Hefty benefits allow top executives to retire in style
By Peter Robison
Bloomberg News Service
FAIRFIELD, Conn. — For Jack Welch and many others who once led large U.S. companies, these are the golden years.
Welch, retired General Electric Co. chairman and chief executive officer, gets a $9 million annual pension. Each day he offers General Electric advice he earns another $17,000.
He was able to contribute a portion of his salary into a deferred-compensation account on which the company guaranteed 10 percent annual interest.
Big-league CEOs often award themselves lifetime benefits that would be the envy of many Americans.
The companies say it's the only way they can attract top talent and reward performance. Shareholders want the payouts reined in at a time when the stocks and earnings of many companies are falling.
"We're seeing more and more abuse in this area," said Patrick McGurn, director of corporate programs at Institutional Shareholder Services, which advises many of the largest U.S. fund managers on corporate governance. "Executives are getting the long end of the stick."
Welch's former peers will fare almost as well.
FleetBoston Financial Corp. Chairman Terrence Murray gets $5.8 million annually after he retires at year's end.
Bernard Ebbers, ousted as WorldCom Inc.'s chief executive officer last month, can rely on a $1.5 million annual pension and medical benefits for life.
International Business Machines Corp. will pay for ex-chief Lou Gerstner's car, office and club memberships until 2012.
"It doesn't make a whole lot of sense," said James McGlynn, manager of the $65 million Summit Everest Fund. "Who's setting these plans where everybody's getting all this money?"
Critics blame the companies' boards. In many cases, the directors are CEOs, with little incentive to restrain compensation, they say.
"It's one big buddy system — you scratch my back, I'll scratch yours," said Larry Margel, the former chief actuary at Towers Perrin, a New York-based company that advises companies on compensation.
