Credit Crunch CEOs Getting Canned
“When companies fail, should they give millions of dollars to their senior executives?”
– Rep. Henry Waxman.
This week two high profile CEOs have been either forced to resign, or into lesser roles within their companies (WAMU and Wachovia). They join a growing list of canned CEOs in the wake of the subprime meltdown.
So, now that many of these guys are getting canned, should we expect to see them at our local soup kitchen? Unlikely. Looking at their past compensation and severance packages, it’s a safe bet to say these guys are going to be fine.
Even now as they’ve gotten the boot, many have huge “golden parachutes” ensuring no matter how horrible they’ve performed, they will land in a pile of cash. In April, former Bearn Stearns CEO James Cayne bought a $25.8 million penthouse in NYC.
Apparently, sometimes underperformance really does pay.
1. Washington Mutual – Kerry Killinger
Status: Canned As Chairman. Still acting CEO.
2007 Total Compensation: $14,364,883
Stock Performance (trailing 12 months): -80.25%
Kerry Killinger was just recently removed as chairman of the troubled retail bank. He still remains CEO. Should WAMU pull a Countrywide or Bear Stearns, Killinger has a severance worth more than $22 million if he is terminated before a change in control.1
2. Merrill Lynch – Stanley O’Neal
Status: Canned in October 2007.
2007 Total Compensation: $28,286,332
Stock Performance (trailing 12 months): -55.1%
Canned in the fall of last year, Mr. O’Neal took in a huge severance package that was built up during his tenure as Merrill Lynch CEO, valued at $161 million.2
3. Wachovia Corp. – Ken Thompson
Status: Canned in June 2008
2007 Total Compensation: $15,795,984
Stock Performance (trailing 12 months): -59.79%
Two months ago Ken Thompson lost the chairman job at Wachovia. This week he was forced to retire from the nation’s fourth-largest bank. He will be receiving a severance of $1.45 million as well as accelerated vesting of $7.25 million in company stock.
4. Bear Stearns – James Cayne
Status: Resigned in January 2008
2006 Total Compensation: $40,004,315
Stock Performance (trailing 12 months): -93.87%
The day after JP Morgan raised its bid for Bear from $2 to $10, Mr. Cayne unloaded his entire holdings in the company, for a $61.3 million profit.3 While a very profitable company, Bear took huge risks in the subprime market which ultimately led to its near implosion.
What do you think?
How much should a CEO be paid? Should CEO pay be tied to stock performance? Earning? Revenue? Risk?
Thursday, June 5th, 2008 at 1:15 pm