Friday, September 23, 2011

Hewlett-Packard's (HPQ) Leo Apotheker Takes a $25M Severance Package Out the Door, after 11 Months of Work

This is not quite on the level of the $200M Home Depot paid Bob Nardelli to be shown the door, but Nardelli worked more than 11 months.  In another sign of the completely broken down and corrupted board of director/CEO system (one even Carl Icahn can rarely break through), Mr. Apotheker received $25M in cash and options as a bonus for his good work for 11 months.  One wonders why what is good for the goose is not good for the ganders - shouldn't every American worker get a nice fat bonus for being fired?  I mean we want to align interests of management with workers right?

I'll leave the rest of the piece without comment, as we've gone over this topic ad nauseum in 2008/2009.  Ok one small comment - I do continue to be in awe of a system which if was in place for the worker bees would allow IT (or HR, or sales, or accounting) workers at peer companies to set the pay for IT workers at other companies.  As everyone 'helps' their peers at fellow companies the circle of good vibes would lead to massive wage inflation.  Not shockingly, this is exactly what has happened in the American public company CEO class via the nonsense board of director system.  If you just exist in that vacuum for 2 years (or 11 months) you create generational wealth - no matter how effective a job you do.   (how much market cap did HPQ lose during this guy's tenure?) Sorry, my complaining is of course "class warfare"...

p.s. if anyone knows what Meg Whitman was granted for the day she eventually gets fired let me know.  I'll prepare the story for 2014....

  • Hewlett-Packard's CEO revolving door is costing the company a fortune.  On the job as chief executive for not even 11 months, Leo Apotheker will leave HP a wealthy man: He has already taken home most of his $1.2 million annual salary, a $4 million signing bonus, and an additional $4.6 million awarded for relocation assistance and to offset payments that he forfeited from his previous employer, SAP.   
  • Apotheker was ousted on Thursday, but he'll collect more money on his way out the door. The former CEO will take home $7.2 million in cash as severance, plus $18 million more in stock.
  • According to the employment agreement HP signed with Apotheker in September 2010, the company will owe him twice his salary and twice his average performance bonus in cash as a goodbye payment. Since Apotheker didn't stick around long enough to collect a performance bonus, the company will just use his bonus target as the "average," which is equal to twice his salary.
  • Additionally, nearly all of Apotheker's stock grants will vest immediately, giving him access to about 800,000 shares of HP. Apotheker had not stayed on long enough to see any of his stock grants vest on the planned schedule -- most were supposed to be given to him annually over the course of two years. Only one stock grant, a 120,000-share grant that was supposed to be doled out gradually as a three-year reward, will be pro-rated.
  • At today's closing share price of $22.80, those grants will be worth $18.2 million. Combined with the cash, Apotheker will take home $25.4 million.
  • HP CFO Cathie Lesjak filled the gap between Hurd and Apotheker. As thanks for her three-month CEO stint, she was granted a $1 million cash bonus and $2.6 million in stock grants in recognition of her "exceptional service," according to a regulatory filing.
  • And Carly Fiorina, who resigned (read: was shoved out the door) as CEO in 2005, was given a $21.4 million cash severance in addition to another $21.1 million in stock grants.
  • In all, the ousters of its past three CEOs, including the bonus for the interim CEO, have cost HP $83.3 million.

[Jan 22, 2009: Merrill Lynch's John Thain Can Only Work on $87,000 Area Rugs]
[Oct 4, 2008: Credit Crisis Sharpens Anger Over CEO Pay]
[Sep 27, 2008: Heads We Win, Tails We Win]
[Sep 17, 2008: Thain's Aides May Get $200M for Weeks of Work]
[Oct 30, 2007: You're Fired! Now Here is $160M to Help Ease the Pain]

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