Greed
"No Wonder CEO's Love Those Mergers." That's the title of a New York Times article (7/18/2004) that confirms something we have repeated often, that one of the main motivations for mergers and acquisitions is the big payday for top executives.
The article notes that while shareholders generally like to have the company acquired, as they reap a neat profit on their stocks, executives like it even more, as they end up "truly, titanically, stuperfyingly rich."
Among the recent buyouts noted in the article:
- The CEO of Caesar's Entertainment, will receive over $26 million thanks to the acquisition by Harrah's.
- The CEO of SouthTrust, stands to take in $59 million in termination awards and an annual pension of $3.8 million from the Wachovia merger.
- Anthem and Well Point executives may make over $67 million in compensation for those two companies' merger.
With so many mergers and acquisitions, there are a lot of very rich unemployed execs.
In addition to the big payouts, there are options, pensions, healthcare, and other perks to cushion the sad fate of the acquired company's execs. Moreover, the company often pays all the onerous taxes incurred by the executives as well. The whole executive package, says the article, may go up to 8 percent of a merger's cost.
This usually passes in silence. "Yet shareholders have no way to know about this in advance because it is hidden from view. The attitude seems to be, why bother the owners with chapter and verse on what the hired help will get?"
Disclosure regulations are lax, and only the interest of a few pension funds brings this stuff to light. Why wouldn't any company's executive want to be taken over?
