Tag: Microsoft

The cushioned exit of Stan O’Neal as CEO of Merrill Lynch & Co. this week was proof again that nothing succeeds at the top levels of business like not succeeding.

O’Neal is to receive a reported $161.5 million in stock options and retirement benefits. He was ushered out because he had lost favor with his board after announcing that the company had a $2.24 billion quarterly loss.

While $161.5 million seems like enough to get by on, it doesn’t equal amounts received by other dismissed executives.

In January of this year, Robert Nardelli, CEO of Home Depot, was given a $210 million severance package. That figure, according to the New York Times, “quickly made him the standard-bearer for failure-based pay.”

Nardelli, like O’Neal, was said to have a harsh management style, a style that might have been tolerated if Home Depot’s stock hadn’t been in the doldrums.

However, it may be a style that’s in demand. Nardelli became chairman and CEO of Chrysler in August.

In 2006, Hank McKinnell, CEO and chairman of Pfizer Inc., exited his job ahead of schedule. He received close to $200 million in severance.

McKinnell was certainly not alone. Citing a report by James F. Reda and Associates, the New York Times reported that 35 dismissed CEOs took away a total of $799 million in 2006.

Among that year’s golden parachuters was Jay S. Sidhu, chairman and chief executive of Sovereign Bancorp Inc. He received a package worth $73.56 million when he resigned in 2006.

The terms of these severance packages simply reflect the realities of the market place, analysts say.

CEOs are in demand. Therefore, they can negotiate the plush terms of their firings at the times of their hirings.

But, not surprisingly, the resignation packages do prompt criticism from the public, from shareholders and from politicians.

That happened after Walt Disney Co. dismissed its president, Michael Ovitz, in 1996.

Ovitz, who had been on the job for 14 months, was given $140 million in severance pay. Shareholders filed suit, but a judge ruled in 2005 that Disney had not violated its fiduciary duty.

A severance package given to Carly Fiorina, CEO and Chairman of the Board, Hewlett-Packard Co. drew a shareholder suit that is yet to be settled.

Her company dismissed Fiorina in February 2005. She received $21.4 million.

Shareholders have pointed out that should the company’s stock improve, Fiorina also stands to make millions more by exercising stock options.

Fiorina’s severance had other perks, including $50,000 in financial counseling. She also got to keep her personal computer equipment and receive free tech support for three years.

Jill Barad, chief executive of Mattel Inc., received $37 million when she resigned in 2000 after the company reported a loss.

As a part of her package, the company forgave a $3 million home loan and sold her a company car at “a nominal price.”

Like some of the other executives who lost their jobs in the most public of fashions, Barad and Fiorina have landed on their feet.

A website lists Barad’s speaking fee at $50,001 and above. Fiorina has signed on with the soon-to-air Fox News business news channel.

Brinker International, the Dallas restaurant company with $4.3 billion in annual revenue, pays members of its board of directors well, more than $200,000 a year in cash and stock, according to the company’s proxy statement.

And it gives them a complimentary dining card for use in company restaurants, which currently number about 1,800 in 49 states, Washington, D.C., and two dozen foreign countries. Brinker’s outlets include Chili’s, Romano’s Macaroni Grill, On the Border and Maggiano’s Little Italy.

The dining card is a great perk for motivating directors to learn first hand about the company’s business and its products. Wonder how many of Countrywide Financial’s directors and their families hold some of the exotic mortgages that are now causing chaos in the credit markets? Or, how many Mattel directors and their families have toys with lead paint in their homes?

A few of Brinker’s directors did not make use of their dining card, as first reported by footnoted.org. Among them was Robert Gates, who left the board late last year when he became Secretary of Defense.

George Mrkonic, the retired president of Borders Group, and John Mims, co-founder of Cypress Ridge Partners, also did not use their cards.

The remaining outside directors did make use of their cards, some of them, apparently, liberally. In its proxy, the company listed only the tax gross up amount paid to each director, related to use of the dining card. That amount would be much less than the value of the meals received.

Ron Kirk, former mayor of Dallas and a partner in the law firm of Vinson & Elkins, received a gross up of $1,022. Rosendo Parra, a retired Dell executive, received $528. Erle Nye, chairman emeritus of TXU, the giant utility company being acquired by private equity firms, received $415. And James Oesterreicher, the retired chairman of J.C. Penney, received $250.

Keep in mind that the average meal (food and drinks) at Chili’s, Romano’s and On the Border generates less than $15.50 in revenue, according to Brinker’s 10-K. The average meal revenue at Maggianos is $25.80.