By now you've probably heard the news: Leo Apotheker has received a severance package worth $13.2 million in cash and stock for his 11-month tenure as CEO of Hewlett-Packard.
Apotheker's outsized payout, which includes relocation fees back to Europe and up to $300,000 to cover losses on the sale of his California home, follows the more-than $12 million his predecessor Mark Hurd received from HP after being ousted following a scandal. Hurd's successor, Carly Fiorina got more than $21 million in severance when she left the firm in 2007.
And new CEO Meg Whitman has received a package worth over $13 million, mostly comprised of stock options tied to performance, according to Equilar.
Clearly, there's something wrong at HP, whose board has been pilloried in the press in the wake of Apotheker's firing.
But HP is far from alone in lavishing departing CEOs with boatloads of shareholder dollars. As The NY Times reports:
- Robert Kelly received $17.2 million in severance after being ousted from the CEO job at Bank of New York Mellon last month.
- Carol Bartz left Yahoo with nearly $10 million in cash and stock options after being fired from the top job at The Daily Ticker's parent company.
- John Chidsey received almost $20 million from Burger King when he left in April.
- Baxter Phillips was awarded nearly $14 million after his company, Massey Energy, was sold to Alpha Natural Resources in June.
- Ian McCarthy walked away from Beazer Homes with about $6.3 million in severance, even after being forced to repay his original package after the company settled with the SEC for filling misleading statements. Beazer even reimbursed McCarthy for up to $10,000 in legal fees.
By comparison, the $1.6 million severance awarded to former UBS CEO Oswald Grubel, who stepped down after a 'rogue trader' cost the firm $2.3 billion, is but a pittance.
There's nothing new about CEOs receiving outsized severance packages, the terms of which are almost always determined at the time the executive is given the job, i.e. when the hiring company has determined the individual in question is absolutely, positively the right person for the job and, thus, worth almost any price. Executives take full advantage of these moments of euphoria and optimism, as do the compensation consultants hired by boards of directors — often filled with CEOs of other companies who hope to get similar packages for themselves.
In the end, you can't really blame CEOs for taking the money and running. You'd do it if you got the chance, wouldn't you?
The real culprits here are the boards of directors, who continue to pay CEOs outrageous amounts of money for failure, as well as the institutional shareholders who repeatedly vote for the same old board members while giving lip service to corporate "activism," as I discuss in the accompanying video with my Breakout colleague Jeff Macke.
In separate but absolutely related news, please see:
- Leo Apotheker