Screw your company up...walk away with $68,000,000.00 in bonus, salary, pensions, etc.

Engineer

Elite Member
Oct 9, 1999
39,230
701
126
Click me!

This isn't to argue whether CEO pay is too high, but to argue why in the name of hell do companies give outrageous amounts of money, including huge bonuses, to someone who fucks the company up with their leadership. Looks to me like the good ole boy network (board of directors) and one final favor. Disgusting!!!

If I owned this stock (who knows, I might in one of my mutual funds), I would be going through the roof on this one. On top of that, I imagine the next CEO will have to slash more jobs to make up for part of this...and I'm sure that those who have their jobs slashed will get peanuts for severance......again, disgusting.


Reuters
AIG ex-CEO severance seen as high as $68 mln: analyst
Tuesday June 17, 6:09 pm ET


NEW YORK (Reuters) - American International Group Inc's (NYSE:AIG - News) former chief executive, Martin Sullivan, who stepped down on Sunday amid large subprime losses, could receive up to $68 million in severance pay and benefits, according to an estimate compiled by an outside research firm.
ADVERTISEMENT


Corporate governance firm The Corporate Library on Tuesday said Sullivan -- who was replaced by Chairman Robert Willumstad as CEO on Sunday -- could receive up to $2.5 million in salary, $26.6 million in bonus payments, $14 million from a defined contribution plan, $21.9 million worth of stock awards, $3.3 million in pension benefits and $32,316 in medical and life insurance coverage, according to a report by research analyst Alexandra Higgins.
 

Robor

Elite Member
Oct 9, 1999
16,979
0
76
Typical corporate America in action. The last 2 placed I worked where I was laid off they 'fired' the CEO's and gave them huge packages on the way out.
 

dainthomas

Lifer
Dec 7, 2004
14,740
3,653
136
All CEOs sit on each other's boards and vote each other huge raises and bonuses. Nice gig if you can get it.
 

ayabe

Diamond Member
Aug 10, 2005
7,449
0
0
Well where's the board on this?

The shareholders should fire the entire board.

 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
102,380
8,509
126
Originally posted by: ayabe
Well where's the board on this?

The shareholders should fire the entire board.

out partying with the CEO.


in delaware it is not a conflict of interest to put your best friend on your board. you couldn't put your estranged brother on the board, but you can put the best man at your wedding on the board. the whole system of executive compensation is fucked.
 

Fern

Elite Member
Sep 30, 2003
26,907
173
106
Let's examine the elements of the package.

- could receive up to $2.5 million in salary

That's probably not controversial?

-$26.6 million in bonus payments

A bonus? Typically, that means he met objectives etc to be *rewarded* with a bonus. Performance or longevity with the company? IDK, but if it was performance based I have to wonder about the criteria given they seem in such poor condition. More info would be nice

- $14 million from a defined contribution plan

WTH? A defined contribution plan, by definition, means he put his own money in it. Likely there is some matching but he's just withdrawing his own pre-tax contributions of some (possibly many) years of salary.

Strikes me as odd to call this compensation. Any amounts in an employee's defined contribution plan are from their own personal legally seperate accounts. The employer owns none of it. Think of 401(k) plans. The company makes no disbursement, rather it would be disbursed from some investment account held by a brokerage company. That is, unless they're using the term "defined contribution plan" incorrectly.


- $21.9 million worth of stock awards

Need more info. But if this is a regular qualified-type plan it means the stock price went up since he awarded. That wouldn't be a big deal as it costs the company very little. Under current rules, the employee participating in such can NOT pay less than 90% of the stock's market price. So, the gains really come from award increases in a stock's value.

- $3.3 million in pension benefits

Here again, not likely controversial. You generally can't strip away a retiree's pension because the company is not currently doing well financially.

- $32,316 in medical and life insurance coverage

Meh, not a big deal.

The bonus bugs me. I'd have to know about the company's historical & current stock price to compain about the stock award.

Of course, I'm sure everyone else here will scream bloody murder about the whole thing.

Fern
 

Craig234

Lifer
May 1, 2006
38,548
350
126
Originally posted by: palehorse
Lesson of the day: become a CEO.

