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HP Spent Over $80M To Get Rid of Its CEOs
hapworth writes "Analysis published today shows that Hewlett-Packard has shelled out over $80 million to get rid of three CEOs since 2005. The first CEO to take her expensive exit, Carly Fiorina, received over $42 million, once stocks, options, and pension are factored in. Mark Hurd, after just four years, received $12.2 million to take his exit; and now, after 11 months, Leo Apotheker will walk out with a reported $25.2 million in severance. With eBay's Meg Whitman in as the new CEO at HP, industry analyst Robert McGarvey writes today that 'the HP gig could help Whitman replenish her personal coffers, depleted by the pumping of $119 million into a futile bid to become California's governor.'"
I'll ruin your company for a measly $5 million; no stock options if you don't mind since I'll probably do a pretty good job of it.
I swear to God...I swear to God! That is NOT how you treat your human!
The Board keeps choosing bad CEO's. Why do the shareholders keep re-electing them? Where are the institutional investors on this? I guess it's their company to destroy, if they really want to.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
gee, I want a job like that...
ELOI, ELOI, LAMA SABACHTHANI!?
The one who was considered successful by all (Hurd) was the one with the least compensation (by a huge margin if you consider his years on the job vs Apotheker). It is no joke we say the worse you do as a CEO the more money they pay you!
Violence is the last refuge of the incompetent. Polar Scope Align for iOS
1...2...3...
... to get a job like that? Oh wait, I need to sign using blood? And what stranger paper is this that smells like... sulfur?
Religion: The greatest weapon of mass destruction of all time
... should be tied with performance measurements meeting certain baselines - reduce waste (not the same as reducing cost), or increase profits by % - that are established at the time of hiring instead of being given wholesome at the exit door. Then again, I might as well wait for pigs to fly.
Based on the performance of these bozos I would say it is money well spent. They should do the same with the board that appointed them.
Any insufficiently advanced magic is indistinguishable from technology.
Before I either get worked up or try defending this practice, why are they being paid this again? Badly written contracts or what?
by Anonymous Coward: I, for one, welcome the shift from car analogies to pizza analogies. um.. overlords?
Why is it that even poorly-performing CEO's get incredibly huge severance packages? I can understand CEOs that actually helped raise a company getting nice parting gifts (like Lou Gerstner and Bill Gates), but shouldn't leaders that, effectively, failed to lead? get much, much less?
If you pay me just half a million I won't work for your company either. It's less money than Notre Dame had to pay to get their previous coach not to work for them.
When the news of HP's troubles gets out, there will be a line around the block of people applying not to work there.
On the other hand, they could charge people just to come in and watch. How many BOD members can they fit in that tiny little car anyway?
Have gnu, will travel.
Sounds like the Board Members are taking their turns at some expensive cash outs. Who's the next volunteer to be CEO for a year and get millions in payout?
-- By all means let's be open-minded, but not so open-minded that our brains drop out.
This problem will always be there if non eof the CEOs are held accountable for their bad decisions, some make them on purpose, as insider information makes dipping stock prices easy for another company paying a hidden fee to buy into another one. Yes it is punishable should it come to light, but hell, none of these things ever come to light except when someone happens to stumble upon something and raise a flag to the right people.
I hate to say this, but if we started keeping tabs on the actual work that CEOs did in terms of good work vs. shody work and say have it in the clause that should there be any badly managed portions of their work, they could be held accountable to pay a fee, of which could be based on the amount of the screw up.
stop hiring out side MBA's and promote people from with in.
It may be better to get people who have / are working at HP to do CEO and VP level work then some out side person who does not know a lot about what goes on in the inside of HP.
That only works if your corporate culture is healthy. Unfortunately, personality pervades an organization from the top down, and HP has spent years under some comically dysfunctional personalities. Anyone who presently occupies a post in HP upper managment is, ipso facto, the problem rather than the solution.
FATMOUSE + YOU = FATMOUSE
stop hiring out side MBA's and promote people from with in.
