24/7 Wall St. has reviewed the largest golden parachute packages going back to the year 2000. To keep this uniform, we only used examples in which these CEOs with golden parachutes were not founders of their companies. Aubrey McClendon was co-founder of Chesapeake, and that at least makes up for some of the headline folly that might be there. If a founder goes out and builds up a company from scratch into a multibillion business, then creating major wealth is expected. But what about when non-founders acting as mere guardians get tens of millions or hundreds of millions when they decide to call it quits?
Investors and the public often have very different opinions over what one man (or woman) is worth. A machinist in a factory may view the creation of wealth by rising to be the guardian of a company much differently than a hedge fund manager or an investor who became wealthy by investing in that company during his or her tenure. Also, many CEOs who get these tens and hundreds of millions as golden parachutes are often viewed very favorably by employees and management of their companies.
There are two sides to the wealth effect story. Much criticism still continues over bonuses and high compensation on Wall St. High-growth sectors like technology, Internet and biotech have created armies of what are called “stock-option millionaires.” How many millionaires were instantly created the day that Facebook Inc. (NASDAQ: FB) came public? The social media giant had a very hyped-up and high-profile IPO, and employees were allowed to sell stock right at the IPO to unsuspecting investors who got burned. In short, this wealth effect swings both ways.
Is it fair to bash every CEO who walks away with a huge golden parachute upon retirement or resignation? No. Some of these CEOs were true visionaries who made significant change and brought about great gains for shareholders. Some other golden parachute packages will look absolutely ludicrous on the surface. Here are 10 of the largest CEO golden parachute packages going back to the year 2000. Due to large discrepancies over stock options and share price issues around a CEOs exit, some large golden parachutes were not included. Even in early 2012, a report from GMI Ratings showed that more than 20 CEOs walked away with retirement packages of more than $100 million. The grand tally was about $4 billion from those exit packages alone.
Not all packages are made directly in cash payments. That means that the packages do not come directly out of the pockets of shareholders at once, and in many cases these will have accumulated for years ahead of the awards. These retirement packages go way beyond cash and may include stock grants, stock options, noncompete compensation, pensions, benefits, security, country club fees, jet use and apartment fees, and more. The size of each exit package goes back to the report from GMI in 2012, but we have added additional color that may shed more light on the sheer size of our selections of non-founder CEO retirement packages. We also have shown how these high-end golden parachutes compare to the market values of these companies as they stand today.
1) Jack Welch
> Company: General Electric Co. (NYSE: GE)
> Package: $417 million
> Market cap today: $236 billion
Jack Welch is deemed to be one of the most visionary CEOs of modern business. He also reigned at GE during the best growth years in America that were not just due to post-war recoveries. Welch joined GE in 1960 and rose through the ranks. From 1981 to 2001 he led GE as CEO and chairman, and GE shareholders saw gains measured literally at about 50-times their investment. Welch was such a great CEO for investors that current CEO Jeff Immelt has had to live in Jack Welch’s shadow. Welch’s exit package was projected to be more than $400 million at the time, although his exit was literally a week before the September 11 terrorist attacks in 2001, and the value of that package may have drifted lower during the recession that followed. Jack Welch made many acquisitions to grow GE, and he had no qualms about using layoffs and consolidation to drive profits, along with the Six Sigma approach. GE predated Welch’s tenure by about 90 years to the 1890s and was among the first constituents and only remaining original component in the Dow Jones Industrial average.
2) Lee Raymond
> Company: Exxon Mobil Corp. (NYSE: XOM)
> Package: $320 million (or more)
> Market cap today: $410 billion
Lee Raymond joined Exxon back in 1963 and was chairman and CEO of the combined Exxon Mobil from 1999 to 2005 after the giant merger he orchestrated. But he dated back as CEO of Exxon to 1993 and had been a director and officer back in the 1980s. We count his CEO tenure as being 1993 to 2005. During that time, Exxon investors saw their shares rise from under $10 to more than $50 in today’s dollars, with large dividend gains along the way. Exxon Mobil has grown to be so large that it was not until 2012 that Apple Inc. (NASDAQ: AAPL) beat it out for the largest company status. Raymond was able to get the Mobil acquisition through even under the Clinton tenure Department of Justice, when some mergers were actually scrutinized. What matters here is that Exxon dates all the way back to the days of Standard Oil from the 1880s. GMI listed Lee Raymond’s retirement package at about $320 million, but other reports in 2006 after Raymond was succeeded by Rex Tillerson put that figure at $400 million or more.
