CEOs With the Midas Touchhttp://www.fool.com/investing/general/2013/07/05/ceos-with-the-midas-touch.aspx Alyce Lomax
July 5, 2013
Having "the Midas touch" conveys a profitable outcome for just about any business scheme. Many chief executive officers most definitely have that magical touch -- but it means they enrich themselves, not the shareholders of the companies they've run. According to recent data, lucrative golden parachutes -- one of the most galling ways chief executives end up winning no matter what -- are alive and well at many major companies.
Many such packages escape investor awareness. For example, have you heard of John Hammergren? He flies under the radar although his pay is over the top. And if he blows that popsicle stand he leads, the cost to shareholders is stunning.
Of course, Hammergren isn't the only one exemplifying departures that are more sweet than bitter for those on the way out. Bloomberg has highlighted corporate leaders who won't just make out like bandits if they leave -- these individuals could receive nearly a quarter of a billion dollars if they vacate their posts.
Parting is such sweet sorrow
Hammergren's good fortune isn't limited to the prospect of a retirement windfall. According to a recent update from corporate governance firm GMI Ratings, every element of his pay enjoyed boosts in 2012. Did he deserve it? Well, when you take into consideration the company's controversial and costly moments -- fines for unsafe drug packaging, legal settlements regarding price fixing, and damages connected to an anesthetic product -- well, there's good reason to question the possibility of golden goodbyes.
GMI Ratings gives McKesson an F due to these aspects and more. Meanwhile, unlike the shareholder vote regarding JPMorgan CEO Jamie Dimon's dual CEO and chairman roles, last year McKesson shareholders gave Hammergren a failing grade on retaining that much power. A narrow majority of shareholders -- 52% -- voted in favor of separating the roles last year, and that translates into significant disapproval among owners.
The long (lucrative) goodbye
More recently, a cavalcade of companies doled out rich golden parachutes in 2012. ConocoPhillips' James Mulva retired with $156 million, making him the top-paid recipient according to Equilar's data.
Other outrageously planned retirement packages are coming to light. CBS CEO Les Moonves is currently set to receive $251.4 million if he hits the road. Discovery Communications' CEO David Zaslav could receive $224.7 million upon his departure.
Investors too often forget the meaning behind these after-the-fact rewards: Boards of directors are throwing millions of dollars of shareholder money at people who had made millions during their actual tenures anyway. There's also simple economic psychology involved that corporate leaders would never apply to regular workers: Why work hard or even effectively if you're guaranteed a gigantic payout if you leave or even get fired?
Jumping without a chute
Zynga (NASDAQ: ZNGA) CEO and founder Mark Pincus' demotion to chief product officer was one of this week's biggest news headlines. Given the way most corporate policies are designed, such a move could have included a handsome reward.
It turns out he's taking a title drop without a chute or special perk, but we don't have to weep for his financial stability. Despite his token $1 salary, Pincus is not hurting for money to begin with; although his net worth wa