« Senator Ron Wyden unveils Universal Health Care in America | Main | A Financial Plan That Comes with Mug Shots »

Gretchen Morgenson recently detailed one of the most egregrious, disgusting payouts in U.S. corporate history. Hank McKinnell, the former Chief Executive of Pfizer, received a $200 million payout after being DUMPED by the company for his horrible performance:

Here's how Mr. McKinnell's $200 million package adds up. First is his pension of about $6.65 million a year for as long as he lives. The company estimates its value at $82.3 million. Sweet.

Next comes $78 million in deferred compensation, which includes $67 million in pay that Mr. McKinnell has set aside over the years. Then there is an estimated $18.3 million in performance-based shares. Given Pfizer's recent results, perhaps it would be more accurate if these were identified as failure-based shares.

Tack on $12 million in severance, vested stock grants worth $5.8 million and a $2.15 million bonus and Mr. McKinnell has all the makings of a very, merry Christmas. But that's not all.

Mr. McKinnell, 63, also received $576,573 worth of medical, dental and life insurance as well as the unspecified value of continued medical and dental coverage under Pfizer's retiree plans for him and his partner, Joanna Slonecka. Included in this pot is the cost of financial counseling programs. (Maybe he can dip into that amount to help line up some therapy for Pfizer�s board.)

The most curious figure of all, though, is $305,644 - rounded up to the nearest dollar, presumably - that represents the value of Mr. McKinnell's unused vacation days.

And this $200 million was in response to the stocks performance over the past five years, when the price per share went from $46 to $26? Where are the Pfizer shareholders?

"The Pfizer board of directors has been inept," said Frederick E. Rowe Jr., a money manager in Dallas and president of Investors for Director Accountability, a grass-roots organization that organized a vote against directors at Pfizer's shareholder meeting last April. Over a long period of time, it has obligated Pfizer shareholders to pay Mr. McKinnell staggering sums for continuous, unmitigated failure. This is nothing other than a betrayal of Pfizer employees and shareholders.

Ms. Morgenson continues:

Mr. McKinnell's $200 million is even more disturbing when put next to the roughly $137 billion in market value that vaporized on his watch. That Mr. McKinnell forced his shareholders to pay $305,644 for his unused days off after draining them of $137 billion is downright stupefying.

But this is how too many leaders behave in 2006. They give large numbers of pink slips to employees. They create really big losses for their shareholders. But they make sure they chisel the company's owners for every nickel and dime, including dental coverage, unused vacation days and financial counseling programs.

If, in fact, U.S. Corporations were anywhere near democratic institutions, the owners of Pfizer (shareholders) would rise up in horror and demand their stolen money be returned.

The article concludes:

In the meantime, Merry Christmas, Hank. From the shareholders who lost $137 billion on your watch and the workers who will lose their jobs because of your stewardship. We hope you enjoy the money piled under your tree.

Every last nickel.

Follow-up:

Another recent article from the NY Times details how executive pay packages allow top officers to jump ship with no financial risk whatsoever. It's called the "Golden Hello":

For a chief executive of a large corporation, it is the one thing - more than the corporate jet or any other perk - that must be guaranteed before the executive will move to run another company.

W. James McNerney Jr., a former superstar manager at General Electric, received not one, but two such deals in recent years, worth tens of millions of dollars. In each deal, he was given any bonuses, stock options, restricted stock and pension benefits that he would have abandoned by leaving his previous employer.

Such golden hello payments are intended to make the executive "whole" - in essence to treat the executive as if his career were one smooth ascent with no costly interruptions. And these multimillion-dollar payments and perks are used to draw in not only chief executives, but virtually every member of the executive suite. If "golden parachutes" - rich exit packages of extra cash, stock or retirement benefits - are needed at times to kick out chief executives, golden hellos are increasingly needed to get them in the door.

Do regular workers get these guarantees when they leave their jobs? Of course not. It can certainly be argued that CEOs are worth more than regular workers, and therefore need to be lured away with proper compensation, but c'mon, these payouts ensure that the CEO takes no risk at all. Where are the shareholders?

The existence of the golden hello undermines the very reason stock options and executive pensions are offered in the first place - to encourage executives to hit performance targets and then to stick around to receive the full value of their compensation package.

"The whole rationale for giving larger bonuses and larger payouts to executives is that their total pay package is supposed to be riskier than that of the average worker," says Eleanor Bloxham, president of the Value Alliance, a group that advises companies on corporate governance. "What's happening with these make-whole packages is that they have no relationship with performance at the new company. You're paying people, really, a guaranteed bonus or, in fact, a guaranteed everything."

Another example of the ridiculous spread between upper echelon executives and the regular worker.

We are setting the stage for the upcoming revolution.

Name (required)
Email
Website
Remember personal info? Yes   No
Comments

home | music | democracy | earth | money | projects | about | contact

Site design by Matthew Fries | © 2003-23 Consilience Productions. All Rights Reserved.
Consilience Productions, Inc. is a 501(c)(3) non-profit organization.
All contributions are fully tax deductible.