New Study Shows How Golden Parachutes Are Getting Bigger

It’s never been so good to get fired—if you’re the CEO of a public company. A new study shows how top execs are walking away with hundreds of millions of dollars, even after they do a crummy job. Plus, Gary Rivlin on the $145 million CEO you've never heard of.

01.11.12 7:26 PM ET

“You’re fired” can be the sweetest words these days when you’re the CEO of a publicly traded company. Sure, Leo Apotheker must have felt lousy when Hewlett-Packard dumped him as chief executive last September after less than a year on the job. But the sting of humiliation was no doubt softened by a $12 million cash payment the company gave him despite the lousy job he had done.

But now a new study released Wednesday shows that $12 million ain’t nothing in the age of the imperial CEO. GMI, a well-regarded research firm that monitors executive pay, looked at the largest severance packages ex-CEOs have received since the start of 2000.

To earn a spot in the top 20, a CEO would need to have received a golden parachute in excess of $100 million.

Thomas E. Freston, for instance, lasted just nine months as CEO of Viacom before being terminated. Yet Freston left Viacom with a walk-away package worth $101 million.

William D. McGuire lasted much longer as longer as the CEO of the UnitedHealth Group. He served in that post for 15 years before he was forced to resign in 2006 over a stock-options scandal. The company forced McGuire to give up hundreds of millions of dollars worth of UnitedHealth stock, but GMI found that he still walked away with a pay package worth $286 million.

Hank A. McKinnell, Jr.’s five-year tenure as CEO of Pfizer didn’t end in scandal.  But GMI notes that Pfizer’s stock performance was so lousy under McKinnell that the company’s market value fell by $140 billion. “Give it Back, Hank!” became the rallying cry for disgruntled Pfizer shareholders. Instead, McKinnell walked away with a payout of nearly $200 million. Or maybe more, depending  on how long McKinnell lives (with the help of free lifetime medical coverage he receives from the company): he collects an annual pension of about $6.5 million.

Tops on GMI’s list sits Jack Welch at $418 million. Welch wasn’t fired as CEO of General Electric; he retired in 2001 after 20 years at the helm. But it was Welch’s messy divorce in 2002 that first cast a spotlight on the multimillion golden parachutes that publicly traded companies were giving their CEOs, whether they were fired, retired, or lost their job after a merger.

Most of the attention back then was paid the perks GE rained down on the former CEO: Free use of an $80,000 a month Manhattan apartment owned by the company. Liberal use of a corporate jet. Country club dues. Security services. Free tickets to see the Knicks, the Yankees, and the Red Sox.

But the real scandal was the $9 million in pension benefits GE is paying Welch each year for life and the almost $300 million in stock profits the company awarded him.

No company has topped GE in the decade since. But plenty of other companies have given out pay packages that seem more like the budget for a small city rather than a goodbye gift to a departing CEO. Lee R. Raymond’s 12 years as the CEO of ExxonMobil was impressive. The company’s profits soared from $5 billion to $25 billion a year under his tenure.  But was he worth the $321 million in walk-away money the company gave him in 2005?  A couple of years later, Edward E. Whitacre Jr., the former AT&T CEO (17 years at the helm if you include the 15 years he ran SBC Communications before its merger with AT&T) received a retirement package worth $230 million, including country-club fees, use of the corporate jet, and home security.

Few exit packages, though, have stirred the ire as the one awarded to Stanley O’Neal, the former CEO of Merrill Lynch.  O’Neal’s five-year tenure ended abruptly at the end of 2007, when it became clear that Merrill would need to take tens of billions of dollars in write-downs on bad subprime mortgages.  The bank had survived the Great Depression but not the mortgage meltdown; in September, 2008, headed toward bankruptcy and fearing that it would be the next big investment bank to go down, the company gave up its independence and agreed to be bought by Bank of America. O’Neal’s reward for a job poorly done?  A payout from his former employer worth $162 million.