GMI:RATINGS – Golden Parachutes: Principles and Practice

 

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Last year, GMI Ratings released this report (link above) identifying the largest severance packages paid to CEOs since 2000. In total, the 21 CEOs included in the report had received severance pay of almost $4 billion in “walk-away” packages each in excess of $100 million.

 

Last week, this issue grabbed headlines again after The Wall Street Journalreported that McKesson Chairman and CEO John Hammergren’s pension benefits of $159 million had set a record for “the largest pension on file for a current executive of a public company, and almost certainly the largest ever in corporate America.”  The 2012 GMI Ratings study found that 60% of CEOs at S&P 500 companies have pensions with an average value of $11.5 million.

 

GMI Ratings has long maintained that companies can use Golden Parachutes effectively and appropriately to protect senior executives from financial harm and to align decisions about M&A with the best interests of shareholders. However, many companies started to apply this principle too widely not just to cash compensation, but also to equity compensation, perquisites, benefits, pensions, and virtually all other forms of pay.

 

In GMI Analyst, our research platform, we flag companies for Golden Parachutes when the CEO’s potential cash severance pay exceeds five times the annual base. More than 600 companies (nearly 10% of our ESG coverage universe) currently meet the criteria for the Golden Parachute red flag. For further details on this KeyMetric, please email us at[email protected] (for current clients), [email protected] (for prospective clients) or [email protected] (for journalists).