IN DEPTH
Golden parachutes
The high cost of parting ways with CEOs
Last Updated: Tuesday, June 9, 2009 | 4:03 PM ET
CBC News
When Sarah Kramer left her post as CEO of eHealth Ontario, she walked out the door with a negotiated package worth nearly $317,000, the equivalent of 10 months' salary.
Sources say Sarah Kramer's severance is less than what she was entitled to under her contract. (CNW Group/eHealth Ontario) Kramer's departure came during a multimillion-dollar contracts scandal at the Ontario agency that is responsible for developing a digital record system by 2015 to allow health-care providers to electronically share patient information.
Sources say Kramer's severance is less than what she was entitled to under her contract, which would have included 15 months' severance, an unspecified bonus and benefits.
Health Minister David Caplan defended Kramer's compensation package as a necessary step to avoid any legal entanglements. He noted that when former Hydro One chief executive Eleanor Clitheroe was fired in 2002 amid allegations of lavish spending, she launched a $30-million lawsuit against the province.
Here's a look at other high-profile, high-cost departures from public- and private-sector enterprises in Canada and the United States.
Tom Parkinson, Hydro One CEO
In December 2006, Tom Parkinson quit as chief executive officer of Hydro One, Ontario's electricity delivery corporation, amid questions over improper spending — including more than $45,000 in personal expenses charged to his secretary's corporate credit card, and using Hydro One's helicopter on several occasions to visit his Muskoka, Ont., cottage.
Parkinson was the highest-paid public sector worker in Ontario, with a salary of more than $1.6 million. He took a $3-million severance package when he resigned.
The previous CEO of Hydro One, Eleanor Clitheroe, had a salary of $2.2 million per year, and when she was fired for allegedly running up hundreds of thousands of dollars on her expense account, she received a $6-million severance package.
Former CEOs of Calgary, Edmonton health boards
Jack Davis, the former CEO of the Calgary Health Region, received a $1.7 million severance package. (CBC) After the province of Alberta replaced nine health boards with a single health "superboard" called Alberta Health Services, several former regional board CEOsreceived severances.
The chief executive officers of the disbanded health regions in Calgary and Edmonton were paid $1.7 million and $1.5 million in severance respectively. In the case of Jack Davis, the former CEO of the Calgary Health Region, his $1.7 million severance was on top of $4.028 million he would receive under the disbanded region's supplemental executive retirement plan.
The week before the severance figures became public in October 2008, Alberta Auditor General Fred Dunn called for improvements in how compensation is determined for public CEOs. He also pledged to audit the severance packages.
Rick Wagoner, chairman and CEO of General Motors
Rick Wagoner, head of struggling automaker General Motors, resigned at the request of the White House. His departure came as U.S. President Barack Obama unveiled his plan to reinvigorate the U.S. auto industry.
Wagoner, 56, joined GM in 1977, serving in several capacities in the United States, Brazil and Europe. He had been CEO since May 1, 2003.
While terms of GM's government loans prevented it from giving executives severance pay, Wagoner will be able to collect a pension that had an accumulated value of $22.1 million US as of Dec. 31. According to the company's latest annual report, he'll also receive $367,000 in stock awards and $535,000 in deferred compensation.
Henry McKinnel, Pfizer Inc. CEO
Henry McKinnell, the Canadian-born former CEO of the U.S.-based pharmaceutical company Pfizer Inc., received a retirement package worth $181 million US in December 2006.
The package included:
- $82.3 million US in pension benefits.
- $77.9 million US in deferred compensation.
- Lump-sum severance of $11.9 million US.
- Stock grants worth $5.8 million US.
- $2.2 million US for 2005 bonus payments.
- $305,644 US for unused vacation time.
- $576,573 US for benefits he would have received had he stayed at the company.
David Dingwall, Royal Canadian Mint CEO and president
In February 2006, David Dingwall was awarded $417,780 in compensation after an independent arbitrator concluded he was forced out of his $277,000-a-year job as head of the Royal Canadian Mint.
Dingwall defended his right to severance before a Commons committee by saying: "I'm entitled to my entitlements" — words that were destined to be repeated over and over in Conservative election ads.
William Fatt, Fairmont Hotels & Resorts Inc. CEO
In March 2006, it was announced that the CEO of Fairmont Hotels & Resorts Inc., William Fatt, would receive more than $6 million US in compensation if his company's shareholders approved its sale to Saudi Prince Alwaleed bin Talal.
The shareholders agreed to the $4-billion US deal at a meeting in April, and final approval came in July.
Fatt's package included three years' severance pay, 69,657 restricted shares worth $45 US apiece, his stock options, health insurance, vacation pay, car expenses, a lump sum in lieu of pension — and career counselling in case he decided to seek another job.
Richard Grasso, New York Stock Exchange CEO
In 2003, the New York Stock Exchange announced that its chairman, Richard Grasso, would receive $139.5 million US in deferred compensation covering the previous eight years. The resulting criticism from shareholder groups forced Grasso to resign weeks later.
Grasso later claimed that the NYSE owed him an additional $48 million US.
In October 2006, a New York State Supreme Court judge ordered Grasso to return some of the pay package and denied his claim to the additional payment.
F. Ross Johnson, RJR Nabisco president and CEO
Following the 1989 takeover of RJR Nabisco by Kohlberg Kravis Roberts & Co., an epic buyout documented in the book and HBO movie Barbarians at the Gate, RJR president and CEO F. Ross Johnson received a golden handshake worth $53.8 million US, a record at the time.
The Winnipegger retired and started his own private investment company, RJM Group, Inc., in Atlanta.
