* For an explanation of the different approaches used by the AFL-CIO and the U.S. Securities and Exchange Commission to calculate total compensation, click here.

LUCKY CEOs BAIL OUT WITH GOLDEN PARACHUTE

While most workers laid off by companies in these tough economic times are lucky if they get more than their last paycheck and the right to extend their health care benefits when they receive a pink slip, chief executive officers at many of America’s largest companies often receive a “golden parachute,” or a generous severance package, when they depart.

Richard L. Bond, the president and chief executive officer of Tyson Foods Inc. until Jan. 5, was one of those lucky CEOs. Under the terms of his Dec. 19, 2006, employment agreement, he stood to collect more than $14 million, or three years’ salary and bonus, the immediate and full acceleration of unvested equity awards, health insurance and unused vacation as severance payments if he got terminated without cause, or if he resigned for “good reason.”[1] Bond, who was promoted to CEO of the Springdale, Ark.-based poultry and meat processing company in May 2006, also would have received payouts from the company’s various retirement plans and his accumulated deferred compensation account (plus earnings).[2]

The potential abuse of “golden parachutes” gained currency during a wave of corporate takeovers in the 1980s. Back then, corporate boards of directors instituted lucrative severance packages for CEOs whose tenures were threatened by an imminent takeover of the company.[3] These days, CEOs frequently receive gilted severance packages when they depart even if the company performed poorly and shareholders suffered.

Golden parachutes encourage top executives to take on excessive risk because they assure rewards even for poor performance. Departing CEOs frequently collect these generous payouts because they’re allowed to step down rather than being fired “for cause” even when the company performs badly. These severance packages encourage CEOs to take on inordinate amounts of risk because they can be worth much more than the incentive compensation CEOs would get for mediocre performance.

Experts and lawmakers have criticized the propriety of such payments, especially to executives of financial service companies that are now being bailed out by the federal government.

When Bond resigned abruptly from Tyson Foods and its board on Jan. 5, 2009, the company issued a brief statement without detailing reasons for Bond’s departure.[4] His departure came after the company posted a $122 million loss for the quarter ended Dec. 31, 2008, despite a $34 million profit a year earlier, raising concerns that the company’s financial condition may be affected by the poor economy. The Corporate Library, an independent corporate governance research firm, has maintained a "D" rating on the company for its corporate governance practices.[5] During his brief tenure as CEO, the company’s stock price was nearly halved, from $15.92 on May 19, 2006, when Bond was promoted to CEO, to $8.75 on Jan. 5, 2009, when he quit.[6] During this period, Tyson Foods performed in the bottom half of its peer group for both one-year and three-year returns, prompting the proxy advisory firm, RiskMetrics Group, to say it would have examined the CEO’s pay package had he not resigned. RiskMetrics said it would have recommended shareholders withhold votes against Kevin McNamara, the chairman of the company’s compensation committee, and the other two members of the committee, at the company’s Feb. 6, 2009, annual shareholder meeting.[7]

The company has not yet disclosed the severance package it gave Bond when he left the company, but while hundreds of thousands of working Americans stand in line to collect unemployment compensation, it’s a fair bet that Bond won’t need to do that.

In the fiscal year ended Sept. 30, 2008, Bond got a 4.4 percent raise in his base salary from $1.2 million, to $1.25 million, despite the company’s poor performance, although he didn’t receive a cash bonus because the company failed to meet the performance targets.[8] Bond also received stock options and other equity awards valued at $2.6 million in fiscal 2008.[9] On top of that, he also got nearly a million dollars in perquisites, including the use of the company aircraft, country club membership and even a department store gift card.[10]

Under his employment agreement, Bond also was eligible to serve as a consultant to the company for 10 years, if his departure constituted a “retirement.” Under that consulting arrangement, Bond would receive an annual fee for the first five years of nearly $800,000 a year—or 60 percent of his base salary at the time of retirement—and nearly $400,000, or 30 percent, of his base salary for the next five years. The arrangement would also let Bond’s stock options and restricted stock continue vesting on their normal schedule, and he would still be entitled to a variety of perks, including using the company aircraft for five years. He and his wife also stood to receive health insurance, under the terms of his employment contract.[11]