By the time Bethlehem Steel Corp.'s former chief executive, Duane R. Dunham, was forced to retire a few years ago after only 18 months in the top spot, the giant steelmaker was bankrupt and headed for a fire sale.
But that didn't stop Bethlehem from handing Dunham a $2.5-million going-away gift. The package included about $500,000 to cover the taxes that he'd have had to pay on his company-funded retirement plan.
At a time when business and government are asking the nation's working families to pay an ever-increasing share of the costs of their healthcare and retirement, as well as bear more of the burdens of losing a job, one group has carefully insulated itself from such hazards: America's CEOs.
In all, more than 300 chief executives among the Standard & Poor's 500 companies have contracts that promise the equivalent of one year or more of salary and benefits if they leave their jobs. In most cases, they'll receive this payout even if they quit, according to an analysis of the companies' most recent Securities and Exchange Commission filings.
Half of the CEOs are promised two or more years' worth of pay should they head out the door, the analysis found. And that doesn't count the stock windfalls that top executives usually collect as they exit.
The review was undertaken for The Times by Corporate Library, a corporate governance research firm.
Compensation consultants say that promising a CEO plenty of protection helps ensure that he or she will act in the interest of the company -- even if that means advocating a merger or takeover that could cost the executive his or her job.
"You want chief executives to be able to objectively evaluate business opportunities without regard to personal interests like their own continued employment," said Donald T. Sagolla of Mercer Human Resources Consulting in Los Angeles.
Still, the size of CEOs' departure pay and benefits -- and the length of time they last -- are especially striking compared with the deteriorating safety net available to most working Americans.
Only half of major companies have any formal severance packages for non-executive employees, according to a recent survey by Aon Consulting and WorldatWork, a trade group for compensation executives. The typical package for a laid-off non-executive worker pays $14,000 to $27,000. And the benefits are tallied in weeks, not years.
By contrast, consider:
* If John A. Allison, chairman and CEO of bank holding company BB&T Corp., is laid off, he's assured of his salary and bonus, which totaled nearly $2 million last year, plus full benefits for five years.
* John D. Wren, president and CEO of advertising and marketing powerhouse Omnicom Group Inc., will be able to collect payments for nine years after he's terminated. The annual payout will amount to half his salary, which was $1 million last year (along with a $1.1-million bonus).
* L. Lowry Mays, chairman and CEO of media behemoth Clear Channel Communications Inc., will get his full salary, bonuses and stock awards for seven years, a package that Corporate Library researcher Paul Hodgson estimates to be worth about $40 million.
But the extent of the senior Mays' protections are nothing next to those of his sons, Mark and Randall, Clear Channel's president and chief financial officer, respectively. If a Mays no longer holds the top job at the company and either son quits, Clear Channel must keep paying him for the next 14 years.
When it comes to corporate takeovers, CEOs are particularly well protected. More than 400 of 500 have so-called change-of-control agreements that promise them at least one year of pay and benefits, and in most cases much more.
Typical are the arrangements for Dennis J. FitzSimons, chairman and CEO of Tribune Co., which owns the Los Angeles Times. According to the company's 2003 proxy filing with the SEC, FitzSimons would collect his salary, twice his largest target bonus and full benefits for up to three years if an outsider were to buy even 20% of Tribune's outstanding shares. His salary last year was $875,000, and his total bonus was $1.2 million.
After retirement, CEOs are also well provisioned. Among the 288 companies that provided enough information to permit reasonable estimates, the median amount that departing CEOs will collect from so-called supplemental executive retirement plans comes to about $800,000 a year.
The outlook is not nearly as rosy for middle-income baby boomers. A recent study by Urban Institute economists Barbara Butrica and Cori Uccello found that the typical family in that group had enough in pension and retirement-account savings to assure it of only about $10,000 a year in old age.
And unlike the 401(k)s that many employers tout as the replacement for traditional pensions -- and that vary in value depending on the ups and downs of the stock market -- the executive retirement plans are guaranteed.Copyright © 2015, Los Angeles Times