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| Tuesday, February 9, 2010 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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September 23, 2008 12:01 AM ET
Although former AIG CEO Robert Willumstad’s surprise decision to reject a $22 million severance package may be an encouraging sign for opponents of large executive pay packages, don’t expect other chief executives of failing companies to do the same. The government’s role in saving AIG from bankruptcy may have put pressure on Mr. Willumstad to forgo the severance package, some observers say, especially since he served as CEO for only three months. But his action has brought more attention to the heated debate over the appropriate level of compensation for CEOs of failing companies. “There is definitely a trend of some companies cutting back on some of these severance packages, especially for newer executives,” said Equilar research manager Alexander Cwirko-Godycki. For example, Merrill Lynch eliminated all severance payments for change-in-control scenarios shortly after former CEO Stanley O’Neal walked away with $161 million when he was ousted last year. As a result, Mr. O’Neal’s replacement, John Thain, will receive $11 million in accelerated stock awards and salary if he leaves the company after the $50 billion sale of Merrill closes early next year, but he won’t get any additional severance payments as a result of the change-in-control. Mr. Cwirko-Godycki said that because of increased scrutiny of executive pay, “new employment contracts tend to be less generous [with severance] than existing contracts and contracts of a generation ago.” News reports said Mr. Willumstad felt compelled to forgo his severance package because he was unable to initiate a turnaround in the short three months he was CEO. His decision also took into account the major hit that AIG employees and investors have suffered from the decline in the insurer’s stock price. Mr. Cwirko-Godycki also suggested that because the government jumped in to save AIG, board members may have feared actions would be taken to curtail Mr. Willumstad’s executive compensation, similar to those taken with the outgoing CEOs of Fannie Mae and Freddie Mac. He said it was possible that Mr. Willumstad arrived at his decision in consultation with the AIG board to keep the government from taking action and limit shareholder anger. “It was easy to foresee that there would be a tremendous amount of concern over a severance package of that size,” said Mr. Cwirko-Godycki. But while there seems to be a move toward limiting severance packages, he said that for now, the trend is most visible among companies caught up in the credit crisis. “In most sectors and at most companies, if an executive is asked to leave without cause, they are going to get what they are contractually owed.”
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