Democrats' lesson of the day: since the Palehorse lesson of the day can't work for 99.99% of people, regulate the issue to make the system more fair and less corrupt.
 

MustISO

Lifer
Oct 9, 1999
11,927
12
81
I often wonder if it ever bothers these asshats to rape their company and make off with tons and tons of cash. This happens a lot and there's no way it's ever going to stop.
 

Genx87

Lifer
Apr 8, 2002
41,091
513
126
Does anybody have information on a law that was passed in ~1990 with regards to salary compensation used for tax purposes? There is supposedly a law put on the books that disallowed salary paid to executives above 1 million dollars to be used against profits for taxes. I found a chart that shows the compensation of CEO's and executives compared to the avg worker and it skyrockets starting in the early 1990s. Peaked in the year 2000.

Bottom line is it sounds like many exectives are being paid via stock options and bonus plans instead of raw salary due to the tax incentives. Peaking in the year 2K appears on the surface to show proof of this as the market peaked that year.

Curious about this law but have no idea what it is called.
 

ayabe

Diamond Member
Aug 10, 2005
7,449
0
0
Originally posted by: Genx87
Does anybody have information on a law that was passed in ~1990 with regards to salary compensation used for tax purposes? There is supposedly a law put on the books that disallowed salary paid to executives above 1 million dollars to be used against profits for taxes. I found a chart that shows the compensation of CEO's and executives compared to the avg worker and it skyrockets starting in the early 1990s. Peaked in the year 2000.

Bottom line is it sounds like many exectives are being paid via stock options and bonus plans instead of raw salary due to the tax incentives. Peaking in the year 2K appears on the surface to show proof of this as the market peaked that year.

Curious about this law but have no idea what it is called.

I gotta run for the day but I think there's info in this document that will explain that law and it's details, check Section II:

Text
 

Foxery

Golden Member
Jan 24, 2008
1,709
0
0
Originally posted by: Fern
- $21.9 million worth of stock awards

Need more info. But if this is a regular qualified-type plan it means the stock price went up since he awarded. That wouldn't be a big deal as it costs the company very little. Under current rules, the employee participating in such can NOT pay less than 90% of the stock's market price. So, the gains really come from award increases in a stock's value.

Any idea how long he has been with the company? AIG stock has been above today's price since roughly June 1997. However, isn't his cost basis from whenever he was either hired or first awarded stock options? In which case, if he has been there for less than 11 years, he was originally given more and its value has gone down.

Like you said, the "bonus" is the problem. Stockholders have every right to be outraged that a company hemmoraging money would throw away another $26M, nevermind that the guy is already making out like a bandit.
 

Craig234

Lifer
May 1, 2006
38,548
350
126
Originally posted by: MustISO
I often wonder if it ever bothers these asshats to rape their company and make off with tons and tons of cash. This happens a lot and there's no way it's ever going to stop.

Why would it bother them? People have a built-in tendency to rationalize things. It's just their getting their just desserts - they didn't make the rules of the game.

Some are bothered at some point. Know where the Nobel Prize came from? Nobel was a wealthy man behind the dynamite industry, and had not done a lot that helped people. A newspaper accidentally ran an obituary which had not a lot of positive, and this got him to make a big change and create the endowment for the prize.

Some other wealthy men who did a lot of harm to make fortunes used the fortunes in part for doing some good, such as Leland Stanford founding Stanford University.

Bill Gates and Warren Buffet stand out today.

But generally, it seems they're the exceptions, and I see little of people being bothered.

But before we go pointing fingers, I think all of us Americans are guilty, perhaps, of something similar that's even worse in ways, when we ignore how our standard of living has been built on the backs of misery for all of modern history. The benefits of slavery are too obvious to discuss, but how many Americans 'were bothered' by the misery put on the Iranian people when the Shah was put in place at the cost of their democracy in 1953, to protect the oil they used for those pleasure drives staying cheap?

There's a sort of conspiracy of silence about how the economics work, the wars and dictators and other things done to benefit the lucky citizens in 'powerful' countries. The government hardly admits a lot of it, the media rarely publicizes it, and Americans are pretty content mostly to not face the issue and happily wave the flag about our greatest nation's virtues.

