Even as BP shareholders celebrate CEO Tony Hayward's impending departure, many have been quick to raise concerns about how much the beleaguered executive will be paid when he heads out the door. After Hayward steps down in October, he will reportedly receive roughly $930,000 per year in pension payments—as well as a one-time severance payout worth about $1.6 million. With stock shares and stock options included, the total size of his package could swell to $18 million, according to one estimate.
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Critics have already berated BP for its inclusion of the $1.6 million severance check, calling it improper for the company to reward Hayward, whose high-profile gaffes have put him at the center of public outrage surrounding the oil spill. "At a time when BP should be devoting every possible resource to ending the spill, cleaning up the Gulf and fully compensating the residents who have had their livelihoods impacted, I find it extremely troubling that BP's board would consider providing such a large severance package to Mr. Hayward," Rep. Ed Markey, a Massachusetts Democrat, said in a letter to BP.
Still, Jeff McCutcheon, an executive compensation expert at the firm Board Advisory, calls Hayward's severence check a "very reasonable" price for BP to pay for the ability to start moving on. "Whatever they're paying to Tony Hayward is a rounding error," he says. "What the board is really trying to do is get the company back on the right track. They're focusing on the big picture. … That means a radical change in direction, and you can't do that under somebody who has been so tarnished by the past."
[See The Hayward Effect: BP Shares Rally.]
All told, Hayward's case is hardly unique. In fact, the past few years have been replete with examples of unpopular executives leaving their jobs with multimillion-dollar packages in hand. In the process, they've reignited the debate about what restrictions should be put in place regarding executive compensation. Apart from Hayward, here are five more officials whose payouts have raised eyebrows:
Stanley O'Neal, Merrill Lynch (Package worth: $161.5 million). Stanley O'Neal became CEO of Merrill Lynch in 2002, shortly after the tech bubble burst. Early in his tenure, O'Neal made few friends with his decision to fire upwards of 20,000 employees. By the time that the next bubble—the housing market—showed signs that it was ready to implode, he had even fewer allies left. In the third quarter of 2007, Merrill reported $2.24 billion in losses. The firm, which had billions of dollars' worth of exposure to bad mortgages, was ultimately rescued by Bank of America.
Robert Nardelli, Home Depot (Package worth: $210 million). Unlike some of the other executives who made this list, Robert Nardelli didn't exactly run his company into the ground. Even though its stock price struggled, Home Depot expanded substantially under Nardelli's watch. Still, Nardelli, once celebrated as a disciplined leader who almost inherited the GE throne, is now equally remembered for the shocking size of the compensation package he received when he was forced out. Ironically, it was Nardelli's large paycheck—he made $38.1 million as part of his last yearly contract with Home Depot—that prompted shareholders to call for his ouster.
Jimmy Cayne, Bear Stearns (Package worth: $61 million). When Bear Stearns collapsed, Cayne was the firm's chairman—but not its CEO. Previously, he had been CEO for 15 years, but he relinquished that title after being widely lambasted for being out of touch. According to critics, Cayne, an avid bridge player, seemed to be more interested in the card game than the day-to-day operations of the company. Cayne eventually sold his stock in Bear Stearns for $61 million.
Martin Sullivan, AIG (Package worth: $47 million). Insurer AIG, whose colossal struggles forced the government to step in with a massive rescue package, is one of the highest-profile examples of a company being run into the ground. The firm also earned a reputation for its overly generous executive compensation. Sullivan tapped into that, taking with him a package that at the time was valued at $47 million. Later, the company froze $19 million in payouts to Sullivan amid inquiries from the New York attorney general's office.
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