*GASP* That's BLASPHEMY! There's nothing that can make [our] stock go down faster than that! What are you smoking today? :)
/sarcasm
The way CEO pay for publicly held companies should work is that shareholders should enter the amount on the proxy. The share-weighted median is the CEO's total compensation. (And no default value for unvoted shares.)
Also, voting rights should pass through as far as the tax break does, so mutual fund managers have to pass voting rights through to their shareholders.
"but we are talking about the one in a million type person/personality types. Just like there is little chance any kid you went to school with would ever be a NBA/NFL star or Hollywood A-lister (or even B and C) their chance at this level is equally small."
Hm... maybe that's the problem. HP (and other companies) should stop hiring one in a million, self-important sociopaths with overly inflated egos and try some normal, competent people.
"It's good to be the king."
???
Profit!
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
Hope they sell that stock as soon as possible.
"First they came for the slanderers and i said nothing."
Bukowski said it. I believe it. That settles it.
So at this point, Hewlett-Packard is just a shell company that exists to funnel the long-term campaign contributions of conservatives into Meg Whitman's war chest by means that are not subject to contribution limits or public oversight... right?
Why would anybody invest in HP if not to directly support the new CEO's compensation package?
The two words have a meaningful difference, and her bid was hardly futile.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
I still want to know how Leo swung $2 million a month for his walking papers.
Actually, it took a lot of courage and fortitude on his part. He had to talk the board down from their initial settlement offer, which was vastly greater (it's only shareholders' money, not their own). Apparently, he wanted the monetary compensation to be so small that it counted as an obvious reprimand, almost an insult, and he clearly succeeded. A mere $25million is as hard a slap in his face as this board could be expected to give...
Those who can make you believe absurdities can make you commit atrocities. - Voltaire
I won't even pretend to think I would ever be at this level, but I would love to sit in a room and watch how they work one day as a fly on the wall. Just what does set these people apart?
Newsflash: they're people like you and me, and eat and shit the exact same way we do. They even work the same way we do. The difference? They were at the right time, the right place to use their particular skills (marketing/design/direction in the case of Jobs, identification of long-term market trends in the case of Gerstner, etc). Most of them are smart - some even scary smart. But not 1:1000000 smart, and certainly not that exceedingly knowledgeable. From what I've seen, what sets CEOs apart from others is that they are very, very good at schmoozing. 1:1000000 good. Otherwise, they'd never have been in the right place at the right time.
Those who can, do. Those who can't, sue.
It may be better in terms of long term performance, but consider this approach to making money if you're on the board of a company:
1. Hire a perceived "rock star" CEO.
2. Stock goes up on the announcement.
3. Sell some of your stock right after the announcement (nothing suspicious about that, just collecting a gain)
4. If "rock star" CEO doesn't work out (as seen in some of the quarterly reports, so you aren't insider trading illegally) buy up some company stock as the price gets lower.
5. Fire bad CEO, stock goes up on the announcement.
6. Form CEO search committee, go to step 1.
This will eventually run the company into the ground, but a director could make a lot of gains on the way down. And they can continue to hold their seat on the board by timing things so that board elections happen between steps 4-6.
I am officially gone from
Normal people arent competent.
Competent people are harder to find than 1 in a million.
i thought once I was found, but it was only a dream.
Hardly trolling; I think it's a good analogy.
http://alternatives.rzero.com/
Actually, what you really want is to fire not just the CEO, but everyone about 3-4 levels down from there, all at the same time. Otherwise you just have the people who supported/enabled the failed CEO running the show.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
I know this may sound like a troll, but this might be worth a thought: the shareholders don't give a flying f..k who runs the company and how much they get paid to leave. They make money on soap opera type information and herd mentality of small "investors". I wonder how much of HP shares are in hands of shareholders who care about how HP *does* in the future as opposed to how will HP's short to mid-term share price do? Does anyone have the numbers?
I bet that for any company whose shareholders are distributed enough among speculators and the individual day-traders, the company profit stops being an issue... which means that "market makers" may ruin companies by providing liquidity.
I won't even pretend to think I would ever be at this level, but I would love to sit in a room and watch how they work one day as a fly on the wall. Just what does set these people apart?
Newsflash: they're people like you and me, and eat and shit the exact same way we do. They even work the same way we do. The difference? They were at the right time, the right place to use their particular skills (marketing/design/direction in the case of Jobs, identification of long-term market trends in the case of Gerstner, etc). Most of them are smart - some even scary smart. But not 1:1000000 smart, and certainly not that exceedingly knowledgeable. From what I've seen, what sets CEOs apart from others is that they are very, very good at schmoozing. 1:1000000 good. Otherwise, they'd never have been in the right place at the right time.
QFT.
Sadly, megaschmoozing is wonderful for becoming CEO but not very good when it comes to generating long term profit.
"I zero-index my hamsters" - Willtor (147206)
I dont think it is a matter of "schmoozing", but rather of attitude and culturing. As an example, what sets people apart into cliches in high school such as jock, prep, nerd? Invariably it is as much to do with their attitude and experience as anything else. Executives have an "executive" attitude. Their whole life is about their work, with little time for even families on the side. Their ethics are different than the average worker, and their instincts usually honed from years of training in high class and executive environments. You and I could no more become an executive, even with luck, than a nerd could become a jock. I speak of all this from experience, as my father is an upper class CEO.
There are 2 issues with what you are saying. There are pros & cons with everything –so I am just point this out:
Profits, waste, etc. are based on accounting numbers which can be gained. Want to increase short term profits – decrease the deprecation of assets. Want to increase long term profits – borrow lots of money, invest in high risk projects, etc. This is why a lot of people favor equity based (Stock options, restricted shares, etc.). The value is being assigned by somebody outside the company.
Secondly, who is setting the marks? Should the marks be easy or hard? In down markets boards rarely blame the CEOs. In good markets (a rising tide will lift all ships) then tend to credit the CEO and not dumb luck. Now, this is true for equity compensation as well.)
Well since the Carly's first order of business was getting rid of those fools who might interfere with her plans to destroy every major PC manufacturer...WAIT A MINUTE? Carly single handedly (with Michael Capellas help) destroyed the number one and number two PC manufacturers...Coincidence? I wonder if she's met Michael Dell or Steve Jobs? Hrmmmmm....
"A person is smart. People are dumb, panicky dangerous animals and you know it." - K
Competent people are indeed hard to find. But nonetheless, a majority of competent people don't make millions of dollars a year, or anything close to it.
Maybe we should just define competency differently then...
the complete disconnect between:
the compensation and performance of many management positions
the short sightedness that dominates our culture vs long term sustainability of any kind
the rich minority and everyone else
However the board and the CEOs haven't been and it is likely the problem will continue and the employees and customers will start getting punished.
Your assumption is that the stockholders get a say at all. The vast majority of corporations, if the stockholders don't like what the board is doing, they have two choices: abstain from voting (they can't vote against the board) or quit being stockholders.
Based on the plummet in HP stock price, it seems that a lot are doing the latter.
If I have been able to see further than others, it is because I bought a pair of binoculars.
HP tried that. It didn't work.
That brings me to an interesting point, / . is just "the ramblings of socially-inept, technology-literate news-mongers".
Don't offer a CEO 10's of millions of dollars and a golden parachute right off the bat. If they perform, then give them the big money. A certain percentage of them are only good at negotiating their compensation package, and, well, that's about it.
Vote monkeys into Congress. They are cheaper and more trustworthy.
Well, apparently competent people, i.e. HP's CEO's, aren't competent either.
That brings me to an interesting point, / . is just "the ramblings of socially-inept, technology-literate news-mongers".
Supported 40 middle class families for life
developed 10-80 next great ideas to assure the company's future.
Hired 800 people at a good salary for a year.
The high stakes game of finding your Steve Jobs isn't cheap.
