Pass along a news tip by clicking HERE.

Saturday, January 21, 2012

Platinum Parachutes: Two Cincinnati Area CEOs Land On a Very Exclusive List

Floating Beyond Golden Parachutists 
Special to The Daily Bellwether
CINCINNATI (TDB) -- Two names with Cincinnati-area ties have turned up on a new list casting the spotlight on 21 CEOs whose combined severance pay of $4 billion exceeded the economic output of 35 countries. One of the names ran a bank, the other a healthcare sector corporation. The list consists of CEOs (you can click here to download full text of the the pdf document) who received platinum (gold doesn’t cut it here) parachutes worth more than $100 million apiece since 2000. The payouts were ranked by GMI Ratings and ranged from $101 million to $417 million. The CEOS raked in their cash from companies among tje usual Fortune 500 envelope-passers like General Electric, Exxon Mobil, IBM, Merck, Pfizer, Merrill Lynch and UnitedHealth.

“Too many golden parachutes and too many retirement packages are of a size that clearly seems only in the interest of the departing executive,” wrote GMI authors Paul Hodgson and Greg Ruel. “In the case of some of the packages in this report, they have been paid to an executive who has not even departed. In the cases discussed in this report, it would seem that compensation committees have lost sight of the original principles, resulting in little or no value for shareholders despite excessive compensation.”

Except for ex-GE CEO Jack Welch, who topped the list with $417 million in walkaway pay in 2001, most of the names in the GMI Ratings report would be known only to diehard students of business history, like Lee Raymond of Exxon Mobil ($321 million) and William McGuire of UnitedHealth ($286 million). Two, though, should ring a bell in Cincinnati for many years to come.

Holding down the No. 14 spot on the list is Jerry Grundhofer, whose severance package was worth $159 million when he retired as CEO of US Bancorp in 2006.  Grundhofer landed in Cincinnati in 1993 as CEO of Star Banc Corp. He led Star to mergers with Firstar and U.S. Bancorp before retiring in 2006 and reaping $159 million in spending money. But shareholders did well under Grundhofer, as U.S. Bancorp shares more than quadrupled in value during his tenure. By contrast, the S&P 500 merely tripled. And U.S. Bancorp employees are today part of the fifth biggest commercial bank in the nation.

The other local name, ranked 15th, is Joel Gemunder. His nine-year run as CEO of Omnicare Inc. is one that shareholders have put behind them. He “retired” in 2010 (along with his investor relations sidekick, Cheryl Hodges) and raked in $146 million, mostly in pension and deferred earnings.

 “His (July) 2010 retirement was abrupt and came just prior to an unfavorable second-quarter earnings report,” the GMI report says. “Omnicare had no succession plan in place to address the departure, eventually naming a successor in December 2010.”

And how did Omnicare shareholders do under Gemunder? The stock traded in the low 20s when he was named CEO in 2001. Quite a few acquisitions – and several Medicare and Medicaid fraud settlements and whistleblower suits – later, the stock sold for $24.50 as Gemunder closed the door behind him.

No comments:

Post a Comment