Saturday, November 24, 2012

Ex-CEOs cash in

For those CEOs that exit their businesses semi-retirement can be an extremely lucrative second career. The size and frequency of consulting contracts for former executives are increasing.

For example, Samuel Palmisano, IBM's outgoing CEO, will earn $20,000 for any day he spends four hours at the company. That means hypothetically he could pocket $400,000 a year for 20 half-days of work. His predecessor, Louis V. Gerstner Jr., made $10,000 per day under a similar consulting arrangement AND who's 10-year consulting contract expires in March.
Boeing's ex-CEO Scott Carson earned $1.5 million over two years for no more than 75 hours a month. He never hit that maximum, and didn't show for the last 6 months, but still received the full fee.
Kimberly-Clark Corp. guarantees Jan B.C. Spencer $50,000 per quarter through mid-2014 for consulting services—and a maximum of 200 hours a year. He estimates he spent nearly 50 hours counseling former colleagues this summer.
Phoenix Cos. Dona D. Young received $300,000 for a year of consulting but was fully paid six months after she retired in 2009.
Acxiom Corp.departing Chief Executive Charles Morgan collected $1.5 million.
In some cases, the deals are so generous that they go beyond the grave—such as the consulting accord for Phillip "Rick" Powell, who stepped down as CEO of First Cash Financial Services  Under Mr. Powell's consulting contract, the operator of pawn shops and check-cashing stores was required to pay $3.5 million in consulting fees even if Mr. Powell had died. ( Powell, who has been fighting U.S. charges of illegal insider trading since last year, remains alive and well.)

 Boards dole out these agreements to guarantee smooth leadership transitions and prevent former bosses from joining a rival, poaching staffers or filing suit against the company. Consulting agreements are often are a hidden addition to severance pay and pensions. These contracts don't even require a minimum workload. A recent study found that only 7 of 174 recent agreements had such restrictions.

In the five years ended August 16 former leaders of the nation's 1,000 biggest concerns took home at least $500,000 in consulting fees.

No comments: