After a one-year lull in 2003, CEO turnover among the top 200 largest U.S. corporations rose in 2004 and 2005, with many departing bosses receiving generous 'golden goodbyes'.
Sixteen per cent of these 200 largest U.S. companies have a new CEO this year, as compared to 17 per cent in 2004 and eight per cent in 2003, according to executive compensation consultants, Steven Hall & Partners.
The historic high for departures was set in 2000 when one out of every five CEOs - 21 per cent - left or lost their jobs.
Steven Hall Partners' analysis also shows that half of the 16 CEOs who departed in 2005 from the top 100 companies received separation payments, with two who resigned under pressure from their boards receiving some of the highest cash payments.
Phillip Purcell, former CEO of Morgan Stanley, is unlikely to be complaining about receiving almost $44 million in cash, while Carly Fiorina, former CEO of Hewlett Packard, was paid $14 million.
In addition, both receive pensions, with Mr. Purcell's supplemented by $500,000 per annum in benefits and charitable donations to be made in his name.
"Fortunately, these two severance packages were the exception, not the rule in 2005, but they certainly captured the headlines. Awards such as these are often questioned as pay for non-performance," said Steven Hall, Managing Director of Steven Hall & Partners.
"Going forward, the cost of packages like the one received by Carly Fiorina pursuant to her hiring employment contract with Hewlett Packard will be disclosed up-front under the proposed Securities and Exchange Commission (SEC) rules and no longer catch shareholders unaware."
However, a few companies such as Coca-Cola, Union Pacific, EDS and American Electric Power, as well as Hewlett Packard, have now adopted policies requiring shareholder approval of senior executive severance that exceeds 2.99 times the sum of the executive's annual base salary and bonus.
According to Mr. Hall, such policies should serve in the future to discourage payments such as the package granted to the departing Mr. Purcell by his friendly board.
Five other executives in the Steven Hall & Partners study who left their CEO positions in 2005 are also being compensated, but for undertaking additional duties.
Kent B. Foster, former CEO of Ingram Micro, became the company's non-executive Chairman of the Board and received $7.6 million in cash and stock, the largest disclosed payout in this group.
Former Exxon Mobil CEO Lee Raymond, who led his company to new heights, has a one-year transitional agreement pursuant to which he has additional responsibilities, and is the most highly compensated over the long term. In addition to $1 million in cash, he will receive a pension stream with a present value of an astonishing $81.3 million.
While other CEOs may receive similar pension benefits, Exxon Mobil is one of the few to fully disclose the present value of its pension benefits in its proxy. Exxon's disclosure conforms to pending enhanced SEC disclosure requirements.
Among the other retired CEOs who are fulfilling additional duties is Craig Barrett of Intel, who received $610,000 in his separation agreement.
While neither Raymond Gilmartin of Merck, nor Alan Lacy of Sears Roebuck, received any separation payments, both continue to be compensated for duties pursuant to their respective agreements.
Mr. Gilmartin will receive $1.6 million in salary and be eligible to receive annual bonuses, while Mr. Lacy continues to receive a salary, bonus and equity awards in his role as Vice Chairman of the Board.
Departing CEOs, for whom no cash payouts were disclosed as of December 31, 2005, were Harry Stonecipher of Boeing; Maurice Greenberg of AIG; J.T. Battenberg III of Delphi; Robert O'Connell of Mass. Mutual Life Insurance; and Robert L. Tillman of Lowes.
Each of these departures represents a different situation, including forced resignation, planned retirement, and change in control.
The other CEO transitions among the top 100 companies in 2005 resulted from M&A transactions. David Dorman left his CEO position with AT&T following its merger with SBC, receiving $10 million in cash and a consulting agreement spanning three years, during which time he will be paid $10 million in stock.
When Timothy Donahue left his CEO position of Nextel Communications and was named Chairman of Sprint Nextel, the company created by the merger, Gary Forsee, formerly CEO of Sprint, became the CEO of the combined company.