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They can be handcuffed, they can be given coffins, they can be parachuted, they can be bungee’d, they can be life-jackets, they can be a hello and they can have their hands shaken. What are we talking about? Well, all of these things seem to have one thing in common, they are golden!
- We have golden handcuffs that tie employees to companies and make sure that they won’t leave, often in the form of some sort of stock option that will take years to mature and that will only be valid as long as you stick with the company. You’re tied to them.
- Then, there is the golden coffin. No, it’s not King Tut’s or Tutankhamun’s. But, it is the lucrative insurance policy that sets up a death-benefit package for senior executives’ heirs. There might be unearned salary that gets awarded to the heirs or accelerated stock options.
- A golden parachute is there to soften the blow and make the landing easier for the executive, usually in the context of a take-over or a merger. They could be in the form of stock options, juicy pay outs and cash bonuses. Beware because if you are being given a silver parachute, then you’re obviously not sitting up there at the top of the roost, are you?
- A golden bungee is the juicy payout that executives get when they decide to leave the company. It will metaphorically save them as they take that leap from the heights of the company where they have been sitting lapping up the cream. It might include cash and stock options. Golden parachutes are so nineties, so yesterday. Golden bungees are swinging, hip, so today (apparently).
- Golden life-jackets are a form of a sweetheart deal, and are supposed to make sure that a top executive stays in the company when a merger goes through or the company is taken over.
- A golden hello is supposed to entice someone to jump from one company to another by providing a tidy sum that will have them drooling and foaming at the mouth. Obviously, the hope is that the guy or girl that has been poached will bring in bundles of cash to the company with their expert knowledge and skills and this will offset the huge payout that will be given. But is it always true?
- A golden handshake is a severance package awarded contractually to a top executive of a company in the event of their losing their job or even just for retirement.
There are so many examples of golden things that abound in the world of business. Most of us would agree that they are unjustly paid, that nobody is worth the millions that are paid out to people that are doing little all else but lapping up the cream in companies. Few of us would back the giving of millions to executives that to all intents and purposes get paid for making mistakes. But, there’s no denying it. It happens and it always will; despite what we are told that companies are going to get things into order and stop dishing out silly sums.
Here are the top golden hellos, to start with, from the lowest to the highest in recent years.
1. $11.5 million: David West
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Hello: David West
David West got a prize $12.5 million when he was lured by Del Monte Foods from Hershey Co in 2011. He was first taken on as a simple executive for the measly sum of $20, 000 a month. That rose two months later in the deal to a salary of $1.2 millionper year. Not bad as increases go! Doesn’t even warrant what percentage that works out as in terms of a pay-rise. I wonder how many of us out there have seen the likes of such salary rises. A no-brainer really, isn’t it? He got a performance-based annual bonus that was between 100% and 200% of his annual salary. He got a $1 million bonus for writing his name on the contract. He also got $11.5 million as a special golden hello to entice him from his previous company.
2. $20 million: Mark V. Hurd
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Hello: Mark V. Hurd
In 2005 when Mark Hurd was appointed as chief executive officer of Hewlett-Packard Co. he was given the tidy sum of $20 million in cash, stock and perks. That was all by just waltzing through the door of the HP head office in Palo Alto, California. The package included $2 million in a bonus for signing the contract.$2.75 million in order to be able to relocate to California. He also got 1.15 million in stock options, which ended up working out to about $6.9 million. He also got $8 million in restricted shares in HP (400, 000 of them). That was nothing compared to the annual salary of $1.4 million as well as an annual bonus that would be minimum $2.8 million and maximum $8.4 million, with long-term incentives ranging from $4.2 million and $12.6 million. In 2007, he got $25 million and in 2008 he was given $42.5 million. He had to resign from HP due to a sexual harassment charge that was brought against him in 2010. Whatever is said, HP shares rallied as it was announced that he was being hired, and the company he was poached from (NCR) saw their shares tumble by 20%.