3) William McGuire
> Company: UnitedHeath Group Inc. (NYSE: UNH)
> Package: $286 million
> Market cap today: $58 billion
If you love your health care insurance premiums rising every single year, you will love the empire-building retirement package for Mr. McGuire. Investors loved McGuire, as UnitedHealth’s stock rose about 50-fold from 1991 to 2006. McGuire did orchestrate UnitedHealth’s move to become the biggest health care insurance provider by combining what were a bunch of regional mergers over and over. McGuire joined United HealthCare in November 1988, he became CEO in 1991 and retired in 2006. His shocking retirement package did not face the public scrutiny that would have arisen had this happened after health care reform efforts took shape under the Obama administration. If you thought that the attacks were bad on bankers, imagine how much publicity and outrage would have come over him walking away with close to $300 million. McGuire’s acquisition machine gobbled up Pacificare, Oxford Health, MetraHealth and others. The first part of the big AARP-sponsored deal also dates back to McGuire’s tenure, but this company’s formation dates back to the mid-1970s after being founded as Charter Med Inc.
4) Ed Whitacre
> Company: AT&T Inc. (NYSE: T)
> Package: $230 million
> Market cap today: $198 billion
The AT&T of today is far different from the AT&T of the past. Ed Whitacre led a lot of the changes, though he was not CEO when the AT&T breakup of the 1980s came about. He became president of SBC (or Southwestern Bell, the real AT&T of today) in 1988, but his career in the telecom outfits goes back to the early 1960s. His chairman role began in 1990, so the dates sound a bit fuzzy when you look at the M&A trail. Whitacre led the acquisition charge, gobbling up Cingular, Pac-Tel, Ameritech, Bell South and ultimately AT&T before recapturing the AT&T name. Whitacre also was very vocal in ISP and Internet giants, getting a free-ride through the major telecom data pipes. Investors appear to have made more than five times their money, but the AT&T M&A trail makes the real calculations difficult. His M&A efforts did bring lots of added wealth to hundreds of thousands (or more) with his buyouts. AT&T is even based in “Whitacre Tower.” GMI put his exit package as being worth some $230 million, but Whitacre did not hang up his racing shoes for very long. He went on to help lead General Motors Co. (NYSE: GM) in its darkest hours of the recession, and he even joined the board of directors for Exxon Mobil. While Southwestern Bell goes back to the AT&T breakup of the 1980s, the original American Telephone & Telegraph dates back to about 1885.
5) Robert Nardelli
> Company: Home Depot Inc. (NYSE: HD)
> Package: $223 million
> Market cap today: $100 billion
The tenure of Bob Nardelli as CEO of Home Depot did not end well. In fact, things were so bad that he was on the first list of CEOs that 24/7 Wall St. called on to be fired. CNBC even ran him as one of the worst CEOs of all time. So how he got a $223 million exit package may seem like a mystery. How this came about was that Home Depot took Nardelli on after Jeff Immelt beat out several Jack Welch replacement candidates to run General Electric. Nardelli was charged with destroying the culture of Home Depot, and his efforts to move the salespeople from earners with upside into hourly workers was yet another example of where cost cuts at all costs did not go the way everyone hoped. Home Depot investors made no real money under Nardelli’s tenure, but his prestige at GE allowed him to dictate very favorable terms if things went south. Nardelli ended up going to private equity and even to Chrysler, and his later salaries other than $1 were not public at the time. This was one of the very dubious packages, but it is also a lesson that companies need to learn about negotiating with CEO candidates bringing a great history with no direct experience where they are landing.
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.