WITH the environment for business worsening, clever executives are carefully scrutinising the information that really matters: how much they will receive if they are simply not up to running their beleaguered firms.
The recent numbers are encouraging. On August 13th, Lucent and Honeywell each filed quarterly statements with America's Securities and Exchange Commission that included details of lavish settlements. In Lucent's case, it took a 15-page attachment to cover the terms for its former chief executive, Richard McGinn, and former chief financial officer, Deborah Hopkins. In contrast, less than a page of Lucent's quarterly report covered its decision to lay off 10,500 employees.
Mr McGinn, who presided over troubled Lucent for barely three years, received the most money: almost $13m. Ms Hopkins did slightly better based on time in the office. She was the CFO for less than a year and received almost $5m. This week, it also emerged that Michael Bonsignore, who ran Honeywell International for two years until its planned merger with GE fell apart last month, is to receive a $9m pay-off and a long list of perks.
The largest component of Mr McGinn's package is the transformation of a “restricted” incentive grant of shares into an outright grant (so much for incentive). Mr McGinn borrowed money on the “assumption of continued active employment”, which, it is safe to assume, is true for most people who take out a loan. Unlike most people, though, when employment was discontinued, his former employer bailed him out, granting him a new $4.3m loan, presumably on better terms. He retains an annual pension of $870,000, as well as health and life-insurance benefits equal to those that other retired Lucent senior executives receive.
Like Mr McGinn, Ms Hopkins was given her restricted stock, and she also received $30,000 for “financial counselling” (not something you would expect a CFO to need). Both she and Mr McGinn will retain share options. These are currently well below their strike price, but in a sharp recovery they would become highly lucrative. This, presumably, ensures that both root for their successors.
Mr Bonsignore's termination agreements says he will be treated like a chief executive, with “executive transportation” and “financial and tax planning services”, among other things, for the rest of his life. All this, without the bother that comes with actually running a company. He will also receive “continuing relocation benefits” that were granted when he moved Honeywell from Minnesota to New Jersey in 1999.
Headhunters say guarantees in the case of dismissal are a growing component in any effort to lure top employees, with the newest demand being cash severance if the company doing the hiring cannot get fresh funding. (Webvan, a failed Internet retailer, has promised to honour a severance package of $375,000 a year, for life, granted to its former boss, George Shaheen.) As executive demands grow, so agreements with employers become hideously complicated. Mr McGinn's exit deal took more than a year to work out. Inevitably, this generates high legal bills. A prominent term in all three agreements made public this week is that the lawyers be paid by the companies involved. No doubt the former executives believe them to be worth every cent.
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