Thanks, but I don't want a golden parachute
While working stiffs suffered another real pay cut in 2005, it was another year of record-setting raises for America's CEOs. A Pearl Meyer & Partners survey of large companies found the median CEO received a 10.3 percent raise last year to $8.4 million. And those at the top got packages that were truly jaw dropping. CEO William McGuire's accumulation of $1.6 billion worth of UnitedHealth Group's stock options was so huge and fortuitously timed that the Securities and Exchange Commission has taken an interest. And drivers around the country fumed when they learned that Exxon's retiring CEO Lee R. Raymond not only took home $49 million just for last year but also is now collecting a pension worth $98 million.
It has gotten so bad that a few chagrined CEOs, worried about the effect of all this largess on investors and workers, have started to hand back some of the goodies. One of these is Edward J. "Ned" Kelly, CEO of Mercantile Bank, who earlier this year canceled a standard golden parachute contract that would have given him three times his annual salary and bonus—a total of $9 million—if he had sold the bank holding company. Kelly is a veteran of boardrooms who has served on the compensation committee of Constellation Energy Group and now heads the audit committees of CSX and the Hartford.
U.S.News & World Report visited him in his Baltimore office to ask: "Are you nuts?"
So you don't have any employment agreement at all?
I do have one, but it doesn't require the firm to pay me any severance should they choose to let me go for whatever reason.
Why did you do that?
I'm in a position where I do not need the job protection.
Why not?
Frankly, because I am pretty confident in my ability to get another job if I want one. In part, that is because of my particular background and having moved around a fair amount. In addition, I think the best way to align shareholders' interests and those of management is through equity. The other reason I did it, which is particular to us, is that I wanted to eliminate any perception that I had an incentive to sell the firm. There was speculation when I arrived in town that as an investment banker from New York, there was a risk that this firm would be sold out from under the community. I think over time what has happened is that parachutes are no longer perceived as a way to make executives indifferent; they are perceived as a way to give executives an incentive to sell. . .
I think it is perfectly reasonable for people to get paid well for having generated value over time . . . My view would be fine, pay, and pay for performance. But if you are being paid for performance, there is no need to worry quite so much about being able to find a job.
So did you get a larger stock option grant in return?
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