3. $26.27 million: Andrea Orcel
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Hello: Andrea Orcel
UBS investment bank paid out a huge $26.27 million to its new Chief Executive Officer, Andrea Orcel. It was made up of $6.364 million in cash payments as well as $19.44 million in deferred shares. Orcel previously worked for Merrill Lynch and this package was supposed to offset the loss in earnings from that bank. UBS was highly criticized for making this golden hello since it came to near collapse in the 2008 financial crisis. Orcel once said in 2012 that the banking system had become “too arrogant, too self-convinced [10]”. The Italian banker [11] has always been dubbed the “deal junkie” and the “Ronaldo of banking”.
4. $45 million: Gary Wendt
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Hello: Gary Wendt
Gary Wendt was the CEO of CE Capital and he got a massive $45-million golden hello to join Conseco in 2000. He was paid $57.4 million in 1999 while working for CE Capital. He was promised a bonus of at least $8 million and at most $20 million in his first year with the company as long as he turned it around. Wendt was brought in after a disastrous takeover of Green Tree Financial in 1998, which resulted in the falling of shares dropping by 92%! At the time that Wendt was taken on and the package was provided, Conseco had a debt of $1 billion that had to be paid off. In 2002 Wendt resigned as CEO. Originally, when it was announced that he was going to be hired, stock value shot up 50%, reaching $11.38. It even went over $20 by 2001. By the time Conseco filed for bankruptcy their stock had tumbled to just 3 cents per share.
5. $55 million: Patricia Russo
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Hello: Patricia Russo
Lucent put up $55 million to poach Russo from Eastman Kodak in 2002. She got a salary of $3 million (for her first year) along with $11 million in restricted shares. Stock options totaled $40 million. She also got an annual pension of $740, 000 just in case she was missing a few cents here or there. She ended up leaving after just seven months as share value continued to tumble.
6. $90 million: Paul Pressler
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Hello: Paul Pressler
Paul Pressler was taken on at Gap (from Walt Disney) with a salary of $4.26 million and 5 million in stock options (worth $87 million). He remained with Gap until January 2007. His contract was for five years and he got a bonus for signing the contract of $885, 000. His annual bonus was to be $1.875 million in 2003, after which he would get a maximum of 250% of his base pay if targets were met. He was also reimbursed for moving expenses.
Questions should certainly be asked as to how much those people are actually worth the money that is paid out to them in forms of golden hellos. They are probably not a patch on the golden parachutes that are dished out as if they were going to go out of fashion. Sometimes regardless of what the CEO does, the deal is that they get a bundle of money somewhere along the line. Can anyone be worth that much? Well, if they are, then maybe they should get the money when they leave after good behavior, rather than paying them up front. Sometimes, the boards of directors are just paying through the nose for a name, or for a friend.
We should always remember that it’s true that ensuring that you get someone behind you to back you up in the world of business is essential. Getting something that is golden will always make for a soft landing. The question is, however, whether or not that it always deserved. But, people (unfortunately or fortunately) always have friends that are in even higher places. It’s just the definition of a ‘friend’ that needs some looking into. It should always be remembered that friends sometimes come from where we never expected them to. There’s that story of the little bird that was flying in the dead of winter. Exhausted and frozen it flunked out and dropped to the ground in a field, almost dead. At that very same moment a passing cow came along and dumped a huge load of dung. The cow pat landed splat right on the little bird. There was the bird, covered in the cow’s number two’s, which suddenly started to thaw out and come back from the grave. Chirping away, as happy as Larry, it was at that moment that a cat on its nightly prowl came along and heard the chirping twitterer. It promptly dug the bird out of the dung and gobbled it up. The moral of the story? Remember that those that shit on you are not necessarily your enemies and those that get you out of it are not necessarily your friends!
Maybe it’s because some of the top executives and CEO’s want to protect themselves from the cat that they get given a golden something or other to soften the blow. Some say that rising tides raise all boats, but I haven’t seen many other people’s salaries rising like some of these ones have.
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Hello - Goodbye!
In the next installment we shall take a look at the biggest golden handshakes that were doled out to the guys that got the push.
In the meantime, who would you cite as the guy that should be up there on the list?
Originally posted: The Biggest Golden Hellos in History [16]