Steve Jobs was not 'found' by a corporate board, but he was fired by one.
The force that blew the Big Bang continues to accelerate.
MBA is a joke degree anyway at most institutions. Its a good supplemental if you have a degree in something else, but anyone with just an MBA (from most institutions) shouldn't even be considered employable beyond a general manager of a grocery store or retail outlet. My best friend went through his MBA after getting a Finance degree, and having experience looking through his homework and curriculum, a fucking idiot could do it. It is know Harvard and other ivy league schools MBA's are significantly harder, however.
That brings me to an interesting point, / . is just "the ramblings of socially-inept, technology-literate news-mongers".
Severance is what permits you to grow yet another head after you misplace those who have gone before. You could always try picking up a discount head off the bargain rack, but the flighty shareholders will vote thumbs down. Or you could rent out the "captain of industry" chair for good coin to thrill seekers with Sim-City cred--except that the lawyers would spoil it. There goes your profit center. By the time your shareholders, the lawyers, and your directors+candidate/sucker all nod in agreement, it's another predictable episode.
There actually is something interesting going on here in the rumpled manifold of greed and commerce.
I think part of it is a selection bias toward winners. It's our heroism reflex run wild. If ten talented people vie for king of the hill (any career juncture from high school to grad school to middling rungs on the corporate ladder) and only one person prevails (probably as much through luck as good management), the winner walks off with the prize and a survivor halo. What price the survivor halo?
Then, like poker, you stake your halo at the next table (in the antechamber of Cloud Nine), in another round of lucky bastard takes all. What price your survivor halo now? Think of the halos as lottery tickets, where you have few ultimate winners at the end of the day. Making the first cut doesn't make your ticket worth anything at all except for prospects in the final draw. Only one person can cash out, so the halos are transacted in multiple rounds of winner-take-all.
Guys like Apotheker, who come into the job wearing the halo of halos (as expected by the flighty shareholders), aren't going to risk all that went before on a sour moment from a sour board (see Dunn, Patricia).
These people aren't necessarily more competent than their rivals, but there are only so many heroism slots available to the human psyche. They got one, their adversary didn't. We believe in success. We believe that success fuels success. Every year we award trophies in all the major sports leagues, whether the champion deserves it or not. It's the slot we hold fixed, while the champion varies. Then along come the carpers of competence, wondering why not all champions are created equal, as if competence prevails on any given Monday. Have you ever opened your eyes in a board meeting?
Shareholders want the halo of "born winner". You see this on sports forums even more clearly. Chris Drury: born winner. Look at his contract lately. Savvy halo owners don't transact on their trophy without a substantial safety net.
The only way the halo represents what it claims to represent is when having the halo grants you super powers because people believe in your halo. When exercising the power of that belief, your decisions might not resemble ordinary competence, and then the resentful competence carpers will fill you with darts. Your halo tarnishes, and you recede, diminished, into The West. You know this going in. Your severance prospects are configured accordingly.
Competence might be a better corporate performance model in long-term aggregate, but with money, the non-linearity of the cash-in/cash-out cycle drives people to manipulate time frames.
Imagine you hold HP stock and the company is positioned to earn 15% in each of the next two years. But that's not good enough. So you convince the exec. (though lush compensation) to represent earnings the first year as 20% and then you cash-out on a 20% annual return in one year, and free up your money to LRR somewhere else. Nice. Next year the company will announce 10% return and the CEO will probably get fired. So unless the midterm compensation was extremely lush, the CEO would prefer to announce 10% return the first year and 20% the second year.
This is why we get halo dramas rather than sustained competence. The aggregate return on the company often matters less to sharp interests than how it's spun. It's the same non-linearity which propels the finance community to b
Attitude and culturing certainly have something to do with it. To some extent, what I call schmoozing is at least partially attitude, and somewhat tied to cultural environment. I'm also dead-sure I could never be a CEO, for the exact reasons you mentioned: nerds make terrible CEOs. Woz knew it, Jobs knew it, and that's why Jobs was CEO and Woz is the whiz. The other part that spells CEO-material is also definitely what you mentioned: enjoying the fact that there is a metric ton of work that knows no time or space boundaries.