When some US corporations wanted to keep sweetheart deals in Chile, such as taking $7.2 in copper for $1 billion, and had their president assassinated and replaced by the dictator Pinochet (and at the same time harsh right-wing Milton Friedman economic policies instituted), how many Americans bothered to notice the relation to their products being a little cheaper?

CEO's not feeling bad about their non-violent extortion of vast sums can seem almost benign in comparison to the history of global economics we all tend to ignore.
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
Originally posted by: Fern
Let's examine the elements of the package.

- could receive up to $2.5 million in salary

That's probably not controversial?

-$26.6 million in bonus payments

A bonus? Typically, that means he met objectives etc to be *rewarded* with a bonus. Performance or longevity with the company? IDK, but if it was performance based I have to wonder about the criteria given they seem in such poor condition. More info would be nice

- $14 million from a defined contribution plan

WTH? A defined contribution plan, by definition, means he put his own money in it. Likely there is some matching but he's just withdrawing his own pre-tax contributions of some (possibly many) years of salary.

Strikes me as odd to call this compensation. Any amounts in an employee's defined contribution plan are from their own personal legally seperate accounts. The employer owns none of it. Think of 401(k) plans. The company makes no disbursement, rather it would be disbursed from some investment account held by a brokerage company. That is, unless they're using the term "defined contribution plan" incorrectly.


- $21.9 million worth of stock awards

Need more info. But if this is a regular qualified-type plan it means the stock price went up since he awarded. That wouldn't be a big deal as it costs the company very little. Under current rules, the employee participating in such can NOT pay less than 90% of the stock's market price. So, the gains really come from award increases in a stock's value.

- $3.3 million in pension benefits

Here again, not likely controversial. You generally can't strip away a retiree's pension because the company is not currently doing well financially.

- $32,316 in medical and life insurance coverage

Meh, not a big deal.

The bonus bugs me. I'd have to know about the company's historical & current stock price to compain about the stock award.

Of course, I'm sure everyone else here will scream bloody murder about the whole thing.

Fern

My first thoughts too were what were the targets set in the bonus plan that warranted a payout? Stupid sensationalist journalism.
 

Thump553

Lifer
Jun 2, 2000
12,824
2,613
136
Considering the truly horrible job he did at AIG maybe the board figured it was damage control to buy him off and boot him out the door. Odds are the stock will bounce back at least 68M now that he's gone. Of course, the next CEO will get credit for this bounce and earn a healthy bonus also.

One of us ordinary joes screws up this bad you get two weeks and pay your own medical under COBRA. Oh to be part of the economic royalty.
 

Fern

Elite Member
Sep 30, 2003
26,907
173
106
Originally posted by: Foxery
Originally posted by: Fern
-snip-

Any idea how long he has been with the company? AIG stock has been above today's price since roughly June 1997. However, isn't his cost basis from whenever he was either hired or first awarded stock options? In which case, if he has been there for less than 11 years, he was originally given more and its value has gone down.

Like you said, the "bonus" is the problem. Stockholders have every right to be outraged that a company hemmoraging money would throw away another $26M, nevermind that the guy is already making out like a bandit.

No, IDK how long he's been with them.

All stock plans generally fall into two categories:

1. Qualified (this means it was established according to rules under US tax laws). If a qualfied stock plan and the rules were followed his "basis" is established at the time of exercise. The most, nay only, plan for exec's is an ISO (incentive stock option plan) and under these he gets no discount for the stock.

2. If non-qualified (doesn't fit anything in the tax code), the stock option is taxed upon grant. His basis would be whatever they made him pay for it to exercise. So, you are taxed right away on these shares.

When I was working in NYC on the tax accounts of Fortune 500 CEOs and execs I only recall them get generous ISO awards. NQ's are rare for many reasons. They all showup as wages on your W-2, no difference between regular salary; it's just *technically* stock. I say technically stock because income tax withholding applies just like other wages. So, they have the company sell and they take the cash left over after withholding etc. They never even see the stock.

So, this doesn't seem to fit unless he's been there a long time and accumulated a bunch of shares. I'm guessing this might be more a bonus plan where he received a chunk of stock.

(I suppose stock splits are possibility. I.e. early shares could have multiplied to the extent today's lower price is still a gain.)

