Friday, December 02, 2005

Paydirt! A recent BusinessWeek article ("Fat Merger Payouts for CEOs", 12/12/05) details some of the big paydays coming out of recent mergers and acquisitions, what the article calls "golden bungee cords." They include: $165 million for James Kilts, CEO of Gillette (acquired by Procter & Gamble) $192 million for Bruce Hammonds, CEO of MBNA (acquired by Bank of America) $92 million for A.D. Correll, CEO of Georgia-Pacific (acquired by Koch Industries) $63 million for John Eyler, CEO of Toys 'R' Us (acquired by a group of equity funds) $55 million for David Dorman, CEO of AT&T (acquired by SBC) A mere $31 for Michael Capellas, CEO of MCI (acquired by Verizon) Several of these CEOs were presiding over out-and-out failures, most notably MCI and AT&T. As the article states, "Some skeptics suggest that supersize payouts perversely benefit CEOS whose companies' weaknesses made them vulnerable to takeover." Those cynical skeptics! And the practice distorts the motivation for takeovers. "Others see the tendency as spawning a generation of serial dealmakers whose specialty is dressing up companies for sale," the article notes. Prime examples are the aforementioned Kilts, who had made a killing selling Nabisco to Philip Morris (now Altria) and Capellas, who had done very well offloading Compaq Computer to Hewlett-Packard. As one analyst notes in the story, CEOS are more and more thinking "What am I doing running the business for the long term when I can just flip it and make more money?" 9:51:06 PM

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