But whether you are CEO material and whether you are CEO are two different things. Random encounters and general environments have a huge impact on where exactly you end up. Bill Gates would have never been Bill Gates had he been born 10 years earlier or 10 years later. The particular skill sets that enabled him to reach the top would have been either largely useless, or a dime a dozen.
Those who can, do. Those who can't, sue.
He has to stay there for ten years if he wants the full monster payoff. Just keeping the stock steady will get him $200 million in five years, another $200 million in ten. And if he manages to raise it at the rate of the last few years, he'll easily be a bilionaire.
In today's US, Gekko would be painted a lefty socialist by the GOP.
This is exactly what Buffett was talking about in his 2005 letter to Berkshire Hathaway shareholders. If you don't want to read the whole thing, there is an excerpt of the relevant portion here.
In this letter, Buffett explains how a CEO can make tons of money while driving a company into stagnation or even destruction. Here we are six years later and it seems like nothing has changed.
I wonder how much it cost the Teamsters to get rid of Jimmy Hoffa
Why companies provide their executives with clear, almost unambiguous incentives to FAIL with these huge golden parachute deals.
I mean, you can stay at company X and work for another five, six years, or you can screw up horribly, get fired, wreck the company on your way out the door, and get a bonus for your trouble.
If rank and file employees were similarly incentivized I'm sure Corporate America would rapidly move to halt such a disastrous practice. Maybe it's time to stop waiting for the so-called free market to fix this problem and simply enact draconian laws aimed at CEO and other executive officer compensation.
One day I feel I'm ahead of the wheel / the next it's rolling over me / I can get back on / I can get back on
They were all let go by the previous 4 CEO's....
First stock award of 500,000 shares ($200 million at current value) comes at five years.
Quite after 4 years, 364 days, the $200 million (or whatever it's worth then) goes bye-bye.
He's rich, and he'll get much more rich pulling a Hurd, but he'll only get super-rich if he stays on for at least five years AND does a good job.
Next article: HP lays off OVER 9000 employees as part of a cost-cutting measure.
"When information is power, privacy is freedom" - Jah-Wren Ryel
Yup. It almost didn't matter what they had to pay Carly to make her go away - it was worthwhile.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
Sure, they should probably also dump the board, but paying Carly whatever she'd negotiated so that she'd go away was pretty obviously a good deal.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
Citizen CEO's just can't compete: Bad Asian CEO's will go away for 1/3 the cost of a bad citizen CEO.
Table-ized A.I.
Then you'll have nothing left.
That's why hired CEOs suck. You can't bring vision in with you from somewhere else. Hired CEOs will never have a vision. Promoted CEOs (Steve Jobs and Bill Gates are that, even if they were essentially hired by themselves into the CEO position when the company was a couple people in a garage). Promoting from within is almost always better than bringing in an outsider, but the outsiders are "safer" because they have been CEOs elsewhere and know the board members on a personal level in many cases.
Learn to love Alaska
They should move to a right to work state and save money.
"You spin me right round, baby, right round, like a broken record, right round, right round, You spin me right round..."
In January, 4 members stepped down and 5 were added, including one Meg Whitman. In addition, during the spying scandal (Patricia Dunn), the board got shuffled as well. The board that made this decision is not the same one that hired Leo.
In addition, a shareholder lawsuit over Fiorina's golden parachute did nothing to prevent Hurd's golden parachute, which sparked another shareholder lawsuit.
The question you should be asking is, why does HP's board continually make bad decisions, even though it is made up of different people?
http://money.cnn.com/2011/01/20/technology/HP_board_of_directors/index.htm
We the directors are the sheiks of the company, and until the well runs dry, we reward our ceos with lots of candy.
Each of us gets candy too.
And only if the shareholders don't squeek.
Leslie Satenstein Montreal Quebec Canada