By: Jim Taylor
Companies I wouldn’t mind
not working for
When I was growing up, my generation generally
looked for a job where progressive promotions would enable us to retire
comfortably.
We got it wrong! Today, it
seems, it’s much more profitable not to work for some companies.
Case in point
– Henry Silverman, former CEO of Cendant Corp.
He left with a severance package worth more than $110 million.
Before he got fired, he got a
salary reported at $1.9 million a year.
So Cendant effectively pays him
not to work for them for 55 years.
Silverman built Cendant into an
industrial conglomerate that included car rental company Avis, hotel chain
Ramada, Orbitz on-line travel, Century 21 and
Coldwell Banker real estate, and Sotheby’s International.
“This was an executive … valued
for his deal-making prowess,” explained Patrick McGurn,
executive vice-president for Institutional Shareholder Services. “He was paid
for putting all these deals together. Now he’s getting paid for taking them
apart.”
Avis paid Silverman $62.5
million for selling them off. Realogy, the real
estate spinoff, will contribute another $50 million. Orbitz and Ramada have yet to be heard from.
Severance packages
I’d
like to offer my services to some companies I wouldn’t mind not working for.
When Edward E. Whitacre Jr., 65, retires from AT&T, he can expect
about $84.7 million in retirement benefits plus $73.8 million in deferred pay –
over $158 million.
At Occidental Petroleum, chief
executive Ray R. Irani has socked away some $124
million in his deferred compensation account. Last year, that account earned
$679,396 in interest. Equilar, a research firm that
specializes in executive salaries, estimated his interest alone at 14 times the
average salary of an oil-industry worker.
Increasingly, senior executives
negotiate severance packages before they sign on.
Employee benefits corporation
Cigna would give H. Edward Hanway between $72.8
million and $80.5 million if he voluntarily stepped down after any sale of the
company.
Johnson & Johnson will pay
William C. Weldon $64.2 million. IBM will pay Samuel J.
Palmisano $54.6 million. And Ford’s Alan Mullaly will get $28 million if he leaves for any reason
other than committing a crime.
Even these settlements pale against
the retirement package for Lee Raymond, CEO of Exxon,
worth nearly $400 million. His salary, for his last year of work, was almost
$60,000 an hour.
Nardelli numbers
Don’t tell me that these figures compare to the
incomes of sports and movie superstars. Julia Roberts doesn’t get paid not to act, or Nellie Furtado not to
sing. Tiger Woods and Steve Nash get paid only if they play.
And don’t tell me that
corporate CEOs deserve this income because they’re responsible for the welfare
of thousands of employees. Tell the thousands of Nortel staff who got laid off.
Tell the Enron employees bilked out of their pensions.
Some severance settlements are
theoretical. Merrill Lynch’s chief executive, E. Stanley O’Neal, could receive
$251.4 million if a merger results in something called “a change-in-control
payout.”
Home Depot lured CEO Robert Nardelli away from GE by
promising take-home cash and bonuses worth $82 million if he were dismissed. He
would receive a cash payment of $20 million within his first 30 days of
unemployment.
It sure beats going on going on
the dole.
Some consultants now call the
value of potential severance and change-in-control payouts the “Nardelli Number.”
The only time I got eased out
of a job, my boss gave me three months pay and relocation counselling.
He didn’t offer “non-compete”
compensation, and I didn’t know enough to ask for it.
Non-compete clauses – when I
disentangle the legal jargon – lie at the heart of the case against Conrad
Black. The prosecution alleges that Black and his friends pocketed some $50
million in “non-compete” fees that should have gone to shareholders of
Hollinger International.
Growing disparities
If these figures make your eyes glaze and your stomach
turn, you’re not alone. Fellow columnist and military ethicist Arthur Gans called them “obscene.”
Gans
was referring specifically to the growing disparity between CEO
and worker incomes.
The Canadian Centre for Policy
Alternatives calculated that by 9:46 a.m. on January 2, Canada’s 100
highest-paid corporate executives had already received as much as an average
Canadian worker would earn in the entire year—$38,010.
In his best-selling book Collapse,
Jared Diamond analyzed the causes of the sudden and precipitous collapse of
past and present civilizations.
He identified five
factors—environmental degradation, climate change, war, trade, and the
society’s own internal response to these challenges.
Not every collapse involved all
five factors.
But every collapse shared one
common factor. The leadership got out of touch with the people.
In every case, the people at
the top acquired more lands, more wealth, more luxury… while their people sank
progressively further into poverty.
Sources as diverse as The
Economist magazine, the OECD, and the Council of
Economic Advisors all agree that the poorest 20 per cent of the
Using Federal Reserve data, Commonweal
magazine calculated that in 1974, corporate CEOs earned 35 times as much as
their average worker. By 1995, they earned 150 times as much.
Excessive variances
And some go far beyond that.
Last year, Occidental’s Irani received a salary of $52.1 million. About 1000 times his average employee’s.
That’s only what Occidental
officially paid him. Buried in fine print, on page 28, the
proxy statement required by the Sarbanes-Oxley Act showed that in 2006 Irani also cashed out $270.1 million in profit from stock
options. And he withdrew another $93.3 million from a deferred stock
plan revealed for the first time.
Total take – 8,594 times his
average worker’s salary.
“Out of touch” seems like an
understatement.
If Diamond is right, the
increasing disconnect between rich and poor
(economists call it the gini ratio) bodes ill for the
future of western civilization, and for welfare of human society generally.
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Copyright © 2007 by Jim Taylor. Non-profit use in congregations and study
groups permitted; all other rights reserved.
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