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Recession Survivors: Golden Parachutes


For some executives, the generous severance package is alive and well.

Sometimes, failure can really pay off.

Just ask Ken Lewis, former CEO of Bank of America (BAC).

After receiving a public flogging by outraged lawmakers, regulators, and BofA shareholders for acquiring Merrill Lynch in a $50 billion deal without bothering to disclose the firm's flimsy financial health or the millions of dollars it agreed to pay employees before the deal went through, Lewis was forced to forego his salary for year by Kenneth Feinberg, the US Treasury's Pay Czar.

But before you shed a tear for Lewis, consider this: According to a recent regulatory filing, he walked away from the disaster he created with a total of $83.6 million in compensation and benefits.

Over at AOL, four top executives who got pink slips last year walked away with a total of $28.4 million in cash and stock for their troubles. Former CTO Ted Cahall actually got a $345,000 retention award just 10 days before his departure was announced.

As you may well know, these are far from the first captains of industry to fail upward. Here's a look back at some of the shiniest golden parachutes to ever come out of corporate America:

  • In 1995, Disney's (DIS) Michael Eisner hired Hollywood agent Michael Ovitz to come on board as the company's president. Ovitz signed a five-year deal for an annual salary of $1 million, a discretionary bonus, and a million stock options yearly.

    Ovitz was canned after just 14 months, and he walked away with $140 million -- $39 million in cash and $101 million in stock.

  • Stan O'Neal, former CEO of Merrill Lynch, left the company with a comfortable $161.5 million in 2007, after the firm lost $2.3 billion in the third quarter of that year -- six times its forecast and the biggest quarterly loss in the company's history. On the bright side, Merrill withheld O'Neal's 2007 bonus.

  • 2006 was a very good year for former Pfizer (PFE) CEO Hank McKinnell. He left the company with an exit package of $213 million for being so kind as to drive down Pfizer's stock price almost 40% between 2001 and the time he was ousted for subpar performance. Oh, and he also made $60 million over the course of those five years at the helm.

  • Angelo Mozilo, of Countrywide Mortgage notoriety, was kind enough to give up the $36.4 million in cash severance, the $400,000 in annual consulting fees, and the use of Countrywide's private jet he was "entitled" to, because it was "the right thing to do" after playing a large role in the near destruction of the company and the US housing market. Fortunately for Mozilo, he sold almost all of his Countrywide stock for $300 million before it tanked, and held onto a $23.8 million retirement fund plus almost $21 million in deferred compensation.

    (See also, Rags to Riches: Angelo Mozilo)

  • Home Depot (HD), America's second-largest retailer after Walmart (WMT), gave CEO Bob Nardelli the heave-ho amid complaints of his accepting $225 million in compensation over the course of six years for deftly navigating the company's stock down 9% during his tenure while rival Lowe's (LOW) rose 188%.

    Nardelli's consolation prize for his departure? $210 million.

  • Chuck Prince, former Citigroup (C) CEO, was shown the door after writing down $11 billion in losses tied to bad subprime mortgages and reducing the bank's market cap by $48.5 billion. However, Prince pocketed a tidy little $40 million package for his colossal failure. Nice work, if you can get it.

  • In 2005, Carly Fiorina, who headed up the company created by merging Hewlett-Packard and Compaq Computer (HPQ), was forced to resign after handily steering HPQ's share price down 60%. She didn't leave empty-handed, though -- Fiorina left with no less than $14 million in severance pay, a $7.4 million bonus, and $21.1 million in additional compensation.

    Hopefully Fiorina, who is now running for a US Senate seat in California, will do a better job running the virtually bankrupt state if she's elected.
No positions in stocks mentioned.
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