Hey! Where's MY Golden Parachute?
Clearly, I've not followed the right career path.
I never got my M.B.A. from Harvard. I've never been employed as the CEO of a multi-billion dollar company. And I'm never going to get my golden parachute.
A golden parachute is, essentially, a ridculously rich severance package for executive-level staff who've lead their company straight down the crapper. In today's economic crisis, the daily papers feature story after story about CEOs sneaking away with millions like thieves in the night, leaving behind the smoking ruins of the giant corporations they ran.
While the concept of the golden parachute is certainly not new, here are a few examples of the golden parachutes awarded in recent years:
Carly Fiorina, Hewlett Packard
In 2005, on the heels of layoffs of 20,000 Hewlett Packard employees, HP CEO Carly Fiorina was fired. Along with walking papers, Fiorina also received roughly $45 million, including $21 million in severance pay and another $21 million buyout of her pension benefits and company stock options.
Kerry Killinger / Alan Fishman, Washington Mutual
Another victim of the subprime lending disaster, WaMu ousted Kerry Killinger just weeks before it was taken over by J.P. Morgan Chase. Killinger reportedly took home a $44 million consolation prize.
Killinger's successor at WaMu, Alan Fishman, enjoyed just three weeks at the helm of the floundering giant before the government stepped in and facilitated the sale to J.P. Morgan. Fishman was eligible for $11 million in severance pay and was entitled to keep his $7.5 million signing bonus. $18+ million for three weeks work? Not too shabby!
Angelo Mozilo, Countrywide Financial Corp.
As the CEO at the top of the subprime mortgage debacle that initiated the economic tailspin that we now all enjoy, Angelo Mozilo voluntarily forwent his $37.5 million severance package. However, he still bagged $44 million when Bank of America bought out Countrywide - this in addition to the roughly $140 million he made from sale of Countrwide stock in 2006 and 2007.
Charles Prince, Citigroup
Charles Prince announced his resignation from Citigroup during an emergency board meeting, in which he said "Given the size and nature of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as chief executive officer is to step down." That step down was undoubtedly softened by the $99 million he took with him in the form of pension and stock holdings.
Robert Nardelli, The Home Depot
Robert Nardelli, who began his reign of The Home Depot in 2000, made his exit in January 2007. Stock prices at the time of his departure were at the same level as at his arrival seven years earlier. Nardelli was awarded $210 million in severance, retirement benefits and stock.
Sadly, this list is far from complete.
Unfortunately, a Google search of the phrase "golden parachute" will yield far more names than I've included here, and too many of these stories are recent. In some cases, the shareholders who've been done wrong have filed lawsuits, largely unsuccesfully, to try to stop these colossal payouts to executives who clearly don't deserve them.
Don't get me wrong - the term "golden parachute" was not necessarily coined with intent for negative connotation. There is absolutely nothing wrong with paying for GOOD performance, and I'm sure that there are top corporate executives out there who've received huge payouts upon their departures for jobs well done. Those guys and gals just don't make the news as readily, especially not these days.
The bailout package recently passed does have provisions to prevent companies being bailed out from using taxpayer money to reward their top executives with golden parachute-style severance packages, but the limitations are widely considered to be largely illusory. Under the plan, golden parachutes are only prohibited if employment agreements are written during the rescue period, and if the company sells more than $300 million in assets to the government. If the severance language already exists before the rescue then the new law will not help.
I guess we had better get used to reading about executives getting rich[er] from their failures, while the employees they lead hit the unemployment lines.