name: Scott Livengood
Former Company: Krispy Kreme
Ousted: Jan. 18, 2005
Reason For Departure: Livengood presided over Krispy Kreme's delicious initial public offering in 2000. And for the next three years, the stock was a Wall Street favorite--apparently people crave hot, sugary doughnuts when the economy is bad. By 2003 the stock was trading at nearly $50 per share, more than double its IPO price. But then the donut days ended. In May 2004, Krispy Kreme posted its first ever quarterly loss, initially blaming the red ink on the low-carb dieting fad. But word of a U.S. Securities and Exchange Commission investigation soon leaked out, followed by a shareholder's lawsuit alleging that the company's top executives were padding quarterly sales figures. Livengood resigned in January of this year. The news sent shares in the donut maker up 10%.
Golden Parachute: $32.7 million in one-time payouts, plus a six-month consulting fee worth $275,000. (One-time payment includes $32.7 million in vested stock options. Consulting agreement could be renewed for an additional half year.)
Name: Franklin Raines
Former Company: Fannie Mae
Ousted: Dec. 21, 2004
Reason For Departure: In 1999, Raines was on top of the world, having just been named the CEO of Fannie Mae, the dominant player in the $8 trillion mortgage market. Raines, the first African American to run a major U.S. corporation, pledged to hold himself personally accountable if Fannie Mae's accounting was ever found to be objectionable. Five years and $9 billion in restatements later, Raines was held to his word and exited the nation's second-largest financial institution under a black cloud.
Golden Parachute: $14.2 million in one-time payouts, plus an annual pension worth $1.4 million and a life insurance benefit of $5 million. (One-time payout includes deferred compensation of $8.7 million and $5.5 million in vested stock options. Life insurance benefit will drop to $2.5 million after reaching age 60. All under review by the Office of Federal Housing Enterprise Oversight.)
Name: Harry Stonecipher
Former Company: Boeing
Ousted: March 6, 2005
Reason For Departure: From the "truth is stranger than fiction" department: After their previous CEO, Phil Condit, resigned amid a government-contract scandal that sent two Boeing executives to jail, Boeing's board decided to bring back Harry Stonecipher. Stonecipher, who had been CEO of McDonnell Douglas when the two companies merged back in 1997, moved aggressively to clean up Boeing's image, becoming what has been described as the "company's chief ethics enforcer." Then, inexplicably, the reappointed 68-year-old CEO embarked on an extramarital affair with an employee twenty years his junior. After the affair came to light, the hapless Boeing board asked for and received his resignation, citing "poor judgment."
Golden Parachute: $44 million in one-time payouts, plus an annual benefit worth $673,799. (One-time payment includes $44 million in vested stock options.)
Lacey Rose with Scott DeCarlo, 05.25.05, 9:35 AM ET
NEW YORK - Wanna get rich? Try this surefire method. First, spend twenty years or so clawing your way up the corporate ladder. Get named CEO. Then screw up royally (anything this side of criminal will do.) Get fired. And then, cash in.
Despite the mounting investor fury over excessive CEO compensation--the average CEO earned $10 million in 2004, more than 300 times what an average worker makes--the practice of paying millions to get rid of underperforming or disgraced chief executives remains the norm in corporate America. (Click here to read our recent special report on CEO compensation.)
Dick Grasso, the former head of the New York Stock Exchange, remains the undisputed champion of the golden handshake, pocketing nearly $140 million on his way out the door. Of course, the size of Grasso's payout made it front-page news--and sparked an ongoing legal battle--but dozens of other CEOs quietly pocket millions after getting the boot. Click here for five of their stories.
Name: Carly Fiorina
Former Company: Hewlett Packard
Ousted: Feb. 10, 2005
Reason For Departure: Fiorina is best known for publicly fighting with HP heir Walter Hewlett over HP's acquisition of Compaq Computer in 2002. Fiorina got her way, paying $19 billion to buy Compaq, creating what was fleetingly the world's No. 1 PC maker. (Dell quickly regained its crown.) But while Fiorina won the battle, she lost the war--and her job--when it became increasingly clear that the Compaq merger was, indeed, a dog.