Fern
 

palehorse

Lifer
Dec 21, 2005
11,521
0
76
Originally posted by: Craig234
Originally posted by: palehorse
Lesson of the day: become a CEO.

Democrats' lesson of the day: since the Palehorse lesson of the day can't work for 99.99% of people, regulate the issue to make the system more fair and less corrupt.
Socialism (ie. mandated redistribution of wealth) FTL.

bah...
 

Engineer

Elite Member
Oct 9, 1999
39,230
701
126
Originally posted by: palehorse
Originally posted by: Craig234
Originally posted by: palehorse
Lesson of the day: become a CEO.

Democrats' lesson of the day: since the Palehorse lesson of the day can't work for 99.99% of people, regulate the issue to make the system more fair and less corrupt.
Socialism (ie. mandated redistribution of wealth) FTL.

bah...

I don't think it should be socialized (mandated) but I would really like the stockholders to be given a vote and I don't mean just let the board of directors decide as they are all in the CEO - good ole boys network.

Like others have said, if I did my job in that fashion, I would have kicked out the door and run off the property....and given nothing in return. Now, more than likely, hundreds or thousands of people will be fired/laid off and they'll not even get a blindfold when they get pushed out of the plane, much less any sort of golden parachute.
 

sandorski

No Lifer
Oct 10, 1999
70,504
6,048
126
Wanted: CEO position. Experience: None. Strengths: Can ruin a corp with the best of them and will accept a much lower Termination Payout

Contact: Sandorski
 

Ricochet

Diamond Member
Oct 31, 1999
6,390
19
81
Well, if that chops your hide you better sit down and breath deep before you read about Home Depot ex-CEO.
 

Linux23

Lifer
Apr 9, 2000
11,339
714
126
Originally posted by: sandorski
Wanted: CEO position. Experience: None. Strengths: Can ruin a corp with the best of them and will accept a much lower Termination Payout

Contact: Sandorski

LOLOL. I almost passed out from Laughter. :D
 

yllus

Elite Member & Lifer
Aug 20, 2000
20,577
432
126
The investors who haven't bought into the mutual back-scratching boardroom system don't seem to care much for thinking through their proxy votes for things like who gets on the board of directors. Actually, they probably just throw the things they get in the mail away if it's not likely to contain a cheque.

The investors who have bought into the mutual back-scratching boardroom system either are fairly blatant about rewarding themselves, or put on the sham of putting the question of CEO pay to a compensation consultant whose own pay is determined by... the CEO and/or the board, who have a fiscal interest in keeping said CEO happy. Now there's a system that screams neutrality.

As for options, not knowing what to do myself, I quote Ben Stein:

There have been attempts by Congress to limit the tax deductibility of chief executives? pay. But these have done nothing to curb the rise in compensation. There have been efforts to link C.E.O. pay with stock performance. These have also not worked. (See ?backdating? above, as well as perfectly legal changing of the strike price.) Every so often, dissident stockholders try to put nonbinding resolutions on proxies to approve or reject pay packages. That also rarely works, because the big institutional holders almost always vote with management. (It?s called the boardroom buddy system for a reason.)

And so, with all moral restraints cast off, there is little to be done. Except in rare instances, the compensation is perfectly legal. As for me, I suggest a law requiring that nonbinding resolutions about pay be allowed on proxies if even only a small percentage of stockholders want them. (Binding resolutions might be too harsh on the few good managers out there.)

We could also have language barring ?obscene and insulting pay,? which courts could interpret as they please, but this seems dangerously vague.
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Originally posted by: sandorski
Wanted: CEO position. Experience: None. Strengths: Can ruin a corp with the best of them and will accept a much lower Termination Payout

Contact: Sandorski

LOL good stuff:)

 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Seems like it's normal....Collectively, the 10 best-paid CEOs made more than half a billion dollars last year. Yet half the members of this stratospheric club were leading companies whose profits shrank dramatically


This is just USA win big lose big... an aside...I really admire the Japanese culture in general but particularly their CEO culture like most make less than 1 million a year, even Toyota's whos kicking every car companies butt- they don't have need for unions either as workers never feel left out and if a CEO is forced to lay off workers he may jump out a window.