6) Fred Hassan
> Company: Merck & Co. (NYSE: MRK), actually Schering-Plough
> Package: $189 million
> Market cap today: n/a; Schering $14 billion, Merck today is $127 billion
Fred Hassan was a great CEO who rose through the ranks of many drug companies like Sandoz, Pharmacia and Wyeth. He led Schering-Plough as CEO from 2003 until 2009, and his golden parachute package was basically after the company’s acquisition by Merck was completed. Shareholders liked Hassan, and he was known by employees to be a great leader during his tenure. Schering-Plough bought Organon for about $14 billion under Hassan’s leadership. Schering-Plough dated back to the 1850s. Hassan’s exit package was originally thought to be more than $60 million, but after all the merger and exit numbers were seen, GMI assigned that value much higher. Hassan’s empire-building fortunate may have been based in part on the package paid out to Hank McKinnell at Pfizer, considering that McKinnell was effectively forced out. Hassan left and has held board seats at Time Warner Inc. (NYSE: TWX) and Avon Products Inc. (NYSE: AVP), and he is currently chairman at Bausch + Lomb. He is also a senior advisor with private equity firm Warburg Pincus.
7) Hank McKinnell
> Company: Pfizer Inc. (NYSE: PFE)
> Package: $188 million
> Market cap today: $203 billion
Hank McKinnell served as CEO of Pfizer from 2001 to 2006, but he rose through the ranks after many years, as he joined Pfizer all the way back in 1971. That makes him nearly a Pfizer-lifer. McKinnell fought generics and fought international knock-offs in a public manner. His tenure was marred by a stagnant and then falling share price. It is possible that his tenure was going to be impossible to be loved as a great builder because his leadership was in the years after both Lipitor and Viagra took over the drug world. McKinnell was in charge when Pharmacia was acquired, and then later under McKinnell came all the drug woes at Pfizer and elsewhere, along with restructuring efforts that never revived the stock. Pfizer was not just too generous with Hank McKinnell. After his exit, Pfizer named top lawyer Jeff Kindler as its CEO with his background at GE and McDonald’s Corp. (NYSE: MCD). By the end of 2010, Kindler also had to leave after yet another poor stock performance. Pfizer reportedly gave Kindler almost $10 million to leave. Layoffs, restructurings, riding the wave of past successes and very poor share performance did not keep Pfizer from overpaying top brass on the way out. Pfizer dates back to the mid-1800s, and based on high-pay exit packages we would say that Pfizer’s stock ticker stands for “Pay For Everything.”
8) Lou Gerstner
> Company: International Business Machines Corp. (NYSE: IBM)
> Package: $189 million
> Market cap today: $230 billion
Lou Gerstner served almost 10 years as CEO and chairman of IBM. After heading up RJR Nabisco and also one of the top positions at American Express Co. (NYSE: AXP), he was credited with turning IBM into a great company again. Gerstner was an early executive to embrace the Internet, and his efforts there and in IT probably kept IBM from becoming just another irrelevant technology and equipment maker. His tenure is also credited with close to 100,000 layoffs, which were largely unpopular with the media but great for investors. Shares rose more than 12-fold from the trough shortly after his CEO job started to the peak of the tech bubble in 2001. IBM’s dividend also more than doubled from trough to peak under his tenure. After his IBM retirement, Gerstner joined the Carlyle Group L.P. (NASDAQ: CG) in private equity, but he has since retired from his full-time role there. IBM is very generous, as long as the CEO leaves after success. Sam Palmisano replaced Gerstner, and Palmisano announced his retirement in 2011. His exit package was said to be worth some $170 million in total.
9) John Kanas
> Company: North Fork Bank, now with BankUnited Inc. (NYSE: BKU)
> Package: $214 million
> Market cap today: n/a, $14+ billion buyout
John Kanas may be the luckiest banker alive. His tenure at North Fork Bank as CEO was from 1977 (at the age of 29) all the way until 2006, when Capital One Financial Corp. (NYSE: COF) acquired the bank. North Fork was the amalgamation of banks, and its history goes back to 1950. Kanas made bank for the North Fork shareholders after the bank was bought out for more than $14 billion. His exit package was listed as $214 million by GMI. If you go back to being the luckiest guy in banking, look at the dates. By selling in 2006, Kanas avoided getting his name ruined. While he was not the founder at North Fork, his bio does show that he was CEO when North Fork came public in 1982. And why Kanas is still the luckiest guy in banking, he joined as chairman and CEO of BankUnited in 2009 after the banking crisis, and that bank has been a rumored possible buyout target before. Kanas is a large shareholder there as well, and he might get to do a repeat of his major windfall payday if bank mergers ever get big enough that this turnaround bank gets acquired.
10) Thomas Ryan
> Company: CVS Caremark Corp. (NYSE: CVS)
> Package: $185 million
> Market cap today: $64 billion
Ryan was CEO of CVS from 1998 until he announced his retirement in 2011, after mergers and building the company up with organic growth and acquisitions. CVS was originally known as Melville Corp., which was a large retail holding corporation dating back to the 1920s. Incorporated in 1922 as the Melville Shoe Co. by Ward Melville, it changed its name to CVS Corp. in 1996. Ryan may have been given a great retirement package, but the company likes steadiness: Ryan began his career with CVS/Pharmacy in 1974 as a pharmacy intern. The company turned to Larry Merlo as the new CEO, and he joined CVS/Pharmacy way back in 1990 through the acquisition of People’s Drug. Under Ryan’s tenure, CVS Corp. and Caremark completed their mega-merger, acquired Eckerd, acquired Sav-On and Osco drugstores from Albertsons, and acquired Long’s. CVS already had been a growth engine and acquisition before Ryan took the helm. CVS shareholders had very mixed sort of returns under Ryan’s leadership, as the growth pains may have added pressure. Still, shareholders did make money from start to finish of his tenure, but they could have made about 300% or so under his tenure if they bought at the trough and sold upon his retirement.
It is amazing just how many $100 million and higher packages there are upon retirement. Shareholders might not have to cough up the money all in cash, but ultimately that is coming out of their end. When you look at the one thing that all these companies have in common, it is not growth under the CEO. They all have size in common, and in many of these cases it seems like the board of directors at each company endorses the 2-and-20 payment that hedge fund managers used to get. Again, our list of these top CEO exit packages is all on CEOs who were not founders of their companies.
These were just 10 of the instances. Others can be seen here from the old chart from GMI below.
Jon C. Ogg