Golden Parachute: approximately $21 million in one-time payouts
Name: Christopher Galvin
Former Company: Motorola
Ousted: Sept. 19, 2003
Reason For Departure: Grandpa founded the company, and Dad turned it into a world-class tech giant. Then young Christopher took over. When he became CEO in January 1997, Motorola was the world leader in mobile phone handsets, with a 31% market share. By the spring of 2003, Motorola could only command a 19% share. The company had gone from being profitable to posting a loss of $3.8 billion in fiscal 2001, its first in 71 years. The stock slid from $20 in 1997 to $8 by May of 2003. Galvin resigned in September.
Golden Parachute: $29.1 million in one-time payouts plus a $2.3 million annual consulting fee for two years. (One-time payout includes a 2003-04 performance bonus of $3.5 million, $10.8 million in vested restricted stock, total funding worth $13.8 million under the company's supplementary retirement plan--including the tax obligation--and another $98,000 in perks--including the value of a automobile retirement gift.)
Name: Scott Livengood
Former Company: Krispy Kreme
Ousted: Jan. 18, 2005
Reason For Departure: Livengood presided over Krispy Kreme's delicious initial public offering in 2000. And for the next three years, the stock was a Wall Street favorite--apparently people crave hot, sugary doughnuts when the economy is bad. By 2003 the stock was trading at nearly $50 per share, more than double its IPO price. But then the donut days ended. In May 2004, Krispy Kreme posted its first ever quarterly loss, initially blaming the red ink on the low-carb dieting fad. But word of a U.S. Securities and Exchange Commission investigation soon leaked out, followed by a shareholder's lawsuit alleging that the company's top executives were padding quarterly sales figures. Livengood resigned in January of this year. The news sent shares in the donut maker up 10%.
Golden Parachute: $32.7 million in one-time payouts, plus a six-month consulting fee worth $275,000. (One-time payment includes $32.7 million in vested stock options. Consulting agreement could be renewed for an additional half year.)
Name: Franklin Raines
Former Company: Fannie Mae
Ousted: Dec. 21, 2004
Reason For Departure: In 1999, Raines was on top of the world, having just been named the CEO of Fannie Mae, the dominant player in the $8 trillion mortgage market. Raines, the first African American to run a major U.S. corporation, pledged to hold himself personally accountable if Fannie Mae's accounting was ever found to be objectionable. Five years and $9 billion in restatements later, Raines was held to his word and exited the nation's second-largest financial institution under a black cloud.
Golden Parachute: $14.2 million in one-time payouts, plus an annual pension worth $1.4 million and a life insurance benefit of $5 million. (One-time payout includes deferred compensation of $8.7 million and $5.5 million in vested stock options. Life insurance benefit will drop to $2.5 million after reaching age 60. All under review by the Office of Federal Housing Enterprise Oversight.)
Name: Harry Stonecipher
Former Company: Boeing
Ousted: March 6, 2005
Reason For Departure: From the "truth is stranger than fiction" department: After their previous CEO, Phil Condit, resigned amid a government-contract scandal that sent two Boeing executives to jail, Boeing's board decided to bring back Harry Stonecipher. Stonecipher, who had been CEO of McDonnell Douglas when the two companies merged back in 1997, moved aggressively to clean up Boeing's image, becoming what has been described as the "company's chief ethics enforcer." Then, inexplicably, the reappointed 68-year-old CEO embarked on an extramarital affair with an employee twenty years his junior. After the affair came to light, the hapless Boeing board asked for and received his resignation, citing "poor judgment."
Golden Parachute: $44 million in one-time payouts, plus an annual benefit worth $673,799. (One-time payment includes $44 million in vested stock options.)